Making sense of the forces driving global markets

By Jamie McGeever, Reuters Open Interest Markets Columnist 

The S&P 500 and Nasdaq touched new highs on Friday before cooling off following a report that U.S. President Donald Trump is pushing for a minimum 15-20% tariff on goods from Europe. 

But Wall Street and most global benchmark indices rose on the week, as upbeat U.S. economic data more than compensated for the heightened trade uncertainty and Trump ramping up his verbal attacks on Fed Chair Jerome Powell. 

Yet another choppy and event-filled trading week ended on a more subdued note on Friday, with trade and the Trump administration's hefty tariffs on major trading partners again at the forefront of investors' minds.

Trump's call for a minimum 15-20% tariffs on imports from the European Union, as reported by the Financial Times, is a reminder that global trade tensions are still alive and could yet hit growth and fuel inflation. 

Elsewhere in the global trade war, Trump's deepening spat with Brazil will be worth monitoring next week, while Treasury Secretary Scott Bessent is in Japan this weekend.

Economists at ratings agency Fitch on Friday raised their projected effective U.S. tariff rate to 19.4% from 14.1%. There's still a great deal of uncertainty over who will end up eating the tariffs, but leveies of that magnitude will not be cost-free.

As well as trade, investors' focus next week will turn to U.S. corporate earnings, with more than a fifth of the S&P 500 companies reporting and the European Central Bank's policy decision.

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Here are some of the best things I read, watched and listened to this week: 

Following Friday's latest Japanese inflation data and ahead of Sunday's potentially crucial upper house election, it's worth reminding ourselves of how much of an outlier Japanese interest rates are in real terms. 

The Bank of Japan's inflation-adjusted policy rate is almost -3%. The BOJ wants to continue raising rates, but it's not so simple. 

Sunday's election could pave the way for a wave of public spending and tax cuts, putting the developed world's worst public finances under even more strain and weakening the yen further.

Yet long bond yields are already the highest on record. Raising rates and driving bond yields even higher could have a negative impact on growth. Maybe a very serious impact. 

Policymakers are in a bind.