Futures are lower to start the week - but well off the lowest levels of the session - following the best day for US stocks since November, as the market digests trade war news and the Trump Put remains absent. Over the weekend, Scott Bessent dismissed recent stock declines as healthy, reinforcing the view that President Donald Trump’s administration is unlikely to step in to boost markets (the Fed is a different matter). Trump also reminded investors over the weekend that he would be imposing both broad reciprocal tariffs and additional sector-specific tariffs on April 2. As of 8:00am ET, S&P futures are down -0.2% having been down as much as 0.6% earlier; Nasdaq futures are down 0.1% as Mag 7 stocks edged lower, though Nvidia gained before its much anticipated conference on artificial intelligence. Europe’s Stoxx 600 index rose 0.4%, extending its year-to-date outperformance against US stocks. In global news, Trump will speak with Russian President Vladimir Putin on Tuesday about ending the war in Ukraine. So far the Ukraine ceasefire news is having a muted impact. Trump also said reciprocal tariffs and additional sector-specific tariffs will hit on April 2. Meanwhile, the US retail operator of Forever 21 filed for bankruptcy after years of poor performance. Bond yields are lower as the curve bull flattens while the USD falls to fresh 4 month lows. Commodities are bid higher led by Ags and Energy, following the latest stimulus vows from China. Today’s macro data focus is on Retail Sales where a stronger number may give the market comfort in trying to create a relief rally and the Fed on Weds could be supportive too.
In premarket trading, Tesla leads losses among Mag 7 stocks (Alphabet -0.1%, Amazon +0.3%, Apple -0.2, Microsoft -0.4%, Meta +0.1%, Nvidia +1.4% and Tesla -0.5%), DocuSign rose 1% after William Blair upgraded the e-signature software firm to outperform, noting market opportunity for the company’s Intelligent Agreement Management platform. Incyte (INCY) sinks 14% after reporting topline results from a Phase 3 clinical trial program evaluating the safety and efficacy of povorcitinib. Here are some other notable premarket movers:
Bessent told NBC’s Meet the Press Sunday that he’s not worried by the slump in US stocks, after about $5 trillion was wiped from the S&P 500’s value and the index tumbled into a correction. “Corrections are healthy,” he told NBC. Traders still don’t seem convinced. His comments are a blow to those harboring hopes that President Donald Trump will seek to cushion the market impact of his policies.
“This statement caused some alarm for many Wall Street types who had been counting on Bessent to be the second Trump administration’s ‘voice of reason’ on economic policy,” said Benjamin Picton, a strategist at Rabobank. The comments effectively dash prospects that policymakers will throw “liquidity bones to financial markets whenever they showed signs of wobbling,” Picton added.
Meanwhile, fears of a protracted global trade war are benefiting haven assets, with gold holding close to record highs around $3,000 an ounce, and Treasury yields edging lower. Bund yields dropped five basis points as jitters mounted over Tuesday’s parliamentary vote on Germany’s landmark spending package.
Another source of concern is the US threat of “unrelenting” military strikes on Yemen’s Houthi militants, who said they would respond by targeting US vessels in the Red Sea. The events lifted Brent crude futures above $71 a barrel, while European shipping stocks, including AP Moller-Maersk A/S and Hapag-Lloyd AG, gained.
It's a busy week on the macro front as the Federal Reserve, Bank of England and the Bank of Japan are set to hold policy meetings. While they are not expected to change interest rates, investors will watch in particular for any clues from the Fed on what kind of support could be offered to the economy. Swaps see high odds of three Fed cuts this year, but Fed chair Jerome Powell faces the task of assuring investors the economy remains on solid footing, while signaling policy support will be provided when required. US retail sales data due later Monday are expected to reinforce the picture of a slowing economy, following on from below-forecast inflation readings last week.
In Europe, the Stoxx 600 rose 0.4%, with energy and utilities shares leading gains after China said it would take steps to revive consumption, while consumer products and retail stocks are the biggest laggards. Here are the biggest movers Monday:
Stocks across Asia also rose, pulled higher by a rebound in technology shares and a sense of optimism over China’s plans to boost consumption. The MSCI Asia Pacific Index gained as much as 1.2%, with chip makers TSMC and Samsung Electronics giving it the biggest boost as they tracked a recovery in US tech shares Friday. Benchmarks in Hong Kong, Japan and South Korea all moved higher. The biggest news for traders to digest came from China, after a weekend report from the state news agency said Beijing will promote “reasonable growth” in wages and set up a mechanism to adjust the minimum salary, something it seems to do every other months. A raft of economic data also showed signs of recovery in the economy, including a pickup in retail sales. The response of mainland Chinese stocks was muted. Although a gauge of Chinese shares listed in Hong Kong rose around 0.6%, the onshore benchmark CSI 300 Index drifted lower. The market appeared underwhelmed with a Monday press conference. Elsewhere, we get the Bank of Japan’s policy decision due on Wednesday, with the central bank widely expected to keep rates steady.
“China’s latest measures reinforce that boosting consumption is a top priority this year, with a multi-pronged approach involving several ministries and a host of different measures,” said Charu Chanana, chief investment strategist at Saxo Markets. “This could help to broaden out the momentum we have seen in China stocks this year, primarily led by tech.”
In FX, the Bloomberg Dollar Spot Index is set for a second daily loss and is down 0.2%, hitting a fresh four-month low as investors awaited US retail sales and manufacturing data for further clues on the state of the world’s biggest economy. The Norwegian krone is the best performer among the G-10 currencies, rising 0.9% against the greenback. The pound and euro rise 0.3% each.
In rates, treasuries are slightly richer across the curve, following a wider bull-flattening rally seen across bunds which find support from short covering flow ahead of Tuesday’s vote on the spending package. 10-year Treasury yields drop 3 bps to 4.28% in a slight bull-flattening move. Gilts are steady. Bunds rally, led by longer-dated maturities before Tuesday’s vote in the Bundestag on the spending package. German 30-year yields fall 8 bps to 3.13%. Treasury auctions this week include $13 billion 20-year bonds Tuesday and $18 billion 10-year TIPS Thursday.
In commodities, Bitcoin is little changed around $83,500. Spot gold climbs $12 to near $3,000/oz having topped that level for the first time on Friday. WTI rises 1% to $67.80 a barrel.
Looking at today's calendar, US economic data calendar includes March Empire manufacturing, February retail sales (8:30am), January business inventories and March NAHB housing market index (10am). Fed officials are in external communications blackout ahead of March 19 policy announcement
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APAC stocks began the week on the front foot following last Friday's resurgence on Wall St and amid encouraging Chinese activity data but with gains capped owing to geopolitical tensions after the US conducted strikes on Yemen's Houthis and with participants awaiting this week's central bank decisions. ASX 200 gained with the advances led by notable strength in the commodity-related sectors and following encouraging data from Australia's largest trading partner. Nikkei 225 climbed at the open despite the lack of obvious catalysts, while Japan's largest labour union anticipates an average 5.46% wage increase this year which would surpass 5% for the second consecutive year and would be the highest in 34 years but is still below the union's 6.09% pay increase demand. Hang Seng and Shanghai Comp were positive with sentiment underpinned following recent support pledges and after encouraging Chinese activity data in which Industrial Production topped forecasts and Retail Sales matched estimates. However, gains in the mainland were limited as data also showed an increase in Urban Unemployment and House Prices remained in deep contraction territory.
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European bourses (STOXX 600 +0.3%) opened mixed, and traded indecisively on either side of the unchanged mark; though sentiment gradually picked up as the morning progressed. European sectors hold a positive bias, but with the breadth of the market fairly narrow. Energy takes the top spot, lifted by underlying strength in oil prices; the complex is buoyed by heightened geopolitical tensions after the US struck Houthi targets. On that, the militant group said it would continue naval operations until the Gaza blockade is lifted and aid is let in. Basic Resources benefits from the risk tone, and after constructive Chinese activity data overnight, with particular focus on the stronger-than-expected Industrial Production data. US equity futures (ES -0.4%, NQ -0.4%, RTY -0.6%) are lower across the board, with slight underperformance in the RTY, giving back some of the significant strength seen on Wall Street on Friday. Intel's (INTC) new CEO plans to overhaul the chip design and manufacturing business, plans to restart AI efforts and produce chips at annual cadence as it looks at further cuts, Reuters reports.
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DB's Jim Reid concludes the overnight wrap
This morning we’ve launched our latest global market survey, which we’re doing on a quarterly basis now. We ask simple questions to tease out your thoughts on tariffs, whether your view on Germany has changed, your preference for US or European equities, whether the US equity correction is over just as it began, and a few other topical questions. We would very much appreciate all responses. They are all anonymous. We’ll publish the results later this week. The link to fill it in is here.
A reminder that late last week we launched our Deutsche Bank Research Institute (DBRI), a new offering designed to provide valuable insights for corporates, investors and policymakers navigating today’s complex and rapidly evolving global landscape. The Institute will connect the world to Europe and Europe to the world, across geopolitics, macroeconomics, technology, and the evolving corporate landscape. The new Institute website is here and is open to the public so you can share widely. It contains the inaugural “What Germany’s economy needs now” paper which outlines a series of necessary reforms which will demand a historic effort from the next government. Hopefully the huge fiscal stimulus package that will likely get approved this week (more later) will give them the opportunity to implement these reforms. See the English version here and the German here.
It’s a busy week for central bank watchers with decisions due from the Fed, the BoJ (both Wednesday) and the BoE (Thursday), amongst others. Economic data highlights include retail sales in the US (today), various US housing data, labour market stats in the UK (tomorrow) and inflation in Japan (Friday) and Canada (tomorrow). After we had the white smoke of a deal on Friday, the spotlight will be on the vote around the huge proposed fiscal expansion in Germany. The Bundestag and the Bundesrat are expected to hold votes tomorrow and Friday, respectively, before the new Bundestag sits from March 25. We'll preview these below. Note that overnight Trump has said he'll speak to Putin tomorrow so that's another thing to watch
The full day by day week ahead is at the end as usual but let's preview a few of the key events. Firstly, the Fed is widely expected to stay on hold on Wednesday. In their preview (see "March FOMC preview: Patience is a virtue amidst cross currents"), our economists still expect limited guidance about the policy path ahead given all the extreme uncertainty. The statement is likely to announce a pause in QT beginning in April, and we expect forward guidance indicating that QT is expected to resume once the debt ceiling is resolved and the liability composition of the balance sheet normalises. There are risks that a slowing is announced rather than a pause. Our economists also expect the SEP to maintain two rate cut dots this year but with an upward drift in individual dots that could push the median dot to one cut as a risk. The economic projections will likely show higher inflation, somewhat weaker growth, and an unchanged forecast for the unemployment rate this year. Last week's inflation data looked softer on the surface but as our economists pointed out, they still point towards another strong core PCE print. Today’s retail sales will likely be the last piece of data influencing the Fed.
In terms of Germany, this week will be a landmark one with votes on the deal in the Bundestag tomorrow and the Bundesrat on Friday. With the deal agreed on Friday the bulk of the execution risk has been averted. Assuming it goes through, which must be now over 95% probability wise (on my crude guestimates), our economists believe this could lead to a fiscal stimulus of 3-4% of GDP by 2027 at the latest. So don’t underestimate how huge this package is. Our economists’ note here from Friday outlines the remaining risks both in terms of the vote and the constitutional court ruling around whether not enough time was provided to scrutinise the deal. However the legislation is covered by less than 20 pages of text, so we think the legal risk here is low. We also don’t think there is a large risk that the constitutional court rules against the legitimacy of this outgoing parliament given that most experts believe they have constitutional power until the last session. I still don’t think markets have fully caught up to how much of a game changer this will be for Germany over the next few years. Longer-term though our inaugural Institute paper suggests Germany should use this period to embark on significant structural reform. Hopefully the comfort of higher growth towards the latter part of this decade won’t reduce the likelihood of this.
Back to central banks, the BoJ is expected to keep rates steady and the current monetary policy framework maintained on Wednesday. See our economists’ preview of the meeting here. For the BoE, our UK economist expects the BoE to keep the Bank Rate unchanged at 4.5% (his full preview can be found here).
Asian equity markets have begun the week on the front foot after mixed China data but in anticipation of a domestic 30-point action plan to stimulate consumer spending and bolster stock and real estate markets. There is a press conference at 3pm local time (7am GMT so just after we go to print). As I check my screens, the KOSPI (+1.52%) is leading gains in the region with the Hang Seng (+1.07%), Nikkei (+1.20%), and the S&P/ASX 200 (+0.83%) also notably higher. Mainland Chinese stocks are more mixed with the CSI (-0.24%) lower but with the Shanghai Composite (+0.19%) edging higher. S&P 500 (-0.55%) and NASDAQ 100 (-0.59%) futures are slipping after the strong rally on Friday but are also being weighed down by an interview with Bessant over the weekend who suggested stock market corrections are normal and didn't suggest the administration is going to shy away from what it would see as difficult but necessary changes to the economy.
Coming back to China, industrial output accelerated at a faster pace in the first two months of 2025, advancing +5.9% (v/s +5.3% expected) while retail sales rose by +4.0% in the January-February period from a year ago, against market expectations for a +3.8% y/y growth. Fixed asset investment rose by +4.1% on a year-to-date basis, beating the +3.2% growth estimated by Bloomberg. The unemployment rate rose to 5.4% in February (v/s +5.1% expected), the highest level in two years. Meanwhile, new home prices dipped -0.1% versus a month earlier after two months of relatively steady prices indicating that the nation’s property slump lingers despite the country’s latest efforts to prop up the market. Used-home prices dropped -0.34%, the same pace as the previous month, and fell -0.1% from January in top-tier cities. The market has moved on to focus on the announcement as we go to print.
Looking back at last week now and markets saw a fresh selloff as tariff uncertainty mounted and investors grew more cautious on the US outlook. That meant the S&P 500 fell -2.27% in what was also its 4th consecutive weekly loss. Moreover, if the index sees a 5th weekly decline this week, that would be the longest run of declines since the 2022 bear market. However, on Friday there was then a very sharp recovery, which saw the S&P 500 pare back its losses for the week to rise +2.13% on the day, marking its best daily performance since Trump’s election victory back in November. And there were other signs by the weekend that market volatility was easing, as the VIX index closed at 21.77pts, which was its lowest level since the start of March.
Nevertheless, that recovery on Friday wasn’t enough to save most assets from a significant slump, with US HY spreads (+30bps last week) posting their biggest move wider last week since the turmoil last summer. Those losses were echoed around the world, albeit to a lesser extent, and Europe’s STOXX 600 fell -1.22% (+1.14% Friday) in its worst week of 2025 so far. Notably, Friday even saw gold prices move above the $3,000/oz mark for the first time intraday, before closing slightly beneath that at $2,984/oz.
There were also big moves in European sovereign bond markets, as Germany’s CDU leader Friedrich Merz reached an agreement with the Greens on proposals to amend the constitutional debt brake to allow more borrowing. That meant yields continued to push higher in Europe, with those on ten-year bunds up +3.9bps last week (+2.1bps Friday) to 2.87%, whilst the French 10yr OAT yield was up +1.3bps (+1.0bps Friday) to 3.57%.
For US Treasuries, it was a more stable story, with the 10yr yield up +1.1bps last week (+4.4bps Friday) to 4.31% despite having traded as low as 4.15% early last Tuesday. Friday's rise in yields came amid a significant jump in inflation expectations in the University of Michigan’s preliminary index for March. It showed 1yr expectations rising to +4.9% (vs. +4.3% expected), which is their highest since November 2022. And 5-10yr expectations also jumped up to a 32-year high of +3.9% (vs. +3.4% expected). In turn, that led investors to dial back their expectations for Fed rate cuts this year, with just 65bps priced in by the December meeting at the close, the fewest in over two weeks. The UoM survey continues to show extreme polarisation of inflation and economic views along party lines but the rise in expectations overall and from Independent voters is starting to be a concern.