European and Asian markets have rebounded after three days of heavy losses, though tension and volatility remain evident in the stock exchanges. The White House confirmed on Tuesday that it will impose a 104% tariff on China, triggering alarm bells on Wall Street. What began as a positive session for U.S. indices slowly deflated throughout the day. The S&P 500 and Nasdaq, which opened strong, have reversed course and are fluctuating between losses and gains at mid-session, while the Dow Jones manages to stay in positive territory.

In Europe, there is a sense of tense calm just hours before the new tariffs go into effect. Spain’s Ibex closed up 2.37%, its biggest gain since March 2023, reclaiming the 12,000-point mark, thanks to the strength of the banking sector. However, the Spanish index is still 9.6% below the 13,350 points it hit on Wednesday, April 2, just before Trump’s tariff announcement. Other European markets have seen similar, if not slightly higher, gains. Germany has risen by 2.9%, France by 2.5%, and the U.K. by 2.8%.

Outside of the stock exchanges, other asset classes also appear more stable after the recent turmoil. Oil prices have inched higher, the dollar remains steady against the euro—trading around $1.09 — and bond yields are rising.

Still, caution prevails. Market nerves are far from settled, as evidenced by the S&P 500 volatility index (VIX), which surged above 60 points — its highest level since the start of the pandemic — though it has moderated somewhat in today’s session.

Stock markets remain fragile — though the tone has become somewhat more tempered. After global markets shed $10 trillion in market capitalization over just three days, investors are hungry for any sign of good news. While Trump remains firm on not altering a single comma of his tariff plan, he has welcomed Japan’s decision to send a negotiating team to the U.S. to begin trade talks. For traders, this signals a potential opening — not only with Tokyo, but possibly with other regions as well.

U.S. Treasury Secretary Scott Bessent said in an interview with CNBC that many countries have reached out to initiate trade negotiations, and that Trump himself will be directly involved in the process. Meanwhile, the European Union is preparing its own response to the U.S. tariff plan. Despite this, the tone coming from Brussels suggests a preference for dialogue over confrontation. European Commission President Ursula von der Leyen has urged China to “avoid a new escalation.”

As it stands, unless there are last-minute changes, the country-specific tariffs are set to take effect on April 9.

In Asia, market sentiment has improved — especially in Tokyo — on hopes that upcoming talks might lead to a trade agreement with the U.S. Japan’s Nikkei index rebounded 6% after a steep 8.6% loss over the previous three days. Hong Kong’s Hang Seng, which dropped more than 12% yesterday, rose 1.5%, while China’s Shanghai Composite Index gained 1.6%. Some analysts see hope in the possibility that the U.S. may be open to genuine negotiations.

Still, volatility remains extremely high, and market experts are proceeding with caution.

In other markets, previously battered companies also saw significant gains. Siemens Energy climbed 7.6%, aviation manufacturer Dassault rose 7%, and defense group Rheinmetall added 6%.

Still, despite the day’s rally — driven more by technical rebounds than a fundamental shift in sentiment — pessimism remains the prevailing mood. Strategists at BlackRock, the world’s largest asset manager, downgraded their outlook on U.S. equities from “overweight” to “neutral.” “We see more pressure on risk assets in the near term given the major escalation in global trade tensions,” it stated.

More troubling are the forecasts from Goldman Sachs, which warns the market correction could evolve into a cyclical bear market as recessionary risks mount. Unlike a sharp, one-off drop triggered by a specific event — where markets tend to rebound more quickly — a cyclical bear market implies prolonged declines, typically lasting around two years, with a slower recovery to previous highs.

Just yesterday, BlackRock CEO Larry Fink remarked that nearly every executive he speaks with believes the U.S. is already in a recession. Other prominent Wall Street figures echoed this sentiment: J.P. Morgan CEO Jamie Dimon urged urgent clarity on the situation, warning that a breakdown in U.S. global alliances would be “disastrous.”

An episode that underscored just how hypersensitive markets have become was yesterday’s brief frenzy sparked by a false rumor: that President Trump was planning to grant a 90-day tariff truce to all countries except China. The unsubstantiated news triggered a dramatic and short-lived reversal on Wall Street — U.S. stock indices swung from a 4% loss to a 3% gain within minutes. Once the White House officially denied the rumor, markets slipped back into the red, though losses remained contained, despite no clear signs of negotiation progress or concessions from Trump. Speaking after meeting with Israeli Prime Minister Benjamin Netanyahu at the White House, Trump confirmed there would be no delay in implementing the country-specific tariffs.

In anticipation of further turbulence, investors continue to seek refuge in safe-haven assets. Gold rose 1.7% on the day, reaching $3,025 per ounce — just shy of the $3,100 record set days earlier. In the bond market, the yield on the 10-year U.S. Treasury dropped 22 basis points yesterday before partially recovering to hover around 4.16%. Meanwhile, the German 10-year yield rose slightly to 2.63%, and the Spanish equivalent held steady at 3.337%. The Spanish Treasury issued €5.83 billion in 6- and 12-month bills, cutting interest rates to their lowest levels since 2022.

In currency markets, traditional safe havens like the yen and the Swiss franc advanced, while the U.S. dollar remained mostly stable. However, fears of a U.S. recession are fueling expectations of deeper interest rate cuts. Markets are now pricing in a total easing of 125 basis points by year-end — equivalent to five 25-basis-point cuts — according to interest rate swap data. Just last week, before Trump’s unexpectedly aggressive tariff announcements, traders had anticipated only three cuts. On Tuesday, the dollar dipped slightly, with the euro trading at $1.096.

Oil markets also showed modest signs of recovery. Brent crude futures, the European benchmark, rose 0.8% to $64.80 per barrel. Still, prices remain under pressure, having dropped 14% over the past three sessions to their lowest levels since 2021. One of the biggest concerns for the oil market is the escalating trade dispute between China and the United States, which threatens to slow global growth and could even tip major economies into recession.

“I would say [the improvement] aligns more with a bearish rebound — something traders should try to avoid — rather than believing we’ve reached a key inflection point for a sustained upward trend,” concludes Chris Weston, Head of Research at Pepperstone.

Juan José del Valle, an analyst at Activotrade, believes that while the markets are more volatile than ever, “far from being a sign of retreat, the current uncertainty is creating one of the most interesting scenarios in recent years.”

For Del Valle, the turmoil represents “a unique opportunity to be attentive, rethink strategies, rebalance portfolios and, above all, start putting to work that liquidity that has been waiting for the right moment.”

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