U.S. Indices saw choppiness and ultimately ended firmer with gains seen in the both the S&P and NASDAQ 100, as risk sentiment was boosted after CNBC’s Megan Casella said there are three main options that US President Trump is looking at, with blanket 20% tariffs less likely than tiered system of three different rates and also country-by-country rates. On top of this, both the Canadian Dollar and Mexican Peso firmed against the Dollar as she added that Canada/Mexico fentanyl tariffs are expected to be lifted. Prior to this, risk sentiment was lacklustre, and US indices were seeing losses with Treasuries gaining after Washington Post sources said the White House aides have drafted a proposal to impose tariffs of around 20% on at least most imports to the US, and the move was further accentuated after dismal US data. ISM Manufacturing PMI fell deeper than expected into contractionary territory, with weak sub-indices and prices paid soaring, while JOLTS (at the same time) printed short of the Wall St. consensus. In wake of the data (incl. Construction spending) Atlanta Fed GDPNow Q1 model was revised down to -3.7% (prev. -2.8% on March 28th), with the Gold adjusted -1.4% (prev. -0.5%). Sectors were predominantly firmer, mega-caps (Cons. Disc., Comms. Tech) lead the way, and Health lagged as it was weighed on by Johnson & Johnson (JNJ) (-7.6%) as a US judge rejected Cos. USD 10billion bankruptcy proposal to settle lawsuits. Overall, Treasuries bull flattened with T-Notes off post-data peaks given positive tariff developments, which also saw the Dollar generally softer against peers in addition to the soft US data. Ahead, it goes without saying the highlight is ‘Liberation Day’ with President Trump set to speak at the Rose Garden event at 16:00EDT/21:00BST. ISM Manufacturing PMI for March was a grim report, with the headline falling to 49.0 from 50.2 and beneath the expected 49.5. The inflationary gauge of prices paid jumped to 69.4 (prev. 62.4, exp. 65.0) and outside the top end of the forecast range. On this, Capital Economics notes it is still way below its pandemic, even after rising again in March, it seems likely to increase further next month once more tariffs come into effect. However, new orders and employment dipped to 45.2 (prev. 48.6) and 44.7 (prev. 47.6), respectively, while production dropped back beneath 50 to 48.3 from 50.7. Backlog of orders, new export orders, and imports all fell as well. Inventories jumped 3.5 points and limited the damage to the headline figure and likely reflects some stock building ahead of the tariff announcement on April 2nd. Once again, respondent comments were largely dominated by tariff concerns and just picking out a few: 1) “Customers are pulling in orders due to anxiety about continued tariffs and pricing pressures”; 2) “Business condition is deteriorating at a fast pace. Tariffs and economic uncertainty are making the current business environment challenging”; 3) “Newly implemented tariffs are significantly impacting gross profits”. Overall, CapEco said the slight dip in the headline suggests that, rather than triggering a reshoring factory renaissance, the uncertainty surrounding President Trump’s tariff threats are depressing activity. The February JOLTS data saw Job Openings fall to 7.568 million from 7.762 million, beneath the 7.616 million forecast, while the vacancy rate slipped to 4.5% from 4.7%, with the ‘quits’ rate unchanged at 2.0%. Note, in July 2024, Fed’s Waller cited his own research with Fed economist Andrew Figura from 2022 on the Beveridge curve. He said that they projected that if layoffs were steady, the unemployment rate would rise to around 4.5% if the job vacancy rate dropped back to its pre-pandemic level of 4.6%. Analysts at Pantheon Macroeconomics write that elevated economic policy uncertainty began to weigh on labour demand in February, but warns a bigger decline likely lies ahead due to the increased uncertainty over the past month. Elsewhere both Gold and Oil closed lower by 0.4% and 0.2% respectively.
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