Car makers shares dropped after Donald Trump announced he would impose 25% on imports of all foreign-made cars and car parts from April 1. Trump is set to reveal a new tariff regime on April 2, a day he has dubbed “Liberation Day”. In retaliation, the EU is said to be considering imposing tariffs on US services exports, including Big Tech’s operations.
Russia and Ukraine agreed to a partial ceasefire, focusing on a cessation of naval hostilities in the Black Sea and the suspension of attacks against energy infrastructure.
UK
The FTSE 100 gained 0.1% over the week.
UK inflation unexpectedly fell to 2.8% in February.
Chancellor Rachel Reeves’ annual Spring Statement announced a raft of further spending cuts. The Office for Budget Responsibility (OBR) also halved its UK economic growth forecast for 2025 to 1% and called for higher unemployment and inflation this year. However, the OBR upgraded its economic growth projections for each year from 2026 through 2029.
The S&P Global UK Composite PMI rose to 52.0 in March from 50.5 in February to reach its highest level since September, driven by the strongest expansion in the service sector since August.
US
The S&P 500 slid 0.3% over the week while the Nasdaq lost 1.0%. Shares closed on a weak note after higher than expected inflation and flagging consumer spending reignited the sell-off.
The S&P 500 is currently on course to record its worst quarterly performance since 2022.
The core PCE index, the Federal Reserve’s preferred measure of inflation rose to a higher-than-expected 2.8% in the year to end February.
The University of Michigan index of US consumer sentiment was revised lower to 57 in March from a preliminary of 57.9, and well below 64.7 in February. Consumer sentiment fell for a third straight month to hit the lowest since November 2022 as consumer’s expectations worsened for personal finances, business conditions, unemployment and inflation. Forecasts for 5-year inflation climbed to 4.1%, the highest since 1993.
The Conference Board’s Consumer Confidence Survey fell to 92.9, its lowest level in four years, while expectations for the next six months dropped to the lowest in 12 years.
The S&P Global US Composite PMI rose to 53.5 in March, from February’s 10-month low of 51.6. The service sector led the upturn (PMI at 54.3 vs 51), with some of the growth attributed to a recovery in business activity following weather-related disruptions in January and February. Meanwhile, manufacturing fell (49.8 vs. 52.7) after a tariff-driven boost earlier in the year. Notably, expectations for the year ahead worsened to the second-lowest level since October 2022, with many companies “citing worries over customer demand and the impact of aspects of the new administration’s policies.”
Europe
The Eurofirst 300 fell 1.4% over the week.
The HCOB Eurozone Composite PMI edged up to 50.4 in March, marking the strongest pace of growth since last August. Manufacturing output returned to expansion for the first time in two years, recording its strongest increase since May 2022, while the service sector growth eased to a four-month low.
The Eurozone’s Economic Sentiment Indicator fell to 95.2 in March, the lowest level in three months.
The Ifo Business Climate indicator for Germany rose to 86.7 in March, marking its highest level since July 2024.
Japan
The Nikkei 225 dropped 1.5% over the week.
The au Jibun Bank Japan Composite PMI fell to 48.5 in March, down from 52.0 in February. This marked the first reduction in private sector activity since October and the sharpest contraction since February 2022. The service sector shrank for the first time in five months, while manufacturing recorded its ninth month of decline, representing the fastest drop in a year.
Japan’s Prime Minister Shigeru Ishiba said that the impact on the country’s key auto industry and the economy of the latest US tariff announcement would be “very big” (autos make up roughly one-third of Japan’s total exports to the US) and that appropriate responses must be considered, with all options on the table.
Pacific Basin ex Japan
China is considering including services in a programme that would seek to spur purchases of services in sectors such as travel, tourism and sports as it struggles to boost chronically weak domestic demand.
Emerging Markets
The MSCI EM Index declined 0.9% over the week in USD terms.
Turkish markets rebounded as top economic officials stepped up efforts to soothe foreign investor concerns about last week’s detention of Istanbul mayor who is President Recep Tayyip Erdoğan’s leading political rival.
Mexico’s GDP shrank 0.6% in the fourth quarter of 2024, while economic activity fell 0.2% over the month of January as Donald Trump’s changing tariff plans cast uncertainty over the relationship with its largest trading partner.
Bonds
The yield on the 10-year US Treasury bond rose 1bp over the week to close at 4.26%, while the yield on the 2-year note slid 4bps to 3.91%.
The yield on Germany’s 10-year Bund fell 3bps to 2.73%, while 10-year UK Gilt yields fell 2bps to 4.75%. Japan’s 10-year bond yield rose 4bps to 1.55%
Commodities
Gold reached a fresh record high of above $3,050 per troy ounce amid growing demand for safe haven asset in the face of escalating trade tensions.
Currencies
The Indonesian rupiah fell to its weakest level against the US dollar since the Asian financial crisis of 1998. The currency was pressured by mounting fears about the policies of President Prabowo Subianto and their impact on the fiscal position of south-east Asia’s largest economy.
