U.S. Indices closed Friday in positive territory but the steep weekly decline remained amid US growth concerns and continued tariff uncertainty. Once again, Friday was a heavy headline day with a deluge of risk events, such as the US jobs report, a load of Fed speakers (Powell the highlight), as well as President Trump and his top execs speaking. Recapping NFP, the headline fell slightly short of expectations but perhaps not as bad as feared, although there is tremendous uncertainty ahead with government job cut efforts from the DOGE. Otherwise, in the report, it was soft – the Unemployment Rate rose to 4.1% from 4.0%, despite expectations for it to be unchanged, but still remains below the year-end Fed forecast of 4.3% (which is set to be updated in March). In addition, Fed Chair Powell largely reiterated his messaging from January and February, stressing the Fed is not in a rush to adjust policy with uncertainty ahead, but the economy remains in a good place. Note, the Fed goes into blackout today ahead of the March 19th FOMC meeting. From Trump, there was a deluge of tariff talk (more details below), but the main takeaways were remarks on Canada, warning he may do reciprocal tariffs as early as today or Monday, and also on Truth stating he is “strongly considering” imposing “large scale” sanctions and tariffs on Russia until a ceasefire and final peace settlement for Ukraine is attained. Sectors closed largely firmer, with Utilities sitting atop of the pile, while Consumer Staples and Financials lagged as the former was weighed on by COST (-6%) post-earnings. Elsewhere, the Dollar was lower and continued its week of losses, which saw the Canadian Dollar lag amid the aforementioned tariff uncertainty. Treasuries chopped but were ultimately lower as risk sentiment improved into the weekend. Lastly, the crude complex was again choppy, albeit settling with slight gains but couldn’t prevent a week of losses, which initially stemmed from OPEC raising oil output. Headline NFP rose by 151k in February, beneath the expected 160k while the prior was revised down to 125k from 143k, seeing two-month net revisions of -2k vs the prior +100k. The headline showed that perhaps the job numbers were not as bad as feared when going into the report, but there is tremendous uncertainty ahead with government job cut efforts from the DOGE. There are also economic slowdown fears and cost pressure fears due to US President Trump’s tariff policy. Elsewhere in the report, it was soft. The unemployment rate rose to 4.1% from 4.0%, despite expectations for it to be unchanged, but still remains below the year-end Fed forecast of 4.3% (which is set to be updated in March). Wages were in line at 0.3% M/M but softer than forecast at 4.0% Y/Y (exp. 4.1%), while the prior’s saw revisions lower to 0.4% from 0.5% and 3.9% from 4.1%, respectively. Elsewhere in the report, the measures of slack saw the U6 unemployment rate rise to 8.0% from 7.5%, suggesting labour market slack is increasing, while the participation rate fell to 62.4 from 62.6%. Overall, this data is unlikely to sway the Fed thought process too much with fears of economic growth ahead currently the focus point with lots of uncertainty ahead. Money Markets are pricing in 70bps of rate cuts this year with the next cut fully priced by June. The Fed is widely expected to keep rates unchanged in March but it is currently 50/50 for May; we see the updated dot plots and economic projections at the March meeting which will help us further understand the Fed’s thought process at the moment. US President Trump, speaking on Canada, warned he may do reciprocal tariffs as early as today or Monday. Trump said Canada has tremendously high tariffs on lumber, and Canada has been ripping them off on dairy and lumber for years, while also noting the EU has been a terrible abuser of tariffs. He threatened sanctions and tariffs on Russia due to them continuing to strike Ukraine, which is making peace talks difficult. Elsewhere, the USTR will hold a hearing on 11th March on China’s effort to target the semi-industry for dominance. White House trade advisor Navarro says automakers have pledged to move supply chains to the US more quickly as part of trade negotiations. On reciprocal tariffs, it will focus on one tariff rate for each country to reflect tariff and non-tariff measures. On India, US Commerce Secretary Lutnick said India has one of the highest tariffs in the world, calling for rethinking of India-US relationship, adding they would like to focus on bilateral trade and for India to bring down tariffs. Lutnick also noted that it is time to do something big, not go product-to-product. India’s market cannot remain closed for agricultural products, some products can have quotas and limits to craft a deal. The US wants manufacturing of pharmaceuticals and semiconductors to come home with support of tariff wall. On South Africa, US President Trump posted that “South Africa is being terrible” with reference to the agriculture sector. The US will be stopping all Federal funding. On Brazil, Lutnick informed Brazil’s Vice President in a call that the US could postpone tariffs on Brazilian goods. Meanwhile, Fed Chairman Powell largely reiterated his messaging from January and February, stressing the Fed is not in a rush to adjust policy with uncertainty ahead, but the economy remains in a good place. He did acknowledge that recent data points to possible moderation in consumer spending and heightened uncertainty, but it remains to be seen how these may affect future spending and investment. Nonetheless, in the Q&A Powell said the general thought is that a one-time jump in prices does not need a monetary policy response, and that the economy is fine, it does not really require them to do anything at the moment. Powell noted there is still a lot of uncertainty about what will be tariffed and for how long and at what level, but warned if that turns into a series of actions, or if tariffs are larger, or expectations start to move, that will influence how the Fed reacts. He stressed that what really would matter is what is happening with longer-term inflation expectations. He did note that most longer-term inflation expectations remain stable and consistent with the 2% inflation goal. As expected, last Thursday, the ECB pulled the trigger on a 25bps reduction to the Deposit Rate, taking it to the upper limit of the estimated neutral range. Greater attention fell upon the Governing Council’s decision to tweak its policy statement so that it reads “monetary policy is becoming meaningfully less restrictive” (prev. “monetary policy remains restrictive”). Elsewhere, the Bank opted to reiterate its data-dependent and meeting-by-meeting approach, whilst stating that it will not pre-commit to a specific policy path. For the accompanying macro projections, the headline 2025 inflation forecast was raised to 2.3% from 2.1%, 2026 held at 1.9% and 2027 trimmed to 2.0% from 2.1%. On the growth front, policymakers cut their 2025 and 2026 growth views whilst holding 2027 at 1.3%. At the follow-up press conference, President Lagarde remarked that the statement language tweak was not an innocuous change and word changes have meaning. She added that the ECB is now moving towards a more ‘evolutionary approach’. With regards to the policy decision, all policymakers, with the exception of Austria’s Holzmann (who abstained) backed the announcement. In terms of where the ECB goes from here, Lagarde suggested that the GC could cut again or pause its cutting cycle depending on the data. The fact that Lagarde classified the policy discussion as “lively” and “intense” suggests upcoming decisions will become more contentious. Overall, the ECB’s policy path is an incredibly uncertain one with Lagarde suggesting that the Bank needs time to assess recent fiscal announcements from the EU and Germany, whilst also awaiting clarity on the Trump tariff regime. As such, policymakers appear to be buying for time before committing to their next move. Elsewhere, Oil closed higher by 1.02% while Gold ended Friday with a 0.2% loss.
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