The week ahead: Tariffs, statements and economic data

• US trade deadline nears.

• Can US stocks and the dollar extend gains?

• Global growth check in the era of tariffs.

• US CPI to see tariff impact, as UK price moderation could be temporary.

• What to expect from the UK’s spring statement.

The last trading week of March will be crucial for financial markets. Not only will we get a timely update on global economic conditions in the era of President Trump’s economic policies. We are also just over a week away from President Trump’s reciprocal tariffs that are scheduled to come into effect on April 2nd, so this could be one of the last ‘normal’ trading weeks for the rest of the Trump term.

Are markets overestimating the risk from tariffs?

The latest news regarding reciprocal tariffs is mildly positive for risk sentiment at the start of this week. US and European equity futures are pointing to a stronger open as traders react to news that reciprocal tariffs will not be implemented all at once. The tariffs for April 2nd are now likely to be less sprawling and not a fully global event. They are also expected to exclude sector-specific tariffs on autos, pharma, and chip makers, which may spur some relief rallies later on Monday.

But is a delay to tariff announcements merely kicking the can down the road, rather than  a softening in Trump’s approach to tariffs? There have been comments from officials this weekend, which suggests that tariffs will not be as bad as some expect, and they will only target countries that run large trade surpluses with the US.

Tariffs in Trump’s second term as President are still broader compared to his first term, and they continue to weigh on markets. However, the selloff in US equities, particularly in big tech, could reverse if markets have overestimated the risk from tariffs on global trade.

Buy the rumour/sell the fact: Can US stocks extend gains?

Stocks are at an interesting junction. US stocks staged a turnaround rally on Friday, and managed to eke out a weekly gain, after a rally in several tech giants buoyed the US index. The triple witching option expiry at the end of last week, caused a surge in interest in US stocks, which triggered the weekly gain. Tesla’s stock price gained more than 5% on Friday, and its stock price managed to outperform the overall market last week and rose more than 1%, after a grueling start to the year. Tesla is now the second worst performing stock on the S&P 500 so far this year and is down 38%. Nvidia failed to join in the Magnificent 7 rally and was down more than 4% last week. This suggests that the market was not convinced by Nvidia’s new product launch, which does not bode well for the stock, which is lower by 13% YTD.

Although US stocks did not extend losses last week, it looks more like a pause in the sell off, and we do not think that US stocks will be making record highs any time soon. However, market dynamics are worth noting. Individual traders poured $12 bn into US equities last week, in contrast, trend following systemic funds turned negative on US stocks for the first time in more than a year. This suggests that there could be further downside to go for stocks, although there is clearly some buying interest after a sharp sell off in 2025.

This is a difficult environment to predict where stocks will go next. President Trump’s tariff plans have been negative for the US equity market so far, whereas equity indices in China and Germany, the US’s largest trading partners and thus most exposed to US tariffs, have surged. Thus, has the market already priced in the negativity from reciprocal tariffs, and will US stocks recover from here? It is too early to say, but markets can move in mysterious ways, and we would not rule out a recovery rally in some US stocks in the week leading up to reciprocal tariffs. Firstly, trade makes up less than a quarter of the US economy, so although the impact of tariffs cannot be ignored, they may not be as harmful for the US economy as some think. Added to this, the stocks that have led the sell off in 2025 are the biggest US tech stocks. However, these stocks are some of the most resilient to Trump’s tariff plans. If investors start looking at tech from this angle, then there is a case form a more prolonged rally for US stocks.

We will also be looking closely at the dollar, which had its best daily performance so far this month, at the end of last week. The dollar index rose back above 104.00, as EUR/USD fell back towards $1.08, and GBP/USD dipped below $1.29, although both currencies are moving higher vs. the USD on Monday after the tariff news. We will be watching to see if the greenback can extend gains further, or if the dollar will falter once more as speculation rises about a Mar-a-Lago accord to officially weaken the dollar. It is worth noting that CFTC data last week saw the biggest weekly buying of euro for 5 years, there was also buying of Mexican dollars and a small amount of CAD longs were also recorded. The aggregate dollar position flipped from long, to short, which could limit the dollar’s upside in the short term.

Gold stumbled at $3,050 resistance last week, however, we continue to think that the gold price will remain above $3,000 per ounce for the medium term. Although the strengthening of the dollar has weighed on the yellow metal in recent days, we think that gold will remain in demand in the current economic environment.

Below we look at three key events to watch in the coming week.

1. Global PMI data

Recession fears have driven market action in recent months. This makes the provisional March reading for global PMIs at the start of this week even more pivotal than usual. They will give us a timely update on how economies and businesses are faring now that markets have had a few weeks to get used to President Trump’s tariff regime, and to see if businesses have shifted their practices ahead of reciprocal tariffs that are due on 2nd April.

The UK is expected to see a slight pickup in manufacturing PMI to 47 from 46.9, however the composite index is expected to remain just above the expansion zone at 50.5, with the service sector PMI also remaining steady at 51. If we get a surprise uptick in the PMI data, then it could signal the weakness in GDP in January was temporary. However, an unexpected decline in PMI could trigger risk off sentiment for UK bonds, the pound and the UK mid cap equity sector.

Overall, PMIs in Europe are expected to rise, with the composite PMI for March expected to rise to 50.7 from 50.2. The risk is to the upside, since this survey may reflect hopes that German fiscal largesse will boost growth in the currency bloc. The boost to Eurozone PMIs is expected to come from Germany, with France remaining a weak spot for now.

The US PMI figures will also be watched closely, as risks grow for a sharp slowdown of the economy in Q1. The market is expecting a decline in manufacturing sentiment, while the service sector PMI is expected to remain at 51. The composite PMI for the US is expected to moderate slightly to 51.3 from 51.6 in February, which suggests a slowdown in US growth in Q1 rather than a recession. Thus, the March PMI data for the US could have the power to soothe volatile financial markets.

2. US and UK inflation data

Inflation data is also key this week, and the UK, Japan and US figures are in focus. In the US, core PCE inflation is expected to rise by 0.3% MoM, which is double the pace of the Fed’s 2% target for inflation. The annual inflation rate is expected to rise to 2.7% in February from 2.6% in January. The headline rate is expected to remain steady at 2.5%.

Price increases are expected to come from goods, health care, and financial services, with only a few sectors registering declines in prices. There could also be signs that spending is being front loaded ahead of tariffs. Personal spending is expected to rise by 0.5% last month, up from -0.2% in January. Thus, President Trump’s tariff plans are already expected to impact US economic data before the big kahuna of tariffs arrives on April 2nd.

In the UK, the spring statement will take centre stage this week, however, CPI for February is also worth watching. The market is expecting headline CPI to fall a notch to 2.9% from 3%. The core rate could moderate to 3.6% from 3.7% and the service sector price index could fall back below 5% to 4.9%. UK inflation is still expected to be above the BOE’s February forecast for CPI, as food and core goods prices start to rise after moderating in recent months.

This could be a temporary moderation in UK prices, as April sees a raft of cost pressures weigh on UK businesses and the UK consumer. These include the hike to employers’ national insurance, the increase in the UK’s energy price cap and a raft of other administrative costs that could weigh on consumption going forward.

In Japan, another jump in Tokyo CPI is expected, as the price of food weighs on price growth. This could enhance the case for the BOJ to hike rates, and it may halt the yen’s recent slide.

3, The UK’s Spring Statement

The UK’s Spring Statement will take place this Wednesday at 12000 GMT. The details of the statement have mostly been leaked in advance, and we doubt that the Chancellor will want to surprise financial markets this week. The news is grim if you are a civil servant. The Chancellor is set to announce a 15% reduction in the government’s operating costs, which could include reducing the number of civil servants by 10,000, with back office and administrative roles being targeted. The UK’s civil service employs nearly 550,000 people, so these job cuts are unlikely to have a major impact on the unemployment rate. The government has also announced sweeping changes to the benefits system, with plans in place to make it harder for people to claim disability benefits. Reeves has also committed not to raising taxes in this budget.

This suggests that there is very little for Rachel Reeves left to announce in her spring statement. Business in the UK may breathe a sigh of relief, but the chancellor’s £40bn of tax rises on businesses will still come into force from next month. The question is, will the government’s numbers add up, and can the UK’s fiscal headroom be rebuilt through these cuts?

Labour’s cuts to benefits and government spending could make DOGE blush in the US, but will it help the UK economy to grow? The UK economy shrank by 0.1% in January, which fueled concerns that the UK could be moving towards a recession. The OBR is expected to half its GDP predictions for the UK for this year, which would mean that the UK’s fiscal headroom has disappeared, and there is a near £5bn shortfall in the government finances between now and the end of this parliament.

Thus, the spring statement will be watched closely to see how the chancellor tries to plug this black hole. Will she hint that a broader array of tax rises could be coming down the line, which is bad news for the UK bond market, or will she dare to cut spending to some of the UK’s sacred cows like healthcare? While Reeves may not mention these departments in name, the early days of Kier Starmer’s government are surely the time to do it

Regarding her push for growth, Reeves is expected to announce some limited new expenditure programmes, including in new technical colleges and further supply side reforms to boost skills and jobs in engineering and bricklaying.

Defense spending will likely be at the top of the agenda, and Reeves is expected to announce how this could boost UK growth and benefit key UK defense firms. It is worth noting that some of the best performing companies on the FTSE 100 so far this year are defense firms,  including Rolls Royce holdings, which is up 40% YTD, and BAE Systems, which is higher by 38% YTD.

The Spring Statement could also include some details about reducing taxes on banks and tech companies, in an effort to avoid the US’s reciprocal tariffs that are set to come into effect on April 2nd. This could be a vital step towards the UK reaching a trade deal with the US in the coming months. We think that the pound could be a top FX performer in the coming months as long as 1, the UK avoids the worst of President Trump’s reciprocal tariffs and 2, the UK can forge a trade deal with the US. GBP may have backed away from $1.30 last week, but we think that this decline will be temporary.

Reality still bites for Rachel Reeves, who still needs an economic miracle before the Autumn budget, especially since Labour has slipped further behind the Conservatives when it comes to who the public trusts with the economy. For this week, Reeves could judge her spring statement as successful if the bond market remains calm. UK bonds have outperformed European bonds in the past month, but yields have been rising. If Reeves can deliver her spring statement without triggering a further rise in bond yields, then this could be one bright spot for the UK’s beleaguered chancellor.