ON DECK FOR MONDAY, MARCH 31
KEY POINTS:
- Trump’s remarks slam risk appetite, buoy gold
- France’s Le Pen barred from 2027 election, fined with jail sentence
- China’s state PMIs held firm
- German, Italian CPI were warmer than last week’s French and Spanish tallies
- German, Japanese and South Korean data was strong into tariffs
- BanRep expected to hold with cut risk
- US oil execs likely to signal continued dismay toward Trump
- Reminder: Global Week Ahead—Tarrified!
Thanks, Trump. A series of angry weekend comments by Trump ahead of this coming Wednesday’s tariff day is causing risk-off sentiment across global markets.
Stocks are down by 1–2%+ across global exchanges. Sovereign bonds are rallying everywhere with US Treasury yields outperforming. The strongest beneficiaries of this uncertainty are the yen—watch out BoJ—and gold that’s now well over $3,100/oz for a gain of over $500 since the start of the year; that’s not a good sign for the economy and global financial system. Chart 1 shows the massive surge.
Mixed in throughout it all are overnight data releases that really don’t matter amid present and forward-looking risks, month-end portfolio effects that probably have global PMs scratching their heads over what to do next more than anything else, and light calendar-based developments into the N.A. session.
WHAT TRUMP SAID
Trump’s thirst for attention was on full display yesterday. Here’s what went down:
- Trump’s advisers are still trying to figure out what to do on Wednesday after having created all the hype. The WSJ reports (here) that his advisers are considering broader, higher tariffs of 20% across the board.
- Trump said nothing is off the table for annexing Greenland; so, you’d risk war with other NATO allies, would you??!
- He also claimed he doesn’t care if vehicle prices rise and that auto tariffs are permanent. The most vulnerable are producers with little US content given how the tariffs work and that means European and Asian vehicles produced outside of the US.
- Trump also sounded aggressive toward Putin and Iran, saying he is prepared to use secondary tariffs on Russian oil exports if Ukraine talks are unsatisfactory and to bomb the latter if it doesn’t agree to a peace deal. Sanctions haven’t done much to sway Russia to date. As for Iran, a short time after Trump’s remarks they rejected any direct talks with the Trump administration. Oil is up this morning despite dollar strength.
FRANCE’S LE PEN CONVICTED
National Rally leader Marine Le Pen was convicted of embezzlement this morning in a long standing dispute over diverting funds to her party’s causes. She was sentenced to two years in prison plus two suspended years and handed a 5-year ban from elections along with a €100,000 fine. Not knowing enough about the French political and legal process I’m unsure of whether an appeal is possible and, perhaps more importantly, whether this destroys the National Rally or emboldens it. Going by the US experience where nothing stuck to Trump, we perhaps need to closely follow further developments.
CHINA’S PURCHASING MANAGERS’ INDICES WERE SOLID—BEFORE TARIFFS
China’s state PMIs held firm in March (chart 2). The composite PMI edged up three-tenths to 51.4 which is within the realm of statistical noise. It has, however, moved up by 1.3 points since January on some combination of shaking off the Lunar New Year and tariff front-loading. The manufacturing PMI also moved up 0.3 to 50.5 while the non-manufacturing PMI was up four-tenths to 50.8.
EUROZONE INFLATION NOT TRACKING AS SOFTLY AS IT EARLIER READINGS SUGGESTED
German states reported CPI figures for March this morning ahead of the national add-up. They are roughly tracking around the 0.4% EU-harmonized consensus estimate for the German tally. Individual states were up by 0.2-0.6% m/m.
Italian CPI was up by 1.6% m/m in March (1.3% consensus). That lifted the y/y rate to 2.1% from 1.7% (1.8% consensus). The month-over-month figures were warmer than usual when comparing like months of March given they are seasonally unadjusted (chart 3).
GERMAN CONSUMERS WERE SPENDING—BEFORE TARIFFS
German consumers were not fussed by recent developments—at least up to February. Retail sales volumes were up by 0.8% m/m that month (0% consensus) and were revised up half a point to post a gain of 0.7% in January.
JAPANESE AND KOREAN READINGS WERE ROBUST—BEFORE TARIFFS
It was the same thing in Japan where February data was robust. Industrial output was up 2.5% m/m (2.0% consensus, -1.1% prior). Retail sales were up 0.5% (-0.2% consensus) and revised up seven-tenths to 1.2% m/m the prior month. Housing starts also gained by more than consensus expected. The bigger issue for Japan is whether the BoJ can continue hiking as markets have pressed while the yen is gaining safe haven flows and global trade is in turmoil thanks to Trump.
South Korean factories were humming in February, probably as they sought to jump ahead of tariffs. Industrial output was up by 1% m/m (0.8% consensus), but in this case that’s only rebounding from a worse than previously understood drop the prior month (-2.8% m/m instead of -2.0%).
GERMAN REMARKS SUPPORT EUROPEAN-CANADIAN ALLIANCE
And outgoing German Chancellor Scholz expressed solidarity with Canada against Trump’s vicious attacks which continues to indicate a Canada-Europe alliance of sorts. He said “Canada is not a federal state of anyone, Canada is a proud, independent nation. Canada has friends all over the world—and especially many of them here in Germany and Europe. We stand by your side.” And likewise here, friend.
LIGHT DEVELOPMENTS INTO N.A. SESSION
Random tariff talk is likely to continue to spark enormous volatility and dominate light developments.
Colombia’s central bank is expected to hold at 9.5%, but there is a modest minority that still thinks they may cut (2pmET).
The Dallas Fed’s manufacturing activity reading for March is due out (10:30amET). Being oil country—and in the wake of the Dallas Fed’s survey of oil industry executives that strongly condemned the Trump administration’s energy policies—the reading may continue to reflect pessimism.
GLOBAL WEEK AHEAD REMINDER
As a reminder, please see the Global Week Ahead—Tarrified! It’s in client inboxes. Key topics addressed in this issue are as follows:
- A black mark on the annals of global economic history will arrive this week
- ‘Liberation Day’ will be a libertarian’s worst nightmare
- A protectionist US wall revisits 1930, and the 1500s through 1700s
- Which countries are most vulnerable to US tariffs
- All the ways America heavily protects its auto sector
- Expect retaliation…
- …including direct pre-commitments to do so from Canada
- Four narratives on the way forward
- US nonfarm payrolls: cautious optimism for now
- Fed’s Powell to update outlook post-tariffs and nonfarm…
- …and most of the Fed’s Board will weigh in post-tariffs
- Canadian jobs: tariffs and snow
- BanRep expected to hold again
- RBA to hold
- Eurozone CPI is likely to be soft for now
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