Markets
European stocks hesitated yesterday to join Wall Street up to 2% higher but they catch a nice bid today. Equities in the region rise around 1% in what is otherwise a news-poor trading day. With the April 2 “Liberation Day” date approaching fast there’s an apparent increase in articles diving deeper in what US President Trump could announce in terms of reciprocal tariffs. We’re moving beyond the flurry of often confusing headlines to highlight one report that’s grabbing some attention. The Financial Times citing people familiar wrote the US administration is considering a two-step approach in the new tariff regime. It would entail launching (trade) investigations first under the so-called Section 301 of the 1974 Trade Act while simultaneously invoking rarely-used emergency powers to install immediate tariffs in the meantime. The articles under which this could happen, according to the FT, would mean tariffs of either up to 50% or 15%. The fact of the matter remains, however, that no one, including the market, simply does know what to expect. Meanwhile, the tariff chatter is causing further headaches for US consumers as confidence continues to slip. The Conference Board composite indicator fell to its lowest since the pandemic months, driven lower by the expectations component. The latter tanked to just 65.2, the lowest since 2013. The outcome dovetails with the U. of Michigan survey two weeks ago. And just like that, US growth worries are back at the front after one day of absence. US front end yields extended a previous intraday retreat from the highs to new daily lows around 4.01% (2-yr -2 bps). Longer maturities similarly hit new lows for the day but nonetheless underperform vs the front. European/German yields appear to have found a bottom end last week and eke out a few bps today. Curves bear steepen with net daily changes of up to 4 bps. The US dollar faces some selling pressure, including against a euro that’s not doing great today either. The latter has been correcting lower over the past week and could remain lackluster going into April 2. EUR/USD did shrug off early morning weakness that pushed it temporarily sub 1.08 to trade around 1.081 currently. DXY revisits the 104 area. There’s a striking outperformance by the Scandinavian currencies today, led by the Swedish crown. Aided by a technical acceleration after breaking to new YtD highs, SEK is rallying towards EUR/SEK 10.80, its strongest level since November 2022. Oil prices in commodity markets build on a rebound that started early March. Brent rises towards $73.5/b. Gold bounced off the 3K mark.
News & Views
According the a Eurobarometer poll conducted for the European Parliament in January and February, Europeans have high expectations from the EU in its role to protect them against global challenges and security risks. 74% of citizens think that their country benefits from EU membership. This is the highest result ever recorded in a Eurobarometer survey for this question since it was first asked in 1983. 66% of citizens want the EU to play a greater role in protecting them against global crises and security risks. Defence and security (36%) and competitiveness (32%) are considered the top policy priorities. Regarding economic topics that are at the forefront for the European Parliament to address as priority, four in ten Europeans mention inflation, rising prices and the cost of living (43%). At the national level, results for a stronger role of the EU range from 87% in Sweden to 47% in Romania and 44% in Poland.
UK retail sales in March declined sharply amid weak confidence, the March CBI distributive trades survey shows. The March outcome marked the sixth consecutive monthly decline. Retail sales volumes fell at an accelerated rate in the year to March (balance -41% from -23% in February). Sales are expected to fall at a slower pace next month (-30%). Sales for the time of year were judged to be below seasonal norms to a similar extent to February (-36% from -34%). Sales are expected to disappoint again in April (-35%). Retail orders placed upon suppliers fell at the same rapid pace as in February (-38%). Orders are expected to decline at a similar rate next month (-41%). Retail stock volumes in relation to expected demand were firm in March (+20% from +16% in February; long-run average +17%). Martin Sartorius, Economist at CBI analyses that ‘Firms across the retail and wholesale sectors reported that global trade tensions and the Autumn Budget are weighing on consumer and business confidence, which is leading to reduced demand’.
