Newsquawk European Market Wrap - 27th March 2025

• European stocks hit by Trump auto tariff announcement; car-heavy DAX lagged


• USD faltered after gaining yesterday; GBP and EUR were the main beneficiaries


• Diverging performance across global fixed income markets. Crude flat

EQUITIES

• 
  European Equities have traded in the red for the entire session, holding onto prior losses with the STOXX 600 trading at session lows of 543, down 0.8% at the time of writing. Macro newsflow throughout the session has been light, aside from comments from an EU spokesperson, who said the Commission is preparing responses to the US tariffs. This did little to move the dial as traders await the April 2nd tariff date.


• 
  The DAX was the clear laggard, weighed down by underperformance in the auto sector after Trump reiterated his call for 25% tariffs on the industry. Auto stocks were lower throughout the day, broadly down between 1% and 5%, with Stellantis (-5%) the worst performer due to its exposure to Mexican and Canadian manufacturing. In contrast, Volkswagen has posted the smallest losses, with some desks noting that its Tennessee plant provides a buffer against the tariffs.


• 
  US indices rebounded shortly after the cash open from the downside seen on Wednesday, with the focus surrounding Trump’s tariff updates. Nonetheless, US automakers (F, GM) are getting hit, while car rental Cos. (HTZ, CAR) are soaring on potential increased demand for rentals. Data-wise – Initial Jobless Claims were more-or-less in line with the expected and prior, while Continued Claims, for the week that coincides with the usual payroll survey week, were beneath analyst expectations. Q4 final GDP was revised slightly higher, with Q4 core PCE and consumer spending revised down. US sectors opened almost exclusively in the red, with only Staples in the green, with Technology the laggard and weighed on by NVDA (-0.7%) and AMD (-2.6%), with the latter hit by a Jefferies downgrade. Ahead, a slew of ECB speakers (incl. Lagarde), the US 7-year auction, Banxico, and Fed’s Collins/Barkin are due after the closing bell alongside LULU earnings.

FX

• 
  USD - DXY was on the backfoot after gaining yesterday with the USD showing a mixed performance vs peers. USD gains yesterday were bolstered by the Trump administration's decision to impose 25% tariffs on all cars made outside of the US. That being said, the extent of yesterday's rise was relatively limited with some desks drawing attention to the selling seen in the US equity space as a balancing factor. The pre-election playbook of tariff headlines being USD positive appears to have been rewritten with the hit to economic confidence in the US being the dominant force vs. potential safe haven appeal. Elsewhere, it is worth noting that today is FX spot month-end. As a reminder, Barclays month-end rebalancing model indicates a strong USD buying signal by month-end against all majors. For today's agenda, an upward revision to final Q4 GDP and downward move in quarterly PCE passed with little in the way of fanfare. DXY remained within yesterday's 104.18-68 range.


• 
  EUR - Slightly firmer vs. the USD after a run of six consecutive sessions of losses. It remains to be seen how much legs the bounceback in EUR/USD has given the latest Trump administration announcement of 25% tariffs on all cars made outside of the US. Furthermore, the EU’s top trade negotiator Sefcovic expects US President Trump to hit the bloc with tariffs of about 20% next week. ECB speak continued to focus on the impact of the trade war on the EZ economy with the hawks focusing on the inflationary impact and doves on the growth hit. Today, ECB's Wunsch noted that the Bank is facing a difficult balancing act and a pause should be on the table next month. EUR/USD was unable to make its way back onto a 1.08 handle and approach yesterday's peak @ 1.0803. To the downside, attention is on the 200DMA @ 1.0729.


• 
  GBP - GBP attempted to atone for yesterday's CPI and Spring Statement induced losses. The recovery was a tentative one thus far, albeit Cable was able to reclaim the 1.29 handle. As the dust settles on yesterday's announcement from UK Chancellor Reeves, ING wrote that "if the Chancellor has to raise taxes in the autumn, this means that this year's Bank of England easing cycle is under-priced". As it stands, Refinitiv data shows around 44bps of loosening by year-end. If upside in Cable extends, the WTD peak sits @ 1.2973.


• 
  JPY - USD/JPY extended on yesterday's upside with JPY the worst performer across the majors. Fresh macro drivers for Japan are light as markets look ahead to Tokyo CPI overnight. On which, analysts at ING expect a slight easing of Tokyo prices "amid energy subsidy programmes and stabilisation of fresh food prices. But prices excluding fresh food and energy are likely to remain at a 1.9% rate". As a reminder, the latest BoJ meeting provided no surprises as it maintained rates at 0.50%. Markets do not fully price the next 25bps hike until September with a total of 35bps of loosening seen by year-end. USD/JPY failed to hold above the 151 mark. If upside resumes, focus will be on the 50DMA @ 151.43 and 200DMA @ 151.65.


• 
  Antipodeans - After a positive start to the session, both failed to recoup much of the recent lost ground to the USD. Of note for both countries' largest trading partner, China, US President Trump has suggested he could give the nation some tariff relief to get a deal done on TikTok; China has reportedly rejected this approach. AUD/USD is back above its 50DMA @ 0.6293 but failed to hold above the 0.63 mark. NZD/USD advanced further on a 0.57 handle but stopped shy of yesterday's 0.5762 peak.


• 
  NOK - Norges Bank left rates unchanged in-line with the view of most desks (some looked for a 25bps cut as guided in January). A hold that was justified by inflation pickup. Despite this, the Norges Bank still takes the view that the policy rate can be cut in 2025 and then gradually over the next few years. However (largely as expected), the repo forecasts were subject to a hawkish adjustment with the end-2025 rate at 4.21% (prev. 3.80%); i.e. pricing points to potentially two cuts (but skewed towards just one) at the end of 2025 vs the three cuts across 2025 implied by the December MPR. EUR/NOK fell from 11.3850 to 11.3374 (session low) in a kneejerk reaction as some bets for a cut were unwound. Thereafter, price action was choppy as participants digested the points of uncertainty in the statement and new repo forecasts.

FIXED

• 
  A session of modest divergence between EGBs and USTs given the growth and inflation implications respectively of the latest tariff rhetoric.


• EGBs traded firmer with yields lower across the curve and particularly at the short end** with the curve flattening; action which came as the odds of ECB easing ramped up given the growth concerns. There is now over an 80% chance of a cut in April and just under 60bps seen by end-2025.


• Specifically, this sent Bunds to a 128.69 session high with gains of 54 ticks at best with the German 10yr yield down to essentially the 2.75% mark as it stands.


• 
  USTs under pressure and down to a 110-06 base at worst. Action which saw the odds of Fed easing come under pressure. USTs are set to end the session off worst levels, whilst the short-end of the curve is back to near flat and the curve steepening into 7yr supply.


• Data today included weekly claims, which saw initially essentially in-line while continuing (coincides with the BLS survey window), came in below consensus; however, Pantheon highlights that despite this, leading indicators are alarming and they look for the series to increase next month. Alongside this, Final GDP for Q4 was subject to some modest revisions but spurred no reaction.


• Finally, Gilts have been pressured with impetus coming from the tariff updates and also as participants digest Wednesday’s Spring Statement, with the top-line assessment being that Reeves’ slim headroom means that further spending cuts and/or tax increases are likely in the Autumn Budget, barring a substantial improvement in the growth backdrop or other input.


• 
  Gilts down to a 90.55 base at worst, taking out the 90.75 low from Wednesday which printed during the statement on the 5yr borrowing assessment and cautious headroom commentary from the OBR. A low which has also taken out the early-March base and leaves just 89.59 before the 89.23 contract low.


• 
  UK sells GBP 3bln 4.00% 2031 Gilt: b/c 3.1x (prev. 2.91x), average yield 4.517% (prev. 4.155%), tail 0.5bps (prev. 0.8bps)

COMMODITIES

• 
  Crude - Subdued action across the board with sentiment feeling heavy amid the US administrations ongoing tariff rhetoric, on which Trump will have a news conference on April 2nd which is the "real Liberation Day" amid a swathe of tariffs. Aside from that, crude-specific drivers remain light with no notable nor concrete updates on the Middle Eastern nor Russia-Ukraine fronts. WTI May resided in a USD 69.12-69.96/bbl range while its Brent counterpart traded in a USD 73.23-73.97/bbl band.


• 
  Nat Gas - Dutch TTF shifted between modest gains and losses in early European hours, with complex-specific newsflow light this morning but with traders cognizant of the heating season coming to an end, with stockpiling season ahead. "Winter prices still command a small discount, but it’s becoming more likely that storage sites can be filled without interventions.", according to Bloomberg. No major reaction was seen from the EIA Nat Gas data which saw a build of 37.0bcf (vs exp. 25.0bcf).


• 
  Precious Metals - Eventually trading firmer across the board despite a lack of fresh drivers but amid a softer Dollar and downbeat risk mood on the back of the aforementioned tariffs. Spot gold initially bucked the trend amid haven flows. Spot gold notched a USD 3,017.65-3,057.75/oz range, hitting a fresh record high in the process.


• 
  Base Metals - Lower across the board despite the softer Dollar but amid the downbeat risk mood on the back of the aforementioned tariffs. Citi turned near-term bearish on ex-US copper pricing, revising the 0–3 month price target to USD 9,500/ton from USD 10,000/ton and seeing a 25% US copper import tariff imposed in Q2 2025. Citi sees copper easing to an average of USD 8,800/ton through H2 2025. Citi thinks Section 232 tariffs on US copper imports at 25% could be announced as soon as April and implemented by May. 3M LME copper current resides in a USD 9,809.90-9,997.75/t range at the time of writing.

TRADE/TARIFFS

• 
  China rejects Trump's offer of tariff waivers in exchange for TikTok deal, according to AFP.


• French Finance Minister Lombard says US auto tariffs are very bad news; right now the only possible answer to US tariffs is to raise "our own".


• UK Chancellor says UK is in “intense negotiations” with the US on all tariffs and “working on” exempting the UK because “we don't run a surplus”, via BBC.


• German Autos logistics provider BLG, on US auto tariffs, says they are calculating scenarios for potential decline in handling of up to 15%.


• 
  EU commission spokesperson says EU is preparing its response to new import tariffs announced by US, no timing yet; EU's answer will be timely, robust and well-calibrated.

EUROPEAN DATA

• EU Money-M3 Annual Growth (Feb) 4.0% vs. Exp. 3.8% (Prev. 3.6%)


• EU Loans to Non-Fin (Feb) 2.2% (Prev. 2.0%); Households (Feb) 1.5% (Prev. 1.3%)

CENTRAL BANKS

• 
  ECB's Kazaks says we can probably keep cutting rates if the baseline holds, adds uncertainty is really high and geopolitics is the main cause.


• 
  ECB's Wunsch says the ECB is facing a difficult balancing act as tariffs would be bad for the economy and inflationary, via CNBC; a pause should be on the table in April. Unclear what the impact of the recent German fiscal announcement will be. Inflation risks might be on the upside.


• 
  ECB's Villeroy says France needs to bring the deficit back to the 3% mark


• 
  ECB's de Guindos says ECB is optimistic with regard to inflation. Believe that they will converge towards target in coming quarters on a stable basis. Main impact of tariffs on growth and short lived impact on inflation. For growth, trade war is extremely detrimental. Needs to be very prudent with policy.


• 
  Norges Bank maintained its Key Policy Rate at 4.50% as expected; current assessment of the outlook implies that the policy rate will most likely be reduced in the course of 2025; Q4-2025 Repo Path 4.21% (prev. 3.80%).


• 
  CBRT says in order to maintain the sound functioning of financial markets, additional actions will be taken if deemed necessary. Will continue to use all tools at its disposal. Proactive steps taken in the period incl. targeting a reduction in volatility of asset prices, aimed at limiting upside risks to the inflation outlook.


• Brazil's Central Bank forecasts 2025 GDP at +1.9% (prev. +2.1%), forecasts 2025 trade surplus of USD 61bln (prev. USD 65bln) - Monetary Policy report. Inflation is projected at 3.7% in 2026 and 3.1% in Q3 2027.


• 
  Riksbank's Breman says the policy rate should be seen as a reflection of the risk outlook, rather than a forecast that the policy rate will be unchanged for three years.

GEOPOLITICS

• Russia's Foreign Ministry says recent Russia-US contacts are at the beginning of a long and difficult process of restoring relations, according to RIA. Premature to draw far-reaching conclusions about Russia-US relations, according to Tass.


• Russian Foreign Ministry says a British and French deal for intervention in Ukraine risks a direct clash between NATO and Russia.


• "Naval forces from the IRGC, along with their counterparts from Lebanon, Iraq, and Yemen, are conducting a joint naval exercise in a show of force against Israel and in solidarity with Palestinians in Gaza", according to IRNA.


• 
  "US official to Al-Arabiya: The Pentagon is considering plans to deploy additional forces in the Middle East", according to Al Arabiya.


• 
  Russian Deputy Foreign Minister says given the current circumstances, it is impossible that Russia will make any concessions on strategic stability, via Tass; no concrete agreement on Black Sea deal.


• European Council President Costa says EU must keep the pressure on Russia via sanctions and he will convey this message in today's leaders' meeting on Ukraine.


• Ukraine reportedly attacked Russian energy infrastructure facilities in the past 24 hours, according to Tass.


• Advisor to Iran’s Supreme Leader Khamenei says Iran is “ready” for indirect talks with the US, according to Al Arabiya.


• WSJ's Norman reports that an EU Official confirms that the EUR 5bln near-term ammo plan now has required funding. Adds, that his understanding is that there were no final plans outlined on a European deployment to Ukraine.


• 
  French President Macron says they will continue to support in the short term Ukraine and the Ukraine army. Several countries made additional military and financial commitments for Ukraine on Thursday. It is not the time to lift sanctions against Russia. All countries agreed this. Agreed to continue to put pressure on Russia and Russia's shadow fleet. Decided to mandate foreign ministers to come up with proposals within three weeks on how a Russia/Ukraine ceasefire could be monitored. Conclusions on this ceasefire proposal by Foreign Ministers will be shared with the US.


• 
  Ukrainian President Zelensky posts "Russia is trying to push their own conditions onto our partners, but those conditions are unrealistic".

NOTABLE NORTH AMERICAN NEWS

• Bank of America (BAC) exec says mortgage applications jumped 80% in Q1.


• US HHS Secretary Kennedy Jr. is planning 10k job reductions in his department, according to WSJ; new unit will focus on chronic diseases.

NORTH AMERICAN DATA

• US GDP Final (Q4) 2.4% vs. Exp. 2.3% (Prev. 2.3%)


• US GDP Deflator Final (Q4) 2.3% vs. Exp. 2.4% (Prev. 2.4%)


• US GDP Sales Final (Q4) 3.3% vs. Exp. 3.2% (Prev. 3.2%)


• US GDP Cons Spending Final (Q4) 4.0% (Prev. 4.2%)


• US Core PCE Prices Fnal (Q4) 2.6% vs. Exp. 2.7% (Prev. 2.7%)


• US GDP Deflator Final (Q4) 2.3% vs. Exp. 2.4% (Prev. 2.4%)


• US Adv Goods Trade Balance (Feb) -147.91B (Prev. -155.57B)


• US Wholesale Inventories Adv (Feb) 0.3% (Prev. 0.8%)


• US Retail Inventories Ex-Auto Adv (Feb) 0.1% (Prev. 0.5%)


• US Initial Jobless Claims 224.0k vs. Exp. 225.0k (Prev. 223.0k, Rev. 225k)


• US Continued Jobless Claims 1.856M vs. Exp. 1.888M (Prev. 1.892M, Rev. 1.881M)


• US EIA- Nat Gas, Change Bcf 37.0bcf vs. Exp. 25.0bcf (Prev. 9.0bcf)

27 Mar 2025 - 15:00- ForexGeopolitical- Source: Newsquawk