Weekly house view | “Liberation day” has arrived
The week in review
President Trump said he was placing 25% tariffs on auto imports to foster domestic manufacturing, raising market concerns about a global trade war and sending US equities lower. The auto tariffs, which are growth negative and inflation positive, cover almost USD 500bn of imports, around 1.6% of GDP. Trump also threatened “secondary” tariffs on any country that buys Venezuelan oil. US households, like markets, have grown uneasy about policymaking under Trump, as shown by consumer confidence falling in March to a four-year low. The S&P 500 fell 1.5%[i] on the week (in USD). Benchmark 10-year Treasury yields edged up 1 bp to 4.26%. Gold prices reached a new all-time high at USD 3,086 during the week and copper hit an all-time high on tariff fears. The tech-heavy Nasdaq fell 2.6%[ii] (in USD). The chairman of a Chinese tech giant expressed concern about large investment announcements in artificial intelligence in the US, saying they may mark the start of a bubble. In Europe, Sweden said it would raise defence spending to 3.5% of GDP by 2030 from 2.4% currently given high uncertainty in trans-Atlantic relations. In the UK, Chancellor Reeves presented spending cuts as part of a series of measures to restore her fiscal targets but markets were unconvinced. The 10-year gilt yield rose.
Geopolitics
Russia and Ukraine agreed to halt military activity over the Black Sea, but Trump grew frustrated with Russian President Putin for slow progress in ceasefire talks: “You could say that I was very angry,” he said.
Key data
In the US, consumer confidence fell to its lowest level since January 2021, with households fearing a recession in the future and higher inflation because of tariffs. The S&P Global US services PMI rebounded by 3.3pts to 54.3. The S&P Global US manufacturing PMI declined by 2.9pts to 49.8. In the euro area, the Flash composite PMI rose slightly in March. PMIs suggest modest euro area GDP growth in Q1. Germany’s Ifo survey rose in March as companies expect a recovery after two years of contraction. March Tokyo CPI surprised to the upside, with new core up to 2.2% y-o-y.