Daily Points

ON DECK FOR MONDAY, MARCH 10

KEY POINTS:

• Sloppy talk on the economy by the US administration is dragging equities lower
• Mark Carney crushes opponents, becomes new interim PM as widely expected
• Comparing early Canadian election platforms: Carney versus Poilievre
• Trump, Bessent and Lutnick should all have been more careful with their comments
• US administration continues to back off tariffs, delays tariffs on dairy, lumber…
• ...but is committed to protecting coddled US steel companies as metals prices soar
• Norwegian inflation soars, roils local markets
• Mixed German macro data
• Global Week Ahead — A Break for March (reminder here)

Negative talk about the US economy by Trump and his Treasury Secretary are dragging down stocks. There is little else to consider by way of market-moving global developments. Norway’s inflation rattled local markets, German data was mixed, and few should be surprised that Canada’s Liberal Party chose Market Carney to be interim PM. I offer a tentative loose comparison of election pledges.

Stocks are broadly lower with US futures leading the way with declines of about 1%. European cash markets are down by about ¼% to ¾%. Asian exchanges were mixed including a gain of ¼% in Seoul and a little more than that for the Nikkei to nearly a 2% drop by the Hang Seng and mild decline in Shanghai. Sovereign bonds are mostly dearer with a rally being led by US Ts. The dollar is weaker on a DXY basis as the yen and CHF pick up safe haven flows and the Euro and related crosses gain.

US ADMINISTRATION SIGNALS CONCERN ABOUT THE ECONOMY

There was one simple way of answering reporters’ questions about recession risk and they all blew it.

Trump and Bessent could have given a stock answer in political-speak. Instead, they fanned the flames and in a way that has markets thinking that either the US administration is in disarray, and/or the administration is ok with the damage being caused by its policies at a very early stage. This includes totally irresponsible moves on tariffs that are sapping confidence to spend and invest, mass firings in the federal government alongside the inability to move fiscal plans forward and with the negative hit to the economy from immigration policy. Trump inherited a strong economy and will be made to own consequences of his administration’s policies.

Trump said this in his usual ineloquent manner: “There is a period of transition, because what we’re doing is very big, we’re bringing wealth back to America, that’s a big thing. There are always periods of…it takes a little time, it takes a little time, but I think it should be great for us, I mean I think it should be great.”

This follows Treasury Secretary Bessent’s comments on Friday after payrolls: "Look, there's going to be a natural adjustment as we move away from public spending to private spending. The market and the economy have just become hooked, and we've become addicted to this government spending, and there's going to be a detox period." The private economy was actually performing very well before the new administration took over, Mr. Bessent; just have a look at consumption figures right up to Q4 as one example.

Commerce Secretary Lutnick was a smidge wiser than both of them but went too far with his claim “There’s going to be no recession in America.” Lutnick’s comments on economics are often not to be treated very seriously, but absent from all three officials’ comments was a rallying middle ground.

All of them should be vastly more careful with their chosen words. Once you start recession talk backed by their policy actions, developments can snowball rapidly from there and they can be hard to turn around.

For my two cents, I think the probability of a US recession has definitely shot higher but am not prepared to make such a call. Q1 GDP had several distortions, ranging from weather to LA fires, although policy instability is harming growth and confidence at a time when stock market valuations had been priced for perfection and then some.

US ADMINISTRATION DELAYS TARIFFS ON CANADA

In any event, we’re seeing the Trump administration back pedal from tariffs as it dawns upon them that this would harm the US economy. Ya think??! Gosh, what a revelation.

The US administration appears to be delaying tariffs on dairy and lumber from Canada until April 2^nd. This is according to Commerce Secretary Lutnick and conflicts with Trump’s threat on Friday to impose them as soon as that day or shortly thereafter. We’ll see if they ever appear, and how broader negotiations toward a trade agreement may proceed. Lutnick reaffirmed that Wednesday is the day for US metals tariffs including against Canada, in which cash American consumers will simply have to pay more to coddled US steel companies and to the benefit of organized US labour in that sector.

CANADA’S NEW INTERIM PRIME MINISTER

While there is no market reaction this morning, Canada’s election call took one step closer to becoming reality. Mark Carney will take over the reins as PM at some point probably this week once PM Trudeau officially resigns and once the Governor General asks Carney to form a new administration that will include selecting a fresh cabinet. He might call an election at any point and perhaps set in motion an April election. In the end, it wasn’t even a contest, as Carney took 85.9% of the vote on the first ballot yesterday.

I’m sure it will change when an election is upon us, but I’ve included a table comparing the election platforms of Canada’s new PM Mark Carney and Conservative Leader Pierre Poilievre. Key for both will be to stand firm against the US administration’s foolish trade policies and to hope Canada can then navigate toward more constructive policy options. For instance, tax cuts in a trade war would likely be hoarded with little effect in my opinion.

MIXED GERMAN DATA

German macro data was mixed for the month of….January. The lagging numbers don’t speak to forward risks of course, but fwiw industrial output was up 2% m/m and exports were down 2.5% m/m and imports gained by 1.2%. Most of this is continuing the seesaw pattern.

NORGES BANK EXPECTATIONS TRIMMED POST-CPI

A large upside surprise by Norway’s CPI reading slammed Norwegian markets. Norway’s rates curve gets the prize for worst performer this morning with yields up by double digits in bear flattener fashion, while the krone is the class leader thanks to a 1% appreciation to the USD. CPI was up by 1.4% m/m (0.5% consensus) with underlying CPI doubling expectations at 1% m/m. February is normally an up-month for the seasonally unadjusted readings, but the underlying CPI measure’s m/m gain was among the hottest on record.

Pricing for the March 27^th Norges decision was scaled back by about 5bps post-data to about 16bps. None of the next four meetings are fully priced for a 25bps cut, though they get closer by June.

There is nothing material on deck in N.A. today with just the NY Fed’s 1-year inflation expectations measure for February due out (11amET).