Red across the board as fresh commentary about Liberation day spikes uncertainty

EU mid-market update: Red across the board as fresh commentary about Liberation Day spikes uncertainty; Gold >$3.1K amid safe haven flows; European clocks move forward 1 hour for DST.

Notes/observations

- European indices open lower, with Germany lagging as markets await reciprocal tariff announcement on Wed, Apr 2nd (“Liberation Day”). Trump’s push for reciprocal tariffs on all countries—reviving a universal flat rate and targeting auto imports with a 25% levy—has fueled risk-off sentiment across most assets. Additional threats of 25-50% tariffs on Russian oil buyers, tied to Ukraine peace efforts, add geopolitical spice to the mix. Heightened tariff fears have spurred revisions to Fed rate cut forecasts.

- Goldman Sachs has increased the likelihood of a US recession in the next 12 months from 20% to 35%. They now expect the Fed to cut rates in July, September, and November instead of June and December. They also anticipate a 15% reciprocal tariff on the EU from a potential Trump administration, raising total EU tariffs by 20 percentage points. Tier1 analysts continue to think Trump will negotiate comprehensive country-specific packages, but admit that hawkish scenarios could take US tariffs to levels unseen since the 1930s; Meanwhile, Nomura strategists warn that hopes for an April 2 tariff resolution boosting market confidence are fading.

- DAX lags despite German retail sales beating expectations for February. Collection of state CPI readings out of Germany point to a national reading above the 2.2% consensus at 08:00 ET (12:00 GMT).

- UK sentiment brightens with Lloyds Bank’s business barometer showing a boost in retailer optimism, even as PM Starmer confirms ongoing tariff talks with US.

- Yen is stronger against all major pairs due to safe haven flows. Yen also impacted by month-end, quarter end and FY end flows. BOJ cut the monthly bond buying amount from ¥4.50T to ¥4.105T. This was the first time since Jan 2024 that BOJ slowing buying of super-long bonds.

- Copper retreats modestly from its long run up in 2025, whereas spot gold surges 1% to a record $3,115/oz amid safe-haven buyi.

- Asia closed lower with Nikkei underperforming -4.0%. EU indices -0.9% to -1.6%. US futures -0.6% to -1.3%. Gold +1.2%, DXY -0.3%; Commodity: Brent -2.1%, WTI -2.7%; Crypto: BTC -2.1%, ETH -2.7%.

Asia

- China Mar Manufacturing PMI (Govt Official): 50.5 v 50.4e (2nd month of expansion; highest since Mar 2024); Non-Manufacturing PMI: 50.8 v 50.6e.

- Japan Feb Preliminary Industrial Production M/M: 2.5% v 2.0%e; Y/Y: 0.3% v 1.2%e.

- Japan Feb Retail Sales M/M: +0.5% v -0.2%e; Y/Y: 1.4% v 2.5%e.

- New Zealand Mar ANZ Business Confidence: 57.5 v 58.4 prior.

- Australia Feb Private Sector Credit M/M: 0.5% v 0.5%e v 0.5% prior; Y/Y: 6.5% v 5.0% prior.

- South Korea Feb Industrial Production M/M: 1.0% v 0.8%e; Y/Y: 7.0% v 3.3%e.

- Japan Fin Min Kato reiterated to communicate closely with US counterparts on FX. Agreed with US that excessive FX moves were not desirable.

Global conflict/tensions

- Pres Trump noted Putin's comments on Zelenskiy were not going the right direction; Was "very angry, pissed off" about Putin’s recent comments suggesting ways to install new leadership in Ukraine; Would put secondary 25-50% tariffs on all Russian oil if there wais no Ukraine deal and would think it was due to Russia’s fault.

Europe

- UK Mar Lloyds Business Barometer: 49 v 50e.

Americas

- Pres Trump said to be pushing senior advisers to go bigger on tariff policy as they prepare for the “Liberation Day” on April 2nd; Pres Trump reportedly revived idea of flat universal tariff single rate on most imports.

- President Trump stated that would be announcing pharmaceutical tariffs soon; Deals on averting auto tariffs would come later on.

- Pres Trump stated that absolutely would follow through on Canada tariffs; Had 'very good talk' with Canada PM Carney.

- President Trump commented he was not joking about a 3rd term, there were methods for doing so; added that it was far too early to think about it.

- Goldman Sachs analysts raised US recession probability for next 12 months from 20% to 35%; Now saw the Fed to cut in July, Sept and Nov (**Note: previously saw June and December cuts); Expecte dthe Trump administration to implement a reciprocal tariff on the EU worth 15%, raising the total effective tariff rate on the EU by 20ppts.

Energy:- Pres Trump stated that was not putting on oil sanctions 'right now'; had not heard anything on limiting tariff actions. Going to make decision on secondary tariffs on Iran and would not want to put secondary tariffs on Russia.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -1.27% at 535.24, FTSE -0.93% at 8,578.04, DAX -1.18% at 22,190.71, CAC-40 -1.22% at 7,819.59, IBEX-35 -1.14% at 13,150.94, FTSE MIB -1.52% at 38,150.00, SMI -1.41% at 12,675.90, S&P 500 Futures -0.99%].

Market Focal Points/Key Themes: European indices open lower across the board and remained under pressure through the early part of the session; lack of risk appetite attributed to uncertainty ahead of Wednesday’s tariff announcements; among sectors managing gains are utilities and consumer discretionary; sectors leading the way lower include materials and financials; Aston Martin proposes to take a stake in Yew Tree, to sell shares in its Formula One team; reportedly Fraisers looking to raise its stake in Accent; focus on German flash CPI coming out later in the day; no major earnings expected in the upcoming US session.

Equities

- Consumer discretionary: Bertelsmann [BTG.DE] +1.5% (earnings), EasyJet [EZJ.UK] -1.5% (interview), Pets at Home [PETS.UK] -12.5% (trading update).

- Financials: Banca Monte Paschi de Siena [BMPS.IT] -3.5% (ISS recommends opposing Paschi share hike for Mediobanca bid).

- Industrials: Aston Martin [AML.UK] +12.5% (Proposed £52.5M investment by Yew Tree Consortium and selling of shares in Aston Martin Aramco Formula One Team), Stellantis [STLA.NL] -3.0% (global auto names down ad collection date for US auto tariffs nears), John Wood Group [WG.UK] -25.0% (Business update on independent review; Ongoing discussions with lenders on refinancing and debt waivers; FY24 results publication delayed).

- Technology: Cancom [COK.DE] -15.0% (final FY24 results).

Speakers

- ECB Chief Lagarde stated that Trump tariffs allowed chance for Europe to show independence; Europe must take better control of its own destiny. Almost at our inflation target.

- ECB Panetta (Italy) stated that needed to be cautious on calls for lower rates due to uncertainty from US tariff announcements. Fight against inflation was not over.

- France Commerce Minister Laurent Saint-Martin reaffirmed would apply reciprocal measures if US tariffs go ahead this week. Still hoped could avoid trade war with US.

- French Court said to find Le Pen guilty over misuse of EU funds.

- South Africa Democratic Alliance (DA) party said to see good chance of budget agreement by mid-week.

- Japan lower house said to pass FY25/26 budget.

- Iran Supreme Leader Khamenei sated that US would receive blow if the act on Trump's threats (**Reminder: Pres Trump stated that if Iran did not make a deal, "there would be bombing"; Considering punishing Iran with “secondary tariffs”; US and Iranian officials were talking).

- DOGE team said to have accessed Federal payroll system.

- US govt said to have held preliminarily discussions over possible farmer financial help.

Currencies/fixed income

- FX markets were steady during the EU morning with focus on the Apr 2nd “Liberation Day’ tariffs implementation by President Trump. Risk aversion flows were prevalent in other assets as EU bond yields moved lower by approx. 3bps.Dealers noted of rising recession risks in the US as Goldman Sachs analyst raised its US recession probability for next 12 months from 20% to 35%; Goldman also now saw Fed to cut in July, Sept and Nov (v prior June and December.

- EUR/USD was steady at 1.0820 area as EU inflation data continued to pour in. The German readings were mixed after lower ones registered by France and Spain late last week, ECB talk was caution that upside risks to inflation were not diminished yet.

- USD/JPY stayed down by the lower end of 149 handle. The yen currency was the biggest winner among the majors on the risk haven flows.

- 10-year German Bund yield at 2.69% and 10-year Gilt yield at 4.66%. 10-year Treasury yield at 4.20%.

Economic data

- (FI) Finland Feb Retail Sales Y/Y: -0.7% v -1.1% prior.

- (DE) Germany Feb Retail Sales M/M: 0.8% v 0.0%e; Y/Y: 0.5% v 0.5%e.

- (DE) Germany Feb Import Price Index M/M: 0.3% v 0.0%e; Y/Y: 3.6% v 3.3%e.

- (DK) Denmark Q4 Final GDP Q/Q: 1.8% v 1.6% prelim; Y/Y: 4.4% v 4.1% prelim.

- (ZA) South Africa Feb M3 Money Supply Y/Y: 6.1% v 7.1% prior; Private Sector Credit Y/Y: 3.7% v 4.6% prior.

- (HU) Hungary Feb PPI M/M: -0.4% v +0.4% prior; Y/Y: 8.2% v 9.1% prior.

- (HU) Hungary Jan Average Gross Wages Y/Y: 10.4% v 9.9%e.

- (HU) Hungary Feb Trade Balance: €1.1B v €1.4Be.

- (CH) Swiss Q4 Foreign Exchange Transactions (CHF): 0.1B v 0.7B prior.

- (TH) Thailand Feb Current Account Balance: $5.5B v $4.2Be; Overall Balance of Payments (BOP): $5.5B v $4.2B prior; Trade Account Balance: $4.4B v $0.4B prior; Exports Y/Y: 13.9% v 12.9% prior; Imports Y/Y: 4.1% v 7.5% prior.

- (DE) Germany Mar CPI North Rhine Westphalia M/M: 0.3% v 0.4% prior; Y/Y: 1.9% v 1.9% prior.

- (DE) Germany Mar CPI Hesse M/M: 0.4% v 0.3% prior; Y/Y: 2.4% v 2.3% prior.

- (DE) Germany Mar CPI Bavaria M/M: 0.3% v 0.4% prior; Y/Y: 2.3% v 2.4% prior.

- (DE) Germany Mar CPI Brandenburg M/M: 0.4% v 0.6% prior; Y/Y: 2.3% v 2.3% prior.

- (DE) Germany Mar CPI Saxony M/M: 0.6% v 0.3% prior Y/Y: 2.5% v 2.3% prior.

- (DE) Germany Mar CPI Baden Wuerttemberg M/M: 0.3% v 0.5% prior; Y/Y:2.2 % v 2.5% prior.

- (ES) Spain Jan Current Account Balance: €1.2B v €1.7B prior.

- (CH) Swiss Weekly Total Sight Deposits (CHF): 451.2B v 449.2B prior; Domestic Sight Deposits: 441.7B v 440.4B prior.

- (NO) Norway Central Bank (Norges) Apr Daily FX Purchases (NOK): 100M v 400M prior.

- (PL) Poland Mar Preliminary CPI M/M: 0.1% v 0.3%e; Y/Y: 4.9% v 5.1%e.

- (CZ) Czech Feb M2 Money Supply Y/Y: 4.0% v 4.5% prior.

- (UK) Feb Net Consumer Credit: £1.4B v £1.2Be; Net Lending: £3.3B v £3.8Be.

- (UK) Feb Mortgage Approvals: 65.5K v 65.6Ke.

- (UK) Feb M4 Money Supply M/M: 0.2% v 1.1% prior; Y/Y: 3.8% v 4.1% prior; M4 (Ex-IOFCs) 3-month Annualized: 4.7% v 4.8% prior.

- (HK) Hong Kong Feb Retail Sales Value Y/Y: -13.0% v -6.9%e; Retail Sales Volume Y/Y: -15.0% v -9.6%e.

- (HK) Hong Kong Feb M3 Money Supply Y/Y:6.8 % v 4.5% prior; M2 Money Supply Y/Y: 6.8% v 4.5% prior; M1 Money Supply Y/Y: 5.3% v 1.8% pri.

- (IT) Italy Mar Preliminary CPI M/M: 0.4% v 0.0%e; Y/Y: 2.0% v 1.6%e.

- (IT) Italy Mar Preliminary CPI EU Harmonized M/M: 1.6% v 1.3%e; Y/Y: 2.1% v 1.8%e.

- (GR) Greece Jan Retail Sales Value Y/Y: +1.9% v -5.3% prior; Retail Sales Volume Y/Y: +2.5% v -5.0% prior.

- (IS) Iceland Feb Final Trade Balance (ISK): -57.3B v -57.9B prelim.

Fixed income issuance

- (EU) EFSF opened its book to sell EUR-denominated 5-year bonds; guidance seen +32bps to mid-swaps.

Looking ahead

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

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

- 06:00 (PT) Portugal Mar Preliminary CPI M/M: No est v -0.1% prior; Y/Y: No est v 2.4% prior.

- 06:00 (PT) Portugal Mar Preliminary CPI EU Harmonized M/M: No est v -0.1% prior; Y/Y: No est v 2.5% prior.

- 06:00 (IL) Israel to sell combined ILS2.95B in 2027, 2028, 2029, 2033, 2034 and 2052 bonds.

- 6:00 (RO) Romania to sell RON500M in 7.4% Apr 2027 Bonds; Avg Yield: % v 7.05% prior; bid-to-cover: x v 1.53x prior (Feb 17th 2025).

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

- 08:00 (DE) Germany Mar Preliminary CPI M/M: 0.3%e v 0.4% prior; Y/Y: 2.2%e v 2.3% prior.

- 08:00 (DE) Germany Mar Preliminary CPI EU Harmonized M/M: 0.4%e v 0.5% prior; Y/Y: 2.4%e v 2.6% prior.

- 08:00 (ZA) South Africa Feb Trade Balance (ZAR): No est v -16.4B prior.

- 08:00 (CL) Chile Feb Retail Sales Y/Y: 2.7%e v 8.0% prior; Commercial Activity Y/Y: No est v 5.6% prior.

- 08:00 (CL) Chile Feb Industrial Production Y/Y: -0.9%e v 1.9% prior; Manufacturing Production Y/Y: -1.2%e v 3.5% prior; Total Copper Production: No est v 426.9K prior.

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

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

- 09:00 (FR) France Debt Agency (AFT) to sell €6.2-7.8B in 3-month, 6-month and 12-month bills.

- 09:01 (AU) Australia Mar CoreLogic Home Value M/M: No est v 0.3% prior.

- 09:45 (US) Mar Chicago Purchase Managers Index (PMI): 45.0e v 45.5 prior.

- 10:30 (US) Mar Dallas Fed Manufacturing Activity: -5.0e v -8.3 prior.

- 10:30 (UK) Quarterly investor & GEMM remit meetings.

- 11:00 (CO) Colombia Feb National Unemployment Rate: No est v 11.6% prior; Urban Unemployment Rate: 10.2%e v 11.1% prior.

- 11:00 (MX) Mexico Feb Net Outstanding Loans (MXN): No est v 6.852T prior.

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

- 12:00 (US) USDA Quarterly Crop Report.

- 12:00 (SE) Sweden Central Bank (Riksbank) Breman.

- 14:00 (CO) Colombia Central Bank Interest Rate Decision: Expected to leave Overnight Lending Rate unchanged at 9.50%.

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

- 17:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 83.8 prior.

- 18:00 (AU) Australia Mar Final PMI Manufacturing: No est v 52.6 prelim.

- 19:01 (UK) Mar BRC Shop Price Index Y/Y: -0.4%e v -0.7% prior.

- 19:30 (JP) Japan Feb Jobless Rate: 2.5%e v 2.5% prior; Job-To-Applicant Ratio: 1.26x v 1.26 prior.

- 19:50 (JP) Japan Q1 Tankan Large Manufacturing Index: 12e v 14 prior; Large Manufacturing Outlook: 9e v 13 prior.

- 19:50 (JP) Japan Q1 Large Non-Manufacturing Index: 33e v 33 prior; Large Non-Manufacturing Outlook: 29e v 28 prior; Large All Industry Capex: 3.2%e v 11.3% prior.

- 19:50 (JP) Japan Q1 Small Manufacturing Index: -1e v +1 prior; Small Manufacturing Outlook: -3e v 0 prior.

- 19:50 (JP) Japan Q1 Small Non-Manufacturing Index: 15e v 16 prior; Small Non-Manufacturing Outlook: 10e v 8 prior.

- 20:00 (KR) South Korea Mar Trade Balance: $6.0Be v $4.3B prior; Exports Y/Y: 4.9%e v 0.7% prior (revised from 1.0%); Imports Y/Y: 2.2%e v 0.2% prior.

- 20:01 (IE) Ireland Mar PMI Manufacturing: No est v 51.9 prior.

- 20:30 (AU) Australia Feb Retail Sales M/M: No est v 0.3% prior.

- 20:30 (JP) Japan Mar Final PMI Manufacturing: No est v 48.3 prelim.

- 20:30 (KR) South Korea Mar PMI Manufacturing: No est v 49.9 prior.

- 20:30 (TW) Taiwan Mar PMI Manufacturing: No est v 51.5 prior.

- 20:30 (PH) Philippines Mar PMI Manufacturing: No est v 51.0 prior.

- 20:30 (TH) Thailand Mar PMI Manufacturing: No est v 50.6 prior.

- 20:30 (VN) Vietnam Mar PMI Manufacturing: No est v 49.2 prior.

- 20:30 (SG) Singapore Q1 Preliminary URA Private Home Prices Q/Q: No est v 2.3% prior.

- 21:45 (CN) China Mar Caixin PMI Manufacturing: No est v 50.8 prior.

- 23:30 (AU) Reserve Bank of Australia (RBA) Interest Rate Decision: Expected to leave Cash Rate Target unchanged at 4.10%.