InvestMacro

Despite Friday’s good growth, US indices closed the week in negative territory. On Friday, the Dow Jones (US30) Index gained 1.65% (for the week -2.40%). The S&P 500 Index (US500) increased by 2.13% (for the week -1.16%). The Nasdaq Technology Index (US100) was up 2.49% (for the week -0.62%). Stocks were under pressure last week on concerns that US tariffs would dampen economic growth and corporate earnings. Last Tuesday, President Trump imposed 25% tariffs on Canadian and Mexican goods and doubled tariffs on Chinese goods to 20% from 10%. Trump also confirmed that he will impose retaliatory tariffs against foreign countries on April 2 as planned. Trade tensions escalated on Wednesday when the European Union imposed tariffs on up to $28.3 billion worth of US goods, including soybeans, beef, and poultry, in response to US tariffs on steel and aluminum imports. In addition, Canada announced 25% counter-tariffs on about $20.8 billion worth of US-made goods, such as computers and sporting goods, as well as US steel and aluminum products.

Last week, the US dollar hit new lows for the year against the Chinese yuan, Mexican peso, euro, sterling, Japanese yen, Swedish króna and Norwegian krona. The architects of the new US foreign economic policy expected the dollar’s strength to absorb some cost of US tariffs and expected some exporters to cut prices. Instead, the dollar has mostly fallen against major currencies.

The Mexican peso (MXN) strengthened to 19.9 per US dollar in March, hitting a four-month-high, thanks to a high interest rate differential and resilient external accounts. With Banxico’s benchmark rate at 10.50%, the currency is benefiting from an attractive trade amid easing US rate expectations. In addition, the government’s calm, negotiation-oriented approach to tariff disputes has resulted in favorable concessions and minimal retaliation in key sectors such as auto and electronics.

Equity markets in Europe were mostly up on Friday. The German DAX (DE40) gained 1.86% (week ended -0.76%), the French CAC 40 (FR 40) closed 1.13% higher (week ended -1.63%), the Spanish IBEX 35 (ES35) gained 1.43% (week ended -1.93%), and the British FTSE 100 (UK100) closed 1.05% higher (week ended -0.55%) on Friday. European markets saw gains, boosted by optimism over German Chancellor Friedrich Merz’s investment plan and hopes for a resolution to the situation in Ukraine. Meanwhile, the ongoing tariff war remains a serious concern.

WTI crude oil prices rose 0.9% to settle at $67.20 per barrel on Friday after a more than 1% decline in the previous session as investors continued to assess ongoing geopolitical uncertainty over the war in Ukraine. Despite Russian President Putin’s tentative support for a ceasefire, confidence in an early resolution of the situation declined. Meanwhile, geopolitical tensions, including Chinese and Russian support for Iran and the expiration of the US energy sanctions license, continue to weigh on market sentiment. Macroeconomic uncertainty is also weighing on oil, with the International Energy Agency warning of a growing supply glut as an escalating trade war reduces demand and OPEC+ increases production.

Asian markets traded flat last week. Japan’s Nikkei 225 (JP225) rose by 0.22%, China’s FTSE China A50 (CHA50) gained 0.56%, Hong Kong’s Hang Seng (HK50) fell by 0.65% and Australia’s ASX 200 (AU200) was negative 1.99%. Hong Kong shares rose 375 points in Monday morning trading, jumping for a second session amid growing optimism over China’s announced plan to stimulate domestic demand. Australian stocks also followed the Hang Seng’s rally.

On Sunday, China’s State Council launched a special action plan to boost domestic consumption, including raising household incomes and setting up a childcare subsidy scheme. The plan also includes measures to stabilize the stock market but does not give details on when and how this might happen. China will expand real estate income channels through stock market stabilization measures and develop more bond products suitable for individual investors. Meanwhile, traders digested good economic data, including a 4% year-on-year rise in retail sales for the first two months of 2025, the fastest pace since October, and a stronger-than-expected 5.9% increase in industrial production. However, the unemployment rate rose to a two-year high of 5.4% in February from 5.2%, exceeding market expectations of 5.1%.

At the end of Wednesday, the Dow Jones (US30) fell by 0.20%. The S&P 500 Index (US500) was up 0.49%. The Nasdaq Technology Index (US100) added 1.13%. Stock indices mostly rose on Wednesday, although the Dow Jones Industrials Index fell to a 6-month low. Stocks found support on Wednesday amid easing price pressures after the February US Consumer Price Index rose less than expected. The February US CPI rose by 0.2% m/m and 2.8% y/y, which was weaker than expectations of 0.3% m/m and 2.9% y/y. February CPI excluding food and energy rose by 0.2% m/m and 3.1% y/y, weaker than expectations of 0.3% m/m and 3.2% y/y. Stock gains were limited by escalating trade tensions. On Wednesday, the European Union imposed tariffs on up to $28.3 billion worth of goods from the US, including soybeans, beef, and poultry, in response to US tariffs on steel and aluminum imports.

The Canadian dollar is holding near 1.44 per dollar, near a one-month low of 1.45 hit on March 3, as Canada imposed retaliatory tariffs of 25 percent on $21 billion worth of US goods after Trump’s duties on steel and aluminum took effect. The move raises costs for US manufacturers and increases trade uncertainty. Meanwhile, the Bank of Canada cut rates by 25 bps to 2.75%, marking a 225 bps easing from June 2024 to counter an expected slowdown in the economy. The Bank of Canada warned that the change in US tariff policy is eroding confidence in the economy and dampening domestic demand, and companies are already struggling to borrow as a weaker loonie drives up the cost of imports. Markets are predicting another rate cut before the end of the year.

Equity markets in Europe were mostly up yesterday. Germany’s DAX (DE40) rose by 1.56%, France’s CAC 40 (FR40) closed higher by 0.59%, Spain’s IBEX 35 (ES35) fell by 0.57%, and the UK’s FTSE 100 (UK100) closed positive 0.53%. The US imposed 25% tariffs on European steel and aluminum, prompting the EU to announce retaliatory tariffs on US goods, resulting in the EU announcing retaliatory duties on €26 billion worth of US goods in April. Market sentiment improved on optimism about a possible ceasefire in Ukraine after Kyiv said it was willing to accept a US-brokered proposal, and after Washington restored military aid and resumed intelligence sharing with Ukraine.

WTI crude oil prices rose more than 2% to above $67.7 a barrel on Wednesday, extending gains for a second session as US data showing strong domestic demand and easing inflation boosted market sentiment. US consumer prices rose at the slowest pace in four months, raising hopes for a more patient Federal Reserve. Crude oil inventories rose by a smaller-than-expected 1.5 million barrels, according to government data.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) rose by 0.07%, China’s FTSE China A50 (CHA50) gained 0.25%, Hong Kong’s Hang Seng (HK50) fell by 0.76% and Australia’s ASX 200 (AU200) was negative 1.32%.

Caution prevailed in China after the end of the ‘two sessions’, with economists warning that the 5% growth target would be difficult to achieve due to intensifying domestic and external factors, as well as Beijing’s modest pledges to boost consumption and reduce overcapacity.

Australia’s Prime Minister said Australia will not impose retaliatory tariffs against the US. Instead, the government will continue to seek an exemption, warning that retaliatory measures could increase consumer spending and lead to higher inflation. Meanwhile, Australia’s consumer inflation expectations for the next 12 months fell to 3.6% in March from 4.6% in February, indicating that price pressures in the economy are easing.

At the end of Tuesday, the Dow Jones Index (US30) fell by 1.14%. The S&P 500 Index (US500) was down 0.76%. The Nasdaq Technology Index (US100) lost 0.28%. On Tuesday, stocks came under pressure after President Trump announced he would raise tariffs on steel and aluminum imports from Canada to 50% from 25% starting Wednesday in response to Ontario’s imposition of a 25% export tariff on US-sourced electricity. However, stocks partially recovered when Ontario Premier Ford said he would suspend the 25 percent tariff on electricity to the US when US Commerce Secretary Lutnick agreed to meet with him in Washington on Thursday. President Trump has also said he is considering eliminating the 50 percent tariffs he initially imposed on Canada.

Tuesday’s economic news in the US showed strength in the labor market, lending support to stocks after the January JOLTS Job Openings Index rose 232,000 to 7.74 million, beating expectations of no change at 7.60 million.

The Mexican peso remained stable at 20.35 in March. The peso was supported by high interest rates in Mexico, which support carry trade flows, as well as a solid external balance, including a trade surplus and strong remittances. However, weak domestic data, including a drop in consumer confidence and a 0.6% contraction in Q4 2024 GDP — the sharpest since 2021 — has reinforced expectations of a rate cut by the Bank of Mexico on March 27, which could undermine the peso’s attractiveness from a yield perspective.

Bitcoin (BTC/USD) rose more than 4% on Tuesday, recovering more than half of Monday’s losses on disappointment that President Trump’s new digital assets’ reserve will only be replenished with digital assets already owned by the government, rather than new digital assets acquired through seizures.

Equity markets in Europe were mostly down yesterday. Germany’s DAX (DE40) fell by 1.29%, France’s CAC 40 (FR40) closed down 1.31%, Spain’s IBEX 35 (ES35) lost 1.57%, and the UK’s FTSE 100 (UK100) closed down 1.21%. European stocks lost ground on Tuesday, extending their decline from the previous session to a one-month low, as the impact of a slowing US economy outweighed support from increased public spending by Eurozone governments. Companies more exposed to global discretionary demand suffered losses, with Inditex, Ferrari, and L’Oreal falling 1-2%. On the other hand, industrial giants continued to rise on the back of government promises to increase infrastructure and military investment. Schneider, Safran, Airbus added more than 0.6%, while Rheinmetall and Leonardo rose more than 4%, extending momentum for defense contractors. Automakers were also in focus, with Volkswagen shares rising 2% despite aggressive profit cuts and an uncertain future due to US tariffs as investors showed less pessimism than expected.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) fell 0.64%, China’s FTSE China A50 (CHA50) rose by 0.47%, Hong Kong’s Hang Seng (HK50) lost 0.01% and Australia’s ASX 200 (AU200) was negative 0.91%.

Japan’s largest companies have agreed to significant wage increases for the third consecutive year to help workers cope with rising inflation and ease labor shortages. Labor union group Rengo is pushing for a 6.09% average wage increase this year, the highest demand in 32 years. Broad wage growth is needed for the Bank of Japan to further raise interest rates from 0.5% and for the government to stimulate consumer spending amid stagnant inflation-adjusted wages.

China kept its economic growth target at “around 5%” while setting a record-high fiscal deficit of 4% of GDP. It also lowered its consumer inflation target to 2% and set a target to keep urban unemployment at 5.5%. The 2025 budget signals an increase in public spending to support economic growth.

At the end of Monday, the Dow Jones Index (US30) fell by 2.08%. The S&P 500 Index (US500) was down 2.70%. The Nasdaq Technology Index (US100) decreased by 4.00%. The US market had its worst day of the year yesterday as fears that President Donald Trump’s tariff policies could lead the US economy into recession dampened investor sentiment. Sentiment deteriorated further after President Trump did not rule out the possibility of a US recession this year and noted short-term economic shocks associated with his trade and fiscal agenda in an interview Sunday Morning Futures on Fox News Channel. Trump imposed 25% tariffs on Mexico and Canada last week, but then exempted most goods for a month, creating uncertainty around his trade policy. The US president also raised tariffs on Chinese goods, prompting retaliatory duties from China. He is set to impose retaliatory tariffs globally from April 2, which could further undermine sentiment in the markets. Shares of major technology companies including Tesla (-15.4%), Nvidia (-5%), and Meta (-4.4%) were among the hardest hit, contributing to the broader market’s decline. Tariffs imposed by the Trump administration have raised fears that inflation could rise and make it harder for the Federal Reserve to cut interest rates.

The Goldman Sachs note provides insight into the recent behavior of hedge funds in the stock market, indicating a significant reduction in their exposure to equities. Hedge funds significantly reduced their holdings in stocks last Friday, the largest such move in two years. The size of the moves made by some hedge funds on Friday can be compared to those seen in March 2020, during the first COVID pandemic outbreak, and January 2021. During those periods, hedge funds were forced to wind down their short positions in stocks favored by retail investors.

The Canadian dollar weakened to US $1.44, nearing a one-month low amid sharp policy changes, escalating tariff threats from the US, and disappointing economic data. In a landmark election, former Central Bank official Mark Carney became Canada’s new Prime Minister, taking a hard-line stance and promising to maintain tariffs on US goods until “Americans show us respect,” which, combined with his relative inexperience, increased uncertainty about future trade negotiations and domestic policy direction. In addition, the February jobs report showed that the Canadian economy only added about 1,000 positions versus the expected 20,000, adding to concerns about the economy’s momentum. Given current economic concerns, including trade tensions and a weakening labor market, the Bank of Canada is expected to cut interest rates from 3.00% to 2.75% at its March 12 meeting.

Equity markets in Europe were mostly down yesterday. Germany’s DAX (DE40) fell by 1.69%, France’s CAC 40 (FR 40) closed down 0.90%, Spain’s IBEX 35 (ES35) fell 1.32%, and the UK’s FTSE 100 (UK100) closed down 0.92%. In Europe, traders overlooked a stronger-than-expected recovery in German industrial production in January.

WTI crude oil prices fell to $66 a barrel on Monday amid expectations of weaker demand and ample supply. US President Donald Trump and Treasury Secretary Scott Bessent have signaled that the US could face economic difficulties in the medium term due to trade wars with Canada, China, and Mexico, in addition to promises of aggressive government spending cuts. In China, fresh data showed that consumer and producer prices fell more than expected in February, raising concerns that goods consumption is not being affected by credit growth. This increased the impact of the OPEC+ agreement to raise oil production as early as April after the organization’s members struggled to meet their commitments to cut output.

Asian markets were flat yesterday. Japan’s Nikkei 225 (JP225) rose by 0.38%, China’s FTSE China A50 (CHA50) declined 0.53%, Hong Kong’s Hang Seng (HK50) fell by 1.85%, and Australia’s ASX 200 (AU200) was positive 0.18%. Traders continue to sell stocks amid persistent deflationary pressures in China in February, driven by weakening seasonal demand and cautious household spending due to job and income concerns. In addition, the US is set to inspect China-made chip models used in consumer electronics, which could lead to the imposition of additional tariffs on Chinese products. Meanwhile, China will conclude two sessions today and some traders expect new measures to stimulate the sluggish economy.

Australian consumer sentiment rose to a three-year high in March, helped by the Reserve Bank of Australia’s interest rate cut in February and easing cost-of-living pressures. However, business confidence readings turned negative in February, indicating continued economic concerns. The Australian dollar hovered at $0.627 on Tuesday after three consecutive sessions of declines, hurt by widespread risk aversion in financial markets amid growing fears of a US recession. The Aussie was also hampered by lingering economic uncertainty and lingering deflationary pressures in China, its biggest trading partner, as traders awaited policy announcements after a key meeting in Beijing.

The US market showed the worst week since September. On Friday, the Dow Jones (US30) rose 0.52% (-2.50% for the week). The S&P 500 Index (US500) gained 0.55% (-3.32% for the week). The Nasdaq Technology Index (US100) gained 0.74% (-3.76% for the week). The US stock markets saw a volatile day on Friday, as Wall Street recovered from earlier losses amid continued uncertainty over President Trump’s trade policies. Stocks recovered losses after Fed Chairman Powell said the Central Bank was in no rush to cut interest rates, but the overall economic outlook remains clouded by trade tensions and political uncertainty. Still, economic data showed mixed results as a weaker-than-expected employment report showed non-farm payroll employment rose by 151k in February, while the unemployment rate rose to 4.1%.

Former Canadian Central Bank official Mark Carney has won the race to become leader of Canada’s ruling Liberal Party and will succeed Justin Trudeau as prime minister. During the campaign, Carney said he supported retaliatory tariffs against the US in dollar terms and a coordinated strategy to increase investment. He has repeatedly complained that Canada’s growth under Trudeau has not been good enough. There is a risk that the new prime minister will seek a snap election to get a popular mandate.

Equity markets in Europe were mostly down on Friday. Germany’s DAX (DE40) fell by 1.75% (week-to-date +1.44%), France’s CAC 40 (FR40) closed down 0.94% (week-to-date -0.23%), Spain’s IBEX 35 (ES35) gained 0.17% (week-to-date -0.64%), and the UK’s FTSE 100 (UK100) closed negative 0.03% (week-to-date -1.47%) on Friday. In Europe, European Union leaders reaffirmed their commitment to Ukraine and pledged increased military support during an emergency meeting on Thursday.

WTI crude oil rose 1% to $67 a barrel on Friday after US President Donald Trump threatened sanctions against Russia if it fails to reach a ceasefire with Ukraine. Trump mentioned he was “strongly considering” sanctions against Russian banks and tariffs on Russian goods due to the ongoing attacks.

Asian markets were mostly down last week. Japan’s Nikkei 225 (JP225) was down 1.72%, China’s FTSE China A50 (CHA50) added 0.29%, Hong Kong’s Hang Seng (HK50) increased by 4.71%, and Australia’s ASX 200 (AU200) was negative 3.36%.

China’s consumer prices fell the most in 13 months. Chinese consumer prices fell to 0.7% y/y in February 2025, exceeding market projections that expected a 0.5% decline and reversing the 0.5% rise in the previous month. This marked the first consumer deflation since January 2024 amid weakening seasonal demand following the Spring Festival in late January. On a month-on-month basis, CPI fell by 0.2%, shifting from January’s 11-month high of 0.7%, the first decline since last November. Meanwhile, producer prices fell to 2.2% y/y, marking the 29th consecutive month of decline. The offshore yuan depreciated to around 7.25 per dollar as investors reacted to weaker-than-expected Chinese inflation data that underscored lingering risks of deflation.

Japan’s index of leading economic indicators, which gauges the economic outlook for the coming months based on data such as job offers and consumer sentiment, rose to 108.0 in January 2025 from a downwardly revised 107.9 in December 2024, the highest since last October. Meanwhile, consumer sentiment weakened to its lowest level since March 2023.

The US stocks fell on Thursday as trade uncertainty and changes to the Trump administration’s tariff policy fueled investor anxiety. The Dow Jones Index (US30) was down 0.99%. The S&P 500 Index (US500) decreased by 1.78%. The Nasdaq Technology Index (US100) fell by 2.79%, hitting its lowest level since last November.

The US government currently holds about 200,000 bitcoins worth about $18 billion. The order also says it will create a US digital asset reserve to store other confiscated crypto assets. However, the news did not enthuse investors as the US government will not buy bitcoin to replenish the reserve, meaning there is no new buying pressure on the market. White House Chief of Staff David Sachs announced the reserve will be funded solely by bitcoins seized in criminal and civil forfeiture cases.

Equity markets in Europe were mostly up on Thursday. Germany’s DAX (DE40) jumped 1.47%, France’s CAC 40 (FR40) closed 0.29% higher, Spain’s IBEX 35 (ES35) gained 0.15%, and the UK’s FTSE 100 (UK100) closed 0.83% yesterday. The DAX index rose more than 1% to a new record high above 23,360 on Thursday, with most stocks rising as European leaders pledged to increase defense spending and support Ukraine, reacting to Donald Trump’s change in US policy. EU leaders welcomed proposals for greater budgetary flexibility in defense and a plan to jointly borrow up to 150 billion euros to finance military spending. The European Central Bank delivered an expected interest rate cut but took a more cautious stance on future rate changes, revising its near-term inflation forecasts upward.

WTI crude oil prices traded around $66 a barrel on Friday, starting the worst week since October and the longest weekly losing streak since December 2023. The potential impact of changes in global trade pressured prices. Although President Donald Trump eased some tariffs on Mexico and Canada before April 2, retaliatory tariffs on Canada remain, and China’s measures will take effect next week. The bearish sentiment is compounded by the fact that OPEC+ plans to restart production in April, which coincides with the prospect of a restart of the Kirkuk-Ceyhan pipeline and increased production from Kazakhstan’s Tengiz field, adding to fears of oversupply.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) fell 1.60%, China’s FTSE China A50 (CHA50) gained 0.66%, Hong Kong’s Hang Seng (HK50) rose 0.59%, and Australia’s ASX 200 (AU200) was negative 1.26%.

At the end of Wednesday, the Dow Jones (US30) was up 1.14%. The S&P500 Index (US500) was up 1.12%. The Nasdaq Technology Index (US100) jumped 1.36%. The White House confirmed that General Motors, Ford, and Stellantis received a one-month extension on tariffs related to the US-Mexico-Canada agreement, easing concerns about the impact on the economy. Investors viewed the move as a potential signal that the administration could negotiate further tariff waivers, which prompted a rebound in the broad market. Traders await Friday’s monthly jobs report after ADP data showed the US private sector added just 77,000 jobs in February, the smallest gain in seven months. Meanwhile, the dollar faced further pressure from a rising euro as Germany’s proposed €500 billion infrastructure fund and plans to overhaul borrowing rules boosted growth prospects in the Eurozone.

Equity markets in Europe were mostly rising on Wednesday. Germany’s DAX (DE40) jumped 3.38%, France’s CAC 40 (FR40) closed 1.56% higher, Spain’s IBEX 35 (ES35) gained 1.40%, and the UK’s FTSE 100 (UK100) closed negative 0.04%. Berlin announced a historic increase in defense and infrastructure spending. Friedrich Merz, Germany’s incoming Chancellor, confirmed that the main centrist parties will create a €500 billion infrastructure fund and amend the constitution to remove fiscal restraints on defense and security spending.

WTI crude oil prices rose to $67 a barrel on Thursday, likely a technical rebound after hitting multi-year lows in the previous session. Some relief came after a US official suggested that President Donald Trump may slap a 10% tariff on Canadian energy imports in line with trade agreements. However, sentiment remained bearish due to concerns over the impact of the US tariffs and OPEC+’s decision to increase production. Tariffs and retaliatory measures could slow global growth and weaken oil demand. Meanwhile, EIA data showed that US crude inventories rose more than expected, adding to oversupply fears.

Asian markets rose steadily yesterday. Japan’s Nikkei 225 (JP225) rose by 1.07%, China’s FTSE China A50 (CHA50) gained 1.26%, Hong Kong’s Hang Seng (HK50) jumped 3.41%, and Australia’s ASX 200 (AU200) was positive 0.34%. China reacted sharply to the new US tariffs, declaring its willingness to wage “any type of war” with the US and dismissing the US fentanyl explanation for imposing the tariffs as a “flimsy excuse.”

The New Zealand dollar climbed as high as 0.573 US dollars on Thursday, hitting a one-week-high, amid improving risk sentiment after the US granted a temporary tariff reprieve to automakers. On Monday, President Donald Trump granted automakers a one-month reprieve from imposing 25% tariffs on imports from Canada and Mexico. The kiwi was further supported by fresh fiscal stimulus measures promised by China, which signaled increased efforts to boost consumption and protect economic growth amid ongoing trade tensions with the US.

Vietnam’s annual inflation rate fell to 2.91% in February 2025, a three-month low, down from 3.63% in January. The slowdown was driven by lower inflation in the service sector. Meanwhile, core inflation, which excludes volatile items, slowed to 2.87% from 3.07% in January.