- US stocks extended on losses and the S&P 500 slipped into correction territory with sentiment weighed on by trade tensions after US President Trump threatened a 200% tariff on alcohol from within the EU in response to the 50% EU tariff on US whiskey. Aside from trade, data and geopolitics also took the limelight in which US PPI data printed softer than expected but was offset by upward revisions, while the PCE components were hotter than the prior, and both Initial and Continued Jobless claims fell beneath analyst forecasts. The data saw two-way price action in T-notes, with T-notes hitting session lows once the data was digested, although the downbeat risk tone reignited the flight-to-quality bid which saw T-notes settle higher across the curve. On the geopolitical front, Russian President Putin supported the idea of a ceasefire but stressed that the ceasefire must lead to a final settlement of the conflict and solve the root causes of the conflict, while Ukrainian President Zelensky claimed that Russian President Putin is preparing a rejection of the ceasefire proposal but is scared to say this directly to US President Trump.
- USD was broadly firmer against peers as a risk-averse theme was seen across the markets with the threat of US tariffs growing with US President Trump showing no signs of relinquishing the April 2nd tariffs, while Trump also threatened 200% tariffs on alcohol products from France and EU-represented countries in response to the 50% tariff they imposed on US whiskey. In terms of the data, US PPI eased more than expected on both the headline and core prints, however, the prior saw upward revisions and the metrics that feed into PCE mostly accelerated from the prior month, while jobless claims unexpectedly fell.
- Looking ahead, highlights include New Zealand BusinessNZ PMI & Food Price Index, Supply from Japan, Indian Holiday Closure.
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LOOKING AHEAD
- Highlights include New Zealand BusinessNZ PMI & Food Price Index, Supply from Japan, Indian Holiday Closure.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks extended on losses and the S&P 500 slipped into correction territory with sentiment weighed on by trade tensions after US President Trump threatened a 200% tariff on alcohol within the EU in response to the 50% EU tariff on US whiskey. Aside from trade, data and geopolitics also took the limelight in which US PPI data printed softer than expected but was offset by upward revisions, while the PCE components were hotter than the prior, and both Initial and Continued Jobless claims fell beneath analyst forecasts. The data saw two-way price action in T-notes, with T-notes hitting session lows once the data was digested, although the downbeat risk tone reignited the flight-to-quality bid which saw T-notes settle higher across the curve. On the geopolitical front, Russian President Putin supported the idea of a ceasefire but stressed that the ceasefire must lead to a final settlement of the conflict and solve the root causes of the conflict, while Ukrainian President Zelensky claimed that Russian President Putin is preparing a rejection of the ceasefire proposal but is scared to say this directly to US President Trump.
- SPX -1.39% at 5,522, NDX -1.89% at 19,225, DJI -1.30% at 40,814, RUT -1.62% at 1,994.
- Click here for a detailed summary.
TARIFFS/TRADE
- US President Trump said he is not going to change his mind on April 2nd tariffs and won't bend on Canada metals or April 2nd tariffs, while he added that they don't need Canada's cars, energy or lumber.
- US President Trump posted that the EU has put a 50% tariff on Whiskey and "If this Tariff is not removed immediately, the U.S. will shortly place a 200% Tariff on all WINES, CHAMPAGNES, & ALCOHOLIC PRODUCTS COMING OUT OF FRANCE AND OTHER EU REPRESENTED COUNTRIES". Trump also posted "The U.S. doesn’t have Free Trade. We have “Stupid Trade.” The Entire World is RIPPING US OFF!!!"
- US Commerce Secretary Lutnick said steel and aluminium are needed for national security and that retaliatory tariffs are "tone deaf", while he added the US needs to be treated fairly and that they need semiconductors, autos, pharmaceuticals, steel and aluminium in America.
- US Secretary of State Rubio said they have seen a level of cooperation from the Mexican authorities that they have never seen in the past, but added it is not enough.
- Ontario Premier Ford said they want to have a constructive meeting with US Commerce Secretary Lutnick and noted that inflation is going to happen with tariffs. Ford also said Lutnick put out an olive branch this week and President Trump let them down.
- French Overseas Trade Minister St. Martin said in response to US President Trump's tariff remarks that France remains determined to respond with the European Commission and partners, while they will not yield to threats and will protect industries.
- European Commission said EU Trade Commissioner Sefcovic reached out to US counterparts on Wednesday over tariffs and calls are being prepared.
- WTO said Canada initiated a WTO dispute complaint regarding US steel and aluminium duties.
- EU Industry Commissioner Sejourne said he wishes to remove barriers which make it difficult for firms to operate within the bloc, reduce red tape and simplify regulations, according to WSJ.
NOTABLE HEADLINES
- US President Trump posted "But have no fear, we will WIN on everything!!! Egg prices are down, oil is down, interest rates are down, and TARIFF RELATED MONEY IS POURING INTO THE UNITED STATES", as part of a post criticising the WSJ.
- US Treasury Secretary Bessent said the Trump administration is focused on the real economy and long-term gains for the market, while it is not concerned about a little bit of market volatility over a three-week period. Bessent added that the focus is the medium/long-term and actions will lay the groundwork for real income and job gains.
- US Commerce Secretary Lutnick said when President Trump balances the budget, the President has suggested he wants to waive taxes for those earning under USD 150k, while they want it to take three years to balance the budget. Lutnick added there will be no tax on TIPS, overtime, and social security, as well as commented that the US does not want to buy 60% of their aluminium from Canada.
- US Senate Majority Leader Thune said there is no major update from Senate Minority Leader Schumer’s team on any time agreement/amendment deal, while he responded “It depends on whether or not they want to vote on the year-long CR and how soon they want to do it” when asked on the chances of allowing amendment vote on a 30-day CR, according to Punchbowl.
- WSJ's Timiraos posted "The numbers in so far suggest core PCE will be firm, higher than core CPI for February and higher than the January core PCE … will publish the table when I have time later".
DATA RECAP
- US PPI Final Demand YY (Feb) 3.2% vs. Exp. 3.3% (Prev. 3.5%, Rev. 3.7%)
- US PPI exFood/Energy YY (Feb) 3.4% vs. Exp. 3.5% (Prev. 3.6%, Rev. 3.8%)
- US Initial Jobless Claims w/e 220.0k vs. Exp. 225.0k (Prev. 221.0k, Rev. 222k)
- US Continued Jobless Claims w/e 1.87M vs. Exp. 1.9M (Prev. 1.897M)
FX
- USD was broadly firmer against peers as a risk-averse theme was seen across the markets with the threat of US tariffs growing with US President Trump showing no signs of relinquishing the April 2nd tariffs, while Trump also threatened 200% tariffs on alcohol products from France and EU-represented countries in response to the 50% tariff they imposed on US whiskey. In terms of the data, US PPI eased more than expected on both the headline and core prints, however, the prior saw upward revisions and the metrics that feed into PCE mostly accelerated from the prior month, while jobless claims unexpectedly fell.
- EUR retreated further beneath the 1.0900 level amid the escalation in the trade tiff after US President Trump threatened 200% tariffs on alcohol products from France and EU-represented countries, while the single currency was also not helped by the conflicting opinions regarding talks between Germany's CDU and Greens on a financial package.
- GBP marginally softened albeit with the downside limited amid a lack of catalysts for the UK ahead of GDP estimates.
- JPY strengthened with USD/JPY back beneath the 148.00 handle amid softer US yields and the risk-off mood.
FIXED INCOME
- T-notes saw two-way price action on US data before moving higher as risk sentiment soured.
COMMODITIES
- Oil prices declined and were initially weighed on by US envoy Witkoff landing in Russia and with further pressure following some constructive remarks from Russian Putin, in addition to the downbeat risk tone.
- IEA OMR cut 2025 oil demand growth forecast to 1.03mln BPD (prev. 1.1mln BPD) and stated "the scope and scale of tariffs remains unclear, and with trade negotiations continuing apace, it is still too early to assess the impact on the market outlook".
- US President Trump called for pipeline approval from New York and stated that NY State has held up this project for many years, but we will not let that happen any longer and will get federal approval.
- Russian and European officials see US interest in Gazprom ties, according to Bloomberg.
GEOPOLITICAL
MIDDLE EAST
- Israel is targeting a headquarters belonging to the Jihad movement in Damascus, according to Sky News Arabia citing an Israeli source.
- US has reportedly presented an updated proposal for extending the Gaza ceasefire deal, by several weeks, in return for additional hostage releases by Hamas, according to four sources cited by Axios.
- US imposed sanctions on the Iranian Oil Minister and Hong Kong-flagged vessels in which it sanctioned three entities and three vessels to stop the flow of money to Iran.
RUSSIA-UKRAINE
- Russian President Putin said Russia agrees with the US proposal to stop fighting in Ukraine but said any truce should lead to long-standing peace and would have to eliminate the root cause of the conflict, while he thanked Trump for his attention to the Russia/Ukraine conflict. Putin also said if the US and Russia agree on energy cooperation, then a gas pipeline for Europe could be provided which will be beneficial for Europe thanks to cheap Russian gas.
- Ukrainian President Zelensky said Russian President Putin is preparing a rejection of the ceasefire proposal but is scared to say this directly to US President Trump, while he added they need to impose sanctions that put pressure on Russia and will continue to work with our partners to force it to end the war. Furthermore, he said Russia is setting conditions on a ceasefire to try to delay it or make it not happen.
- Ukrainian President's Chief of Staff said Ukraine will never agree to a frozen conflict and noted they agreed with the US that European representatives will definitely take part in the peace process.
- Ukrainian government official said Kyiv understands it cannot recover all its territory by military force right now and will need to do this diplomatically over time, while Kyiv will not recognise Russian rights over Ukrainian territory and territorial concessions were not discussed during Jeddah talks with US officials.
- US President Trump does not think Russia will attack US allies and said they'll make sure it doesn't happen, while Trump said he still has a good relationship with North Korea’s leader.
- US President Trump said Special Envoy Witkoff is in serious discussions in Russia and hopefully should have an idea today how we're doing, while Trump added he is getting word things are going ok in Russia and said hopefully Putin and others want to end this nightmare. It was also reported that US Envoy Witkoff is to meet with Russian President Putin on Thursday night, according to Politico.
- Kremlin Aide Ushakov said the proposed ceasefire is nothing more than a temporary breather for Ukrainian forces, while he outlined Russia's position on the need for long-term settlement in talks with US NSA Waltz. Ushakov said a temporary 30-day ceasefire would "give nothing" to Russia, while it was also reported that the Kremlin said the 30-day ceasefire proposal is hasty and needs to be updated to account for Russian interests, according to RIA.
- Russia's Kremlin said Russian President Putin may have an international phone call later on Thursday, while Putin said there is a huge amount of misinformation out there regarding reports that Russia has laid out demands for talks. However, a Kremlin aide said there was no agreement on a Russian President Putin and US President Trump call so far and it is not expected to happen today.
- Russian Foreign Minister Lavrov said the deployment to Ukraine of foreign military personnel under any flag is unacceptable and Russia considers any foreign military bases in Ukraine as unacceptable. Furthermore, Lavrov said the deployment of troops or building bases in Ukraine would mean direct involvement of these countries in the conflict with Russia and Russia would respond with all available means to deployment of foreign troops and bases in Ukraine.
OTHER
- Russian Foreign Ministry said European plans to lift defence spending amount to the incitement of war on the European continent.
- Russia and Belarus are ready to take military and diplomatic measures in response to NATO actions, according to a Russia-Belarus joint statement.
- NATO SecGen Rutte said Europe is committing to much higher defence spending and needs to produce more weapons but added it is not doing enough and is lagging behind the Russians and the Chinese.
- US President Trump said they are going to have to make a deal on Greenland and thinks the annexation will happen, while he added the US is going to order 48 icebreakers.
ASIA-PAC
NOTABLE HEADLINES
- PBoC said it will lower rates and the RRR at a "proper time", while it will keep liquidity ample and guide social financing costs lower. PBoC said it will balance short and long-term developments, strengthen expectation guidance and keep CNY basically stable at a reasonable and balanced level.
- China’s financial regulator said it will firmly ensure the delivery of housing projects and will introduce targeted financial support measures to help boost consumption.
- US Senator Steve Daines is trying to get President Trump to name him as a special envoy to China to help secure a meeting with Chinese President Xi that could pave the way for a summit between the leaders, according to FT.
- Belgium targeted Huawei in an EU corruption probe and the Chinese company’s offices in Brussels were raided as part of a cash-for-influence investigation, according to FT.
EU/UK
NOTABLE HEADLINES
- ECB's Rehn said can only hope that the Trump administration can respect central bank independence, while he added they should aim at negotiated solutions for US tariffs and encourage the administration to avoid unnecessary and harmful measures.
- ECB's Kazaks said he cannot say everything is done on inflation and rates will be decided meeting by meeting amid uncertainty.
- ECB's Nagel said US trade tariffs on the EU could push Germany into a recession in 2025.
- German CDU leader Merz said they have carried out good talks with the Greens on a financial package and have changed the proposal on infrastructure fund to also include climate protection measures, while he proposed to meet demands by the Greens to expand the scope of defence to include civil defence and intelligence funding.
- Germany's Green Party official said there was no progress in talks with CDU/CSU and SPD on debt plans, while it was separately reported that Germany's Greens leader Droge said they do not trust a word of CDU Leader Merz.
- Portugal's President disbanded parliament and called an early parliamentary election on May 18th after the government recently lost a confidence vote.
DATA RECAP
- EU Industrial Production MM (Jan) 0.8% vs. Exp. 0.6% (Prev. -1.1%, Rev. -0.4%)
- EU Industrial Production YY (Jan) 0.0% vs. Exp. -0.9% (Prev. -2.0%)
