Today's Update 04-03-2025
Key Points and Metrics
Key Points and Metrics:
U.S. Economic Indicators:
ISM Services PMI (March 2025):
Actual: 50.8
Forecast: 52.9
Previous: 53.5
Insight: The services sector expanded at a slower pace than expected, indicating a potential slowdown in economic activity.
ISM Services Employment:
Actual: 46.2
Forecast: 53.0
Previous: 53.9
Insight: Employment in the services sector contracted, falling below the 50.0 threshold for growth.
ISM Services New Orders:
Actual: 50.4
Forecast: 51.9
Previous: 52.2
Insight: New orders continued to grow but at a diminished rate.
ISM Services Prices Paid:
Actual: 60.9
Forecast: 63.1
Previous: 62.6
Insight: Price pressures eased but remained elevated.
Initial Jobless Claims:
Actual: 219,000
Forecast: 225,000
Previous: 224,000
Insight: Jobless claims decreased slightly, suggesting a stable labor market.
Continuing Jobless Claims:
Actual: 1.903 million
Forecast: 1.870 million
Previous: 1.856 million
Insight: Continuing claims increased, indicating potential softening in employment.
Trade Balance (February 2025):
Actual: -$122.7 billion
Forecast: -$123.5 billion
Previous: -$131.4 billion
Insight: The trade deficit narrowed more than expected.
Energy Sector:
EIA Natural Gas Storage Change:
Actual: +29 billion cubic feet (Bcf)
Forecast: +27 Bcf
Previous: +37 Bcf
Insight: Natural gas storage increased, exceeding expectations but reflecting a slowdown from the previous period.
OPEC+ Production Plans:
Announcement: OPEC+ plans to increase oil production by 411,000 barrels per day in April.
Market Reaction: WTI crude oil prices weakened following the announcement.
International Developments:
Tariff Responses and Trade Tensions:
Europe:
France's President Macron urged companies to pause U.S. investments.
France plans a robust response to U.S. tariffs, potentially on an industry-by-industry basis.
Spain announced a €14.1 billion plan to protect its economy from U.S. tariffs.
ECB officials expressed concerns over the impact of U.S. tariffs on growth and inflation.
Mexico:
Ongoing discussions with the U.S. regarding tariffs on the automotive industry, steel, and aluminum.
Mexico's Economy Minister scheduled to visit Washington, D.C. next week.
China:
Fitch Ratings downgraded China's long-term foreign-currency issuer default rating to 'A' from 'A+' with a stable outlook.
The downgrade cites weakening public finances and a rising debt trajectory.
China's GDP growth forecasted to slow to 4.4% in 2025 from 5.0% in 2024.
Market Movements:
Equities:
Russell 2000 Index: Fell by 4.5%, approaching bear market territory.
Credit Risk: The cost of credit protection on U.S. investment-grade bonds rose significantly.
Federal Reserve Expectations:
Traders now fully price in a Fed rate cut in June, earlier than previous expectations of July.
Morgan Stanley revised its forecast, expecting no interest rate cut from the Fed in 2025.
Cryptocurrency Market Sentiment:
Crypto Fear & Greed Index: 25/100 (Extreme Fear)
Fear and Greed Index (General): 11/100 (Extreme Fear)
Central Bank Communications:
European Central Bank (ECB):
Meeting Minutes Highlights:
Concerns over the uncertainty of inflation due to tariffs.
Discussion on whether current monetary policy remains appropriately restrictive.
Emphasis on the need for caution in policy-setting and communication.
Federal Reserve Officials:
Speeches scheduled from Fed's Jefferson and Fed's Cook.
Other Notable Events:
Housing Market:
Redfin Report: The typical U.S. homebuyer's monthly payment reached $2,802 during the four weeks ending March 30.
Trade Deficits:
U.S.-China Trade Deficit (February): Narrowed to $21.17 billion from $31.74 billion in January.
Company Actions:
Stellantis: Planning to pause some operations in Canada and Mexico due to tariffs.
Additional Insights:
ECB's Outlook:
The combination of U.S. tariffs and potential retaliation could pose upside risks to inflation.
Uncertainty in exports is a major concern for the Eurozone economy.
Investor Sentiment:
Traders increased bets on a potential fourth Fed rate cut within the year, indicating growing concern over economic growth.
Trade War Developments
OPEC+ plans to increase production by 411k bpd in April
EU preparing aggressive tariff response with Germany and France leading push
Spain announced €14.1 billion plan to protect their economy
France considering retaliatory taxes on US big tech
France's President Macron urging companies to pause US investments
UK published 400-page list of potential products for tariff response
Switzerland engaging in dialogue with US over tariff justification
Fitch downgraded China to 'A' from 'A+' amid debt concerns
Economic Indicators
US ISM Services PMI fell to 50.8, below expectations (52.9)
Services employment index plunged to 46.2, well below forecast (53.0)
Traders now fully price in a Fed rate cut in June (previously July)
50% chance of a fourth Fed cut this year
Morgan Stanley revised forecast to expect no Fed cuts in 2025
US continued jobless claims rose to 1.903M (Previous: 1.856M)
Final Thoughts
The global markets are experiencing a significant risk-off sentiment as Trump's tariff announcements trigger fears of a full-blown trade war. The sharp decline in services sector data, particularly the employment component falling into contractionary territory (below 50), suggests the US economy may be slowing more rapidly than anticipated. This has accelerated expectations for Fed rate cuts, with markets now pricing in a June cut.
European and Asian nations are quickly formulating retaliatory measures, with France taking a particularly aggressive stance. The extreme fear readings in both traditional and crypto markets highlight the depth of investor concern. With the Russell 2000 entering bear market territory, small caps are showing particular vulnerability to these trade tensions. Investors should prepare for continued volatility as this trade conflict unfolds and monitor upcoming employment data closely for signs of further economic deterioration.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Always do your own research and consider your financial situation before making investment decisions.
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Harry