‘US exceptionalism’ trade wanes in favour of EU, China [Video]

A set of Chinese data released earlier today looked better-than-expected; the fixed asset investment unexpectedly accelerated in February, growth in industrial production slowed less than expected – a slowdown due to the Chinese new year break, while growth in retail sales accelerated to 4%, more than expected. The unemployment rate rose, however, and the worries regarding the property crisis and the shrinking population remain on the back of investors’ mind despite the AI-led boost in Chinese equities this year. To address the issues while the momentum is in favour, the Chinese authorities pledged to provide more support to stabilize stock and property markets, support wages and more importantly do something to boost the shrinking birth rates.

On Friday, Friedrich Merz reportedly reached an agreement with the Greens to unlock a EUR 500bn debt-financed spending bill on infrastructure and defence. The latter pushes the German yields higher, obviously, with the 10-year bund yield testing the 2023 peak. The euro and stocks continue to see support on the expectation that the extra spending will boost growth and even productivity in Europe, while the S&P500 is weakened following a four-straight-week and a 10% selloff. Friday’s session looked better for the US equities, as the oversold conditions attracted dipbuyers and the US politicians agreed to avert a government shutdown. But consumer sentiment tanked to the lowest levels in the US since November 2022 while the long-term inflation expectations spiked to the highest levels since 1993 – that’s the worst possible combination for market sentiment.