- US stocks closed notably in the red and were hit by risk-off trade due to a combination of factors including Trump tariff developments and with an FT article noting that Chinese energy efficiency rules could hit Nvidia (NVDA) sales. As such, Technology was the clear laggard among sectors with mega-cap names Communication Services and Consumer Discretionary the next worst performers.
- USD strengthened amid tariff-related headlines, stronger-than-expected Durable Goods and the downbeat risk tone.
- Looking ahead, highlights include Chinese Industrial Profits, Supply from Australia & Japan.
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LOOKING AHEAD
- Highlights include Chinese Industrial Profits, Supply from Australia & Japan.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks closed notably in the red and were hit by risk-off trade due to a combination of factors including Trump tariff developments and with an FT article noting that Chinese energy efficiency rules could hit Nvidia (NVDA) sales. As such, Technology was the clear laggard among sectors with mega-cap names Communication Services and Consumer Discretionary the next worst performers.
- SPX -1.12% at 5,712, NDX -1.83% at 19,917, DJI -0.31% at 42,455, RUT -1.03% at 2,074.
- Click here for a detailed summary.
TARIFFS/TRADE
- US President Trump announced to impose 25% tariffs on all cars not made in the US, while he said they will be doing tariffs on pharmaceuticals and tariffs on lumber. Trump stated auto tariffs are going into effect on April 2nd and will start being collected on April 3rd, as well as noted that he will have a news conference on April 2nd which is the real Liberation Day. Furthermore, reciprocal tariffs on April 2nd will be on all tariffs but they will be lenient and in many cases, the tariffs will be less than the tariff charged on the US.
- US President Trump considers more limited tariff plans, while it was earlier reported that automotive tariffs could be narrowed and reciprocal tariffs lowered in latest administration proposals, according to WSJ.
- US will reportedly not take all non-tariff barriers (e.g. VAT) in determining reciprocal tariff rates, according to CNBC.
- EU’s top trade negotiator Sefcovic expects US President Trump to hit the bloc with tariffs of about 20% next week, while it was reported that a White House official said “no final decisions have been made” on what the reciprocal tariff rates will be for US trading partners, according to FT.
- EU expects US President Trump to set a flat, double-digit tariff on April 2nd and it was suggested that the tariff rate applied to the EU could be as high as 20% or 25%, according to Politico citing two diplomats.
- China's Vice Premier He Lifeng spoke with USTR's Greer by video call and both sides had a candid and in-depth exchange of views on the economy and trade, while China expressed solemn concerns on US tariffs and planned reciprocal tariffs. Furthermore, both sides agreed to maintain communications on issues of each other’s concerns and it was also reported that USTR Greer expressed 'serious concerns' on China's trade practices.
- Canadian PM Carney said if he wins the April 28th election, his government would create a CAD 2bln fund to boost the auto sector's competitiveness and stated that their partners in Asia that share their values don't include China and need to be very careful about doing trade with China.
NOTABLE HEADLINES
- Fed's Musalem (2025 voter) said risks that inflation will stall above 2% or move higher in the near term appear to have increased and patience with current policy is appropriate as the Fed gathers evidence inflation is returning to target. Musalem said he is wary of assuming all tariff-related price increases will be temporary as second-round effects could be more persistent, while he added that if the labour market remains strong and second-round tariff effects become apparent, the Fed may need to keep rates higher for longer or consider more restrictive policy. Furthermore, Musalem stated that the labour market is at or close to full employment and it is appropriate for policy to remain where it is given inflation is above target.
- Fed's Kashkari (2026 voter) said a lot of progress can be made on bringing inflation down and there is still more work to do, while in the next year or two, ought to be able to reduce interest rates further. Kashkari said this is the most dramatic shift in confidence in the last decade, save for the COVID era, in which a lot of the uncertainty and sentiment shifts are about tariffs and it is conceivable that the hit to confidence could be a bigger effect than tariffs themselves, as well as stated kind of a wash between the forces on interest rates from tariffs, so we should sit where we are.
- US President Trump posted a quote on Truth stating "TRUMP VOWS TO PROTECT SOCIAL SECURITY & MEDICARE BENEFITS”.
- US President Trump cut 10% of chip curb agency funds, drawing Senate alarm.
- US CBO said the US government could face default risk as soon as August without an increase in the debt ceiling and the borrowing ability could exhausted in late May or sometime in June if borrowing needs exceed CBO projections.
DATA RECAP
- US Durable Goods (Feb) 0.9% vs. Exp. -1.0% (Prev. 3.2%, Rev. 3.3%)
- US Durables Ex-Transport (Feb) 0.7% vs. Exp. 0.2% (Rev. 0.1%)
- US Non-def. Cap Ex-Air (Feb) -0.3% vs. Exp. 0.2% (Prev. 0.8%, Rev. 0.9%)
FX
- USD strengthened amid tariff-related headlines, stronger-than-expected Durable Goods and the downbeat risk tone.
- EUR was pressured due to the tariff threat with a report noting that EU Trade Chief Sefcovic expects President Trump to hit the bloc with tariffs of about 20% next week, applying to all 27 member states.
- GBP retreated after softer-than-expected CPI data from the UK and with attention also on Chancellor Reeves's Spring Statement where no further tax hikes were implemented. Furthermore, OBR GDP forecasts for the year were slashed and its forecasts of GBP 9.9bln of fiscal headroom were unchanged from October, while the OBR labelled the current headroom as being a “very small” margin against the risks that are inherent in fiscal forecasts.
- JPY weakened with
- BoC Minutes stated that ahead of the announcement, the BoC was generally assigning less weight to downside risks to inflation and generally agreed new data had shifted the balance, with somewhat less risk of lower inflation outcomes. Minutes stated they would probably have left rates unchanged at 3% had there not been a tariff threat and increased uncertainty but decided a 25bps cut would provide some help to Canadians to manage the uncertainty related to tariffs. The Minutes also revealed that some governing council members suggested keeping the rate unchanged until there was more clarity on the effects of tariffs and other members felt the threat of tariffs and uncertainty had changed the outlook enough to warrant a cut.
FIXED INCOME
- T-notes were choppy amid strong durable goods data, as well as a downbeat risk tone on NVDA woes and more tariff threats.
COMMODITIES
- Oil prices were firmer for the duration of the session, but trimmed some of the upside heading towards the settlement amid a continued souring of risk sentiment.
- US EIA Weekly Crude Stocks w/e -3.341M vs. Exp. -1.55M (Prev. 1.745M)
- Russian Deputy PM Novak said the Kropotkinskaya oil station is currently being restored and it is too early to say when work will be completed, while the Sudzha station is significantly damaged and its restoration will require considerable time.
GEOPOLITICAL
RUSSIA-UKRAINE
- US President Trump said great strides are being made in Russia-Ukraine talks. It was separately reported that the Ukrainian Chief of Staff to the President said relations between Washington and Kyiv are "back on track".
- US Secretary of State Rubio said the agreement with Russia and Ukraine is one "in principal" and the Russians detailed a number of conditions afterwards which the US is going to evaluate. Rubio added that after they evaluate and understand their position, they'll present it to the President.
- US Treasury Secretary Bessent said President Trump would not hesitate to raise sanctions on Russia if it gives him a negotiating advantage, according to a Fox News interview.
- Ukrainian President Zelensky said he expects the US to ensure the ceasefire is without conditions despite Russian claims, while he added that sanctions against Russia should remain in place. Zelensky also stated that Ukraine and the US discussed a halt of strikes on civilian facilities, but the US did not get support on this from Russia.
- Ukraine's military said Russian accusations of Kyiv's strikes on Russian energy facilities are false and it did not attack Russian energy facilities in Kursk and Bryansk regions and in occupied Crimea on March 25th-26th.
- Russia's Kremlin said the order on the moratorium on energy strikes is still in force and Russia are compliant, while they are continuing contacts with the US and satisfied with the dialogue. Furthermore, it stated the Black Sea initiative will be activated after a number of conditions are met.
- Russian Defence Ministry said Ukraine attempted to attack gas storage infrastructure in Crimea with drones overnight, according to RIA.
- Russian-installed management said Ukrainian reports on alleged damage to a fuel tank at the Zaporizhzhia nuclear plant "are fake", according to Reuters.
- French President Macron said Russia is reinterpreting what was agreed in ceasefire talks and France is to provide military support to Ukraine of EUR 2bln. Macron also stated they want to mobilise partners on Thursday to increase military support to Ukraine.
- EU rejected the Russian ceasefire demand for sanctions relief, while the Kremlin said that the agreement is dependent on dropping measures imposed on the agricultural bank, according to FT. It was separately reported that an EU Commission spokesperson said the unconditional withdrawal of Russian military forces from Ukraine would be one of the main preconditions to amend or lift sanctions.
- NATO Secretary General Rutte said this is not the time to go it alone, not for Europe or North America and there is no alternative to NATO, while he added that Europe needs to know that Uncle Sam still has their back and America also needs to know that its NATO allies will step up. Rutte also said that French and British nuclear deterrence can't replace US deterrence and there will be no normalisation of relations with Russia even after the war in Ukraine is over.
ASIA-PAC
NOTABLE HEADLINES
- BoJ's Koeda said the Bank's mandate is to contribute to a healthy economy and various indicators show Japan's underlying inflation is moving towards a sustainable achievement of the BoJ's 2% target, while she noted that some effects of monetary policy steps appear with a lag so want to scrutinise how BoJ's decisions could impact the economy. Koeda also said Japan's real interest rate is currently extremely low and underlying inflation is heightening moderately.
- Beijing’s energy efficiency rules could severely impact Nvidia’s China sales, as H20 chip fails to meet new environmental standards, according to FT.
EU/UK
NOTABLE HEADLINES
- UK Chancellor Reeves confirmed no further tax hikes and said they will raise an extra GBP 1bln by tackling tax evasion, while they will bring forward GBP 3.25bln of investment to reform public services and day-to-day public spending will rise 1.2%/year in real terms (vs 1.3% in October forecasts). Reeves said growth reforms will deliver an extra GBP 3.4bln to support public services by 2029-2030 and real household disposable income will grow this year at nearly twice the rate forecast in October. Furthermore, she said welfare spending as a share of GDP will fall from 2026 and welfare measures will save GBP 4.8bln, while planning reforms are to permanently boost GDP by 0.2% by 2029-2030.
- OBR forecasts show GBP 9.9bln of fiscal headroom (vs 9.9bln in October) and OBR now expects UK GDP growth of 1.0% this year (2.0%) but sees growth recovering to 1.75% over the rest of the decade and forecasts the UK economy growing 1.9% in 2026, 1.8% in 2027, 1.7% in 2028, 1.8% in 2029. Furthermore, the OBR sees CPI at 3.2% in 2025 (prev. 2.6%), sees 2.1% in 2026 (prev. 2.3%), and 2% from 2027 onwards, while forecasts show GBP 47.5bln more borrowing between 2024-25 and 2029-30 vs October forecasts and the OBR labelled the current headroom as being a “very small” margin against the risks that are inherent in fiscal forecasts.
- UK DMO CEO said a reduction in long-dated Gilt issuance in 2025/26 represents an "important shift" and the shift to shorter-dated Gilts reflects "cost and risk for the exchequer".
- UK Chancellor Reeves defended the digital services tax and said they believe that companies should pay tax in the countries in which they operate, which is why they introduced the digital services tax in the first place, and their views on that have not changed".
- ECB's Centeno said there is no reason to deviate from the interest rate path incorporated in projections, while a weak economy and neutral rate estimates argue for more cuts and he does not see any reason for an April pause. Centeno added that neutral rates might not be enough to sustain inflation at 2% and would like to see rates closer to 2% sooner rather than later.
- ECB's Holzmann said the ECB should refrain from cutting its key interest rate at its April meeting in a show of caution as rising military spending and higher US tariffs threaten to keep EZ inflation above its 2% target, according to WSJ.
- ECB's Villeroy said in the short-term, US President Trump's "lose-lose" strategy is harming the US as the Fed's downgrade of its forecast show, while he added a 25 percentage point increase in US tariffs in Q2 would have a limited impact on European inflation, but could reduce EZ GDP by 0.3 percentage points in a year.
DATA RECAP
- UK CPI YY (Feb) 2.8% vs. Exp. 2.9% (Prev. 3.0%)
- UK Core CPI YY (Feb) 3.5% vs. Exp. 3.6% (Prev. 3.7%)
- UK CPI Services YY (Feb) 5.0% vs. Exp. 4.9% (Prev. 5.0%)
