Risk aversion continues ahead of US jobs report and Powell, USD claws back recent losses

Notes/observations

- Global sell off continues following brutal Thursday session that saw worst single day for Wall Street since the pandemic in 2020. Although, move so far today is less extreme as some caution observed before Nonfarm Payrolls at 08:30 ET and comments from Fed Chair Powell at 11:25 ET.

- March nonfarm payrolls are projected to increase by +140K, a slowdown from February but above the +100K breakeven rate, with a wide forecast range (+85-185K), reflecting uncertainty; Some analysts see a leisure and hospitality rebound after soft Jan/Feb weather impacts, modest +10K rise in government jobs; Focus also on the elevated U6 underemployment rate’s potential decline.

- Bull case on trade front expects Trump’s reciprocal tariffs to be reversed due to market stress and economic pressure, while bears see a prolonged trade war impacting growth, pushing US and globe into recessionary, as well as risk of inflationary effects. Fed’s view on situation critical.

- Goldman Sachs and Bank of America signal significant downside risks, Europe’s growth is expected to suffer while US stagflation fears mount.

- Sterling (GBP) saw notable weakness during London session as traders increased bets to 3 BOE rate cuts for 2025, alongside what was seen as overextended upside move in last 48 hours. US dollar rotates off lows as analysts see traders taking gains from short positions ahead of NFP.

- Asia closed lower with Nikkei225 underperforming -2.8%. EU indices -1.6% to -4.0%. US futures -0.4% to -0.9%. Gold -0.8%, DXY +0.5%; Commodity: Brent -3.6%, WTI -3.8%; Crypto: BTC +1.1%, ETH +1.0%.

Asia

- China and Hong Kong markets closed for national holidays.

- Japan Feb Household Spending Y/Y: -0.5% v -0.8%e.

- Australia Feb Household Spending M/M: 0.2% v 0.3%e; Y/Y: 3.3% v 3.2%e.

- Japan govt said to be considering measures on tariffs, including an extra budget.

- South Korea Constitutional Court upheld Former Pres Yoon ousting in a unanimous impeachment decision; An election has now been triggered and will be held within 60 days.

- BOJ Gov Ueda reiterated vie that would guide monetary policy appropriate from standpoint of sustainably achieving 2% inflation target. US tariffs to potentially affect business confidence and put downward pressure on the economy.

- BOJ Dep Gov Uchida noted that US tariffs would have a negative impact on Japan's economy. To raise rates if economy improves, prices rise.

- Japan Fin Min Kato noted that was concerned US tariffs could have major impact on trade systems and economies. Had no comment on FX levels.

Europe

- EU Watchdog cautioned that European banks were exposed to risk of USD shortfall. Noted that 60 out of 267 banks had insufficient USD funding to cover exposures in the currency.

Americas

- President Trump said he was open to reducing tariffs if other nations offered something "phenomenal" in negotiations. Liked that interest rates going were down

- JP Morgan analyst raised the risk of global recession in the next year to 60% from 40%.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -2.14% at 511.92, FTSE -1.68% at 8,332.58, DAX -2.27% at 21,212.22, CAC-40 -1.77% at 7,464.48, IBEX-35 -3.90% at 12,698.98, FTSE MIB -4.12% at 35,544.00, SMI -2.25% at 11,986.00, S&P 500 Futures -0.75%].

Market Focal Points/Key Themes: European indices opened lower across the board and continued into the red through the early part of the session; fallout from tariffs seen keeping markets in risk-off mode; sectors managing gains include materials and consumer discretionary; sectors leading the way lower include financials and energy; oil & gas subsector under pressure after large drop in Brent prices; B&S receives takeover offer from Sarabel; Shell sells a stake in Colonial Enterprises to Brookfield; KKR withdraws from consortium seeking to acquire Gerresheimer; focus on NFP numbers later in the day; no major earnings expected in the upcoming Americas session.

Equities

- Consumer discretionary: Sodexo [SW.FR] -4.5% (final results).

- Consumer staples: Nestle [NESN.CH] +0.5% (analyst downgrade - Morgan Stanley cuts to underweight).

- Energy: BP [BP.UK] -2.5% (oil prices down; Chair intends to step down).

- Financials: Santander [SAN.ES] -5.5% (affirms FY25 targets and guides Q1 revenue flat), Swedbank [SWEDA.SE] -3.5% (analyst downgrade - HSBC cuts to hold), ABN Amro [ABN.NL] -4.5% (analyst upgrade - RBC raises to outperform).

- Healthcare: Sanofi [SAN.FR] -2.5% (Trump's comments on pharma tariffs) - Industrials: Stellantis [STLA.NL] -3.0% (Stellantis Mexico to idle Toluca plant for one month, and will idle Saltillo plant for two weeks), Gerresheimer [GXI.DE] -11.5% (KKR drops out of consortium seeking to acquire Gerresheimer).

- Technology: ASML [ASML.NL] +1.0% (analyst upgrade - Santander raised to outperform), Logitech [LOGN.CH] -2.5% (analyst upgrade - tier 1 firm raised to neutral).

Speakers

- Czech Central Bank (CNB) Mar Minutes noted that members agreed on a wait-and-see approach. Domestic economy was stable and current rates at appropriate level. Several members viewed easing cycle as not over but more caution was needed. Saw more price risks from abroad; tariffs increase raised overall inflation risks balance.

- Poland Central Bank (NBP) Kotecki stated that saw chance for a rate cut in May.

- Vietnam Trade Ministry announced it would impose temporary anti-dumping tariffs on galvanized steel imports from China and South Korea.

- Taiwan Premier Cho Jung-tai noted tariffs would had significant impact on electronics exports. Would provide NT$88B in aid to industries.

- South Korea's Acting President Han and Election Commission Head agree on June 3rd as good date for Presidential Election, but not final.

Currencies/fixed income

Broad USD weakness continued at the start of the session in the wake of President Trump's tariff announcement but the Greenback clawed its way back by mid-session. Focus turned to the US jobs report due out later today. Markets also eyeing comments from Fed Chair Powell.

- EUR/USD was above the 1110 level but saw its gains evaporate. Focus whether the Euro could muster a weekly close above the key psychological 1.10 level.

- GBP/USD trying to stay above the 1.30 handle.

- USD/JPY tested 145.50 as the yen currency remain the main beneficiary of risk aversion. Trump's tariff policy has darkened the outlook for the global economy. Pair around 1.46 by mid-session.

- US 10-year yield remained below the 4% level and at the lowest since Dec.

- 10-year German Bund yield at 2.55% and 10-year Gilt yield at 4.41%. 10-year Treasury yield at 3.95%.

Economic data

- (CH) Swiss Mar Unemployment Rate: 2.9% v 2.9%e; Unemployment Rate (seasonally adj): 2.7% v 2.7%e.

- (DE) Germany Feb Factory Orders M/M: 0.0% v 3.4%e; Y/Y: -0.2% v +1.5%e.

- (SE) Sweden Mar Preliminary CPI M/M: -0.7% v -0.4%e; Y/Y: 0.5% v 0.8%e.

- (SE) Sweden Mar Preliminary CPIF M/M:-0.5 % v -0.2%e; Y/Y: 2.3% v 2.6%e.

- (SE) Sweden Mar Preliminary CPIF (ex-energy) M/M: 0.0 % v 0.2%e; Y/Y: 3.0% v 3.2%e.

- (HU) Hungary Feb Industrial Production M/M: -1.3% v +0.2%e; Y/Y: -8.0% v -5.5%e.

- (FR) France Feb Industrial Production M/M: 0.7% v 0.5%e; Y/Y: % v -1.3%e.

- (FR) France Feb Manufacturing Production M/M: +1.4% v -0.5% prior; Y/Y: -1.2% v -2.0% prior.

- (ES) Spain Feb Industrial Production M/M: 0.7% v 0.4%e; Y/Y: -1.9% v -1.2% prior; Industrial Output NSA (unadj) Y/Y: -2.4% v -1.3% prior.

- (CZ) Czech Mar Preliminary CPI M/M: 0.1% v 0.0%e; Y/Y:2.7% v 2.6%e.

- (CZ) Czech Feb Retail Sales (ex-auto) Y/Y: 3.8% v 3.5%e.

- (DE) Germany Mar Construction PMI: 40.3 v 41.2 prior.

- (TH) Thailand May Foreign Reserves w/e Mar 28th: $245.3B v $247.1B prior.

- (UN) Mar FAO World Food Price Index: 127.1 v 126.8 prior.

- (IT) Italy Feb Retail Sales M/M: +0.1% v -0.4% prior; Y/Y: -1.5% v +0.9% prior.

- (RU) Russia Narrow Money Supply w/e Mar 28th (RUB): 17.94T v 18.11T prior.

- (UK) Mar New Car Registrations Y/Y: +12.0% v -1.0% prior.

- (UK) Mar Construction PMI: 46.4 v 46.3e prior.

- (IT) Italy Q4 YTD Budget Deficit to GDP: 3.4% v 4.8% prior.

Fixed income issuance

- (IN) India sold total INR360B vs. INR360B indicated in 2027 and 2034 bonds.

Looking ahead

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

- 05:30 (ZA) South Africa to sell combined ZAR1.0B in I/L 2031, 2038 and 2058 Bonds.

- 06:00 (IE) Ireland Mar Live Register Monthly Change: No est v -0.2K prior; Live Register Level: No est v 165.5K prior.

- 06:00 (UK) DMO to sell £6.0B in 1-month, 3-month and 6-month bills (£1.0B, £2.0B and £3.0B respectively).

- 06:30 (IS) Iceland to sell 2027 and 2038 RIKB Bonds.

- 07:00 (BR) Brazil Mar FGV Inflation IGP-DI M/M: -0.5%e v 1.0% prior; Y/Y: 8.5%e v 8.8% prior.

- 07:30 (TR) Turkey Mar Real Effective Exchange Rate (REER): No est v 74.96 prior.

- 07:30 (IN) India Forex Reserve w/e Mar 28th: No est v $658.8B prior.

- 07:30 (IN) India announces upcoming bill issuance (held on Wed).

- 08:00 (PL) Poland Central Bank (NBP) Mar Minutes (2 decisions ago).

- 08:00 (MX) Mexico Mar Consumer Confidence: 46.0e v 46.3 prior.

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

- 08:30 (US) Mar Change in Nonfarm Payrolls: +140Ke v +151K prior; Private Payrolls: +135Ke v +140K prior; Manufacturing Payrolls: +2Ke v +10K prior.

- 08:30 (US) Mar Unemployment Rate: 4.1%e v 4.1% prior; Underemployment Rate: No est v 8.0% prior; Labor Force Participation Rate: No est v 62.4% prior.

- 08:30 (US) Mar Average Hourly Earnings M/M: 0.3%e v 0.3% prior; Y/Y: 3.9%e v 4.0% prior; Avg Weekly Hours All Employees: 34.2e v 34.1 prior.

- 08:30 (CA) Canada Mar Net Change in Employment: +10.0Ke v +1.1K prior; Unemployment Rate: 6.7%e v 6.6% prior; Full Time Employment Change: No est v.

-19.7K prior; Part Time Employment Change: No est v +20.8K prior; Participation Rate: No est v 65.3% prior; Hourly Wage Rate: 4.1%e v 4.0% prior.

- 11:25 (US) Fed Chair Powell.

- 12:00 (US) Fed’s Barr.

- 12:00 (EU) Potential sovereign ratings after European close (S&P on UK and Italy; Moody’s on France, Belgium; Fitch on Italy).

- 13:00 (US) Weekly Baker Hughes Rig Count data.

- 14:00 (BR) Brazil Mar Monthly Trade Balance: $7.0Be v -$0.3B prior; Exports: $28.6Be v $22.9B prior; Imports: $21.1Be v $23.3B prior.

Weekend data

- (VN) Vietnam Mar Q1 GDP YoY: 7.0%e v 7.6% prior.

- (VN) Vietnam MarCPI YoY: 3.3%e v 2.9% prior.

- (VN) Vietnam Mar Trade Balance: +$1,2Be v -$1.6B prior; Exports YoY: 13.1%e v 25.7% prior; Imports YoY: 19.4%e v 40.0% prior.

- (VN) Vietnam Mar Industrial Production YoY: No est v 17.2% prior.

- (VN) Vietnam Mar Retail Sales YoY: No est v 9.4% prior.

**TTN Chart of The Day: