Liberation day has come

In focus today

In the US, Donald Trump is widely expected to enact new broad-based tariffs with an expansion to measures against Canada and Mexico, while auto tariffs will wait until Thursday. The first reciprocal tariffs are also due to be announced today, with the latest news focusing on an announcement of alleged 20% tariffs on most goods imported to the US. Read more from Research US: Trump's 'Liberation Day' - What to expect?, 27 March. On the data front, ADP's March private sector employment report will provide markets with the first sense of what to expect from Friday's nonfarm payrolls.

In Denmark, statistics about Nationalbanken's currency interventions in March will be released. Given that the EUR/DKK remains close to the central rate, we expect Nationalbanken did not intervene in March. If this holds true, it will mark the 26th consecutive month without interventions from Nationalbanken.

In Poland, the Polish central bank announces its decision on the leading interest rate. We expect an unchanged policy rate at 5.75%, in line with consensus.

Economic and market news

What happened yesterday

In the US, ISM manufacturing activity index declined to 49.0 in March (cons. 49.5) from 50.3 in February. The index showed a sharp weakening in order-inventory balances, which is typically a negative signal for production going forward. Consequently, the employment index declined as well, while price pressures rose sharply (69.4 from 62.4). In the JOLTs report, voluntary layoffs declined, which is typically a sign of consumers' feeling less confident about their employment prospects. At the same time, involuntary layoffs increased, although in historical context their level is still modest.

In the euro area, HICP inflation declined to 2.2% y/y in March as expected from 2.3% y/y in February. Inflation in the first quarter of the year has thus averaged 2.3% y/y, which was what the ECB staff projections expected at the March meeting. The decline in March was due to energy and services inflation. In 2025 Q2, we expect inflation to average 2.2% y/y in line with the ECB staff projections and inflation markets pricing. The expected inflation developments support further easing from the ECB in our opinion.

In Denmark, the release of flash private sector earnings for Q1 indicated that nominal earnings rose by 4.4% y/y in Q1, down from 4.6% y/y in 2024 Q4. This nominal wage growth was in line with expectations and demonstrates a continuation of the trend of real wage growth, although at a slower pace than observed over the past year and a half.

In Sweden, the bargaining parties finally reached an agreement, with a cost benchmark of 6.4 percent over a 24-month period (3.4% year 1, 3.0% year 2). The agreement was well in line with our forecast (6.2% over 24-month period) and well in line with the Riksbank's forecast for wage increases. For monetary policy, this wage agreement should be neutral compared to expectations.

PMI for the manufacturing sector rose marginally to 53.6 in March from 53.5 last month. All subcomponents except for deliveries contributed on the upside (i.e. new orders, production, inventories, and employment). The reading was as expected, and in line with the readings over the past five months.

Equities: Equities rose yesterday, while bonds fell - what's not to like?

Well, firstly, the movements in equities did not accurately reflect the messages from key figures, particularly the ISM manufacturing print, in our view. An ultimate equity bull might argue that this is just a Goldilocks scenario, but that is far from the case, despite realised inflation data in Europe being even more benign than consensus expectations and very close to the 2% target.

The fact remains that key figures disappointed yesterday, and leading inflation data came in high. Additionally, we observed signs of frontloading and loss of confidence effects in manufacturing data, mostly related to areas where tariffs are already imposed, particularly Canada and Mexico. Meanwhile, Chinese data, on the flipside, was the positive surprise yesterday. In other words, equity investors were hoping for a less severe outcome of "Liberation Day" today rather than focusing on much else. More interestingly, emerging markets and Europe outperformed the US, both in macroeconomic and financial market terms. This further fuels the argument that US tariffs are affecting the US most significantly, and the notion of US exceptionalism is best paused with Trump or, at "worst", ending.

In the US yesterday: Dow -0.03%, S&P 500 +0.4%, Nasdaq +0.9%, and Russell 2000 +0.02%.

Asian markets are in a waiting position this morning, treading water ahead of the tariff announcement later today in the US.

European and US futures are slightly lower this morning.

FI&FX:

Donald Trump's 'Liberation Day' is here, and markets are awaiting clarity on the tariff announcements scheduled for 3PM ET / 9PM CEST / 10PM EEST. US equities closed Tuesday in green with SPX +0.4% and Nasdaq +0.9%. Bonds performed as well amid soft US data, and the US 10y yield was off 10bps from Monday's high. EUR/USD continues to gyrate around 1.08 while the JPY gained marginally vs the USD, though still just below 150. SEK and NOK firmed vs the EUR, where EUR/NOK at 11.29 is not far from last summer's lows. EUR/SEK is back at 11.80. EUR/DKK rose to the highest level since early February yesterday to around 7.4620. The zloty awaits the rate decision from NBP where unchanged at 5.75% is widely expected.