Full scale meltdown as market waits for someone to blink and trade tensions to resolve

EU Mid-Market Update: Full scale meltdown as market waits for someone to blink and trade tensions to resolve; EU prepares response.

Notes/observations

- Market rout enters capitulation mode. Nikkei225 entered bear market after closing 7.8% lower. Germany’s DAX opened -10% lower. Hard to find safety, as gold and US dollar also fall. Swiss Franc looks to be the only place to hide. Volatility skyrockets (VIX >60), only higher during Yen carry trade sell off in Aug 2024 and COVID pandemic Feb/Mar 2020 selloff.

- Who blinks first? The fundamental question looking ahead for global market sentiment. Notably, Asia (excl China) showing signs of giving in. Following Vietnam on Friday offering to cut tariffs on US imports to zero, both Taiwan and Philippines entertain idea of cutting tariffs on US products. Press reporting EU is preparing to announce a response today. German Econ Min hinted at using EU’s Anti-Coercion Instrument (ACI).

- Economic data takes a back seat amid turmoil, as analysts see largest recessionary factor coming from ongoing trade war. Traders are pricing in more rate cuts for ECB and Fed since last week.

- Note: During times of market crisis like now, additional attention is given to stress related triggers, such as circuit breakers, margin calls, liquidity crunches, counterparty risks, derivatives exposure and bank stress.

- Asia closed lower with Hang Seng underperforming -13.2%. EU indices -4.9% to -6.6%. US futures -3.4% to -3.8%. Gold -0.3%, DXY -0.3%; Commodity: Brent -3.7%, WTI -3.9%; Crypto: BTC -8.3%, ETH -16.9%.

Asia

- Japan Feb Labor Cash Earnings Y/Y: 3.1% v 3.0%e; Real Cash Earnings Y/Y: -1.2% v -1.3%e.

- (CN) China Mar Foreign Reserves: $3.240T v $3.252Te; Gold reserves: 73.70M v 73.61M troy oz prior (5th straight month of resumed purchases).

- China filed WTO lawsuit against US over reciprocal tariffs.

- China retaliated on Fri with its own 34% tariffs on all US goods from April 10th, the first country to retaliate and thus raise fear of a full-blown trade war between the world’s two largest economies.

- China MOFCOM published list of 16 US companies placed on export control list.

- Renewed speculation that China might have room to cut RRR.

- China PBOC set Yuan reference rate: 7.1980 v 7.1789 prior (weakest since Nov 27th, 2024 at 7.1982).

Europe

- ECB's Schnabel (Germany) commented that some people had the view that Trump's 'Liberation Day' could be the day of peak uncertainty, but she was not entirely sure that is the case.

Americas

- President Trump commented on Friday that was not intentionally engineering market sell off and could not say what happens to markets. Stressed that China trade surplus was unsustainable and had spoken to Europe, Asia leaders on tariffs.

- Commerce Sec Lutnick stated that tariffs would stay in place for weeks.

- Treasure Sec Bessent stated that he was not concerned about the stock market's negative reaction last week to Trump's announcement that he was imposing tariffs. Market consistently underestimates Trump.

- White House National Economic Council Dir Hassett stated that USTR report noted that more than 50 countries have reached out to the president to begin a negotiation.

- Senate voted 51-48 on a Budget resolution that unlocks their ability to pass a party-line bill later this year that will combine an overhaul of the tax code with border, energy and defense policies.

- Fed Chair Powell noted on Friday that tariffs would likely raise inflation in coming quarters and more persistent effects possible.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -5.9% at 467.14, FTSE -5.0% at 7,660, DAX -6.6% at 19,342, CAC-40 -6.2% at 6,862, IBEX-35 -6.0% at 11,688, FTSE MIB -6.5% at 3,167, SMI -5.4% at 10,982, S&P 500 Futures -3.6%].

Market Focal Points/Key Themes: European indices opened sharply down across the board and remained under pressure through the early part of the session; aftermath of the trade war affects still weighing on bourses; all sectors start the day in the red, with less negative including real estate and utilities; sectors leading the way lower include industrials and financials; oil & gas subsector under significant pressure after Brent fell below $65/bbl; no major earnings expected in the upcoming US session.

Speakers

- EU Trade Commissioner Sefcovic stated to accelerate free trade cooperation with other countries.
German Econ Min Habeck Trump tariffs is an attack on global trade. Tariffs were causing huge damage and markets could get worse. EU should loosen State-aid rule at assist companies in the bloc.

- Norway Trade Min noted that all options were on the table including against the tech sector.

- Turkey Fin Min Simsek commented that disinflation to continue strongly throughout 2025.

- Poland Central Bank (NBP) Member Wnorowski commented that saw not too much room for rate cuts in 2025.

- Ukraine officials said to be traveling to US this week to discuss minerals agreement.

- Thailand Bourse said to tightening floor & ceiling dynamic price band on stocks. Curbs on stock trading to help ease volatility from tariffs.

- Iran govt said to have made a 'generous' offer to US on nuclear deal; awaiting reply.

Currencies/fixed income

- Safe haven flows push down bond yields and inflows into JPY, CHF currencies amid growing concerns over the possibility of a global recession to be brought about by U.S. tariffs. The sentiment eased a bit as the EU morning progressed but damage on the equity front was extensive.

- EUR/USD unable to sustain breaks above the 1.10 level. Markets pricing in 4 more ECB rate cuts this year.

- GBP/USD drifted below the 1.29 level as the session progressed.

- USD/JPY moved back above the 146 area as the initial risk aversion sentiment waned.

- 10-year German Bund yield at 2.48% and 10-year Gilt yield at 4.45%. 10-year Treasury yield at 3.96%.

Economic data

- (DE) Germany Feb Industrial Production M/M: -1.3% v -1.0%e; Y/Y: -4.0% v -3.6%e.

- (DE) Germany Feb Trade Balance: €17.7B v €18.5Be; Exports M/M: 1.8% v 1.5%e; Imports M/M: +0.7% v -0.4%e;

- (UK) Mar Halifax House Price Index M/M: -0.5% v -0.1% prior; Y/Y: 2.8% v 2.9% prior.

- (SE) Sweden Mar Budget Balance (SEK): -4.6B v +74.0B prior.

- (NO) Norway Feb Industrial Production M/M: +1.6% v -1.8% prior; Y/Y: 0.0% v -6.5% prior.

- (NO) Norway Feb Manufacturing Production M/M: +1.4% v -1.6% prior; Y/Y: 6.1% v 2.9% prior.

- (FI) Finland Feb Preliminary Trade Balance: -€0.2B v -€0.2B prior.

- (ZA) South Africa Mar Net Reserves:$63.2B v $61.7B prior; Gross Reserves:$67.5B v $66.3B prior.

- (HU) Hungary Feb Retail Sales Y/Y: 3.3% v 4.0%e.

- (AU) Australia Mar Foreign Reserves (A$): 105.2B v 104.8B prior.

- (CZ) Czech Feb Industrial Output Y/Y: -1.4% v -2.6%e; Construction Output Y/Y: 0.9% v 8.2% prior.

- (CZ) Czech Feb Trade Balance (CZK): 35.5B v 22.0Be.

- (AT) Austria Mar Wholesale Price Index M/M: -0.8% v -0.2% prior; Y/Y:-0.2% v -0.1% prior.

- (CH) Swiss Mar Foreign Currency Reserves (CHF): B v 735.4B prior.

- (CH) Swiss Weekly Total Sight Deposits (CHF): 433.7B v 451.2B prior; Domestic Sight Deposits: 433.4B v 441.7B prior.

- (TW) Taiwan Mar Foreign Reserves: $578.0B v $577.6B prior.

- (EU) Euro Zone Apr Sentix Investor Confidence: -19.5 v -9.0e.

- (HK) Hong Kong Mar Foreign Reserves: $413.1B v $416.4B prior.

- (EU) Euro Zone Feb Retail Sales M/M: 0.3% v 0.5%e; Y/Y: 2.3% v 1.9%e.

- (IS) Iceland Mar Preliminary Trade Balance (ISK): -38.6B v -57.3B prior.

- (SG) Singapore Mar Foreign Reserves: $381.1B v $379.3B prior.

Fixed income issuance

- (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 3-month Bills; Avg Yield: 4.33% v 4.38% prior; Bid-to-cover: 3.15x v 2.46x prior.

Looking ahead

- 05:25 (EU) Daily ECB Liquidity Stats.

- (RO) Romania Central Bank (NBR) Interest Rate Decision: Expected to leave Interest Rate unchanged at 6.50%.

- (IL) Israel Mar Foreign Currency Balance: No est v $220.3B prior.

- (UR) Ukraine Mar Official Reserve Assets: No est v $0.1B prior.

- (MX) Mexico Citi Survey of Economists.

- 05:30 (DE) Germany to sell €2.0B in 6-month BuBills.

- 05:30 (NL) Netherlands to sell €2.5-3.5B combined in 3-month and 6-month bills.

- 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays.

- 05:45 (IT) ECB’s Cipollone (Italy).

- 06:00 Norway announcement on upcoming bond issuance (held on Wed).

- 06:00 (RO) Romania to sell combined RON1.1B in 2028 and 2034 bonds.

- 06:30 (TR) Turkey to sell Bonds (2 tranches).

- 07:25 (BR) Brazil Central Bank Weekly Economists Survey.

- 08:00 (PL) Poland Mar Official Reserves: No est v $229.2B prior.

- 08:00 (MX) Mexico Mar Vehicle Production: No est v 317.2K prior; Vehicle Exports: No est v 259.0K prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:00 (JP) Japan PM Ishiba to hold call with President Trump.

- 08:00 (ES) Spain Debt Agency (Tesoro) size announcement on upcoming issuance.

- 08:00 (IN) India announces details of upcoming bond sale (held on Fridays).

- 08:30 (CL) Chile Central Bank (BCCH) Mar Minutes.

- 08:30 (CL) Chile Mar Trade Balance: $2.1Be v $1.6B prior; Total Exports: No est v $8.0B prior; Total Imports: No est v $6.3B prior; Copper Production: No est v $3.9B prior.

- 08:30 (CL) Chile Mar International Reserves: No est v $44.9B prior.

- 08:50 (FR) France Debt Agency (AFT) to sell €6.2-7.8B in 3-month, 6-month and 12-month bills.

- 09:00 (IL) Israel Central Bank (BOI) Interest Rate Decision: Expected to leave Base Rate unchanged at 4.50%.

- 09:00 (RU) Russia Mar Official Reserve Assets: No est v $632.4B prior.

- 09:00 (CL) Chile Feb Nominal Wage Y/Y: No est v 8.3% prior.

- 10:30 (CA) Canada Q1 Overall Business Outlook Survey: No est v -1.2 prior; Future Outlook Sales: No est v 31 prior.

- 10:30 (US) Fed's Kugler.

- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.

- 15:00 (US) Feb Consumer Credit: $15.0Be v $18.1B prior.

- 16:00 (US) Weekly Crop Progress Report.

- 17:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 85.3 prior.

- 18:00 (NZ) New Zealand NZIER Business Opinion Survey.

- 19:00 (KR) South Korea Feb Current Account Balance: No est v $2.9B prior; Balance of Goods (BoP): No est v $2.5B prior.

- 19:00 (CO) Colombia Mar CPI M/M: 0.6%e v 1.1% prior; Y/Y: 5.1%e v 5.3% prior.

- 19:00 (CO) Colombia Mar CPI Core M/M: 0.5%e v 1.3% prior; Y/Y: 5.3%e v 5.4% prior.

- 19:50 (JP) Japan Feb Current Account Balance: +¥3.800Te v -¥257.6B prior; Adjusted Current Account: ¥2.740Te v ¥1.94T prior; Trade Balance (BoP Basis): +¥527.5Bev -¥2.94T prior.

- 20:01 (IE) Ireland Mar Construction PMI: No est v 48.7 prior.

- 20:30 (AU) Australia Apr Westpac Consumer Confidence: No est v 95.9 prior.

- 21:00 (PH) Philippines Feb Unemployment Rate: No est v 4.3% prior.

- 21:30 (AU) Australia Mar NAB Business Confidence: No est v -1 prior; Business Conditions: No est v 4 prior.

- 23:00 (TH) Thailand Central Bank to sell THB55B in 3-month bills.

- 23:30 (HK) Hong Kong to sell 3-month, 6-month and 12-month bills.

- 23:35 (JP) Japan to sell 30-year JGB Bonds .