US equity futures have extended gains throughout the European morning, with the Nasdaq 100 outperforming compared to when we first noted on Sunday night that a risk-on push has gripped markets last night, after a Bloomberg report that Trump’s April 2 tariff package may be more “targeted” than feared. The WSJ added that the admin will "likely omit a set of industry-specific tariffs while applying reciprocal levies on a targeted set of nations...Those sector-specific tariffs, however, are now not likely to be announced on April 2, said an administration official, who said the White House is still planning to unveil the reciprocal tariff action on that day." That news was enough to send S&P futures 1.2% higher and Nasdaq futures 1.5% with all Mag 7 stocks higher this morning led by TSLA (+3.8%), META (+2.1%) and AMZN (+1.5%). Still, we are not fully in the clear because as Goldman Delta 1 trader Rich Privorotsky writes, "my presumption was that the opening salvo would have been maximalist, this seems a step back from that approach. Objectively positive if tariffs are smaller in magnitude/scope but the bigger issue is the perpetual uncertainty…seems that is not going away." Bond yields were 3-5bps higher on the flight away from safety. Commodities are mostly lower this morning, with Aluminum and Copper being down 1.4% and 0.8%, respectively. This week, the key macro focus will be flash PMIs (today) and PCE (Friday), with investors anticipating major tariff announcement next Wednesday (April 2).

In premarket trading, Tesla led gains among the Mag 7 stocks (Alphabet +1.7%, Amazon +1.7%, Apple +0.9%, Microsoft +1%, Meta +2.7%, Nvidia +1.9% and Tesla +3.7%). Nvidia and Palantir rose amid news that Jack Ma’s Ant Group has developed AI techniques that could cut costs by 20%.

Cryptocurrency-exposed stocks advance as Bitcoin gains for a second straight session. Among shares gaining: Coinbase Global +4.4%, Riot Platforms +4.4%, Mara Holdings +4.6%

Azek (AZEK) jumps 19% after the Australian building-materials company James Hardie Industries agreed to buy the home-decking provider in a deal that valued the business at $8.75 billion in cash and stock.

FedEx (FDX) climbs nearly 1% after Jefferies turned bullish, confident in the parcel delivery company’s ability to continue to grow earnings regardless of top-line trends as it executes on its cost-cutting plans.

Lumentum Holdings (LITE) rises 4% after Raymond James upgraded the optical and photonic products company, saying that recent events from Nvidia and Corning suggest that concerns over co-packaged optics products are overblown.

Super Micro Computer (SMCI) falls about 1% as Goldman Sachs cuts its recommendation on the beleaguered chipmaker to sell amid AI server competition and margin pressures.

Viasat Inc. (VSAT) climbs 4% after Deutsche Bank upgraded the satellite communications company to buy, citing multiple paths for the company unlock value.

Investors are taking comfort from reports by both BBG and WSJ that President Donald Trump’s coming wave of tariffs is poised to be more targeted than the barrage he has occasionally threatened. The administration is not planning separate, sectoral-specific tariffs to be unveiled at the same event on April 2, officials said.

“This raises the possibility that some sectors and countries may fare better than others, helping explain market optimism,” said Daniel Murray, chief executive officer of EFG Asset Management in Zurich.

With much of Wall Street hitting peak bear in recent weeks, Morgan Stanley strategists were among those who see a turnaround on the horizon for US stocks. A dollar that’s down 3.8% from its January peak and signs of a bottoming out for Magnificent Seven earnings could attract flows back to the US, they told clients. 

Elsewhere, investors were keeping an eye on Turkey where the arrest of Ekrem Imamoglu, President Recep Tayyip Erdogan’s main political rival, could spark nationwide protests. The lira fell 0.6% against the dollar, trading near record lows. Meanwhile, the dollar weakened and Treasury yields ticked higher (see more below).

Clues on the state of the US economy will come later from purchasing managers indexes. The US print is expected to show the economy remains in expansion mode.

European indexes were little changed. The Stoxx 600 rose 0.1% to 550.19 erasing earlier gains with health care, food and beverages and real estate sectors lagging, while tariff-sensitive miners outperformed. German software developer SAP SE took the spot as Europe’s most-valuable public company, unseating Danish weight-loss drug maker Novo Nordisk A/S, whose shares have declined 18% this year. Here are some of the biggest movers on Monday:

European mining stocks are the best performers as industrial metal prices climb on hopes US President Donald Trump’s next round of tariffs will be more targeted than previously suggested.

Saab gains as much as 6.5% as UBS upgrades the defense firm to buy, along with Thales, which rises as much as 3.8%.

S4 Capital rises as much as 15% after the advertising and marketing firm’s full-year results beat estimates, with the decline in like-for-like sales decelerating significantly in the final quarter.

Wood Group shares rise as much as 11%, before paring gains, after the engineering company agreed to extend the deadline by which Sidara must table a firm offer or walk away.

Deutsche Bank shares climb as much as 3.6% after RBC Capital Markets raised the price target on the German lender to match a street-high of €26.

EQT shares gain as much as 4.3% after the Swedish private equity firm was upgraded to buy from hold at ABG Sundal Collier.

RWE gains as much as 3.8% after activist investor Elliott Investment Management disclosed it has bought a sizable stake in the German utility company and called on management to increase and accelerate its share buyback program.

Wilhelmsen gains as much as 8.2% after the Norwegian shipping company announced strengthening its partnership with an established auto original equipment manufacturer and enters a 10-year contract extension.

Bayer shares drop as much as 8.9% in German trading after a jury in the US state of Georgia ordered the company to pay about $2.1 billion to a plaintiff who claimed its Roundup weedkiller caused cancer.

Kering shares fall as much as 3.8% as analysts cut their estimates ahead of the luxury firm’s first-quarter earnings due April 23, citing lack of momentum at key brand Gucci.

Hochtief shares drop as much as 4.6% after BofA Global Research downgraded the construction company, warning that the “tide could be turning” after a strong run.

Vodafone falls as much as 3.4% as BofA Global Research cuts its recommendation to neutral, citing a dilutive UK deal and competition in Germany.

Earlier in the session, Asian equities erased losses, boosted by surge in the region’s heavyweight markets of China and India. The MSCI Asia Pacific Index traded little changed after falling as much as 0.5%. Chinese technology firms gave the biggest boosts to benchmark, with Alibaba and Xiaomi among the top contributers. Mainland China and Hong Kong benchmarks rose, boosted by a rotation from small-cap stocks to their larger peers as concerns rise over earnings.
India’s NSE Nifty 50 Index was on pace to erase its loss for the year after rallying more than 1% amid early signs of a pickup in government spending and monetary easing. Japan’s Topix fell for the first time in eight sessions, after soft domestic economic data dented sentiment. Indonesia’s JCI Index recouped most of its losses after sliding to its lowest level since 2021 early in the session. Stock benchmarks also closed lower in Taiwan and South Korea. Despite the recovery, investors remain cautious ahead US reciprocal levies scheduled to go into effect next week, even after President Donald Trump indicated a more targeted approach than previously threatened. 

In FX, the Bloomberg Dollar spot index fell 0.2%, while Treasury yields rose across the curve; as 10-year yield pushed 5bps higher to 4.29%. Havens JPY and CHF are the weakest performers in G-10 FX. The pound rose to session high after March PMIs indicated the UK economy showed signs of improvement. The euro stayed higher after business activity in the euro area reached its highest level in seven months as manufacturers recovered more than expected. The yen dropped as much as 0.4% to 149.85 after BOJ Deputy Governor Shinichi Uchida said on Monday that the bank will keep monitoring the economy and financial markets and raise interest rates if the bank’s economic outlook is realized. There’s a chance that “US tariff policy, which is scheduled for April 2, may be revised to a more flexible content,” says Hiroyuki Machida, director of Japan FX and commodities sales at Australia & New Zealand Banking Group in Tokyo.

In rates, US bonds underperformed gilts and bunds across the curve, with the 10-year Treasuries yield up more than 4 bps to 4.29%. Treasuries were pressured lower as US stock futures advanced after report that President Donald Trump’s coming wave of tariffs is poised to be more targeted. Intermediates lead losses on the day, steepening 2s10s spread which remains near top of Friday’s range. This week also includes duration risk through 2-, 5- and 7-year auctions starting Tuesday. Around $30 billion of corporate issuance is also expected. Treasury yields cheaper by 3bp to 4.5bp across the curve, with the 2s10s spread steeper by around 1bp on the day; US 10-year yields around 4.285% with bunds and gilts outperforming by 2bp and 6bp in the sector. Gilts notably outperform following earlier manufacturing PMI data, while Bank of England Governor Andrew Bailey will speak at 2 p.m. New York time on “growth in the UK economy.” Peripheral spreads tightened to Germany with 10y BTP/Bund narrowing ~2bps to 110bps

In commodities, spot gold is little changed at $3,023/oz. WTI trades within Friday’s range, adding 0.4% to trade around $68.53. Most base metals trade in the green; LME lead rises 2%, outperforming peers.

Looking at today's calendar, the US data slate includes February Chicago Fed national activity index (8:30am) and March manufacturing PMI (9:45am); Fed speaker slate includes Bostic (1:45pm) and Barr (3:10pm). This Week: SPX implied move through 3/28 is 2.23%. Less catalysts to watch into next week; focus will be on Consumer Confidence (Tues), final 4Q GDP reading (Thurs), and PCE/U Mich data (Fri), as well as $183bn in Treasury supply across 2, 5, and 7-year notes.

Market Snapshot

S&P 500 futures up 1.2% to 5,783

STOXX Europe 600 up 0.3% to 551.48

MXAP up 0.1% to 189.22

MXAPJ up 0.6% to 591.91

Nikkei down 0.2% to 37,608.49

Topix down 0.5% to 2,790.88

Hang Seng Index up 0.9% to 23,905.56

Shanghai Composite up 0.2% to 3,370.03

Sensex up 1.4% to 77,985.57

Australia S&P/ASX 200 little changed at 7,936.89

Kospi down 0.4% to 2,632.07

German 10Y yield little changed at 2.77%

Euro up 0.2% to $1.0844

Brent Futures little changed at $72.11/bbl

Brent Futures little changed at $72.13/bbl

Gold spot up 0.1% to $3,025.66

US Dollar Index down 0.13% to 103.96

Top Overnight News

President Trump reportedly plans his tariff 'Liberation Day' with a more targeted push, according to Bloomberg citing officials, while it was noted that Trump will announce widespread reciprocal tariffs on nations or blocs but is set to exclude some and the administration is currently not planning separate, sectoral-specific tariffs to be unveiled at the same event as Trump had once signalled. Furthermore, WSJ also reported that the "White House Narrows April 2 Tariffs" and that tariffs on industrial sectors such as cars and microchips are no longer expected to be announced although major trading partners will still be hit with reciprocal tariffs. The news has been a relief for markets gripped by anxiety about an all-out tariff war.

Trump signed a memorandum aimed at preventing abuses of the legal system and federal courts and directed the Attorney General to seek sanctions against lawyers and law firms that engage in frivolous unreasonable and vexatious litigation against the US government or departments and agencies of the government.

US President Trump’s administration revoked temporary legal status for 530k Cubans, Haitians, Nicaraguans and Venezuelans in the US effective April 24th.

US Treasury is considering streamlining bank regulators, according to Semafor; Treasury is drafting recommendations on OCC and FDIC.

A US proposal to levy Chinese-built ships docking in America would spark a trade “apocalypse” and has the potential to be devastating for the US economy, maritime experts warned. A two-day USTR hearing in Washington starts today. BBG

Ant built AI models that cost 20% less using Chinese-made chips with results similar to those from Nvidia. BBG

China said it was ready for any “unexpected shocks” ahead of US President Donald Trump imposing higher tariffs on the world’s second-biggest economy. FT

The PBOC will inject 450 billion yuan ($62 billion) of liquidity into the market through one-year medium-term lending facility tomorrow. BBG

Japan’s services PMI sank in Mar, with manufacturing coming in at 48.3 (down from 49 in Feb) and services at 49.5 (down from 53.7 in Feb). RTRS

India’s equity rout is starting to worry its legion of retail investors. Inflows into domestic mutual funds have dropped about 30% from October’s record and the influx of new entrants has slowed to a two-year low. BBG

Eurozone flash PMIs for Mar are mixed, with decent performance on manufacturing (48.7, up from 47.6 in Feb and above the Street’s 48.2) but weakness in services (50.3, down from 50.6 in Feb and below the Street’s 51.1). BBG

The UK economy showed signs of improvement, with S&P Global’s purchasing managers’ index jumping to a six-month high of 52 in March. BBG

Turkish court formally arrested Istanbul Mayor Imamoglu after prosecutors asked the court to keep Imamoglu and four aides in jail pending their trial on terrorism and corruption charges. It was also reported that Turkey’s Central Bank Governor said in a meeting with bank executives that the central bank will do whatever is necessary within market rules, while the Capital Markets Board announced a ban on short selling on the Istanbul Stock Exchange until April 25th, eased the equity ratio requirement for credit capital markets transactions and removed the maximum limit for the total amount to be used for share buybacks of listed companies.

Tariffs/Trade

US President Trump reportedly plans his tariff 'Liberation Day' with a more targeted push, according to Bloomberg citing officials, while it was noted that Trump will announce widespread reciprocal tariffs on nations or blocs but is set to exclude some and the administration is currently not planning separate, sectoral-specific tariffs to be unveiled at the same event as Trump had once signalled. Furthermore, WSJ also reported that the "White House Narrows April 2 Tariffs" and that tariffs on industrial sectors such as cars and microchips are no longer expected to be announced although major trading partners will still be hit with reciprocal tariffs.

Canadian PM Carney said they aim to have free internal trade by Canada Day on July 1st and can increase GDP by CAD 150bln by reducing internal trade barriers between provinces, while he added they will allow businesses to defer corporate income tax payments and GST and HST remittance due to new US tariffs. Furthermore, PM Carney called for a general election on April 28th and proposed a middle-class tax cut to reduce the lowest tax bracket by 1%, as well as noted that Trump’s tariffs and threat actions create the most significant crisis of our lifetime and said Trump wants to break them so the US can own them.

China reportedly explores limiting exports to mollify US President Trump and may offer to curb the quantity of certain goods exported to the US, according to WSJ citing advisers to the Chinese government. Furthermore, it was also reported that Trump directed US federal agencies to assess the economic relationship between the US and China with the review due in early April.

China’s Foreign Minister Wang said China wants to pursue trade talks with other countries.

Malaysia is to crack down on NVIDIA (NVDA) chip flows under US pressure, while Malaysia's Trade Minister said Washington suspects high-end semiconductors are making it to China despite trade controls, according to FT.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded mixed in a rangebound fashion amid tariff and trade-related uncertainty, while weekend newflow was mostly centred around geopolitics although there were some reports that suggested the potential for a more focused approach by US President Trump regarding April 2nd 'Liberation Day' reciprocal tariffs. ASX 200 was little changed as strength in financials and consumer discretionary offset the underperformance in  consumer staples and tech, while the latest flash PMI data from Australia accelerated. Nikkei 225 swung between gains and losses with price action indecisive amid a weaker currency and a deterioration in Japanese flash PMIs which all printed in contraction territory. Hang Seng and Shanghai Comp conformed to the lacklustre mood amid lingering frictions although Chinese Premier Li stated at a business forum it is necessary for countries to open up their markets in an increasingly fragmented world and that China was ready for any unexpected shocks, while the PBoC reiterated its pledge to cut rates and RRR at an appropriate time during its quarterly meeting on Friday.

Top Asian News

PBoC to conduct CNY 450bln of 1-year MLF operation on Tuesday. MLF operation to be carried out by adopting a fixed quantity, interest rate bidding, and multiple price bidding method.

Chinese Premier Li said at a business forum it is necessary for countries to open up their markets in an increasingly fragmented world and countries must work to resist risks and challenges from rising instability and uncertainty. Li also stated that China was ready for bigger than expected external shocks and will focus on combining policy intensification with stimulating market forces, as well as deepening reform of the economic system and will strive to open up chokepoints of the economic cycle.

US GOP Senator Daines met with Chinese Vice Premier He Lifeng on Saturday and noted that they are at a time when they have important issues to discuss between the two countries, while Senator Daines also met with Premier Li Qiang on Sunday in Beijing.

BoJ Governor Ueda said they cannot sell long-term JGB holdings immediately and have been gradually tapering long-term JGB holdings now. Ueda said the purpose of BoJ policy is to achieve stable prices and will not be disturbed by consideration for state finances, while he reiterated that the BoJ will adjust the degree of monetary easing if the 2% inflation target is likely to be achieved. Ueda said will not rule out the possibility of selling BoJ's government bond holdings.

Japanese Finance Minister Kato said it is important for currencies to move in a stable manner reflecting fundamentals and they will take appropriate action against excessive moves.

South Korea's Constitutional Court overturned the impeachment of Prime Minister Han, while Han stated he will address urgent issues of trade as a priority after being reinstated as the acting President.

STOXX 600 began the week on a firmer footing before trimming opening gains after a mixed APAC handover, which saw the Hang Seng close higher by almost 1% ahead of BYD earnings, the company holding a 2.8% weighting in the index, and other indices uneventful. Sentiment in Europe remains capped by ongoing geopolitics, with Russia-US talks in Ukraine ongoing in Riyadh, while Israel increases its offensive in Gaza and Lebanon. Sectors are mixed, after opening almost entirely in the green. Healthcare is the clear underperformer, led by losses in Bayer, which is down -7.4% at the time of writing. On the flip side, the best performing sector is Basic Resources, after JPMorgan gave a “Double Upgrade" to the Mining sector, which sees the likes of London-listed Antofagasta and Anglo American up 2.6% and 3.7% respectively.

Top European News

UK Chancellor Reeves ordered GBP 2bln of Whitehall cuts to help fix the nation’s finances, according to FT. It was separately reported that Reeves said the UK will cut 10,000 civil service jobs, according to Bloomberg. Furthermore, Reeves will stick to fiscal rules despite global turmoil which raises the prospect of belt-tightening measures in the budget update this week, according to Reuters.

ECB's Cipollone said key elements strengthen the case for further interest rate cuts; "recent data suggests we might reach the inflation target sooner than expected", via Expansion.

Czech Republic is to rescue Radio Free Europe after US President Trump’s funding cuts, according to FT.

Geopolitics: Middle East

"Israeli Channel 12 on government sources: The military operation will be expanded and what we have done so far has not pushed Hamas to any understandings towards reaching a deal", according to Al Jazeera.

AP said Egypt has put forward a new proposal to try to put the ceasefire between Israel and Hamas back on track.

"There are positive indications about a new Egyptian proposal in the negotiations, but the gaps are still large", according to Israel's N12.

Israeli PM Netanyahu spoke with US Secretary of State Rubio and discussed regional developments including the release of hostages and resumption of fighting in Gaza.

Israel’s military said a projectile was launched from Yemen towards Israel which was intercepted and it conducted strikes on Rafah and Khan Younis, while Israel’s military also said the division that operated in Lebanon is preparing for Gaza activity.

Israel conducted an air strike which killed Hamas political leader Salah Al-Bardaweel in the southern Gaza Strip and targeted the surgery department at Gaza’s Nasser Hospital which killed Hamas political bureau member Ismail Baarhoum.

US peacekeepers said an escalation of the volatile situation at the Lebanon-Israel border could have serious consequences for the region, while it was reported that Israeli PM Netanyahu ordered strikes against dozens of targets in Lebanon in response to rocket fire although Hezbollah denied any link to rocket launches from southern Lebanon on Saturday.

White House National Security Adviser Waltz said the US took out key Houthi leadership during strikes in Yemen, as well as weapons factories and some drone facilities, while he added that the US is seeking full dismantlement of the Iranian nuclear program in a way the entire world can see.

US envoy Witkoff said Hamas is the aggressor here and had every opportunity to demilitarise and accept the bridging proposal but they elected not to. Witkoff also stated that their signal to Iran is let’s sit down and see if we can get to the right place through diplomacy, while he added that Iran cannot have a nuclear bomb which cannot and will not happen.

Iran’s Foreign Minister Araqchi said talks with the US are impossible unless Washington changes its pressure policy.

Iranian Foreign Ministry warned of the repercussions of the new Israeli escalation against Lebanon, according to Sky News Arabia.

Geopolitics: Ukraine

Negotiations between the delegations of the Russian Federation and the US last about two hours; "the parties do not plan to complete the meeting in the near future", according to TASS.

Russia's Kremlin said Saudi Arabia negotiations are underway on technical issues, there are many different aspects related to a settlement in Ukraine that need to be worked out. The Black Sea initiative is on the agenda in these talks. There is a common understanding with the US on the willingness to move towards a settlement

Russia's Defence Ministry says Ukraine attempted to attack an oil pumping station in Russia's Krasnodar region, according to IFAX; the station is out of operation for repairs.

Russia's Kremlin, on energy strike moratorium, said they are monitoring the situation after attacks by Ukraine.

Ukraine and US delegations began talks in Saudi Arabia, while Ukrainian President Zelensky said the Ukrainian delegation is working in a completely constructive way and the conversation is quite useful. There were also comments from the Ukrainian Defence Minister that the agenda for talks included proposals to protect energy facilities and critical infrastructure.

White House National Security Adviser Waltz said the US is talking through a number of confidence-building measures to end the Russia-Ukraine war including the future of Ukrainian children taken into Russia.

US envoy Witkoff said the US expects a lot more progress on the Russia-Ukraine conflict and that Russian President Putin does not want to take all of Europe with the situation much more different than WW2.

White House is aiming for a Russia-Ukraine truce agreement by April 20th, according to Bloomberg.

Russia’s Kremlin said the Putin-Trump call was a step towards a face-to-face meeting and talks in Saudi Arabia will be as well. It was also reported that the Russian Defence Ministry said Russian forces took control of Sribne in eastern Ukraine, according to IFAX.

Geopolitics: Other

South Korea’s Foreign Minister said sanctions against North Korea must be carried out faithfully and that North Korea should not be rewarded for its wrongdoing in the course of the war in Ukraine.

Venezuela’s government said it will resume repatriation flights of migrants from the US beginning on March 23rd.

US Event Calendar

08:30: Feb. Chicago Fed Nat Activity Index, est. -0.17, prior -0.03

09:45: March S&P Global US Composite PMI, est. 51.3, prior 51.6

09:45: March S&P Global US Services PMI, est. 51.0, prior 51.0

09:45: March S&P Global US Manufacturing PM, est. 51.8, prior 52.7

DB's Jim Reid concludes the overnight wrap

I hope you had a good weekend. I'm off to New York after sending this to print, assuming Heathrow is open. I thought I had a proud parenting moment to share this morning. Maisie entered a poetry competition across several schools a few weeks ago and on Friday we got a letter saying that her poem is going to be published in a book. I helped her with one line of it and I nodded with approval at the judge's verdict. My suspicions were raised when the letter also said you could buy as many copies of the book as you wanted for relatives at £20 a pop. I then heard from other parents that unless the poem was truly awful or contained profanities then virtually all get published. Sounds like a great business model.

Talking of great publications, our German economics team have now updated their economic forecasts (link here) after the debt break reform passed its final legislative challenge in the Bundesrat on Friday. There remains a lot of uncertainty on the magnitude and timing of the fiscal expansion to come but they now expect real GDP growth to accelerate to 1.5% in 2026 and 2.0% in 2027 even as they lower 2025 two-tenths to 0.3%. A point we already stressed in the inaugural paper for the DBRI (see here) is that we would expect a deficit-fuelled growth spurt to fizzle out after 2027. While productivity-enhancing investments in defence and infrastructure could raise potential growth, it would take deep structural reforms to get German growth rates back to 2% sustainably. So the trillion-euro question is whether Germany will use the sugar rush recovery to implement much needed reforms or whether the stronger growth will actually make it feel less pressing and politically more difficult. My view is that we will probably see the positive growth impacts before we know if they will fail to do the reforms. So momentum still remains in the German risk trade for now in my opinion.

Looking to this week now, it will be the last full week before the April 2nd US tariff announcement. So expect lots of headlines on this. Indeed US equity futures are higher this morning on Friday's story that tariffs will be more targeted than the worst fears.

Outside of trade, inflation will take centre stage with the all-important US core PCE on Friday. Before that, UK and Australian inflation are out on Wednesday with flash French and Spanish CPI out on Friday, alongside Tokyo CPI. In terms of other highlights, today’s global flash PMIs will be interesting. US and Europe bounced last month but since then the tariff rhetoric has aggressively stepped-up, but on the other hand Germany has reversed decades of fiscal conservatism. So, it’ll be interesting to see how the surveys respond to those developments. Other notable US economic indicators due include the Conference Board’s consumer confidence index tomorrow following a slide in the University of Michigan gauges last week (we have the final reading for this on Friday). Talking of confidence tomorrow sees the latest German IFO so we’ll get another chance to see if the fiscal package has changed the outlook or whether the threat of tariffs dominate. The IFO is only decimals off the recent lows which were only weaker at the height of the GFC and briefly at the start of Covid. Wednesday then sees US Durable Goods and the latest Spring statement from the UK with the fiscal finances precariously balanced given the self-imposed fiscal rules. See our economists’ preview here. Thursday will see the final Q4 US GDP print and latest trade data which will both impact Q1 GDP trackers. The trade data may see an import surge ahead of likely increases in tariffs. Also of note will be the latest Congressional Budget Office Federal debt and statutory limit report as well as the long-term budget outlook (all the way to 2055) on Wednesday and Thursday, respectively.

With regards to central banks, highlights include the summary of opinions from the March BoJ meeting on Thursday. In Europe, the ECB will publish its consumer expectations survey on Friday, the same day as Norway’s central bank will decide on rates. In China, highlights include the 1-yr MLF rate fixings tomorrow as well as industrial profits for February on Thursday. Focus will also be on the annual China Development Forum ending today in Beijing. Many CEOs of blue-chip American and European corporates are attending.

The full day-by-day week ahead is at the end as usual but let's preview the core US PCE on Friday. Personal income (+0.2% vs. +0.9%) and consumption (+0.3% vs. -0.2%) should normalise in opposite directions but the core PCE deflator (+0.37% vs. +0.28%) is likely to edge up and if we're correct that will push the YoY rate up a tenth to 2.8%. The recent stronger-than-expected inflation readings have caused our economists to mark up their 2025 inflation forecasts. They now see Q4/Q4 core CPI and core PCE inflation at 3.0% and 2.7%, respectively.

Over the weekend the news flow intensified in Türkiye with key opposition leader, and Istanbul mayor, Ekrem Imamoglu being jailed on corruption charges after being detained by police last week. The fact that he wasn't charged with terrorism means the news isn't as extreme as it could have been as such a move would have led to the appointment of a trustee to the Istanbul Municipality, risking more protests and unrest. The Bloomberg TRL equity index fell -17.59% last week and the central bank hiked overnight lending rates by 200bps to 46%. Last night the regulator broadened a short-selling equity ban and relaxed company share buy-back rules to try to help stabilise markets. So one to watch this morning.

Asian equity markets are generally lower this morning with US equity futures the bigger movers on tariffs hopes. S&P (+0.66%) and Nasdaq (+0.79%) contracts are leading the way. Elsewhere the Shanghai Comp (-0.40%), KOSPI (-0.27%), Hang Seng (-0.12%) and the Nikkei (-0.07%) are slightly lower. Yields on 10yr USTs (+3.4bps) have climbed to 4.28%.

Early morning data showed that the Japanese au Jibun Bank manufacturing PMI fell to 48.3 in March from 49.0 in February, contracting for a ninth consecutive month. The decline was led by softer overseas demand for goods. At the same time, service activity shrank for the first time in 5 months, falling to 49.5 in March from 53.7 in the prior month. Following the data release, the Japanese yen (-0.34%) is drifting lower for the third successive day trading at 149.83 against the dollar.

Looking back at last week now, and a more positive market tone just about dominated with the S&P 500 (+0.51%) rising for the first time in five weeks. Earlier in Friday’s session, the index had been on course to post another weekly decline but recovered to close +0.08% higher on the day in part thanks to more sanguine comments from President Trump who said that “there’ll be flexibility” in the upcoming reciprocal tariff plans though he appeared to oppose any outright exemptions. Sectorally, rotation away from tech mega caps continued, with the Mag-7 down -0.63% on the week, though it did see a sizeable +1.41% jump on Friday.

In Europe, equities also saw modest gains with the Stoxx 600 +0.56% higher on the week, despite Friday’s -0.60% retreat. Southern Europe led the weekly gains with Italy’ FSTEMIB (+0.98%) and Spain’s IBEX (+2.65%) reaching their highest levels since 2007 and 2008 respectively. Germany’s DAX (-0.41% on the week due to a -0.47% fall on Friday) saw a modest decline for a second week running, though it is still +14.98% higher YTD.

Bond markets mostly posted steady gains, with 10yr Treasury yields falling -6.6bps to 4.25% (+0.9bps Friday), supported by Powell’s dovish undertones at the latest Fed meeting. Money markets ended the week pricing 70bps of Fed cuts by year end, up +5.6bps on the week. In Europe, bonds saw a similar rally with 10yr bund yields falling -11.0bps to 2.76% (-1.5bps Friday) even as the outgoing German parliament approved the constitutional amendment to loosen the debt brake.

Finally, commodities posted gains, with Brent crude oil seeing its largest rise in ten weeks (+2.24% to $72.16/bbl) amid increased supply uncertainty, while copper rose +4.48% to within 1% of its May 2024 record high. And gold again touched new record highs, up +1.27% to $3,022/oz (-0.75% Friday).

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