31st March 2025

U.S.

• Stocks Decline Due to Trade Policy Uncertainty & Inflation

• U.S. stock indexes fell, led by declines in the information technology and communication services sectors.

• Value stocks outperformed growth stocks for the sixth straight week.

• Markets started the week cautiously optimistic due to hopes of a measured approach to tariffs.

• New tariffs, including a 25% levy on non-U.S.-made automobiles, led to a downturn in stocks.

• Economic slowdown concerns and weakening consumer sentiment further pressured the market.

• Inflation Data & Consumer Spending

• Core personal consumption expenditures (PCE) price index rose 0.4% in February, up from 0.3% in January.

• Inflation-adjusted consumer spending increased only 0.1%, below the expected 0.3% rise.

• Year-over-year, core PCE rose 2.8%, staying above the Fed’s 2% target.

• Consumer Confidence Hits a 12-Year Low

• The Conference Board’s Consumer Confidence Index declined for the fourth month to 92.9 (from 100.1).

• The expectations index dropped 9.6 points to 65.2, the lowest in 12 years, signalling potential recession risks.

• The University of Michigan’s Consumer Sentiment Index fell 12% to 57.0, with expectations declining 18%.

• Year-ahead inflation expectations increased to 5.0% (from 4.3% in February).

• Business Activity & Economic Outlook

• S&P Global’s Flash Composite PMI for March was 53.5, showing growth in business activity.

• Services sector strength offset manufacturing weakness.

• Future outlook worsened due to concerns over customer demand and U.S. policy impacts.

• Input prices rose at the sharpest rate in nearly two years, mainly due to tariffs and labour costs.

• Treasury Yields & Bond Market

• U.S. Treasury yields fluctuated, rising early in response to tariff uncertainty but falling on Friday.

• Municipal bonds faced seasonal weakness.

• High-yield corporate bond investors remained cautious on tariffs, though technical conditions were stable.

EU

• Stock Market Performance

• STOXX Europe 600 Index fell 1.4% following U.S. trade tariffs.

• France’s CAC 40 dropped 1.6%, Germany’s DAX declined 1.9%, and Italy’s FTSE MIB fell 0.8%.

• UK’s FTSE 100 managed a slight 0.1% gain.

• Impact of U.S. Trade Tariffs

• European stocks initially rose but fell after Trump announced 25% tariffs on all auto and auto parts.

• The worst-case scenario materialised as no exemptions were granted.

• Trump threatened additional tariffs if the EU retaliated.

• Economic & Geopolitical Developments

• Eurozone private sector expanded for the third month, with manufacturing growing for the first time in two years.

• Germany’s Ifo Business Climate Index hit its highest level since July 2024.

• Parliamentary approval for increased German defence and infrastructure spending supported optimism.

• Ukraine and the U.S. held constructive talks, and a partial Russia-Ukraine ceasefire was announced.

• UK Economic Outlook

• Chancellor Rachel Reeves’ Spring Statement confirmed more spending cuts.

• Office for Budget Responsibility (OBR) halved its 2025 growth forecast to 1%.

• UK inflation fell to 2.8% in February (from 3% in January), raising hopes for a May interest rate cut.

Japan

• Stock Market Decline

• Nikkei 225 fell 1.48%, and TOPIX Index dropped 1.67%.

• The 25% U.S. tariff on auto imports negatively affected Japanese automakers and exporters.

• Fears of a trade war further dampened investor sentiment.

• Government Response & Yen Movement

• Prime Minister Shigeru Ishiba warned of the severe impact on Japan’s auto industry (one-third of exports to the U.S.).

• Japan is seeking an exemption through diplomatic efforts.

• The yen weakened to JPY 150 against the U.S. dollar (from JPY 149.3).

• Bond Yields & Inflation

• The 10-year Japanese government bond yield rose to 1.56% (from 1.52%).

• Bank of Japan (BoJ) signalled potential rate hikes if inflation remains high.

• Tokyo’s core CPI rose 2.4% year-over-year in March, driven by rising rice prices.

China

• Stock Market Performance

• CSI 300 Index was nearly flat (+0.01%), while the Shanghai Composite Index fell 0.40%.

• Hong Kong’s Hang Seng Index declined 1.11%.

• Industrial Sector & Economic Goals

• Industrial profits fell 0.3% in early 2025, missing expectations.

• China aims to increase consumption from 55% to 70% of GDP by 2035.

• Boosting domestic consumption is a top priority for 2025 to counter trade tensions.

• China maintained a 5% annual GDP growth target, requiring significant stimulus.

Other Key Markets

Czech Republic

• Central Bank Holds Interest Rates at 3.75%

• Decision was unanimous among all seven Bank Board members.

• Inflation expected to remain slightly above the 2% target in 2025, reaching the target in 2026.

• Inflation risks persist due to high service prices, global tariffs, and Germany’s fiscal expansion.

Mexico

• U.S. Trade Actions Against Mexico Intensify

• Trump signed an order imposing a 25% tariff on all auto and auto parts imports starting April 3.

• The tariff applies to non-U.S. content in imports from Mexico and Canada under USMCA.

• A 25% tariff could effectively increase costs by 5% across all Mexican exports.

• Additional U.S. tariffs include 25% on steel, aluminium, and non-USMCA goods.

• Mexican President Claudia Sheinbaum has not announced retaliatory tariffs but will wait until April 2 for any changes from Trump.

PLEASE NOTE:

This content is for informational purposes only and should not be construed as investment advice or a specific recommendation to act on any investment. It is importnat to assess your own circumstances before making investment decisions. The views expressed are as of the date indicated and whilst we believe the information is from reliable sources, we do not guarantee it’s accuracy. Past performance is not indicative of future results, and all investments carry market risks, including the potential loss of the principal.