April Fool's lightens market mood ahead of dark day of tariffs tomorrow

EU mid-market update: April Fool's lightens market mood ahead of dark day of tariffs tomorrow; House special elections may serve as early indicator of the political climate under Trump's second term.

Notes/observations

- Europe starts bullish, fueled by a combination of Trump’s latest comment on tariffs, noting “We’ll be very kind” and a technical bounce following yesterday's selloff to end Q1. No sectors are red, upside led by tech and health care. FX seeing weak EUR and firm JPY. US 'Liberation Day' looms tomorrow. Reports also due from the USTR, Commerce, Treasury, and OMB which will address trade agreements, deficits, intellectual property, tariffs, currency manipulation, and foreign subsidies, with specific focuses like the USTR reviewing the USMCA and China’s "Phase 1" deal, Commerce tackling trade deficits and fentanyl flows, Treasury examining currency and tax issues.

- European leaders reiterate they have a response planned and are ready to implement them. UK PM Starmer said the UK will not avoid US tariffs.

- Data wise, March manufacturing PMIs across Europe were mixed, with new orders experiencing a healthy rise from February on avg. Euro Zone Flash Core CPI YoY below est at 2.4% (lowest since end-2021). Italian unemployment was better than consensus at 5.9% (lowest since 2007) and UK Nationwide House Price Index was flat MoM.

- Today, special elections in Florida's 1st and 6th congressional districts will replace former Representatives Matt Gaetz and Michael Waltz, with outcomes potentially affecting the GOP's slim 218-213 House majority and President Trump's ability to advance his legislative agenda. Both races showing unexpected competitiveness due to significant Democratic fundraising advantages despite the districts' strong Republican leanings. These elections, alongside a concurrent Wisconsin Supreme Court race, serve as early indicators of voter sentiment under Trump's second term, where narrow victories or losses could signal weakening support and complicate future GOP legislative efforts.

- Asian events saw RBA leave rates unchanged as expected and China’s Caixin Manufacturing PMI beat consensus at 51.2.

- Asia closed mixed with KOSPI outperforming +1.6%. EU indices +0.7-1.4%. US futures -0.1% to +0.2%. Gold +0.2%, DXY -0.1%; Commodity: Brent -0.2%, WTI -0.2%; Crypto: BTC +3.3%, ETH +5.7%.

Asia

- Reserve Bank of Australia (RBA) left Cash Rate Target unchanged at 4.10% (as expected) for its 1st pause under the current easing cycle that began in Feb 2025. Statement noted monetary policy remained restrictive. Sustainably returning inflation to target remained the priority. Underlying inflation was moderating but the outlook remained uncertain and pronounced; inflation could move in either direction.

- RBA Gov Bullock post-rate decision press conference stressed that RBA and economy was well positioned for any shocks that might come; Board did not explicitly talk about a rate cut.

- Australia Feb Retail Sales M/M: 0.2% v 0.3%e.

- Australia Mar Final PMI Manufacturing: 52.1 v 52.6 prelim (confirmed 3rd month of expansion).

- China Mar Caixin PMI Manufacturing: 51.2 v 50.6e (6th month of expansion).

- Japan Mar Final PMI Manufacturing: 48.4 v 48.3 prelim (confirmed 9th month of contraction).

- South Korea Mar PMI Manufacturing: 49.1 v 49.9 prior.

- South Korea Mar Trade Balance: $5.0B v $6.0Be; Exports Y/Y: 3.1% v 4.9%e; Imports Y/Y: 2.3% v 2.2%e.

- Japan Feb Jobless Rate: 2.4% v 2.5%e.

- Japan Q1 Tankan Large Manufacturing Index: 12 v 12e; Large Manufacturing Outlook: 12 v 9e.

- Japan Q1 Large Non-Manufacturing Index: 35 v 33e; Large Non-Manufacturing Outlook: 28 v 29e; Large All Industry Capex: 3.1% v 3.2%e.

- PBOC is expected to cut RRR in Apr to counter US tariffs and liquidity pressure.

- Japan Ruling [LDP] Party lawmaker Onodera: Auto tariffs will cause major economic crisis in Japan; expects the tariffs to impact 'all' regions in Japan.

- South Korea Constitutional Court brings forward ruling on impeached Pres Yoon's criminal trial to Apr 4th.

Europe

- UK Mar BRC Shop Price Index Y/Y: -0.4% v -0.4%e.

- More ECB Officials said to signal a readiness to accept the April rate pause.

Americas

- US Treasury Sec Bessent announced that US Pres Trump to announce US reciprocal tariffs at 3pm ET on Wed (19:00 GMT), with overwhelming financial, economic and corporate focus on the outcome.

- Elon Musk set to step down from DOGE by end of May.

- Fed’s Barkin (non-voter for 2025): Base case was it would take a while before we get clarity.

- Fed's Williams (voter noted was a lot of uncertainty around tariffs and details matter.

Speakers/fixed income/FX/Ccommodities/erratum

Equities

Indices [Stoxx600 +1.06% at 539.60, FTSE +0.88% at 8,658.12, DAX 1.30% at 22,449.38, CAC-40 +0.97% at 7,866.04, IBEX-35 +0.62% at 13,225.63, FTSE MIB +1.06% at 38,454.00, SMI +0.86% at 12,725.30, S&P 500 Futures +0.01%].

Market focal points/key themes: European indices opened higher across the board and remained upbeat through the early part of the session; tariffs seen as focus in the markets, with not that Trump appeared to hint at leniency in commentary to the press yesterday; Cyprus closed for holiday; among sectors trending higher are health care and technology; lagging sectors include energy and utilities; CaixaBank puts up for auction a portfolio of NPLs; Colruyt considering strategic actions for its French ops.no major earnings expected in the upcoming US session.

Equities

- Energy: Nordex [NDX1.DE] +2.5% (Awarded orders from OX2 in Finland for N175/6.X turbines totalling 472 MW).

- Financials: CLS Holdings [CLI.UK] -7.5% (earnings) - Healthcare: Bavarian Nordic [BAVA.DK] +2.5% (U.S. FDA approval of Freeze-Dried smallpox and Mpox vaccine), Oncopeptides [ONCO.SE] +27.5% (US FDA removes clinical hold on Oncopeptides' next-gen cancer drug OPD5, based on PDC platform).

- Industrials: Travis Perkins [TPK.UK] -9.0% (earnings; 2025 trading challenging), Mercedes-Benz [MBG.DE] -0.5% (sees Q1 within FY25 outlook), Skanska [SKAB.SE] +2.0% (receives ~SEK4.5B order to replace Raritan River Bridge in Middlesex County, NJ, USA (~$421M)).

Speakers

- ECB's Rehn (Finland) noted that if data verified baseline scenario, then the right reaction would be to cut rates at the upcoming Apr meeting.

- BOE’s Green commented that slack was opening up in labor market. Satisfied with central forecast on inflation. Disinflation contined to be on the way.

- EU Commission Pres Von der Leyen stated that would assess US announcement on tariffs carefully and give a calibrated response.

- UK PM Starmer stated that talks with US on an economic agreement were well advanced.

- Sweden Central Bank (Riksbank) Jansson noted there were strong reasons to expect inflation to fall back; temporary deviations could be seen through. Economy still needed support and would act quickly and decisive on policy if the situation arose.

- Thailand Fin Min Pichai stated that long-term economic outlook not impacted by earthquake; Maintained 2025 GDP growth forecast at 3.0% but did see some impact from the earthquake on 2025 GDP forecast.

Currencies/fixed income

- FX market remained in a holding pattern ahead of the Wed announcement by Trump on the reciprocal tariff measures.

- EUR/USD holding above the 1.08 level as various economic released did little to overcome uncertainty stemming on the trade front. Core CPI registered a 3 1/2 year low but reports circulated that ECB Officials said to signal a readiness to accept the April rate pause.

- GBP/USD at 1.2920.

- USD/JPY at 149.50.

- Gold continued to hit fresh record highs as trade tariffs loom.as its maintained its safe haven status..

- 10-year German Bund yield at 2.69% and 10-year Gilt yield at 4.67%. 10-year Treasury yield at 4.17%.

Economic data

- (NL) Netherlands Feb Retail Sales Y/Y: 1.6% v 3.6% prior.

- (NL) Netherlands Mar Preliminary CPI Y/Y: 3.7% v 3.5%e; CPI EU Harmonized M/M: 0.5% v 0.4%e; Y/Y: 3.4% v 3.3%e.

- (NL) Netherlands Mar Manufacturing PMI: 49.6 v 50.0 prior (moved back into contraction).

- (UK) Mar Nationwide House Price Index M/M: 0.0% v 0.2%e; Y/Y: 3.9% v 4.2%e.

- (RU) Russia Mar Manufacturing PMI: 48.2 v 50.2 prior (1st contraction in 6 months).

- (SE) Sweden Mar PMI Manufacturing: 53.6 v 54.0e.

- (CH) Swiss Feb Real Retail Sales Y/Y: 1.6% v 2.9% prior.

- (AT) Austria Mar Preliminary CPI M/M: 0.2% v 0.6% prior; Y/Y: 2.9% v 3.2% prior.

- (HU) Hungary Mar Manufacturing PMI: 51.2 v 51.2e.

- (PL) Poland Mar Manufacturing PMI: 50.7 v 51.1e.

- (CZ) Czech Q4 Final GDP Q/Q: 0.7% v 0.7% prelim; Y/Y: 1.8% v 1.8% prelim.

- (ES) Spain Mar Manufacturing PMI: 49.5 v 49.7e (2nd month of contraction and lowest since Jan 2024).

- (CH) Swiss Mar PMI Manufacturing: 48.9 v 50.5e (27th month of contraction; PMI Services: 50.6 v 56.8 prior.

- (CZ) Czech Mar Manufacturing PMI: 48.3 v 48.6e.

- (TH) Thailand Mar Business Sentiment Index: 50.2 v 48.9 prior.

- (IT) Italy Mar Manufacturing PMI: 46.6 v 48.0e (12th month of contraction).

- (FR) France Mar Final Manufacturing PMI: 48.5 v 48.9 prelim (confirmed 26th month of contraction).

- (DE) Germany Mar Final Manufacturing PMI: 48.3 v 48.3 prelim (confirmed 33rd month of contraction).

- (EU) Euro Zone Mar Final Manufacturing PMI: 48.6 v 48.7 prelim (confirmed 33rd month of contraction).

- (GR) Greece Mar Manufacturing PMI: 55.0 v 52.6 prior.

- (NO) Norway Mar PMI Manufacturing: 50.6 v 51.9 prior.

- (IT) Italy Feb Unemployment Rate: 5.9% v 6.3%.

- (UK) Mar Final UK Manufacturing PMI: 44.9 v 44.6 prelim (confirmed 6th month of contraction).

- (EU) Euro Zone Mar Advance CPI Estimate Y/Y: 2.2% v 2.2%e; CPI Core Y/Y: 2.4% v 2.5%e.

- (EU) Euro Zone Feb Unemployment Rate: 6.1% v 6.2%e.

- (BE) Belgium Feb Unemployment Rate: 5.9% v 5.8% prior.

- (GR) Greece Feb Unemployment Rate: 8.6% v 9.1% prior.

- (ZA) South Africa Mar Manufacturing PMI: 48.7 v 44.7 prior.

Fixed income issuance

- None seen.

Looking ahead

- (IT) Italy Mar Budget Balance: No est v -€18.7B prior.

- (RO) Romania Mar International Reserves: No est v $71.8B prior.

- (ZA) South Africa Mar Naamsa Vehicle Sales Y/Y: No est v 7.3% prior.

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:25 (CH) Switzerland to sell 3-month Bills.

- 05:30 (DE) Germany to sell €4.5B in 2.20% Mar 2027 Schatz.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.

- 05:30 (BE) Belgium Debt Agency (BDA) to sell combined €2.6B in 3-month, 6-month and 12-month bills.

- 05:30 (ZA) South Africa to sell combined ZAR3.75B in 2031, 2035 and 2040 bonds.

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).

- 06:00 (EU) ECB allotment in 3-month LTRO tender (prior €2.25B with 14 bids recd).

- 06:30 (EU) ESM to sell €1.1B in 3-month Bills.

- 07:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).

- 07:30 (CL) Chile Feb Economic Activity Index (Month GDP) M/M: 0.3%e v 0.4% prior; Y/Y: 0.5%e v 2.5% prior.

- 08:00 (CZ) Czech Mar Budget Balance (CZK): No est v -68.6B prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:30 (EU) ECB chief Lagarde.

- 08:55 (US) Weekly Redbook LFL Sales data.

- 09:00 (BR) Brazil Mar Manufacturing PMI: No est v 53.0 prior.

- 09:00 (US) Fed’s Barkin.

- 09:30 (CA) Canada Mar Manufacturing PMI: No est v 47.8 prior.

- 09:45 (US) Mar S&P Final Manufacturing PMI: 49.8e v 49.8 prelim.

- 10:00 (US) Feb JOLTS Job Openings: 7.680Me v 7.774M prior.

- 10:00 (US) Mar ISM Manufacturing: 49.5e v 50.3 prior.

- 10:00 (US) Feb Construction Spending M/M: +0.3%e v -0.2% prior.

- 10:30 (US) Mar Dallas Fed Services Activity: No est v 4.6 prior.

- 11:00 (MX) Mexico Feb Total Remittances: $4.6Be v $4.7B prior.

- 11:00 (MX) Mexico Central Bank Economist Survey.

- 11:00 (MX) Mexico Mar Manufacturing PMI: No est v 47.6 prior.

- 11:00 (CO) Colombia Mar PMI Manufacturing: No est v 49.0 prior.

- 11:00 (PE) Peru Mar CPI M/M: 0.6%e v 0.2% prior; Y/Y: 1.0%e v 1.5% prior.

- 11:30 (US) Treasury to sell 6-Week Bills.

- 12:00 (IT) Italy Mar New Car Registrations Y/Y: No est v -6.3% prior.

- 12:30 (IE) ECB’s Lane (Ireland, chief economist).

- 14:00 (MX) Mexico Mar IMEF Manufacturing Index : No est v 47.0 prior; Non-Manufacturing Index : No est v 49.5 prior.

- 16:30 (US) Weekly API Oil Inventories.

- 17:45 (NZ) New Zealand Feb Building Permits M/M: No est v 2.6% prior.

- 19:00 (KR) South Korea Mar CPI M/M: 0.1%e v 0.3% prior; Y/Y: 1.9%e v 2.0% prior; CPI (ex-food/energy) Y/Y: 1.8%e v 1.8% prior.

- 19:25 (AU) RBA’s Kent.

- 19:50 (JP) Japan Mar Monetary Base Y/Y: No est v -1.8% prior.

- 20:30 (AU) Australia Feb Building Approvals M/M: -1.3%e v 6.3% prior; Private Sector Houses M/M: No est v 1.1% prior.

- 20:30 (ID) Indonesia Mar PMI Manufacturing.