Key events this week include Trump’s global tariffs, views from the Fed’s Powell (Fri) and the US employment report (Fri). This morning’s Germany and Italy CPI prints will be of interest following the downside surprise on inflation readings from France and Spain last week. We may also get more clues on the ECB’s rate path when we hear from Panetta and Galhau today. China’s Caixin manufacturing PMI, Eurozone CPI, unemployment and manufacturing PMIs, and US job openings and ISM manufacturing will all be scrutinised on Tuesday. US ADP employment and factory orders will shed some light on the broader economy on Wednesday, meanwhile, markets will keep a firm eye on the US’s reciprocal tariffs. China Caixin services PMI will kick-start Thursday, and later we have the US initial jobless claims, trade and ISM data. Also on Thursday, the 25% US levy on car imports takes effect, we also have the ECB’s March meeting notes, and we will hear from the Fed’s Jefferson. The US employment prints will likely keep markets on tenterhooks on Friday. The non farm payroll is currently expected to show that 138k jobs were created in March, however, the “whisper” last week was +70k.
Markets were broadly driven by tariff rhetoric thus growth and inflation expectations last week. On Friday stagflation fears reemerged as the Fed’s favoured inflation measure came in marginally higher than expected coupled with a plunge in consumer sentiment, thus dampening growth expectations. The core PCE Price Index rose 0.4%mom and 2.8%yoy, while the headline measures were steady at 0.3% and 2.5%, respectively, in March. Later the University of Michigan sentiment fell further, driven by inflation concerns, and underscoring concerns around the health of the consumer, which was highlighted earlier in the week by the weaker Conference Board sentiment print. Interestingly, the University of Michigan inflation expectations came in at 5% for the 1-year, while the 5-10 year forecast rose to 4.1%.
Stocks felt the pain with the S&P Index falling 1.53% over the week, while the yield on the 10–year was marginally unchanged. Gold, which thrives in stagflationary environments, continued to soar, gaining 2.08%. The dollar was marginally lower. Meanwhile, Brent crude rose 2.04% to $73.63pb.
Elsewhere, this morning’s release of the official China PMIs signalled strong acceleration in March. The manufacturing survey rose to a 12-month high of 50.5, while the non-manufacturing print also surprised to the upside at 50.8. China is working to reduce US economic dependence amid rising tariffs, with officials at the Boao Forum, emphasising Global South partnerships and policies to stabilise trade. While forecasts are currently predicting 4.5% Asian GDP growth, despite tensions, domestic consumption remains key to achieving China’s 5% growth target. Central bank advisor Huang Yiping noted China has significant policy flexibility to stimulate its economy, with the government introducing new fiscal measures including an increased budget deficit. The central bank has pledged to reduce interest rates and inject capital at an appropriate time, though reforms are still needed to address high household saving rates and boost consumption.
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