Futures, Yields, Dollar All Jump Ahead Of Key CPI Report

US equity futures are higher into today's CPI print with tech outperforming, as the rout that gripped markets in the past two weeks receded after Trump downplayed the risk of a tariff-led recession. An acceleration of the Trade War is not impacting global Equities. As of 8:00am ET, S&P futures are up 0.9%, at session highs while Nasdaq futures rise 1.1%, with all Mag7 higher pre market (ex-AAPL, same pattern as yesterday). Bond yields are also higher by 1bp as German 10Y rates hit the highest since 2023; the USD is also rising as the euro and yen slide. Commodities are stronger led by Energy and Metals with Ags under pressure. The macro data focus is on CPI where the whisper number appears to be below the BBG consensus (0.3% MoM for core/headline; 3.2%/2.9% YoY for core/headline) but the print is important to shape the market narrative with a hotter print producing stagflation worries while propping up the USD, and a cooler print likely to assuage recent econ concerns.

In premarket trading, Nvidia, Palantir and Tesla were roughly 3% higher with most Mag7 names rebounding (Alphabet +0.9%, Amazon +0.8%, Apple -0.06%, Microsoft +0.6%, Meta +1.2%, Nvidia +2% and Tesla +3.4%). Intel surged 8% after Reuters reported that TSMC has pitched Nvidia, Advanced Micro Devices and Broadcom about taking stakes in a joint venture that would operate the chipmaker’s factories. Here are some other notable premarket movers:

• EW Scripps rises 21% after the TV broadcasting company announced a deal to refinance its debt. The company also reported fourth-quarter revenue that beat expectations.
• Groupon jumps 20% after the online coupon company gave a revenue forecast for 2025 that beat the average analyst estimate.
• IRobot falls 21% after the robot vacuum company reported 4Q revenue that missed the average analyst estimate. The board has initiated a review of strategic slternatives.
• LoanDepot slips 12% after the lender reported revenue for the fourth quarter that missed the average analyst estimate.
• Myriad Genetics climbs 4% after the genetic testing company is upgraded to overweight at Piper Sandler on potential for a change in strategic direction.
• Stitch Fix rallies 18% after the personal styling platform boosted its full year revenue forecast.
• Rocket Pharmaceuticals rises 3% after BMO Capital Markets initiated coverage at outperform and set a price target more than six times above where the shares last closed, citing the likely life-long effect of the company’s gene therapies.

Some investors pointed to sentiment improving after President Donald Trump said he doesn’t see a US economic recession, as well as Ukraine’s decision to accept a US proposal for a 30-day truce with Russia. At the White House late Tuesday, Trump struck a more upbeat note when asked if he was worried about a downturn. “I don’t see it at all. I think this country’s going to boom,” he said. And he played down the markets slump, too. They’re “going to go up and they’re going to go down,” Trump said. “Doesn’t concern me.”

Meanwhile, US tariffs on steel and aluminum imports came into force Wednesday, extending the trade wars to more of the country’s top trading partners. The European Union launched countermeasures, with plans to impose its own duties on up to €26 billion ($28.3 billion) worth of American goods.

Besides the trade war, all eyes are also on the US CPI report, with economists polled by Bloomberg expecting an increase of 0.3% in February, versus the previous month’s 0.5% rise (our full preview is here). While the Federal Reserve is not expected to cut interest rates at next week’s policy meeting, a softer print should reassure investors who have been on edge over the inflation trajectory, particularly in light of brewing trade wars.

“Things are generally looking a little bit better on the inflation front in the United States and if today’s number is benign it will be good to see,” said Guy Miller, chief market strategist at Zurich Insurance Co.

Meanwhile, Goldman Sachs lowered its target for the S&P 500 Index to 6,200 from 6,500, in view of declines in the “Magnificent 7” stocks. That still sees the market rising 11% versus Tuesday’s close. “Our revised estimates reflect the recently reduced GDP growth forecast of our US economics team, a higher assumed tariff rate, and higher level of uncertainty that is typically associated with a greater equity risk premium,” strategists including David Kostin and Jenny Ma wrote in a note dated Tuesday.

In Europe, the Stoxx 600 rises 0.8% and is on course to snap a four-day losing streak, led by construction, chemical and industrial shares. The retail sector was the worst performer, trading at the lowest level since August, dragged down by Zara owner Inditex SA, which reported slowing sales. Ukraine’s decision to accept a US proposal for a 30-day truce with Russia has helped underpin broader risk sentiment, as did upbeat remarks from President Donald Trump on US economic prospects. That offset trade concerns as US tariffs on steel and aluminum came into force, prompting countermeasures from the EU. Here are some of the biggest movers on Wednesday:

• Zealand Pharma shares soar as much as 48% in Copenhagen, the most on record, following its pact with Roche to co-develop and co-commercialize the Danish company’s experimental obesity drug petrelintide.
• Cucinelli shares rise as much as 3.9% after the luxury goods stock was initiated with an overweight rating at Morgan Stanley, which cited the resilience of the Italian firm’s business model against a backdrop of macro uncertainty.
• Rheinmetall shares rise as much as 9.3% after the German maker of tanks and armored vehicles forecast sales and operating profit will continue to rise this year, boosted by increased defense spending in Europe. The firm’s operating margin forecast for 2025 missed estimates, however.
• Hill & Smith shares rise as much as 15%, the most in over three years, after the maker of products for the construction and infrastructure markets beat earnings expectations in 2024.
• Hochschild shares rise as much as 17% after the miner reintroduced its first dividend since 2022 as it reported a significant improvement in 2024 earnings, according to analysts at RBC.
• Puma shares drop as much as 27%, the most on record, after the sportswear maker gave a disappointing outlook, citing trade disputes and currency volatility.
• Inditex shares fall as much as 8.9%, the most in three years, after the owner of Zara reported trading in the first quarter-to-date which was softer than analysts expected, offsetting a 4Q EBIT beat.
• Porsche shares fall as much as 5.2% after the luxury carmaker lowered its medium term targets due, according to JPMorgan, to China and higher investments.
• Defense stocks decline after US and Ukrainian negotiators reached an accord for a 30-day halt in the conflict in Ukraine.
• Basic-Fit shares fall as much as 16%, its largest drop since 2022, after the fitness club company reported results and a FY25 outlook that missed expectations.

Earlier in the session, Asian stocks were mixed after a three-day selloff as investors sought to assess the economic impact of US President Donald Trump’s latest tariff moves. The MSCI Asia Pacific Index was little changed after swinging between a gain of 0.4% and a loss of 0.3%. While key gauges in South Korea, Taiwan and Japan advanced, Australia’s mining-heavy stock benchmark fell as the nation failed to secure an exemption from US steel and aluminum tariffs. Malaysia’s benchmark equity index slumped into a technical correction, partly triggered by foreign investors selling the nation’s stocks. Asia’s equity gauge pared an intraday decline after Trump sought to reassure a business roundtable over the outlook for the US economy and the steps he’s taking to boost growth. His comments followed another selloff in US equities on Tuesday. However, selling pressure resurfaced, with Chinese tech stocks falling near the end of the Hong Kong trading session to drag the MSCI Asia gauge lower.

In FX, the Bloomberg Dollar Spot Index rises 0.2%. The yen underperforms its G-10 peers, falling 0.6% against the greenback after the Trump’s administration hit out at Japan’s elevated rice tariffs, raising concern that the country may be next in line for US levies. EUR/USD fell as much as 0.3% to 1.0888, pulling off the five-month peak touched earlier this week. “I think it’s time for some consolidation in the euro’s rally, which has affected the DXY index significantly,” said Alvin Tan, head of Asia foreign-exchange strategy at RBC in Singapore.

In rates, Treasury futures are down in early US session after small Asia-session gains were erased during London morning. US 10-year yields are higher by 2bps at 4.30%; Bunds lead a selloff in European government bonds, with German 10-year yields rising 3 bps to 2.92% the highest since 2023. Downside pressure stems from bund selloff following European Union’s countermeasures against US metals tariffs. Germany’s 10-year yield is getting closer to the 3% milestone as investors brace for a historic surge in spending and borrowing. Focal points of US session focus include February CPI data and 10-year note reopening. This week’s Treasury auction cycle continues with $39 billion 10-year at 1pm New York time and concludes Thursday with $22b 30-year reopening; demand was soft for Tuesday’s 3-year new-issue auction, which tailed by 0.6bp

In commodities, oil prices advance, with WTI rising over 1% to $67 a barrel. Spot gold is steady near $2,915/oz. Bitcoin falls 0.6% to around $82,200.

Today's economic data calendar includes MBA Mortgage Applications (up 11.2%, vs 20.4% last month). February CPI (8:30am) and Federal budget balance (2pm). Fed officials are in external communications blackout ahead of March 19 policy announcement

Market Snapshot

• S&P 500 futures up 0.3% to 5,593.25
• STOXX Europe 600 up 0.5% to 539.74
• MXAP little changed at 185.03
• MXAPJ down 0.1% to 580.17
• Nikkei little changed at 36,819.09
• Topix up 0.9% to 2,694.91
• Hang Seng Index down 0.8% to 23,600.31
• Shanghai Composite down 0.2% to 3,371.92
• Sensex down 0.3% to 73,892.58
• Australia S&P/ASX 200 down 1.3% to 7,786.24
• Kospi up 1.5% to 2,574.82
• German 10Y yield little changed at 2.91%
• Euro little changed at $1.0909
• Brent Futures up 0.6% to $69.99/bbl
• Brent Futures up 0.6% to $69.97/bbl
• Gold spot up 0.1% to $2,918.63
• US Dollar Index up 0.13% to 103.55

Top Overnight News

• Trump posted "The price of eggs have come down, interest rates have come down, gasoline prices have come down—It's all coming down! We're doing it the right way, and I have tremendous confidence in this Country and in the people of this Country…", via Truth Social.
• Trump's administration is considering cutting the size of the Justice Department's public corruption unit.
• The Department of Education said it initiated a reduction in force impacting nearly 50% of the department's workforce with impacted staff to be placed on administrative leave beginning March 21st.
• Commerce Secretary Howard Lutnick said Tuesday that President Trump’s tariff policies will be worth it, even if the economy ends up in a recession. The Hill
• Elon Musk has signalled to President Trump’s advisers in recent days that he wants to put $100mln into groups controlled by the Trump political operation, according to NYT.
• US House passed the spending bill to avert a government shutdown and sent it to the Senate.
• Senior US Democrats believe a government shutdown would be a lose-lose scenario, they are exploring alternative strategies to prevent this perception while avoiding accusations of supporting the President: Punchbowl.
• Active funds continued to sell shares in the MSCI China Index despite its 12% gain last month, a sign of skepticism about the outlook. BBG
• Beijing summoned Walmart execs to express concern after the company reportedly urged Chinese suppliers to absorb higher costs from US tariffs. Such demands, if true, would be bad for its operations in China, state-affiliated media wrote. BBG
• Many of Japan's biggest companies from tech conglomerates to Toyota, have met union demands for substantial wage hikes for a third consecutive year, seeking to help workers cope with inflation and retain staff amid labor shortages. RTRS
• The Kremlin said on Wednesday it needed to be briefed by the United States on the outcome of U.S.-Ukrainian talks in Saudi Arabia before it would comment on whether a proposed ceasefire was acceptable to Russia. RTRS
• Europe retaliates against the US for Trump’s 25% steel/aluminum tariffs, imposing its own duties on American imports worth EU26B (including bourbon and whisky, jeans, and Harley-Davidson bikes), w/additional actions set to arrive next months. FT, WSJ
• The UK split with the EU over retaliatory tariffs even as 25% levies on foreign metals came into effect, reaffirming its commitments to US trade talks. BBG
• TSMC has proposed a deal to AMD, Broadcom, Nvidia, and Qualcomm about a joint venture that would operate Intel’s chip factories (TSMC would run the facilities but own no more than 50%). RTRS

Tariffs/Trade

• US President Trump's 25% tariffs on steel and aluminium took effect with no exemptions.
• US President Trump separately commented that tariffs are having and will have a tremendously positive impact, while he also suggested tariffs may go higher than 25% but did not specify which tariffs.
• Senior EU Official says confirms it is monitoring to see if Chinese steel overcapacity is re-routed to Europe, and "we stand ready to take measures where we need to take those measures", via SCMP's Birmingham. "We may indeed have to take further measures to deal with this indirect consequence of the US tariffs."
• Canada's Energy Minister said at CERAWeek that Canada may implement non-tariff measures such as restricting oil exports if the trade war with the US escalates and that ethanol is absolutely on the list of potential retaliatory tariffs being considered. Canada's Energy Minister also said Canada will respond shortly if tariffs come into play and will wait and see on tariffs, as well as noted that Canada does not want to provoke or escalate and seeks a positive outcome.
• EU Commission launched countermeasures on US imports in which it will allow the suspension of existing 2018 and 2020 countermeasures against the US to lapse on April 1st, while it is putting forward a package of new countermeasures on US exports. Furthermore, it stated that EU countermeasures could apply to US goods exports worth up to EUR 26bln to match the economic scope of the US tariffs but added the EU remains ready to work with the US administration to find a negotiated solution.
• French European Affairs Minister Haddad says, on EU's response to Trump tariffs, "we can go further"; reaffirms trade war is in no one's interest. Thereafter, EU Commission President von der Leyen says countermeasures will match the scope of US tariffs and will be entirely in place by April 13th.
• UK Business and Trade Secretary Reynolds said it is disappointing the US has imposed global tariffs on steel and aluminium, while he stated that negotiations are ongoing for a wider economic agreement with the US to eliminate additional tariffs.
• Australian PM Albanese reiterated they will not impose reciprocal tariffs on the US and will continue to engage with the US on tariffs.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded mixed following the choppy performance stateside where the focus was centred on tariff rhetoric and Ukraine ceasefire talks, while the US's 25% tariffs on steel and aluminium took effect overnight. ASX 200 underperformed with firm losses in consumer discretionary, industrials and financials, while risk sentiment was also pressured after Australia failed in its efforts to get an exemption from looming tariffs. Nikkei 225 remained afloat but with price action choppy after mixed PPI and BSI Manufacturing data. Hang Seng and Shanghai Comp were ultimately mixed with the mood indecisive in both the mainland and Hong Kong amid light fresh catalysts although China’s securities regulator recently pledged to consolidate the momentum of market stabilisation.

Top Asian News

• BoJ Governor Ueda says very worried about uncertainty regarding overseas economy and prices; underlying inflation still remains below 2%; Ready to conduct bond buying operation nimbly in exceptional cases, when long-term rates make irregular moves.
• Hitachi (6501 JT), Toyota (7203 JT) and NEC (6701 JT) agreed to fully meet unions' wage hike demands for 2025, while Nissan (7201 JT), Mitsubishi Electric (6503 JT), Honda (7267 JT), Nippon Steel (5401 JT) and Panasonic (6752 JT) agreed to average monthly wage increases below unions' demands.
• Global Times tweets "China’s Ministry of Commerce and other departments summoned Walmart on Tuesday for reportedly requiring some of its Chinese suppliers to slash prices significantly in an attempt to shift the burden of the US tariffs on China".
• Bank of Japan officials see several reasons against intervening in the bond market even after benchmark yields hit the highest level since 2008, Bloomberg sources say

European bourses (STOXX 600 +0.8%) are stronger today, and sentiment in the complex improves following the hefty downside seen on Tuesday and as the region reacts to Ukraine ceasefire optimism. European sectors hold a strong positive bias; Construction & Materials tops the pile, whilst Retail is the clear laggard. The latter is pressured by post-earning losses in Inditex (-8.2%, slow start to Q1) and Puma (-24%, very weak 2025 outlook). In terms of key movers today; Zealand Pharma (+25%) opened higher by 45% after it secured a deal with Roche (+3%) to collaborate on obesity drugs; Novo Nordisk (-5%).

Top European News

• Portugal's Parliament rejected the motion of confidence in the centre-right government, causing its collapse.
• SEB, on the Norges Bank following hot February CPI, writes: "We are still leaning towards a March cut, absent any upside surprises in the Regional Network Report".
• ECB's Centeno says the EZ economy remains burdened by higher rates, according to WSJ.
• ECB President Lagarde says cannot ensure that inflation will always be at 2% but need to set policy so that it converges towards target. In the event of large shocks, risk grows that inflation becomes more persistent. Need to pay particular attention to anchoring inflation expectations. Cannot provide forward guidance but need to be clear about the reaction function.
• ECB's Simkus says the direction of travel hasn't changed, is irrational to commit on future rate decisions; will see if the ECB cuts or pauses in April

FX

• DXY spent much of the morning essentially flat, having pared overnight strength as the index initially attempted to make back some of the pressure seen on Tuesday. More recently, it has lifted towards the upper end of a 103.43-71 range. Focus has been on the trade front, whereby US President Trump's 25% tariffs on steel and aluminium took effect with no exemptions, but did cancel 50% tariff on Canada. Furthermore, the EU Commission launched countermeasures on US imports with measures to come into force by April. Tariffs aside, US inflation data will be in focus.
• EUR is flat after trading lower in overnight trade, giving back some of the strength seen on the back of news Ukraine ceasefire optimism; currently at the upper end of a 1.0888-1.0923 range. As mentioned above, the EU Commission launched countermeasures on US imports; a senior EU Official suggested more measures may need to be taken place. In terms of EU-China; the Official said the bloc stands ready to take any measures in reference to re-routed Chinese steel, if it leads to overcapacity. In terms of monetary policy, a slew of ECB speakers have appeared at the ECB Watchers Conference, but their remarks had little impact on the Single-Currency.
• JPY is the clear underperformer today, with USD/JPY currently just off sessions highs at 148.65; further upside may see a test of the 149.00 mark, and then a recent high at 149.33 thereafter. Today saw commentary via BoJ Governor Ueda who said he is very worried about uncertainty regarding overseas economy and prices; he also noted that the BoJ is ready to conduct bond buying operation nimbly in exceptional cases, when long-term rates make irregular moves.
• GBP is essentially flat in what has been a quiet UK-specific session thus far; newsflow unlikely to pick up until Friday's GDP figures. Cable currently at the mid-point of a 1.2914-56 range.
• Antipodeans are flat and trade rangebound, with a lack of pertinent newsflow for the region thus far; focus of course has been on trade developments (discussed above).
• CAD is steady vs. the USD after a choppy session in which the trade agenda dominated price action. To recap events, US President Trump backed down from his plans to double tariffs on Canadian steel and aluminium imports to 50%. This followed the decision by the Ontario Premier to suspend its electricity surcharge on the US. Nonetheless, 25% tariffs on Canadian steel and aluminium have gone ahead.
• PBoC set USD/CNY mid-point at 7.1696 vs exp. 7.2324 (Prev. 7.1741).

Fixed Income

• USTs are firmer by a handful of ticks, but do hold a downward bias, in tandem with peers. Currently trading at the bottom end of a 110-26+ to 111-02 range. Focus today has been on the Trump's rollout of the 25% tariffs on steel and aluminium took effect with no exemptions; however, the President did rollback the 50% tariff on Canadian steel/aluminium after Ontario suspended the 25% energy surcharge. Ahead, traders will remain laser focused on the US inflation data; particularly in the context of some of the economic activity woes displayed by data in the past few weeks. Also today, USD 39bln worth of 10yr notes due.
• Bunds are in the red, albeit modestly so. Currently trading around the 127.00 mark, in a 126.69-127.14 range. From a yield perspective the German 10yr has topped 2.9%; as a reminder the upside over the past week is attributed to Germany's defence spending plans. As for today the benchmark digests the inflationary implications of the EU tariff countermeasures on Trump’s metal tariffs; elsewhere, there has been a slew of ECB appearances, but with not one member sparking a significant move in German paper. ECB President Lagarde highlighted the need to set policy that it converges towards the 2% target. Ahead, markets await a few more ECB speakers as well as the Bank's Wage Tracker.
• Gilts are a little lower, and to a similar magnitude as Bunds; UK-specific newsflow has been light, with the next update out of the region coming on Friday (GDP metrics). Currently in a very tight 91.66-91.90 range. Some modest pressure was seen following the 2035 Gilt auction; b/c was strong (though just shy of the 3x mark), whilst the yield tail was a little high.
• UK sells GBP 4bln 4.5% 2035 Gilt: b/c 2.92x, average yield 4.679%, and yield tail 0.5bps.
• Germany sells EUR 3.455bln vs exp. EUR 4.5bln 2.5% 2035 Bund: b/c 2.1x (prev. 2.8x), average yield 2.92% (prev. 2.52%) & retention 23.22% (prev. 22.8%)

Commodities

• Crude is firmer today, benefitting from the generally positive risk tone, and shrugging off overnight indecisiveness after the larger-than-expected build for headline crude. The overarching theme for the complex is the optimism surrounding a 30-day Ukraine ceasefire deal; Ukraine seem ready, whilst Russian sources suggests that "It is difficult for Putin to agree to this in its current form". Brent'May 25 currently sits towards the upper end of a USD 70.33-69.80/bbl range.
• Spot gold is firmer by around USD 4.5/oz; the yellow-metal traded rangebound overnight, but did climb out of those confines in early European trade, to currently sits at session highs of USD 2925.34/oz.
• Base metals are entirely in the green, continuing to build on the prior day's upside; the complex is seemingly unfazed by the recent tariff updates. On that, US President Trump's 25% tariffs on steel and aluminium took effect with no exemptions and cancelled the 50% tariff on Canada, after Ontario's decision to suspend the 25% energy surcharge. 3M LME copper current trades in a USD 9,646.40-9,748.95/t parameter.
• US Private Inventory Data (bbls): Crude +4.2mln (exp. +2.0mln), Distillate +0.4mln (exp. -0.8mln), Gasoline -4.6mln (exp. -1.9mln), Cushing -1.2mln.
• Kazakhstan has yet to deliver oil output and CPC blend crude export cuts in March, according to sources cited by Reuters.
• India's Russian oil imports have recovered in March after a three-month decline following US sanctions, according to trading sources and shipping data cited by Reuters.

Geopolitics: Middle East

• US Secretary of State Rubio said the US welcomes an agreement between Syrian interim authorities and Syrian democratic forces to integrate northeast into unified Syria, while the US will continue to watch decisions made by interim authorities.

Geopolitics: Ukraine

• Russia's Kremlin says it expects US National Security Advisor Waltz and Secretary of State Rubio to brief it on details of talks with Ukraine in the coming days; a potential Russian President Putin and US President Trump call can be organised "very fast". Need to hear from Waltz and Rubio before it will comment on whether it accepts the ceasefire proposal.
• Russian lawmaker stated that any potential ceasefire agreement in Ukraine will be under Moscow's terms and not those set by Washington.
• Russia conducted an air strike on Ukraine’s capital of Kyiv, according to the Mayor. It was also reported that a Russian missile attack killed four people and damaged a grain vessel in Ukraine's Black Sea port of Odesa, while Russian air defence units reportedly destroyed 21 Ukrainian drones overnight, according to Russian agencies.
• Ukrainian Foreign Minister says they are ready to establish a team for developing a roadmap aimed at achieving a ceasefire with Russia.

Geopolitics: Other

• Russian, Chinese and Iranian ships practised artillery fire in the Gulf of Oman, according to Russian agencies.
• North Korea said a recent misfire by South Korean fighter jets during training shows an accident could trigger armed conflict on the Korean Peninsula and US-South Korean military drills can start the world's first nuclear war, according to KCNA
• Chinese Foreign Ministry says China is to hold talks with Russia and Iran on the Iranian nuclear issue in Beijing on March 14th.

US Event Calendar

• 07:00: March MBA Mortgage Applications 11.2%, prior 20.4%
• 08:30: Feb. CPI MoM, est. 0.3%, prior 0.5%
  • Feb. CPI Ex Food and Energy MoM, est. 0.3%, prior 0.4%
  • Feb. CPI YoY, est. 2.9%, prior 3.0%
  • Feb. CPI Ex Food and Energy YoY, est. 3.2%, prior 3.3%
  • Feb. Real Avg Hourly Earning YoY, prior 1.0%, revised 0.9%
  • Feb. Real Avg Weekly Earnings YoY, prior 0.7%, revised 0.6%
• 14:00: Feb. Federal Budget Balance, est. -$308b, prior -$128.6b

DB's Jim Reid concludes the overnight wrap

Markets experienced another volatile session yesterday, as President Trump threatened a further escalation in the trade war against Canada. At the lows of the day, it even saw the S&P 500 (-0.76%) briefly fall into technical correction territory, on track to close just over 10% beneath its February peak. However, there was a late risk-on move towards the end of the session, as a retreat from some of the more aggressive tariffs and positive headlines on Ukraine helped markets to recover, with the S&P 500 ultimately avoiding a correction and “only” closing -9.31% beneath its peak. But even with that, the latest declines still meant the S&P 500 hit a 6-month low, which is the first time we’ve been able to say that since October 2022.

The risk-off tone emerged after Trump said that the US would put an additional 25% tariff on Canadian steel and aluminium, pushing the rate up to 50%, in response to Ontario putting a 25% tariff on electricity coming into the US. He also made various other statements against Canada, saying that if other tariffs weren’t dropped, “I will substantially increase, on April 2nd, the Tariffs on Cars coming into the U.S. which will, essentially, permanently shut down the automobile manufacturing business in Canada.” Then later in the session, Ontario's premier Doug Ford announced that the province would suspend the 25% electricity export tariff, with Trump in turn paring back the planned tariffs on Canadian steel and aluminium back to 25%. Overnight, those 25% US steel and aluminium tariffs have come into effect, which apply worldwide, with no exemptions granted. And the EU have also proposed countermeasures overnight covering €26bn of American goods, which would come into force over April.

Sentiment also got a boost yesterday thanks to constructive headlines out of talks between US and Ukrainian officials in Saudi Arabia. In particular, Ukraine said it was ready to accept a US proposal for a 30-day ceasefire, with the US administration in turn lifting the pause on military aid and intelligence it had announced early last week. US officials now plan to present the plan to Moscow, with Trump saying that "Hopefully President Putin will agree to that also".

With the latest developments, equity futures are now pointing to a recovery overnight, with those on the S&P 500 up +0.27%, whilst DAX futures are up +1.01%. The VIX index of volatility (-0.94pts) also moved off of its 7-month high on Monday, coming down to 26.92pts. But otherwise, it still wasn’t a great day yesterday, and the decline for stocks was a broad-based one, with the equal-weighted S&P 500 down -1.35%. Meanwhile in credit markets, US HY spreads (+6bps) moved up to 316bps, their highest since September, as did IG spreads (+3bps) with an increase to 94bps. Moreover, the selloff turned increasingly global as well, with Europe’s STOXX 600 (-1.70%) posting a 4th consecutive decline for the first time this year. European equities have been outperforming over 2025 so far, but the latest decline left the STOXX 600 -4.66% beneath its record high just over a week ago.

Looking forward, the next test for markets will be the US CPI inflation print for February, which is out at 12:30 London time. This will be an important one ahead of the Fed’s decision next Wednesday, as another strong print would make it more difficult for them to cut rates this year, particularly given the potential inflationary impact of tariffs in the coming months. In terms of what to expect, our US economists are looking for headline CPI to moderate to a monthly +0.27% pace, down from the +0.47% print in January, which was the fastest in over a year. In turn, that would push the year-on-year rate down a tenth to +2.9%. Then for core CPI, they also see that moderating to +0.26%, with the year-on-year rate falling to +3.1%.

Ahead of the CPI print, US Treasuries sold off yesterday, as a strong JOLTS report outweighed the impact of the tariffs. The release showed that the US labour market was in better shape than thought in January, with job openings up to 7.740m (vs. 7.6m expected). In addition, the quits rate of those voluntarily leaving their jobs was up to a 6-month high of 2.1%, again suggesting that workers remained confident in their prospects. By the close, yields on 10yr Treasuries were up +6.6bps to 4.28%, and the 2yr yield was up +6.0bps to 3.945%, with the selloff intensifying later in the US session. And despite the move higher in yields, the US dollar underperformed, with the dollar index falling -0.46% to its lowest since October. However, Treasuries have rallied a bit overnight, with the 10yr yield (-1.3bps) down to 4.27% this morning.

Meanwhile in Europe, bond yields hit fresh highs as the newsflow suggested that the German Greens could still reach a deal on defence spending that would pave the way for more borrowing. The Green party’s co-leader Franziska Brantner said that “of course we are ready to negotiate”. So with investors viewing a deal as possible still, that meant 10yr bund yields moved up +6.2bps on the day to 2.89%, their highest level since October 2023. Indeed, the latest move leaves them just short of their 2.97% peak that month, which itself was the highest since 2011, before yields moved sharply lower as the Euro crisis escalated. Meanwhile in France, the 10yr yield (+4.2bps) did hit a post-2011 high of 3.58%. But despite the broader risk-off move, sovereign bond spreads tightened further, with the Franco-German 10yr spread reaching just 69bps, which is their tightest level since July.

In US political news overnight, the House passed a funding bill that would keep the US government funded through to September 30 and avoid Saturday's shutdown deadline, with all but one of the Republican Representatives supporting the legislation in a 217-213 vote. The next question is if the bill can achieve sufficient Democrat support to reach the necessary 60 votes in the Senate.

Overnight in Asia, equity markets have broadly put in a steady performance, with gains for the Nikkei (+0.32%), the Shanghai Comp (+0.15%), the CSI 300 (+0.03%) and the KOSPI (+1.41%). However, the Hang Seng is down -0.35% this morning, while Australia’s S&P/ASX 200 has seen a sharper -1.32% loss after it was confirmed that Australia would not get an exemption from US steel and aluminium tariffs.

Looking at yesterday’s other data, the NFIB’s small business optimism index was broadly as expected at 100.7 (vs. 101.0 expected). However, there were fresh signs of inflationary pressures, as the share of firms raising average selling prices moved up to a net +32%, the highest since May 2023.

To the day ahead now, and the main data highlight will be the US CPI print for February. From central banks, the Bank of Canada will announce their latest policy decision, and speakers will include ECB President Lagarde, as well as the ECB’s Simkus, Villeroy, Escriva, Centeno, Nagel, Lane and Panetta.