Daily Market Roundup

North America News

U.S. Stocks Rally as Trump Pauses Auto Tariffs on Canada and Mexico

Markets rallied sharply after Trump confirmed a one-month delay on auto import tariffs under the USMCA agreement.

• S&P 500: +1.2%
• Nasdaq Composite: +1.5%
• Dow Jones Industrial Average: +1.1%
• Russell 2000: +1.0%

The market started flat, dipped mid-session, but rebounded strongly in the afternoon on tariff relief optimism.

NY Fed Report: U.S. Businesses Expect Inflation to Accelerate

The New York Fed’s latest survey shows rising inflation expectations among businesses:

• Manufacturers expect inflation to rise to 7.3% (from 3.5% last year).
• Service firms expect inflation to hit 5.7% (up from 3%).
• 80% of firms use imported goods, and tariff-related costs are not expected to be absorbed.
• Service firms plan to increase prices by 5% (up from 4%).
• Manufacturers expect price hikes of 5.4% (up from 3.2%).
• The report warns that higher inflation expectations could become persistent.

Beige Book: U.S. Economic Activity ‘Rose Slightly’

The Federal Reserve’s Beige Book reported:

• Slight growth since mid-January, a downgrade from the previous “moderate” pace.
• Six Fed districts saw no change, four reported modest growth, two saw slight contractions.
• Consumer spending declined, as price sensitivity increased for discretionary items.
• Manufacturing expanded modestly, but tariff uncertainty weighed on business sentiment.
• Employment ticked up slightly, while wage growth slowed.
• Prices rose moderately, but some firms raised prices preemptively due to expected tariffs.

U.S. ISM Services PMI Beats Expectations at 53.5

• ISM Services PMI: 53.5 (expected: 52.6, prior: 52.8).
• Key components:
  • Employment: 53.9 (prior: 52.3).
  • New Orders: 52.2 (prior: 51.3).
  • Prices Paid: 62.6 (prior: 60.4), indicating elevated inflation pressures.
  • Inventories: 50.6 (prior: 47.5), signaling stabilization.

Comments in the report highlight tariffs, DOGE and weather.

• “Tariff actions have created chaos in information and pricing measures, forecasting and forward buys, which may artificially inflate purchases to be followed by a drop off.” [Accommodation & Food Services]
• “There is great uncertainty about future business activity due to the risk of tariffs and other potential government actions.” [Agriculture, Forestry, Fishing & Hunting]
• “Implementation of tariffs will have a significant cost impact to our projects. The majority of the capital equipment we purchase is not manufactured in the U.S., or components that make the equipment come from overseas manufacturers. We are also seeing U.S. prices already rise in anticipation, which is a similar reaction of the U.S. suppliers when the previous tariffs were introduced.” [Construction]
• “The university is still digesting the current potential changes with federal assistance programs.” [Educational Services]
• “The last month has brought multiple weather events. Some locations were closed or delayed opening. Norovirus and other viruses have resulted in busy emergency departments and urgent care facilities.” [Health Care & Social Assistance]
• “Tariffs are going to have a ripple down effect that could severely harm our business.” [Information]
• “Concern regarding tariffs. No impact yet.” [Management of Companies & Support Services]
• “Business seemed to pop after the election, but uncertainty after the election seemed to take the ‘wind out of our sales,’ with uncertainty again increasing.” [Professional, Scientific & Technical Services]
• “Observed some contracting uncertainty earlier in the month relating to federal funding freeze, but operations have largely normalized as of today.” [Public Administration]
• “Weather has been terrible. When it is not cold and snowy, it seems to be raining. I think that is the biggest hurdle at the moment. The tariff situation has created some uncertainty in the lumber market, but without demand the price of lumber should not move very much. Affordability and high interest rates are still headwinds, but sentiment seems to be good.” [Wholesale Trade]

S&P Global Services PMI Revised Up to 51.0

• Final Services PMI: 51.0 (preliminary: 49.7, prior: 52.9).
• Composite PMI: 51.6 (preliminary: 50.4, prior: 52.7).
• Upward revision suggests service sector resilience but reflects a slowdown from January.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence

“The final PMI is an improvement on the earlier flash reading but still paints a worryingly weak picture of service sector business conditions compared to the buoyancy recorded late last year.

“Current output growth has downshifted markedly so far this year from a booming rate of expansion in December to a disappointingly sluggish pace in February.

“Expectations for output growth have also been revised sharply lower as service providers have become increasingly worried over signs of slower demand growth and uncertainty over the impact of new government policies, ranging from tariffs and trade policy to federal budget cutting.

“The strong private sector hiring seen late last year has consequently gone into reverse, with a steep fall in backlogs of work hinting at further job losses to come.

“Adding to the gloomier picture in February was a sharp rise in costs, which companies were often unable to pass on to customers due to weak demand. While this reduced pricing power is good news for inflation, it’s potentially bad news for profitability.”

U.S. Factory Orders Beat Expectations at +1.7% in January

• Factory Orders: +1.7% m/m (expected: +1.6%, prior: -0.6%).
• Durable Goods Orders: +3.2% (preliminary: +3.1%).
• Nondefense Capital Goods (ex-aircraft): +0.8% (preliminary: +0.8%).
• Biggest driver: Transportation Equipment +9.9%.
• Inventories rose for the third straight month, suggesting manufacturers are preparing for stronger demand.

Details:

• New Orders for Manufactured durable goods:
  • Increased 3.2% ($8.7 billion) to $286.1 billion in January, following two months of declines.
  • Transportation equipment led the rise, up 9.9% ($8.7 billion) to $96.6 billion.
  • Nondurable goods orders rose 0.3% ($1.0 billion) to $303.8 billion.
• Shipments of manufactured durable goods:
  • Durable goods shipments increased 0.5% ($1.4 billion) to $288.3 billion, following a 0.8% December increase.
  • Transportation equipment led the gain, rising 1.4% ($1.3 billion) to $94.5 billion.
  • Nondurable goods shipments increased 0.3% ($1.0 billion) to $303.8 billion, led by petroleum and coal products, up 0.9% ($0.6 billion) to $64.0 billion.
• Unfilled Orders for manufactured durable goods:
  • Increased 0.2% ($2.7 billion) to $1,400.6 billion, up in six of the last seven months.
  • Transportation equipment accounted for most of the gain, rising 0.2% ($2.1 billion) to $902.3 billion.
• Inventories of manufactured durable goods:
  • Increased 0.1% ($0.4 billion) to $533.1 billion, marking the third consecutive monthly rise.
  • Transportation equipment inventories rose 0.2% ($0.3 billion) to $174.9 billion.
  • Nondurable goods inventories increased 0.1% ($0.4 billion) to $330.7 billion, led by petroleum and coal products, up 0.7% ($0.3 billion) to $48.5 billion.
• Stage of Fabrication:
  • Materials & Supplies: Up 0.3% (durable goods), 0.5% (nondurable goods).
  • Work in Process: Up 0.1% (durable goods), down 1.1% (nondurable goods).
  • Finished Goods: Down 0.3% (durable goods), up 0.4% (nondurable goods).

U.S. Employment Growth Slows Sharply, Raising Economic Concerns

The ADP private payrolls report showed a major slowdown in U.S. job growth, coming in at +77K for February (expected: +140K).

• Lowest reading since July 2024.
• Prior: +186K (revised up from +183K).
• Goods-producing jobs: +42K (prior: -6K).
• Service-sector jobs: +36K (prior: +190K).
• Wage growth steady:
  • Job stayers: +4.7% y/y.
  • Job changers: +6.7% y/y.
• ADP Chief Economist Nela Richardson:
  • “Policy uncertainty and slowing consumer spending may be causing hiring hesitancy.”

U.S. Mortgage Applications Surge 20.4% as Rates Drop

• Weekly mortgage applications: +20.4% (prior: -1.2%).
• 30-year mortgage rate fell to 6.73% (prior: 6.88%).
• Refinance index jumped to 784.2 from 572.5, reflecting homeowners locking in lower rates.
• Housing demand shows a strong rebound, after a subdued period earlier in February.

White House says one-month exemption for any autos in the USMCA

The White House confirms many earlier reports/rumors that autos would be given a one-month exemption under the USMCA.

“We spoke with the big three auto dealers. We are going to give a one-month exemption on any autos coming through USMCA. Reciprocal tariffs will still go into effect on April 2, but at the request of the companies associated with USMCA, the president is giving them an exemption for one month so they are not at an economic disadvantage,” Leavitt said.

On Canada, the spokeswoman said Trump sees an increase in fentanyl flows through the Canadian border and there needs to be repercussions for that.

Pres Trump/ Canadian Prime Minister Trudeau have spoken since the tariffs took effect

• CNN citing WH officials

• Trump and Trudeau discussed fentanyl and trade
• The call lasted around 50 minutes
• US and Canada will continue to hold discussions on Wednesday according to Canadian sources

Canada is now saying that Canada PM did speak to Pres. Trump today. Vance and Lutnick were also on the call with PM Trudeau

U.S. Automaker Stocks Rise on Hints of Tariff Exemptions

• Reuters reports that the Trump administration is negotiating exemptions for USMCA-compliant automakers.
• Potential 30-day exemptions could be granted to companies investing in U.S. production.
• Discussions remain ongoing, and an agreement is not yet finalized.

Reuters reported

Goldman Sachs: Trump’s Tariffs Likely to Push Inflation Higher

Goldman Sachs projects that Trump’s trade policies could drive inflation higher, creating a challenge for the Federal Reserve.

• 25% tariffs on Canadian and Mexican imports, plus 10% on Canadian energy.
• China tariffs increased to 20%.
• GS estimates a 0.6% increase in core U.S. CPI, pushing it back above 4% y/y.

Trump Confirms Push for U.S. Shipbuilding, Expands Tariff Plans

President Donald Trump announced new measures to strengthen U.S. shipbuilding:

• New tax incentives and a White House shipbuilding office.
• Repeal of the CHIPS Act, arguing it distorts the market.
• 25% tariffs on aluminum, copper, and steel remain in place.
• Interest on U.S.-made car loans to be tax-deductible, boosting domestic auto production.
• Reciprocal tariffs confirmed for April 2.

Meanwhile, the New York Times reports that Trump privately reassured allies that tariffs are here to stay, contradicting Commerce Secretary Lutnick, who had hinted at potential revisions.

Trump Prepares Executive Order to Strengthen U.S. Shipbuilders, Penalize China

The Wall Street Journal reports that Trump is preparing an order with 18 measures:

• New fees on Chinese-built ships and cranes entering the U.S..
• Creation of a National Security Council office focused on the maritime sector.
• Higher wages for nuclear shipyard workers.
• Acknowledging that the U.S. has fallen behind China in shipbuilding and must close the gap.

Canada Q4 Labor Productivity Rebounds to +0.6%

• Q4 labor productivity: +0.6% (prior: -0.4%, revised to +0.1%).
• Best quarterly growth rate in a year.
• 2024 productivity growth: +0.6%, marking an improvement in economic efficiency.

Canada Refuses to Lift Tariffs Until U.S. Fully Removes Its Tariffs

• Bloomberg reports that Canada will not accept a partial rollback of U.S. tariffs.
• Prime Minister Trudeau is expected to reject any middle-ground proposal from U.S. Commerce Secretary Lutnick.
• Trump and Trudeau are scheduled to speak today, but no compromise is expected.

U.S.-Canada Trade Tensions Escalate with Heated Call Between Officials

A tense phone call took place between U.S. Commerce Secretary Howard Lutnick and Ontario Premier Doug Ford:

• Lutnick demanded that Ford “stand down” on trade retaliation—Ford refused.
• Lutnick called Trudeau’s “very dumb thing to do” comment an attack on Trump.
• Ford suggested Canada may escalate retaliatory measures further.

More from The Globe & Mail

Mexico Holds Off on Immediate Retaliation, Watching U.S. Moves Until Sunday

• Mexican President Claudia Sheinbaum:
  • “If necessary, Mexico will seek new trade partners.”
  • “Could have a call with Trump on Thursday.”
  • “Will coordinate with Canada and other allies before taking further action.”

Commodities News

Gold Holds Steady at $2,919 Amid Tariff and Fed Speculation

Gold prices fluctuated around $2,910–$2,919, as markets weighed mixed economic data and tariff uncertainty.

• ADP employment data disappointed, raising concerns about the labor market slowdown.
• ISM Services PMI exceeded expectations, but inflation risks persist.
• The Atlanta Fed GDPNow Model slashed Q1 2025 growth estimates to -2.8% (from +1.6% on Monday).
• Geopolitical developments:
  • A Zelensky aide met with U.S. National Security Advisor to discuss peace efforts.
  • This could ease geopolitical risks, potentially weighing on gold prices.
• Traders eye Friday’s Nonfarm Payrolls report, with expectations for 160K jobs added.

Daily Market Movers: Gold Consolidates Amid Mixed U.S. Data

• ADP Private Payrolls: +77K (expected: +140K, prior: +186K).
• ISM Services PMI: 53.5 (expected: 52.6, prior: 52.8).
• Money markets now pricing in 71.5 bps of Fed rate cuts for 2025, down from 81 bps on Tuesday.

Crude Oil Falls 2.88%, Largest Decline Since November

Crude oil dropped $1.95 to settle at $66.31, marking its biggest daily loss since November 25.

• Intraday low: $65.24 / Intraday high: $68.10.
• Key factors driving the decline:
  • Fears of a tariff-driven economic slowdown.
  • OPEC+ decision to restart 138,000 bpd of halted crude production in April.
  • Technical break below September 2024 lows ($65.27), though buyers stepped in to support prices into settlement.

Venezuelan Oil Supply at Risk as U.S. Deadline Approaches

The U.S. government has given Chevron until April 3 to wind down operations in Venezuela, potentially cutting 200K bpd from global supply.

• U.S. refiners may struggle to replace heavy crude supplies, especially as Canada and Mexico face tariff risks.
• OPEC+ supply is rising, adding further uncertainty to global markets.
• API data showed U.S. crude inventories fell 1.5M barrels, but traders remain focused on tariffs.

European Natural Gas Market Sells Off, Down 3.9%

European TTF natural gas prices fell nearly 3.9%, with traders questioning whether the sell-off was overdone.

• Despite tight storage conditions, European prices have lost their premium over Asian LNG benchmarks.
• Market analysts argue that European gas prices need to remain elevated to attract LNG imports.

U.S. Crude Inventories Rise More Than Expected

• EIA Crude Inventories: +3.6M barrels (expected: +341K, prior: -2.3M).
• Gasoline Inventories: -1.4M barrels (expected: -369K).
• Distillates Inventories: -1.3M barrels (expected: +220K).
• Refinery utilization fell -0.6% (expected: +0.2%).
• Larger-than-expected crude stockpiles signal weaker near-term demand.

OPEC Oil Production Rose by 170K Barrels in February

• Iran led the increase, boosting output by 80K bpd.
• Nigeria also saw an increase of 50K bpd, exceeding its OPEC production target.
• No immediate impact from Trump’s sanctions tightening on Iran’s oil exports.

Oil Market: Private Survey Shows Larger-Than-Expected Crude Draw

Ahead of the official U.S. EIA inventory report, private API data showed:

• Crude oil inventories fell by 1.455 million barrels (expected: -300,000).
• Gasoline inventories declined by 1.249 million barrels.
• Distillates increased by 1.136 million barrels.
• Cushing stockpiles rose by 1.630 million barrels.

Europe News

European Markets Rally as Germany Pushes Fiscal Reforms

Markets surged as Germany proposed major changes to its fiscal policy, potentially enabling higher deficit spending.

• Stoxx 600: +1.0%
• DAX (Germany): +3.55%
• CAC 40 (France): +1.85%
• FTSE 100 (UK): Flat
• IBEX 35 (Spain): +1.5%
• FTSE MIB (Italy): +2.0%

Eurozone Services PMI Softens to 50.6 as France, Germany Weigh on Growth

• Final Services PMI: 50.6 (preliminary: 50.7, prior: 51.3).
• Composite PMI: 50.2 (preliminary: 50.2, prior: 50.2).
• French and German services sectors underperformed, hitting multi-month lows.
• Cost pressures remain elevated, which is a concern for the ECB.

HCOB notes that:

“The Eurozone economy has barely grown for two months in a row now, as the mild growth in the services sector is almost fully eaten up by the recession in the manufacturing sector. The good news is that the downturn in the manufacturing sector is softening, which could pave the way for a recovery of the whole economy.

“Ahead of the next ECB meeting, all eyes are on the wage-driven input cost increases given the central bank’s emphasis on services inflation. With no sign of input cost inflation abating, it is understandable that there are some voices in the ECB who would like to discuss a pause in rate cuts at the next meeting.

“Service provider’s optimism about future activity is falling short of the long-term average, as the environment is strongly marked by political uncertainty in France and Germany as well as a flow of international news which does not encourage consumer spending. At the same time, outstanding business shrank again, which fits into this picture. However, service providers retain some pricing power as selling price inflation has increased compared to January. Overall, the picture is not bleak, but fragile.

“There is a big contrast in service sector performance between Germany and France. Germany’s services sector is growing at a moderate pace while in France, activity is shrinking rapidly and much faster than during the months before. This may be the result of an unsolved political crisis in France, while in Germany the elections may raise hope for a stable government to be formed soon.”

Eurozone Producer Prices Jump 0.8% in January

• Eurozone PPI: +0.8% m/m (expected: +0.5%).
• Breakdown:
  • Energy prices: +1.7%.
  • Capital goods: +0.7%.
  • Durable consumer goods: +0.6%.
  • Non-durable goods: +0.2%.
• Excluding energy, producer prices rose 0.4%—signaling broad-based cost pressures.

Germany’s Final Services PMI Revised Lower to 51.1

• February Services PMI: 51.1 (preliminary: 52.2, prior: 52.5).
• Composite PMI: 50.4 (preliminary: 51.0, prior: 50.5).
• Despite some improvement in manufacturing, services activity slowed.
• Lack of strong momentum suggests continued economic stagnation.

HCOB notes that:

“Services activity growth slowed down since the start of the year, and more so than suggested by the flash HCOB PMI estimate. There’s still mild growth, but the counterweight to the recession in manufacturing is less pronounced, putting the economy in a weaker spot. Looking at the composite PMI, the message is clear: the economy is struggling to get into a growth mode. This means that Germany isn’t just suffering from a lack of external demand, which is the main factor for the manufacturing sector, but also from a lack of internal demand, which drives services. This poses a challenge for the incoming new government as it will not be enough to only improve competitiveness, but there’s also a need to stimulate private consumption.

“Services companies managed to increase prices at a similar rate to the previous month, while cost inflation, driven mainly by higher wages, has softened a bit from a rather high level. On a positive note, new business barely declined, which might be the reason companies are still creating jobs, even if the hiring rate has decreased. Overall, the service sector remains the stabilizer of the whole economy, and there are no clear signs that this will change anytime soon. This is especially true as services are less vulnerable to US trade policies than manufacturing.

“Some companies reported being hopeful that the economy might turn around when a new, more stable government is formed. However, overall optimism about growth prospects is below the long-term average and has declined, which goes hand in hand with a decrease in outstanding business. The PMI doesn’t give the impression of being on the brink of dynamic growth, nor does it suggest we’re heading for a cliff edge.”

German Bond Yields Surge After Debt Brake Loosening

• 10-year German bond yield: +19 bps to 2.67% (biggest one-day jump since July 2023).
• 2-year bond yield: +10 bps to 2.12%.
• This follows Germany’s decision to ease its debt brake, allowing for higher fiscal spending.

France’s Final Services PMI Improves to 45.3, But Still Weak

• February Services PMI: 45.3 (preliminary: 44.5, prior: 48.2).
• Composite PMI: 45.1 (preliminary: 44.5, prior: 47.6).
• The economy remains under pressure after a brief boost from the 2024 Olympics.
• Consumer and business sentiment remain weak, despite a slightly better-than-expected revision.

HCOB notes that:

“The French services sector is in dire straits. The HCOB PMI for the services sector shows an accelerated contraction in business activity in February. France’s dismal state stands out even more when compared to other large economies like Italy and Spain. Lower customer demand, general economic weakness, and hesitant customer behaviour are depressing output, according to surveyed service companies.

“French service providers are being squeezed by high prices. Rising input costs are burdening companies as demand for their services suffers significantly. Purchase prices, salaries, and other paid-for services were cited as causes of inflationary pressures. Output prices are rising only moderately, reflecting companies’ tame efforts to pass higher costs on to customers – so far with limited success.

“The outlook is bleak. The state of new order intakes is catastrophic, with the PMI implying that domestic orders are shrinking more than foreign ones. Market participants attribute the weakness in orders to a wait-and-see attitude among clients and dampened confidence. Despite a slight increase in future output expectations, which remain well below the historical average, sentiment for the rest of the year is sobering. This is leading to an accelerated reduction in employment. Some panel members noted that hiring is limited due to budget constraints.”

Spain’s Services PMI Surges to 56.2, Beating Expectations

• February Services PMI: 56.2 (expected: 55.3, prior: 54.9).
• Composite PMI: 55.1 (prior: 54.0).
• New business demand increased, both domestically and internationally.
• Spain remains a bright spot in the Eurozone, with strong services sector growth.

HCOB notes that:

“The Spanish private sector continues its strong economic path. The HCOB Composite PMI increased slightly in February from an already comfortable level. The services sector is acting as the driving force, while the PMI for the manufacturing sector showed a contraction for the first time in over a year. Thus, the disparity between the two sectors is widening. The general industrial weakness in Europe seems to be increasingly affecting Spain as well. However, the services sector remains strong.

“Price pressures in Spain’s services sector are rising. Input price inflation has reached a one-year high, with wages continuing to play a dominant role. Companies are attempting to pass these cost increases on to customers whenever possible. The wage developments in the services sector are frequently mentioned by the ECB, which is likely not pleased with this pattern. The trend of rising input prices in the Eurozone services sector has also been observed, according to recent HCOB PMI data.

“Activity in Spain’s services sector remains high, which surveyed companies attribute to better sales figures. Demand remains elevated, supported by a still robust order situation. Foreign orders have also grown for the third consecutive month. As a result, the outlook remains optimistic, and companies are trying to hire more workers to keep up with the higher activity and prevent backlogs from increasing further due to a high workload.”

Italy’s Services PMI Jumps to 53.0, Economy Moves into Expansion

• February Services PMI: 53.0 (expected: 50.9, prior: 50.4).
• Composite PMI: 51.9 (prior: 49.7).
• New business activity improved, led by domestic sales.
• Italy’s economy returns to growth, following a sluggish Q4.

HCOB notes that:

“Finally, some good news for Italy. For the first time in four months, the HCOB Composite PMI is back in the growth zone. This is mainly due to the strong performance in the services sector, while the manufacturing PMI has shown some improvement from a weak level.

“Activity in Italy’s services sector increased significantly in February. Companies reported higher sales and the acquisition of new customers. This is also reflected in the order situation. New orders grew again after two months of decline. Although foreign orders remain in decline, attributed to the weak European economy, there is a slight upward trend indicated by a rising index.

“The somewhat better order situation is directly impacting employment and backlogs. Italian service companies hired more employees in February. This is partly due to the formation of backlogs that require additional manpower to clear.

“On the price front, an uncomfortable trend is emerging. Cost pressures faced by service providers are accelerating. Rising personnel and energy costs, as well as higher service fees, were identified as price drivers by service companies. These costs are being passed on to customers. The corresponding HCOB Prices Charged Index posted well above the historical average.”

Italy’s Final Q4 GDP Revised Higher to +0.1%

• Q4 GDP growth: +0.1% q/q (preliminary: 0.0%).
• Suggests modest economic improvement.

UK Services PMI Holds at 51.0, But Employment Conditions Weaken

• Final Services PMI: 51.0 (preliminary: 51.1, prior: 50.8).
• Composite PMI: 50.5 (preliminary: 50.5, prior: 50.6).
• New business saw the fastest decline since November 2022.
• Employment fell at the sharpest pace since November 2020, reflecting weak demand and rising costs.

 S&P Global notes that:

“UK service providers achieved another modest increase in overall business activity during February, thereby extending a run of expansion that stretches back to November 2023. However, there has been a clear loss of growth momentum since last autumn and the survey’s forward-looking indicators continue to suggest an elevated risk of stagflation on the horizon.

“Demand conditions softened in both domestic and export markets, with total new work falling to the greatest extent for just under two-and-a-half years. Business services were hit by cutbacks to investment spending among clients and delayed decision-making due to broader geopolitical headwinds. Consumer service providers meanwhile noted constrained discretionary spending and pressure on household budgets from rising living costs.

“Worries about the near-term economic outlook and the impact of rising payroll costs contributed to another slide in business optimism. The overall degree of confidence regarding year ahead growth prospects was the lowest since December 2022.

“Less upbeat business expectations and another month of sharply rising input prices led to net job shedding across the service economy in February. Employment has now decreased for five months in a row. Aside from the pandemic, this represents the longest period of falling employment since early-2011.”

Switzerland February CPI Rises to 0.3%, Core Inflation Hits 1.1%

• February CPI: +0.3% y/y (expected: +0.2%, prior: +0.4%).
• Core CPI: +1.1% y/y (prior: +0.9%).
• Inflation remains below 2%, keeping the Swiss National Bank (SNB) on track for further rate cuts.

BOE’s Bailey: Inflation Risks Still Exist, But Rate Cuts Are Possible

Bank of England Governor Andrew Bailey stated:

• Inflation is expected to rise, but it won’t be as severe as previous spikes.
• Evidence suggests rate cuts should not be too rapid.
• Further progress in disinflation would allow for rate cuts later this year.
• The size and pace of rate cuts will depend on inflation risks.

BOE’s Greene: Monetary Policy Needs to Stay Restrictive

BOE policymaker Catherine Greene warned:

• Inflation may not decline on its own, requiring continued restrictive policy.
• A cautious and gradual approach to easing rates is necessary.
• The UK is in its fifth consecutive year of above-target inflation.
• Wage growth remains uncertain, making rate decisions difficult to predict.
• The UK likely has a larger economic output gap than previously estimated.

Germany Pushes for EU to Ease Fiscal Rules for Defense Spending

Germany is reportedly lobbying the EU to reform fiscal rules, allowing increased defense spending without breaking budget limits.

• Bloomberg reports that Germany is leading discussions to adjust the rules.
• Germany has one of the lowest debt-to-GDP ratios in the EU, but this move is seen as self-serving.
• The push comes as Germany unveils a €500 billion defense and infrastructure fund, sparking bond market volatility.

Asia-Pacific & World News

China’s Xi Jinping Reaffirms “Common Prosperity” Push

Chinese state radio quoted President Xi Jinping during the National People’s Congress:

• “Economically developed provinces should lead efforts to promote common prosperity.”
• Goal: Narrow urban-rural income disparities by 2035.
• Reinforcing the narrative that the wealthy should help those left behind.
• China’s economic struggles post-COVID have amplified focus on income inequality.

China News Conference Scheduled for Thursday with Key Economic Leaders

A high-profile China news conference will take place on Thursday, March 6, 2025, at 3:00 PM Beijing time (0700 GMT, 2:00 AM U.S. Eastern).

• Speakers include:
  • Pan Gongsheng (Governor, People’s Bank of China)
  • Lan Fo’an (Finance Minister, Ministry of Finance)
  • Wang Wentao (Commerce Minister, Ministry of Commerce)
  • Wu Qing (Chairman, China Securities Regulatory Commission)
  • Zheng Shanjie (Chairman, National Development and Reform Commission)
• The event will provide insight into China’s fiscal, trade, and financial policies amid heightened trade tensions with the U.S.

China’s February Caixin Services PMI Beats Expectations at 51.4

• Services PMI: 51.4 (expected: 50.8, prior: 51.0)—marking 26 consecutive months of expansion.
• Composite PMI rose to 51.5 (prior: 51.1).
• New orders surged, with export orders at a three-month high.
• Input costs fell for the first time since June 2020, easing price pressures.
• Service firms plan aggressive sales strategies to sustain growth.

China Signals Reserve Requirement Ratio (RRR) Cut “At an Appropriate Time”

China reiterated its stance on reducing the RRR, though no timeline was given.

• The statement is frequently repeated but rarely acted upon immediately.

China Suspends Soybean Import Licenses for Three U.S. Firms, Halts U.S. Log Imports

China escalated its trade retaliation against the U.S. by:

• Suspending soybean import licenses for three major U.S. firms.
• Halting all U.S. log imports.
• These actions follow China’s new tariffs on $21 billion worth of U.S. agricultural products.
• Official reason: quality concerns, citing contaminants and pests—a common tactic in trade disputes.
• Soybeans accounted for $12.8 billion in U.S.-China trade in 2024.

China Finance Ministry to Step Up Fiscal Spending, Including a 7.2% Defense Boost

China’s Finance Ministry outlined an expansionary fiscal plan:

• Higher government spending to counter external economic pressures.
• 7.2% increase in defense spending, raising concerns about geopolitical tensions.
• Domestic demand remains weak, affecting government revenue.
• Tax revenue concerns due to slowing growth in key industries.

China Pledges to Keep Yuan Exchange Rate Stable

• China reaffirmed that it will maintain currency stability.
• Key economic targets for 2025:
  • GDP growth “around 5%”.
  • CPI target at 2% (down from 3%).
  • Issuing 1.3 trillion yuan in ultra-long bonds to support the economy.
  • Stronger fiscal policies to stabilize property and stock markets.

PBOC sets USD/ CNY mid-point today at 7.1714 (vs. estimate at 7.2575)

• PBOC CNY reference rate setting for the trading session ahead.

PBoC injects 353.2bn yuan via 7-Day Reverse Repos at 1.5%

• 548.7bn mature today
• net drains 195.5bn yuan in Open Market Operations

Australia’s Q4 GDP Growth Beats Expectations at 0.6%

Australia’s Q4 GDP grew 0.6% q/q (expected: 0.5%), marking the best quarterly performance in two years.

• Annual growth rose to 1.3% (expected: 1.2%).
• Inflation, as measured by the Chain Price Index, increased by 1.4%.

Australia’s Services PMI Softens to 50.8 in February

• Final Services PMI: 50.8 (preliminary: 51.4, prior: 51.2).
• Composite PMI: 50.6 (preliminary: 51.2, prior: 51.1).
• Analysts note softening economic conditions despite steady new business activity.
• Manufacturing orders increased for the first time in over two years, hinting at potential industrial recovery.

RBA’s Hauser: Global Trade Uncertainty at 50-Year Highs

Reserve Bank of Australia Assistant Governor Chris Hauser highlighted:

• Trade war risks are at the highest levels in half a century.
• U.S. tariffs could trigger a global trade slowdown, impacting Australia.
• The February rate cut aimed to counteract economic uncertainty.
• RBA is not fully convinced multiple rate cuts are needed but is prepared to act if inflation surges due to tariffs.

New Zealand’s Commodity Prices Rise 3.0% in February

The ANZ World Commodity Price Index jumped 3.0% m/m (prior: +1.8%), led by:

• Higher dairy and meat prices.
• Strong wool and forestry demand.
• Seafood exports also showed resilience despite global trade concerns.

RBNZ Governor Orr resigns

• Reserve Bank of New Zealand Governor Orr has resigned

Reserve Bank of New Zealand Governor Orr has resigned:

• “I leave the role with consumer price inflation at target, and an economy in a cyclical recovery following the long period of COVID-related disruption. The financial system remains sound. However, there is much work left to do on the major multi-year strategies RBNZ is following. Ongoing focus and funding will be critical to these projects’ success.”

Japan Finance Minister Confirms Forex Discussion with U.S. Counterpart

Japanese Finance Minister Shunichi Kato stated that:

• Japan and the U.S. share views that FX rates are determined by markets.
• Excessive volatility harms economic stability.
• This follows Trump’s renewed threats regarding Japan’s currency policy.

BOJ Deputy Governor Uchida Hints at Further Rate Hikes

BOJ Deputy Governor Uchida indicated that monetary policy will be adjusted gradually:

• If economic forecasts hold, further rate hikes will occur.
• Japan’s economy is expected to grow above its potential rate.
• Corporate capex and private consumption remain strong.
• The BOJ will intervene if long-term rates rise too rapidly.
• No fixed schedule for future rate increases.
• Wage growth is key to inflation trends.
• Higher tariffs could impact Japan’s economy and prices.
• New economic projections on May 1 will guide policy adjustments.
• No immediate plans to sell BOJ’s ETF holdings.

Japan’s Final February Services PMI Rises to 53.7

Japan’s Services PMI improved to 53.7 (prior: 53.0), while the Composite PMI hit 52.0 (prior: 51.1), signaling continued economic expansion.

Crypto Market Pulse

Crypto Market Surges as Trump Signals Potential Tariff Reversal

The cryptocurrency market cap rebounded 4%, surpassing $2.9 trillion as speculation rose that Trump may ease tariffs on Canada and Mexico.

• Bitcoin surged 9%, hitting $90,000 (from $81,480 lows).
• $275 million in short liquidations, the highest of the week.
• Bitcoin ETFs continued to see outflows, with another $143M in sell-offs on Tuesday.

Altcoin Market: ADA, BCH, and HBAR Outperform

• Cardano (ADA) rallied 24%, outperforming Bitcoin.
• Hedera (HBAR) gained 20% on optimism surrounding Nasdaq’s ETF filing for Grayscale’s HBAR spot ETF.
• Ethereum (ETH) and XRP (XRP) rose 5% but struggled at $2,200 and $2.50 resistance levels.

Crypto Industry Developments

• SlowMist warns of critical encryption vulnerability that could expose private keys.
• Australia introduces stricter compliance rules for crypto exchanges, requiring enhanced KYC/AML measures by March 2026.
• SEC drops lawsuit against Cumberland DRW, signaling a softer regulatory stance.

The Day’s Takeaway

Day’s Takeaway: Key Market Trends & Developments

U.S. Markets Rebound on Tariff Delay

• U.S. stocks rallied after Trump confirmed a one-month pause on auto tariffs for Canada and Mexico.
• S&P 500 +1.2% | Nasdaq +1.5% | Dow +1.1% | Russell 2000 +1.0%.
• Market opened flat, dipped midday, then surged in the afternoon on tariff relief optimism.

Fed & Inflation Watch: Mixed Signals from Economic Data

• ADP Private Payrolls: +77K (expected: +140K, prior: +186K)—lowest since July.
• ISM Services PMI: 53.5 (expected: 52.6, prior: 52.8)—inflation risks persist.
• Atlanta Fed GDPNow Model slashed Q1 GDP estimate to -2.8% (from +1.6% on Monday).
• Money markets now pricing in 71.5 bps of Fed rate cuts in 2025, down from 81 bps on Tuesday.

Commodities: Oil Slumps, Gold Steady Amid Tariff Uncertainty

• Crude oil fell 2.88% to settle at $66.31, marking its biggest daily decline since November.
• OPEC+ supply increase and global tariff concerns pressured prices.
• Gold fluctuated around $2,910–$2,919, holding firm as markets weigh Trump’s tariff U-turn and Fed rate-cut expectations.

Crypto Market Surges as Trump Signals Tariff Reversal

• Total crypto market cap jumped 4%, surpassing $2.9T.
• Bitcoin +9% to $90K, leading $275M in short liquidations.
• Altcoins rallied:
  • Cardano (ADA) +24%, Hedera (HBAR) +20%, Ethereum (ETH) & XRP +5%.
• Crypto regulation updates:
  • SEC dropped its lawsuit against Cumberland DRW, signaling a softer regulatory stance.
  • Australia introduced new compliance rules for exchanges, requiring enhanced KYC/AML measures by March 2026.

Global Developments: Trade & Energy Risks in Focus

• Venezuelan oil supply at risk—Chevron must wind down operations by April 3, potentially cutting 200K bpd.
• European natural gas prices fell 3.9%, though analysts say weakness is overdone.
• Germany pushes for EU fiscal rule changes to expand defense spending.

What’s Next?

• Friday’s Nonfarm Payrolls Report (expected: +160K jobs).
• Tariff negotiations with Canada and Mexico continue—markets watching for further easing.
• Crypto markets await inflows after Bitcoin ETF outflows hit $217M this week.
• Fed policy signals—more Beige Book insights on inflation and economic momentum.

Markets are at a key inflection point—will tariffs ease further, or is this just a temporary pause?