Alibaba echoes Microsoft caution against AI data center overbuild

EU mid-market update: Alibaba echoes Microsoft caution against AI data center overbuild; Pentagon Chief dismissed The Atlantic's report.

Notes/observations

- European equities kicked off higher, with FTSE 100 climbing ~0.5% and DAX nudging >22.9K. Gains were fueled by real estate and housebuilding strength in the UK, while Shell’s boosted shareholder payout plans lifted energy stocks. Germany’s Bayer also rebounded sharply after Mon tumble. Not all shone: Kingfisher cratered after weak FY25/26 guidance tied to consumer budget woes in UK and France. US equity futures, meanwhile, leaned lower, while Asian markets showed a mixed bag.

- Trump’s Apr 2nd tariff deadline in sight. Hints of a targeted approach ease nerves, but new levies on autos, pharma, and Venezuelan oil buyers keeping analysts on edge.

- German Ifo Business Climate survey hit 86.7, its best since July, topping forecasts. Optimism reflects Germany’s fiscal flex—eased debt rules for defense and a hefty infrastructure fund. Spain PPI spiked 6.6% y/y in February, steepest since early 2023, driven by a 22.2% energy cost surge. No immediate equity drags, but it flags inflation risks.

- Ahead of UK Spring Statement tomorrow, a KPMG survey revealed grim consumer feelings—most see the economy faltering and are tightening belts. Chancellor Reeves may unveil a £4B deficit Wednesday, tied to weaker growth, but won’t ease borrowing rules, wary of bond market jitters.

- Alibaba Chairman expressed concerns about a potential bubble in AI data center construction, noting that investments may be outpacing actual demand for AI services, with some projects raising funds without guaranteed usage agreements. The company plans to restart hiring, signaling confidence in business recovery. Similar sentiments were echoed by Microsoft CEO Satya Nadella in February, who acknowledged the risk of an AI compute overbuild and emphasized the need for equilibrium between supply and demand.

- Pentagon Chief Hegseth dismissed The Atlantic's report alleging that senior Trump officials discussed war plans in a Signal group chat, calling the journalist "deceitful" and denying the claims. However, The Atlantic’s Goldberg countered, asserting the conversation contained a detailed minute-by-minute account of CENTCOM’s planned actions, shared with civilian leaders. The controversy arose after the editor-in-chief of The Atlantic was accidentally added to the chat on March 12th, where officials reportedly discussed the upcoming March 15th US attack on the Houthis.

- Asia closed mixed with Hang Seng underperforming -2.4%. EU indices +0.4-0.7%. US futures -0.2% to -0.3%. Gold +0.3%, DXY 0.0%; Commodity: Brent +0.4%, WTI +0.5%; Crypto: BTC 0.0%, ETH -1.2%.

Asia

- South Korea Mar Consumer Confidence: 93.4 v 95.2 prior.

- South Korea Feb Retail Sales Y/Y: 4.4% v 11.7% prior; Department Store Sales Y/Y: -3.6% v +10.3% prior.

- BOJ Jan Minutes (2 decisions ago) noted that members agreed that real interest rates were at significantly low levels and would be appropriate that the BOJ continue to tighten policy if the outlook for economic activity and prices was realized.

- PBoC to change the way it sells medium-term loans and MLF rate would exit its role in guiding monetary policy.

Europe

- ECB’s Escriva (Spain) noted that the current environment was extremely uncertain. Downside risks to growth were outweighing upside risks at the moment.

- Chancellor of the Exchequer (Fin Min) Reeves said to have hit her £9.9B of headroom, wiped out ahead of her Mar Budget Statement. UK now approx £4.0B in the red. OBR expected to cut 2025 GDP growth forecast from 2.0% to 1.0%.

Americas

- Fed's Bostic (non-voter for 2025) noted of a lot of uncertainty about the economy; Won't get back to 2% inflation target until early 2027; Now just saw one rate cut this year (prior: two cuts).

- Trump indicated some nations would receive breaks from next week’s “reciprocal” tariffs.

Energy

- Pres Trump signed Executive Order imposing sanctions on countries importing Venezuelan oil, effective on April 2nd, 2025.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.44% at 551.24, FTSE +0.44% at 8,672.85, DAX +0.40% at 22,948.40, CAC-40 +0.64% at 8,073.34, IBEX-35 +0.88% at 13,441.59, FTSE MIB +0.73% at 39,257.00, SMI +0.19% at 13,041.50, S&P 500 Futures -0.19%]

Market focal points/key themes: European indices open higher across the board and remained upbeat through the early part of the session; risk-on appetite seen following better than expected flash PMIs yesterday; Cyprus and Greece closed for holiday; among sectors leading the way higher are energy and financials; lagging sectors include consumer discretionary and technology; Drax acquires Harmoney Energy Income REIT; earnings expected in the upcoming US session include Smithfield Food and GameStop.

Equities

- Consumer discretionary: Kingfisher [KGF.UK] -11.5% (FY results), TUI [TUI.UK] +1.0% (affirms outlook at CMD).

- Energy: Shell [SHEL.UK] +2.0% (strategy update), Tullow Oil [TLW.UK] +4.0% (earnings).

- Financials: Bellway [BWY.UK] +2.0% (earnings).

- Healthcare: Sanofi [SAN.FR] +1.5% (FDA accepts priority review for tolebrutinib to treat non-relapsing secondary progressive multiple sclerosis (nrSPMS) and slow disability accumulation independent of relapse activity).

- Industrials: Jenoptik [JEN.DE] -4.0% (FY results), Smiths Group [SMIN.UK] +1.0% (earnings; acquisition).

- Technology: ASML [ASML.NL] -0.5% (Alibaba's Chairman: Starting to see the beginning of some kind of bubble in AI data center build-out).

Speakers

- ECB's Kazimir (Slovakia) stated that was open to discuss rate cut or pause in Apr (next meeting); Service inflation would be key.

- ECB's Muller (Estonia) commented that rates were not restricting economy or investments. Further rate cut to depend on tariffs.

- Turkey govt said to extend its protest ban in Ankara to Apr 1st.

- Australia Treasurer Chalmers presented his FY25/26 Federal Budget speech which narrowed the FY25/26 Budget Deficit from 46.9B to 42.1B v 40.0Be while maintaining the GDP growth forecast at 2.25%. He did raise the FY25/26 CPI Inflation from 2.75% to 3.00%. Speech noted to cut bottom tax rate from 16% to 14% over 2 years and extend energy rebates through end of 2025.

- India Fin Min Sitharaman stated that its national budget sought to reduce tariffs on raw materials to aid local manufacturers.

- Thailand Fin Min Pichai commented that might buy THB123B of bad debts to help 3M borrowers.

Currencies/fixed income

- USD was on firmer footing for a 5th straight session.

- EUR/USD moving below the 1.08 level and unphased d by better German IFO data for March. Pair trading at 3-week lows.

- GBP/USD at 1.2910 with focus on Wed budget statement by Fin Min Reeves.

- USD/JPY at 150.60 as risk-on appetite prompting some unwinding of yen. Markets breathed a temporary sigh of relief amid reports that President Donald Trump might hold back some of the reciprocal tariffs set to take effect on April 2nd.

- 10-year German Bund yield at 2.80% and 10-year Gilt yield at 4.74%. 10-year Treasury yield at 4.35%.

Economic data

- (EU) Euro Zone Feb EU27 New Car Registrations: -3.4% v -2.6% prior.

- (FI) Finland Feb Unemployment Rate: 9.4% v 9.5% prior.

- (SE) Sweden Feb PPI M/M: -0.1% v +1.7% prior; Y/Y: 3.4% v 3.5% prior.

- (ZA) South Africa Jan Leading Indicator: 114.4 v 113.3 prior.

- (TR) Turkey Mar Real Sector (Manufacturing) Confidence: 103.2 v 102.8 prior; Real Sector Confidence (unadj): 104.1 v 102.4 prior; Capacity Utilization: 74.4% v 74.5% prior.

- (ES) Spain Feb PPI M/M: 1.2% v 0.4% prior; Y/Y: 6.6% v 2.6% prior.

- (ZA) South Africa Q1 BER Consumer Confidence: -20 v -6 prior.

- (TW) Taiwan Feb Industrial Production Y/Y: 17.9% v 17.3%e.

- (HK) Hong Kong Feb Trade Balance (HK$):-36.3B v -34.4Be; Exports Y/Y: 15.4% v 1.7%e; Imports Y/Y: 0.7%e v 0.5% prior.

- (DE) Germany Mar IFO Business Climate: 86.7 v 86.7e; Current Assessment: 85.7 v 85.5e; Expectations: 87.7 v 87.3e.

- (PL) Poland Feb Unemployment Rate: 5.4% v 5.4%e.

- (ZA) South Africa Q4 Non-Farm Payrolls Q/Q: +0.1% v -1.0% prior; Y/Y: -0.8% v -2.5% prior.

Fixed income issuance

- (FR) France Debt Agency (AFT) opened its book to sell EUR-denominated 0.95% July 2043 inflation-linked bonds (Oatei) via syndicate; guidance seen +12bps to Oatei.

- *(NL) Netherlands Debt Agency (DSTA) sold €1.99B vs. €2.0B indicated in 2.50% July 2035 DSL bonds; Avg Yield: 3.011%.

- (ZA) South Africa sold total ZAR3.75B vs. ZAR3.75B indicated in 2044, 2048 and 2053 bonds.

Looking ahead

- (US) Feb Final Building Permits: No est v 1.456M prelim; M/M: No est v -1.2% prelim.

- 06:00 (AT) ECB’s Holzmann (Austria).

- 06:00 (EU) Daily Euribor Fixing.

- 06:00 (UK) DMO to sell £2.0B in 4.75 Oct 2043 Gilts.

- 06:00 (AT) Austria Debt Agency (AFFA) to sell combined €1.75B in 3-month and 6-month Bills).

- 06:15 (CH) Switzerland to sell 3-month Bills.

- 06:30 (DE) Germany to sell €4.5B in 2.40% Apr 2030 BOBL.

- 06:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.

- 06:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).

- 06:50 (EU) ECB’s Vujcic (Croatia).

- 07:00 (UK) Mar CBI Retailing Reported Sales: -24e v -23 prior; Distribution Reported Sales: No est v -26 prior.

- 07:00 (BR) Brazil Mar FGV Consumer Confidence: No est v 83.6 prior.

- 07:00 (BR) Brazil Central Bank (BCB) Mar Minutes.

- 08:00 (MX) Mexico Jan Retail Sales M/M: 0.0%e v 0.1% prior; Y/Y: +1.1%e v -0.2% prior.

- 08:30 (US) Mar Philadelphia Fed Non-Manufacturing Activity: No est v -13.1 prior.

- 08:40 (US) Fed’s Kugler.

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

- 09:00 (HU) Hungary Central Bank (MNB) Interest Rate Decision: Expected to leave Base Rate unchanged at 6.50%.

- 09:00 (US) Jan FHFA House Price Index M/M: 0.3%e v 0.4% prior.

- 09:00 (US) Jan S&P Corelogic House Price Index (20-City) M/M: 0.40%e v 0.52% prior; Y/Y: 4.55%e v 4.48% prior; House Price Index (overall) Y/Y: No est v 3.90% prior.

- 09:00 (UK) Daily Baltic Dry Bulk Index.

- 09:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).

- 09:05 (US) Fed’s Williams.

- 10:00 (US) Feb New Home Sales: 680Ke v 657K prior.

- 10:00 (US) Mar Consumer Confidence: 93.6e v 98.3 prior.

- 10:00 (US) Mar Richmond Fed Manufacturing Index: 0e v 6 prior.

- 10:00 (BE) Belgium Mar Business Confidence: -11.5e v -12.3 prior.

- 10:00 (HUI) Hungary Central Bank post rate decision statement.

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

- 12:00 (DE) ECB’s Nagel (Germany).

- 13:00 (US) Treasury to sell 2-Year Notes.

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

- 17:00 (KR) South Korea Mar Business Manufacturing Survey: No est v 90.1 prior; Non-Manufacturing Survey: No est v 81.7 prior.

- 19:50 (JP) Japan Feb PPI Services Y/Y: 3.1%e v 3.1% prior.

- 20:30 (AU) Australia Feb CPI Y/Y: 2.5%e v 2.5% prior; CPI Trimmed Mean Y/Y: No est v 2.8% prior.

- 22:00 (SL) Sri Lanka Central Bank (CBSL) Interest Rate Decision: Expected to leave Overnight Policy Rate (OPR) unchanged at 8.00%.

- 23:00 (TH) Thailand to sell combined THB34B in 2029 and 2055 bonds.