This could have a detrimental effect on global growth, and on the US economy in particular. In the interval, the focus today will be on macroeconomic indicators relating to employment (Jolts job openings) and activity (manufacturing ISM).
Rates: € rates continued to ease over Monday's session, still fuelled by fears around the imminent implementation of reciprocal tariffs by the US. However, this downtrend reversed in the late afternoon following Bloomberg's report that more and more ECB policymakers seem willing to consider a pause by the central bank in April. As a result, the market revised the probability of an April cut to 73% from 85% on Friday. EGB curves underwent a bear flattening, with the yield for the 10Y Bund closing virtually unchanged at 2.74%, after hitting an intraday low of 2.67%. Meanwhile, the yield for the 2Y Schatz was up 3bp to 2.05%. Sovereign spreads continued to widen due to risk aversion, but also after the verdict in the trial of Marine Le Pen, who will not be able to stand in a presidential election for five years. The 10Y OAT-Bund spread closed at 72bp, in the end recording a slight rise of 1bp.
Credit: iTraxx indices widened (+1.4bp for the Main, +5.1bp for the X-Over) in anticipation of the reciprocal tariff announcement on 2 April, with cyclicals and High Betas clearly underperforming (the ArcelorMittal, Glencore, Lufthansa, Stellantis and Electrolux 5Y CDS widening by around 6bp). Cash also widened, but to a lesser extent than indices, a sign that many market players are currently hedging their portfolios. Prices for hybrids gave up 1/4 of a figure on average, with bigger losses at the long end of the curve (prices off 0.5 to 0.8 figure for hybrids with call dates 2031 and beyond). As for banks, the widening was more significant, reaching as much as 5bp and 7bp, respectively, in the case of the senior and T2 of UK and US banks.
Equities: fourth consecutive session of decline for European indices, still rattled by concerns over tariffs ahead of the announcements by the Trump administration on 2 April. After opening lower in the wake of a 4% fall by the Nikkei, indices extended their decline until mid-session before consolidating marginally higher in late trading. Only telecoms were in the green at the close in the case of the SXXE, while cyclicals underperformed markedly (travel -3%, construction -2.9%, autos -2.6%). The V2X climbed back above 22, at its highest since mid-March. US indices were also in the red, with semiconductors and autos down by almost 4% at the end of the European session. At 5,521, the SPX was nearing to its 13 March low.
FX: the DXY dollar index put on 0.25% to 104.3, supported by risk aversion spurred by concerns over reciprocal US tariffs, due to be announced on 2 April. Against this backdrop, all G10 currencies corrected. The Japanese yen was the currency that corrected the least, remaining just about stable, creeping lower by 0.05% (USD/JPY at 149.9). The euro weakened by 0.2% against the US dollar (EUR/USD at 1.080) in the face of uncertainty over the outcome of the ECB April meeting. Benefiting from what were termed “productive negotiations” between Keir Starmer and Donald Trump on a trade agreement, sterling shed just 0.26% against the US dollar to 1.290 and remained stable against the euro at 0.837. Commodity currencies underperformed the US dollar the most, with the New Zealand dollar and Australian dollar falling by 0.86% to 0.556 and by 0.80% to 0.623, respectively, against the US dollar. Turning to emerging currencies, the USD/KRW reached 1,476.58, at its highest since 2009. The won was rattled by the lifting of the ban on short sales on the Korean stock market but also by data published by the Bank of Korea, revealing that the monetary authorities had intervened in the fourth quarter of 2024, selling 3.76 billion of dollars.
Oil prices traded higher through Monday's session, with Brent up 1.6% near the close, trading around $74.8/bbl. Prices were supported primarily by Trump's comments on Sunday that he was annoyed and very angry at Putin and would impose 25-50% secondary tariffs on importers of Russian crude oil should negotiations to end the war in Ukraine breakdown, and Trump considers Russia to be culpable. Trump also threatened to bomb Iran and place similar secondary tariffs on Iran, should talks on a new nuclear deal not progress. European gas prices closed 0.3% higher at €40.5/MWh. Slovak gas company SPP stated Gazprom would increase supply to Slovakia via Turkstream, although taking spare capacity at the Strandzha-2 entry point in Bulgaria the monthly increase is limited.
