My first observation of “exorbitant privilege” dates back in 1986/87. I was a Treasury Analyst falling head over heels for macro analysis at Toyota’s U.S. headquarters in Southern California. It was a fascinatingly unstable environment, with company management alarmed by the growing backlash against the U.S.’s ballooning trade deficit with Japan (along with the rapidly inflating Japanese Bubble). Offering U.S. consumers much higher quality and reliable automobiles, Toyota’s sales were booming.
Following the Volcker-led taming of the inflation beast, ten-year Treasury yields were below 7% in 1986, half the mid-1984 level. In general, a significant loosening of financial conditions, huge “twin deficits” - fiscal deficits (5% in 1986) and record trade ($170bn in 1986) and current account deficits - along with a strengthening lending boom, were stoking over-consumption and heightened speculation that culminated in 1987’s speculative blowoff and subsequent “Black Monday” crash.
Rather than countering U.S. imbalances domestically (with tighter “money”), Washington imposed “exorbitant privilege” on our closest Asian ally. Japanese officials were basically forced to aggressively loosen (supposedly to stimulate consumption and U.S. imports) already precariously loose conditions. It was a fateful policy blunder, as Japan’s formidable Bubble (real estate, in particular) inflated in catastrophic “terminal phase excess.” Japan suffers to this day.
Following Alan Greenspan’s post-crash assurances, U.S. and Japanese Bubble excess attained powerful momentum. Japan’s Nikkei almost doubled from post-crash lows to end 1989 at 38,916 – a record high that would stand for almost 34 years (until last year). In the U.S., the craziness would crystallize the “decade of greed.”
Bursting Bubbles then left Japan in tatters and the U.S. banking system severely impaired. Greenspan’s aggressive early-nineties reflationary measures unleashed hedge fund speculative leverage, GSE balance sheets, securitizations, and Wall Street finance – the monumental shift to U.S. dominated market-based finance. This highly unstable financial structure took on a life of its own. Crushed by boom-and-bust dynamics on steroids, the emerging markets (i.e., Mexico, the “Asian Tigers,” Russia…) emerged from devastating collapses determined to buttress their currencies and systems with much larger Treasury holdings (solidifying U.S. exorbitant privilege).
In the U.S., policymakers overcame bouts of speculative excess and fragility (i.e., 1994 bond crash and 1998 LTCM implosion) ready to mitigate market dysfunction with aggressive (GSE) liquidity backstops and Fed-orchestrated bailouts. Wall Street finance – with all its critical shortcomings – took on a life of ever bigger Bubbles, busts and policy reflations. From the 1987 stock market crash to the culminating AI and “everything Bubble” - and everything in between.
Especially during recent peak mania excess, there has been a lot of focus on “American exceptionalism.” I’m not dismissing U.S. technological prowess. But there is a lack of appreciation for the financial and policymaking elements critical to our “exorbitant privilege.” We’ve run persistent trade and Current Account Deficits for decades, while enjoying myriad strong dollar benefits. Our nation has been able to habitually trade IOUs for imported goods and services. “Ripping us off”?
Our overheated Credit system floods the world with liquidity (electronic IOUs), a seemingly harmless dynamic with financial flows so easily recycled right back to U.S. Treasury/Agency Securities and American stocks/corporate bonds. This recycling mechanism is integral to the unique latitude enjoyed by the Federal Reserve, affording essentially unlimited discretion to create the liquidity necessary to sustain Credit, asset, and economic Bubbles. And it’s this Fed capacity for open-ended market support that has provided U.S. financial markets a decisive competitive advantage versus all other nations – especially in the realm of leveraged speculation (so dependent on liquid and continuous markets).
Having witnessed this process for decades, I reject the thesis that everyone has screwed us. We’ve all screwed each other. Here at home, inflationism, a deeply flawed analytical framework, and imprudent policymaking basically frittered away decades of “exorbitant privilege.” Over-consumption, resource misallocation and deindustrialization. In exchange for trillions of inexpensive imports, we exported American inflationism, debt excess, asset Bubbles and instability. Today’s world is one of unprecedented financial and economic imbalances and resulting geopolitical volatility.
Seeing it in their best interests, the world has tolerated our habitual borrowing and spending excesses. The U.S. system was the bedrock for global free market capitalism and democracy – the epicenter of historic global development and prosperity. We offered a security umbrella for allies and likeminded nations. America was the driving force and linchpin for myriad international organizations promoting peace and prosperity. Through thick and thin - and some major blunders - we were the glue that held the world together – the stabilizer - the guarantor of the post WWII “World Order.”
March 5 – Bloomberg (Christopher Anstey): “Former Treasury Secretary Lawrence Summers said that volatile policy actions and rhetoric from President Donald Trump are posing the biggest risk to the dollar’s dominance in the world economy in half a century. ‘The broad approach we are taking to the rest of the world represents the biggest threat to the US dollar’s role as the central currency in the world economy we have had in the last five decades,’ Summers said…”
This has been materializing for a while now. Pick your date: November 5th, January 20th, February 19th, or February 28th. The disintegrating world order was overthrown – a New World of Disorder the conqueror. Between the election and President Trump’s January 20th inauguration, the Dollar Index surged 5.7% - bolstered by manic market gains and “American exceptionalism” glorification. The dollar declined 0.7% on the Munich Security Summit, and then another 0.8% on Zelenskyy the “dictator.” Any doubts that the existing world order had been vanquished were answered in the Oval Office last Friday, February 28th. The Dollar Index sank 3.4% this week.
The divisive domestic political debate is essentially irrelevant. MAGA can disparage President Zelenskyy and be apologists for our President and vice president until they’re absolutely convinced it’s perfectly appropriate - common sense - to end military support and intelligence sharing with ungrateful, disrespectful, and delusional Ukraine. It’s such a weird dynamic, but that’s where we are.
Importantly, the world saw it altogether differently; crystal clear; horrifying clarity. Somehow, it all so quickly became much worse than even the worst fears stirred from the Munich Security Summit. The new administration was no longer a reliable partner, alliance leader, member, beacon of hope, guarantor of global peace and prosperity… America’s top leadership was unstable, untrustworthy, and, worse yet, no longer adhered to traditional shared values.
For posterity – and to emphasize the international perspective.
March 4 – Politico (Chris Lunday and Jurgen Klockner): “Europe’s most powerful economy is poised to take a major step to bolster its defense capabilities, with Germany’s chancellor-in-waiting, Friedrich Merz, announcing a far-reaching plan to effectively exempt defense spending from the country’s constitutional fiscal restraints… ‘In view of the threats to our freedom and peace on our continent,’ Merz said…, the motto ‘whatever it takes’ must now apply to the country’s defense… ‘The political developments in Europe and the world are evolving faster than we anticipated just a week ago… Germany and Europe must now undertake extraordinary efforts to ensure our defense capabilities’… ‘The challenge of investing in a strong and secure Europe,’ said SPD co-leader Lars Klingbeil, is ‘perhaps the most important task of my political generation, and with a view to the White House and the events that happened last Friday there in the Oval Office with President Zelenskyy, it has become all the more clear that we need a lot more money for our defense and for security in Europe.’”
March 5 - Bloomberg (Craig Stirling, Mark Schroers, and Alexander Weber): “‘Events at the Munich Security Conference and in the Oval Office have clearly had a huge impact on the thinking of CDU leader Friedrich Merz,’ Greg Fuzesi, an economist at JPMorgan… ‘Germany is heading not only for a massive U-turn on fiscal policy but also for a very strong response to the new defense and security challenges.’”
March 3 – Politico (Marion Solletty): “French Prime Minister François Bayrou… declared the alliance with the U.S. is seriously wounded and called President Donald Trump’s attitude toward Ukraine ‘an indecency.’ ‘On Friday evening, a staggering scene unfolded, marked by brutality and a desire to humiliate, the aim of which was to threaten Ukrainian President Volodymyr Zelenskyy into surrendering to the demands of his aggressor,’ Bayrou said in a speech to the National Assembly… ‘There were two victims in this scene, the security of Ukraine, which is fighting for its survival,’ Bayrou said, and ‘a certain idea of the alliance we had with and around the United States… We are being asked to accept standards we refuse… to abandon our concern for decency and accept the indecency they would like to impose on us.’”
March 3 – New York Times (Andrew Higgins): “Lech Walesa, the leader of Poland’s Solidarity movement, which helped end Moscow’s grip on Eastern Europe at the end of the Cold War, joined with former Polish political prisoners… to send an impassioned letter to President Trump voicing ‘horror and disgust’ at his scolding of President Volodymyr Zelensky…, saying it reminded them of their encounters with bullying Communist-era officials. They wrote… they were ‘terrified by the fact that the atmosphere in the Oval Office during this conversation reminded us of the one we remember well from interrogations by the Security Service and from courtrooms in Communist courts.’”
March 3 – Politico (Victor Goury-Laffont): “French Foreign Affairs Minister Jean-Noël Barrot voiced his confusion over reports that the United States' Defense Secretary Pete Hegseth has ordered a halt of offensive cyber operations against Russia. ‘I have a bit of trouble understanding [Hegseth’s decision],’ Barrot told public radio France Inter... The French minister said European Union countries ‘are constantly the targets’ of Russian cyberattacks. Cybersecurity publication The Record on Friday reported that Hegseth had ordered U.S. Cyber Command to stand down from planning offensive cyber operations against Russia. The report was confirmed by other publications shortly after.”
March 6 – Financial Times (John Burn-Murdoch): “In the realm of geopolitics, it was unthinkable that the US would suddenly suspend military support from a longtime ally fighting off an invasion — until it happened. In economics, surely Trump and his team wouldn’t take action that could tank US stocks, let alone cause GDP to contract? Think again. But the series of shock decisions — not just the rhetoric — from Trump, vice-president JD Vance and Elon Musk are less brain-bendingly inexplicable once you realise this: their version of America is operating on an entirely different set of values from the rest of the western world… The next four years and beyond will be a bumpy ride come what may, but it will be more navigable after accepting that the world has fundamentally changed. For decades, the US was the champion of western values. The America of Trump, Vance and Musk has left them behind.”
March 3 – Reuters (Kate Holton and Andrew MacAskill): “Canadian Prime Minister Justin Trudeau said his priority in talks with King Charles on Monday will be protecting his country's sovereignty after U.S. President Donald Trump recently suggested making Canada the 51st U.S. state. Trudeau said nothing is more important to his citizens than ‘standing up for our sovereignty and our independence’, ahead of the meeting with Charles, who is Canada's head of state… ‘I look forward to sitting down with His Majesty tomorrow, as always we will discuss matters of importance to Canada and Canadians, and I can tell you that nothing seems more important to Canadians than standing up for our sovereignty and our independence as a nation,’ Trudeau told reporters.”
Markets got through the week pretty well, considering the force of the earthquake. Tsunami to follow. “German Bonds Cap Worst Week Since Before Country’s Unification.” Bund yields surged 43 bps to 2.84%. Despite the historic yield spike, there was little indicating notable instability in the realm of levered speculation – i.e., “basis” and “carry trades.” “Basis trades” (levered long cash bonds versus short futures) are largely immune to yield gyrations. Importantly, the big peripheral European “carry trade” (short lower yielding German bunds to finance levered longs in higher-yielding periphery bonds) made it through the week unscathed. Only Spanish yields (up 45bps) rose more than bunds, with Italian and Portuguese yields rising 42 bps, and French and Greek yields jumping 41 bps. European bank and corporate debt CDS increased only moderately.
March 5 – Financial Times (Ian Smith, Mari Novik, Olaf Storbeck and Laura Pitel): “German borrowing costs surged by the most in 28 years on Wednesday, as investors bet on a big boost to the country’s ailing economy from a historic deal to fund investment in the military and infrastructure… Chancellor-in-waiting Friedrich Merz… agreed with the rival Social Democrats (SPD) to exempt defence spending above 1% of GDP from Germany’s strict constitutional borrowing limit, set up a €500bn off-balance sheet vehicle for debt-funded infrastructure investment and loosen debt rules for states. Deutsche Bank economists described the deal as ‘one of the most historic paradigm shifts in German postwar history’, adding that both the ‘speed at which this is happening and the magnitude of the prospective fiscal expansion is reminiscent of German reunification’.”
Supporters will trumpet that there's a method to the madness. President Trump will spur Europeans (and others) to shoulder more of their security responsibilities. It certainly appears he has triggered what will become a historic global surge in militarization, nuclear proliferation, and debt growth.
With this week’s 25 bps (to 2.65%), the ECB has now cut rates 185 bps since June. Meanwhile, bund yields have jumped 32 bps, French yields 57 bps, and Italian yields 13 bps. Bond weakness was not isolated to Europe. Yields jumped 13 bps in Canada and 11 bps in Australia and New Zealand. Chinese yields rose seven bps (“worst slide this year”) to a three-month high of 1.85%. Pain aplenty in European EM bonds. Local currency yields surged 34 bps in Cyprus and Slovakia, 31 bps in Slovenia, 30 bps in Czech Republic, 24 bps in Latvia, and 22 bps in Romania. For the most part, dollar weakness underpinned EM currencies and equities.
The Hungarian forint jumped 5.6%, the Polish zloty 5.0%, the Czech koruna 4.9%, the Romanian leu 4.4%, the Bulgarian lev 4.4%, and the Chilean peso 3.7%. The euro posted its best week (up 4.4%) since March 2009. Surging 6.8%, the Swedish krona’s advance was the strongest all the way back to the eighties. Clearly, hedge fund strategies were poorly positioned for the week’s currency market fireworks.
The Bloomberg “MAG 7” index, having now given up the entire post-election rally, sank 4.5% this week, boosting its y-t-d decline to 10.7%. Ominously, financial stocks were hammered. The KBW Bank Index sank 8.8%, with the Broker/Dealers down 5.2% this week. While financial conditions remain loose, the shock to consumer and business confidence portends economic and Credit vulnerability.
March 6 – Bloomberg (Tatiana Darie): “Leveraged loan prices took a notable leg lower as growth fears rekindle credit risk concerns. US loan prices… posted their biggest drop since August on Tuesday, showing how quickly the repricing in this asset class can be. The loan market has been on fire in recent months, with prices rising to the highest since 2022 and year-to-date issuance swelling to the highest since Bloomberg began tracking the data in 2013.”
The historic U.S. speculative Bubble is faltering. That, however, certainly doesn’t preclude the possibility of a short squeeze and unwind of hedges into March’s quarterly option expiration (on the 21st). Thus far, there has been de-risking, but little to suggest significant deleveraging. Most financial conditions indicators suggest only modest tightening. The recent drop in Treasury yields has supported speculative leverage (i.e., basis and carry trades), countering liquidity impacts from deleveraging in technology and related equities indices. But Treasuries were caught up in this week’s rising global yield dynamic, and will confront tariff and inflation risks going forward.
March 4 – Financial Times (Katie Martin): “Investors are starting to imagine a financial system without the US at its centre, handing Europe an opportunity that it simply must not miss. This exercise in thinking the unthinkable comes despite a cacophony of noise in markets. Mansoor Mohi-uddin, chief economist at Bank of Singapore, recently travelled to clients in Dubai and London. To his surprise, not one of them asked him about short-term issues like tech stocks or tweaks to interest rates. Instead, he says, ‘people were saying, ‘What’s going on?’ The free trade, free markets, globalisation era is over, and nobody knows what’s going to replace it.’ They refer, of course, to the new US administration. Within a month of retaking his seat at the White House, Donald Trump & co had all but trashed the transatlantic alliance, and ridden roughshod over the key checks, balances and institutions on which true US exceptionalism is built. ‘It’s such a momentous change going on. If it continues like this, capital allocators will wonder: ‘Do I want to stay allocated to the US?’ Mohi-uddin says.”
With a major deleveraging dynamic lurking, my thoughts this week returned to critical mortgage finance Bubble dynamics. GSE (quasi-central) market liquidity support was instrumental in mitigating hedge fund deleveraging in 1994, 1998, 2000 and 2002. The 2004 revelation of fraudulent accounting essentially abrogated Fannie Mae and Freddie Mac’s ability to aggressively expand their liabilities to orchestrate hedge fund and market bailouts. Importantly, the loss of this key liquidity backstop was irrelevant, as leverage speculation created seemingly endless liquidity in Bubble “terminal phase” excess years 2005 through 2007. But it mattered tremendously in 2008.
China and global central banks have significantly slowed Treasury purchases over recent years, altering the key dynamic of how dollar liquidity excess is recycled back into Treasuries and U.S. markets. While momentous, this shift in EM central bank recycling has been irrelevant, as leveraged speculation created seemingly endless demand for dollar liquidity, Treasuries and U.S. equities. But it will matter tremendously during the next bout of serious speculative deleveraging. This week’s dollar weakness portends dollar and liquidity issues.
There has been a lot of talk of a modern day (dollar devaluation) Plaza Accord - the administration moving forward with a so-called “Mar-a-Largo Accord.” What seemed like a long shot a couple weeks ago appears a pipedream after Munich, the Zelenskyy beat down, and the U.S. no-show at last week’s G20 meeting in South Africa. It takes a fanciful imagination to envisage global leaders converging on Mar-a-Lago to negotiate a favorable deal for the U.S. In such a fragmented and divisive world, it’s frightening to contemplate how nations will respond to the next crisis. Trust in the Trump administration has been irreparably broken.
March 7 – Wall Street Journal (Brian Spegele and Austin Ramzy): “China’s top diplomat chided the Trump administration and said efforts to contain the country’s rise were destined to fail, presenting Beijing as a force for global stability in a rejection of U.S. policy under President Trump. ‘No country should harbor the illusion that it can suppress and contain China while simultaneously building good relations with China,’ Foreign Minister Wang Yi said... ‘Such two-faced methods are not only detrimental to the stability of bilateral ties but also make it impossible to build mutual trust.’ Wang’s strident comments reflected Beijing’s determination to stand up to U.S. pressure…”
If I were Xi Jinping preparing for a trade war or worse with the U.S., I’d try to hit us where we’re today most vulnerable – AI and American technological exceptionalism. I’d throw unlimited resources at AI, develop world class language models, offer them open source, and spread the technology globally for next to nothing. Why not completely undercut “MAG seven,” stocks that dominate U.S. indices and companies that spend hundreds of billions. I’d also see an opportunity to disrupt China’s leading adversary by advancing plans for Taiwan “unification”.
March 6 – Bloomberg (Catherine Thorbecke): “More than anything, China’s embrace of open-source artificial intelligence systems will be what tips the scales in its favor in the heated tech race with the US. Washington and Silicon Valley now have a limited window to adapt and respond, or risk a future where Chinese AI overwhelmingly powers the products and applications used by the global industries of tomorrow. The DeepSeek shock earlier this year provided the first wake-up call… But the second came this week, in the closely read policy report released at the National People’s Congress in Beijing.”
March 6 – Bloomberg (Winnie Hsu): “A $439 billion rally in Chinese tech megacaps this year has left their once-unbeatable US peers in the dust, an outperformance that many investors say has room to extend. An equal-weighted basket of China’s seven tech heavyweights including Alibaba Group Holding Ltd. and Tencent Holdings Ltd. — dubbed the ‘7 titans’ by Societe Generale SA — has gained more than 40% this year. That compares with an about 10% drop in an index of the Magnificent Seven stocks, whose slump has also pushed the Nasdaq 100 Index to the brink of a correction.”
March 5 - BBC (Laura Bicker): “China has warned the US it is ready to fight ‘any type’ of war after hitting back against President Donald Trump's mounting trade tariffs. The world’s top two economies have edged closer to a trade war after Trump slapped more tariffs on all Chinese goods. China quickly retaliated imposing 10-15% tariffs on US farm products. ‘If war is what the US wants, be it a tariff war, a trade war or any other type of war, we’re ready to fight till the end,’ China’s embassy said… It is some of the strongest rhetoric so far from China since Trump became president and comes as leaders gathered in Beijing for the annual National People's Congress.”
It's just an incredibly precarious environment. I began the year emphasizing “character matters.” I resorted to the pedestrian “Words matter. Civility and respect matter.” I worried out loud that the President’s power-obsessed shtick would play poorly internationally. And the stakes today couldn’t possibly be higher – an especially inauspicious juncture in history to experiment with a comprehensive tariff regime – to manhandle our friends and allies – to sabotage NATO and key security alliances.
I doubt the administration appreciates today’s acute Bubble fragilities. They seemingly couldn’t care less about international ramifications for their words and actions. They relish blowing things up. In my eyes, this is looking less like a disruption and more like a train wreck. We're throwing so much away. It’s worth repeating: this is no environment for aggressive leverage.
For the Week:
The S&P500 slumped 3.1% (down 1.9% y-t-d), and the Dow fell 2.4% (up 0.6%). The Utilities declined 1.4% (up 4.5%). The Banks sank 8.8% (down 3.2%), and the Broker/Dealers dropped 5.2% (up 3.3%). The Transports lost 2.4% (down 1.8%). The S&P 400 Midcaps fell 3.5% (down 4.3%), and the small cap Russell 2000 dropped 4.0% (down 6.9%). The Nasdaq100 slumped 3.3% (down 3.9%). The Semiconductors fell 2.9% (down 7.0%). The Biotechs slipped 0.8% (up 4.9%). With bullion rising $50, the HUI gold index jumped 4.5% (up 18.6%).
Three-month Treasury bill rates ended the week at 4.1975%. Two-year government yields added a basis point to 4.00% (down 24bps y-t-d). Five-year T-note yields gained seven bps to 4.09% (down 30bps). Ten-year Treasury yields rose 10 bps to 4.30% (down 27bps). Long bond yields jumped 11 bps to 4.60% (down 18bps). Benchmark Fannie Mae MBS yields rose 10 bps to 5.51% (down 30bps).
Italian 10-year yields surged 42 bps to 3.96% (up 44bps y-t-d). Greek 10-year yields rose 41 bps to 3.65% (up 43bps). Spain's 10-year yields spiked 45 bps higher to 3.50% (down 44bps). German bund yields surged 43 bps to 2.54% (up 47bps). French yields jumped 41 bps to 3.56% (up 36bps). The French to German 10-year bond spread narrowed two to 72 bps. U.K. 10-year gilt yields rose 16 bps to 4.64% (up 7bps). U.K.'s FTSE equities index fell 1.5% (up 6.2% y-t-d).
Japan's Nikkei 225 Equities Index slipped 0.7% (down 7.5% y-t-d). Japanese 10-year "JGB" yields surged 14 bps to 1.52% (up 42bps y-t-d). France's CAC40 was little changed (up 10.0%). The German DAX equities index rallied 2.0% (up 15.6%). Spain's IBEX 35 equities index declined 0.7% (up 14.3%). Italy's FTSE MIB index slipped 0.2% (up 12.9%). EM equities were mostly higher. Brazil's Bovespa index rallied 1.8% (up 4.0%), and Mexico's Bolsa index gained 1.0% (up 6.7%). South Korea's Kospi increased 1.2% (up 6.8%). India's Sensex equities index recovered 1.5% (down 5.3%). China's Shanghai Exchange Index gained 1.6% (up 0.6%). Turkey's Borsa Istanbul National 100 index surged 8.8% (up 6.9%).
Federal Reserve Credit declined $18.5 billion last week to $6.711 TN. Fed Credit was down $2.190 TN from the June 22, 2022, peak. Over the past 286 weeks, Fed Credit expanded $2.984 TN, or 80%. Fed Credit inflated $3.900 TN, or 139%, over the past 643 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt rose $13.9 billion last week at $3.303 TN. "Custody holdings" were down $40.4 billion y-o-y, or 1.2%.
Total money market fund assets surged another $51.1 billion to a record $7.025 TN. Money funds were up $891 billion over 32 weeks (23.6% annualized) and $967 billion y-o-y (16.0%).
Total Commercial Paper jumped gained $14.5 billion to a seven-month high $1.321 TN. CP has increased $234 billion y-t-d and $55 billion, or 4.4%, y-o-y.
Freddie Mac 30-year fixed mortgage rates fell 13 bps this week to a three-month low of 6.63% (down 25bps y-o-y). Fifteen-year rates dropped 15 bps to 5.79% (down 43bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates down 21 bps to 6.83% (down 36bps).
Currency Watch:
For the week, the U.S. Dollar Index sank 3.4% to 103.905 (down 4.2% y-t-d). For the week on the upside, the Swedish krona increased 6.8%, the euro 4.4%, the Norwegian krone 3.7%, the British pound 2.7%, the Swiss franc 2.6%, the South African rand 2.5%, the New Zealand dollar 2.0%, the Japanese yen 1.8%, the Brazilian real 1.6%, the Australian dollar 1.6%, the Singapore dollar 1.5%, the Mexican peso 1.5%, the South Korean won 0.8%, and the Canadian dollar 0.6%. The Chinese (onshore) renminbi gained 0.45% versus the dollar (up 0.74% y-t-d).
Commodities Watch:
March 6 – Financial Times (Susannah Savage): “US grain prices have fallen sharply in recent weeks as retaliatory tariffs on the country’s agricultural exports fuel fears that a trade war will create a supply glut on global markets. Corn, wheat and soyabean prices in Chicago have dropped since mid-February, coming under further pressure this week after China and Canada said they would impose a range of tariffs on US foodstuffs. Traders have been forced to rapidly rethink their outlooks as the major trading partners threaten tariffs on some of their main exports.”
The Bloomberg Commodities Index recovered 2.0% (up 6.1% y-t-d). Spot Gold rose 1.7% to $2,909 (up 10.8%). Silver rallied 4.4% to $32.5375 (up 12.6%). WTI crude sank $2.91, or 4.2%, to $67.04 (down 7%). Gasoline dropped 5.1% (up 4%), and Natural Gas surged 14.7% to $4.399 (up 22%). Copper rallied 3.3% (up 17%). Wheat slipped 0.6% (down 3.2%), while Corn increased 0.5% (down 1%). Bitcoin recovered $2,300, or 2.7%, to $86,530 (down 7.7%).
Trump Administration Watch:
March 4 – Wall Street Journal (Alex Leary and Tarini Parti): “President Trump put his disruptive return to power on full display during a prime-time address to Congress, offering a no-apologies assessment of his decisions to crack down on illegal immigration, slash the federal workforce and impose stiff tariffs on imports. ‘I return to this chamber tonight to report that America’s momentum is back, our spirit is back, our pride is back, our confidence is back,’ Trump said…, describing what he called a ‘swift and unrelenting’ campaign to transform the country. The one-hour, 40-minute address—the longest of its kind in history—gave Trump an opportunity to sell his combative brand of governing to tens of millions of Americans in what was expected to be his largest audience since his inaugural address.”
March 5 – Bloomberg (Jordan Fabian, Josh Wingrove and Akayla Gardner): “President Donald Trump took the lectern Tuesday for his primetime address beset by warning signs about the US economy, and acknowledged to Americans there could be more discomfort ahead. Trump defended his plan to remake the world’s largest economy through the biggest tariff increases in a century, saying it would raise ‘trillions and trillions’ in revenue and rebalance trading relationships he called unfair. He cast the economic pain the levies are expected to cause in the form of higher prices as a ‘little disturbance’ the nation ought to be able to overcome. ‘Tariffs are about making America rich again and making America great again. And it’s happening, and it will happen rather quickly,’ he said. ‘There’ll be a little disturbance, but we’re OK with that. It won’t be much.’”
March 5 – Wall Street Journal (Richard Rubin and Gavin Bade): “President Trump is trying to sell America on an economic plan that promises a new ‘golden age’ but risks raising prices on inflation-weary consumers and shaking the foundations of world trade and the domestic labor market. In his address Tuesday to Congress, Trump painted a picture of a high-tariff, low-immigration, low-tax, low-regulation version of the U.S. economy—and warned of turbulence along the way. ‘Tariffs are about making America rich again and making America great again, and it is happening and it will happen rather quickly,’ he said. ‘There will be a little disturbance, but we are OK with that.’”
March 3 – Financial Times (Myles McCormick): “A little over a month into his second term, Donald Trump’s warp speed overhaul of US policy has already reverberated across the globe. Thousands of federal employees have been sacked. Ukraine fears abandonment in its war with Russia. The population of Gaza faces potential resettlement. North America is on the brink of a trade war. But for Corinne Wooten, a 30-year-old nurse in the Atlanta suburb of Roswell, Georgia, all of that seems a world away. ‘It truly does not affect my life right now, which is maybe a little selfish to say, but it doesn’t,’ said Wooten… ‘Life has been the same. Nothing’s changed for us.’ Her verdict on Trump’s first month back: ‘So far, so good’… ‘Donald Trump is kicking ass,” said Clark Searles, a 64-year-old pharmaceutical worker and military veteran… ‘He’s actually doing what he promised he was going to do, particularly as it relates to getting the fraud out of our government.’”
March 7 – Financial Times (James Politi, Aime Williams and Guy Chazan): “In the Oval Office on Thursday afternoon, Donald Trump signed the latest in a series of executive orders on trade, partially reversing the 25% tariffs on Canada and Mexico that he had imposed just two days earlier. The dizzying policy changes have sparked an equity market sell-off, concern from businesses and panic in foreign capitals fearful of a repeat of the chaotic decision-making of Trump’s first term... ‘There were three changes in 24 hours affecting us as a North American auto supplier, and that’s a little bit disconcerting,’ said Jeff Aznavorian, president of Clips & Clamps Industries, an engineering group… ‘We can’t guess what or how or who at the moment. It’s like a whipsaw.’”
March 7 – Bloomberg (Jennifer A. Dlouhy and Shawn Donnan): “President Donald Trump’s frenzied tariff barrage has been marked by reversals and faulty rollouts, baffling US trading partners and businesses while raising questions about the aims of his signature policy… ‘There are a lot of mixed signals from the administration regarding which tariffs will apply to which goods on which dates,’ said John Veroneau, a former general counsel for the US Trade Representative who is now a partner at Covington & Burling LLP. ‘The uncertainty is challenging for US companies trying to make decisions.’”
March 7 – Bloomberg (Hadriana Lowenkron): “Recently announced measures will lead the US economy to the ‘three or four percent growth that we’re all hoping for,’ White House National Economic Council Director Kevin Hassett says… Hassett says there’s no uncertainty when it comes to President Trump’s announcements. ‘I think in some sense that you’ve got quite a bit of clarity already. There’s no uncertainty. There’s going to be some tariff, it’s going to be reciprocal,’ he says…”
March 3 – New York Times (David A. Fahrenthold, Emily Badger and Jeremy Singer-Vine): “Elon Musk’s Department of Government Efficiency has deleted hundreds more claims from its mistake-plagued ‘wall of receipts,’ erasing $4 billion in additional savings that the group said it had made for U.S. taxpayers. Late Sunday night, the group erased or altered more than 1,000 contracts it had claimed to cancel, representing more than 40% of all the contracts listed on its site last week.”
March 4 – Financial Times: “Businesses have begun stockpiling materials, reviewing manufacturing footprints and preparing to raise prices as Donald Trump’s trade war has entered ‘uncharted territory’ with sweeping tariffs on Canada, Mexico and China. Sectors including manufacturing, retail and food were among those to highlight shocks to their supply chains after the US president imposed 25% duties on imports from its two North American neighbours and raised new tariffs on China to 20%.”
March 5 – Bloomberg (Ilena Peng, Michael Hirtzer and Kim Chipman): “President Donald Trump is asking American growers to bear with him as tariffs threaten to hurt their business and deepen a farm downturn that’s entering a third year… The trade disputes are a blow for American farmers, a key voting bloc for Trump. But in a speech to Congress, the president promised his newly announced duties will yield even better results than the trade deal he struck with China during his first term. ‘It may be a little bit of an adjustment period,’ he told Congress... ‘We had that before when I made the deal with China, $50 billion of purchases and I said ‘just bear with me’ and they did, they did — probably have to bear with me again, and this will be even better.’”
March 4 – Financial Times (Guy Chazan and Taylor Nicole Rogers): “US farmers reacted with fury to President Donald Trump’s tariffs on imports from Canada, Mexico and China, saying a trade war will threaten their markets, push up the cost of inputs such as fertiliser and ‘take a toll on rural America’. Farmers expressed particular concern about the impact of retaliatory tariffs... ‘Contrary to what the president thinks, this means nothing but pain,’ said Aaron Lehman, head of the Iowa Farmers Union. ‘Our domestic markets aren’t prepared to pick up the slack and that means lower prices for what we grow.’”
March 5 - Associated Press (Stephen Groves): “The Department of Veterans Affairs is planning a reorganization that includes cutting over 80,000 jobs from the sprawling agency that provides health care and other services for millions of veterans, according to an internal memo…”
March 4 – Associated Press (Lisa Mascaro): “House Speaker Mike Johnson is encouraging Republican lawmakers to skip town halls that have been filled with protesters decrying the Trump administration’s slashing of federal government, echoing the president’s claims that the demonstration’s are fueled by professional protesters.”
March 1 – Bloomberg (Emily Nicolle): “The US Securities and Exchange Commission has kicked off the new year with a makeover, wiping clean its slate of crypto enforcement actions and turning what was once a hostile landscape for digital assets into a potential haven. In the last month alone, the securities watchdog has dismissed or paused at least eight cases against crypto companies, including those that targeted some of the sector’s most prominent faces.”
March 2 – Reuters (David Ljunggren): “The U.S. Treasury Department said… it would not enforce an anti-money laundering law that obliges millions of business entities to disclose the identities of their real beneficial owners. The Trump administration has opposed the Biden-era Corporate Transparency Act on the grounds that it is a burden on low-risk entities. The act has faced repeated legal challenges.”
March 6 – Bloomberg (Muyao Shen): “President Donald Trump’s decentralized-finance project World Liberty Financial appears to have bought more than $20 million worth of cryptocurrencies including Ether two days before executives at major digital-asset companies are set to visit the White House to discuss crypto policy.”
March 4 – Bloomberg (Janet Lorin and Maria Luiza Rabello): “President Donald Trump threatened to stop all federal funding for colleges that allow ‘illegal’ protests, further escalating his rhetoric targeting US universities. ‘Agitators will be imprisoned/or permanently sent back to the country from which they came,’ Trump said in a post… ‘American students will be permanently expelled or, depending on on the crime, arrested. NO MASKS!’”
Trade War Watch:
March 4 – Politico (Holly Otterbein, Daniel Desrochers, Jordain Carney and Megan Messerly): “It’s dawning on the world — and several Republicans on Capitol Hill — that sometimes President Donald Trump should be taken literally after all. Trump levied sweeping tariffs on key trading partners Mexico, Canada and China early Tuesday morning, sparking retaliation from Beijing and Ottawa, sending the stock market into a tailspin, and alarming government officials around the globe as they brace for potentially the worst trade war in a century. Canadian Prime Minister Justin Trudeau blasted the United States for launching ‘a trade war against Canada’ while ‘they’re talking about working positively with Russia, appeasing Vladimir Putin — a lying, murderous dictator.’ Target CEO Brian Cornell warned that Americans’ grocery prices would go up. John Bozzella, CEO of the Alliance for Automotive Innovation, said that car prices would spike as much as 25%.”
March 4 – Politico (Nick Taylor-Vaisey): “Canadian Prime Minister Justin Trudeau denounced President Donald Trump for launching a trade war with his country, saying that he won’t back down from a tariff fight... ‘Today, the United States launched a trade war against Canada. At the same time, they’re talking about working positively with Russia, appeasing Vladimir Putin — a lying, murderous dictator. Make that make sense,’ Trudeau said... ‘Canadians are reasonable and we are polite, but we will not back down from a fight, not when our country and the well being of everyone in it is at stake… We don’t want this. We want to work with you as a friend and ally, and we don’t want to see you hurt either, but your government has chosen to do this to you,’ he said… ‘It’s not in my habit to agree with The Wall Street Journal, but Donald, they point out that even though you’re a very smart guy, this is a very dumb thing to do… We two friends fighting is exactly what our opponents around the world want to see.’”
March 3 – Bloomberg (Brian Platt): “The Canadian government announced a sweeping package of counter-tariffs against US-made products after President Donald Trump confirmed that his administration will go ahead with levies against Canada and Mexico… The first stage is 25% tariffs on about C$30 billion ($20.6bn) worth of goods from US exporters… A second round of tariffs at the same rate will be placed on C$125 billion of products in three weeks — a list that will include big-ticket items like cars, trucks, steel and aluminum.”
March 4 – New York Times (Keith Bradsher): “Minutes after President Trump’s latest tariffs took effect, the Chinese government said… it was imposing its own broad tariffs on food imported from the United States and would essentially halt sales to 15 American companies. China’s Ministry of Finance put tariffs of 15% on imports of American chicken, wheat, corn and cotton and 10% tariffs on other foods, ranging from soybeans to dairy products. In addition, the Ministry of Commerce said 15 U.S. companies would no longer be allowed to buy products from China except with special permission... Lou Qinjian, a spokesman for China’s National People’s Congress, chastised the United States for violating the World Trade Organization’s free trade rules. ‘By imposing unilateral tariffs, the U.S. has violated W.T.O. rules and disrupted the security and stability of the global industrial and supply chains,’ he said.”
March 4 – Bloomberg (Hallie Gu): “China has halted soybean imports from three US entities, further ratcheting up trade tensions between the world’s two largest economies. The nation halted qualifications for soybean exports from CHS Inc., Louis Dreyfus Company Grains Merchandising LLC and EGT LLC, its General Administration of Customs said… China also suspended log imports from the US…”
March 7 – Bloomberg (Nell Mackenzie): “Mexican President Claudia Sheinbaum said her country would review tariffs on Chinese shipments, a move that could give the Trump administration a win in its push to build a ‘Fortress North America’ that blocks shipments from the Asian nation. ‘We have to review the tariffs that we have with China,’ Sheinbaum said… She pointed to Mexico’s problems in textile and shoe production, saying: ‘Much of the entry of Chinese products into Mexico caused this industry to fall in our country.’”
March 4 – Politico (Camille Gus): “The European Commission condemned the tariffs imposed by U.S. President Donald Trump against Canada and Mexico on Tuesday, as tensions over trade and the war in Ukraine soar between the historic allies. ‘We call on the United States to reconsider its approach and work towards a cooperative, rules-based solution that benefits all parties,’ the European Union executive said… ‘This move risks disrupting global trade, harming key economic partners, and creating unnecessary uncertainty at a time when international cooperation is more crucial than ever,’ it added.”
March 5 – Bloomberg (Laura Curtis, Shawn Donnan and Erik Hertzberg): “Global shipping executives gathered this week in Long Beach, California, for a major annual conference, expecting to discuss market trends and supply chain challenges. Instead, they found themselves in crisis mode… While beefing up tariffs has long been one of Trump’s signature issues, veteran shippers at the S&P Global’s TPM25 conference in Long Beach said they didn’t expect him to follow through so fully. ‘It’s like an earthquake,’ said Cindy Allen, chief executive officer of consultant Trade Force Multiplier… ‘You do your best to prepare, but then when it comes it’s an 8.0 on the Richter scale. It’s a shock,’ she said…”
New World Disorder Watch:
March 5 – Bloomberg: “The difference couldn’t have been more stark: All of China’s lawmakers slow-clapping in unison as Xi Jinping walked into the Great Hall of the People, followed by a raucous US Congress split between two camps alternatively cheering and jeering Donald Trump. The contrasting scenes played out back-to-back in different parts of the world on Wednesday morning in Asia, underscoring the growing divide between two economies that spent much of the past few decades becoming more intertwined, largely with China selling goods to US consumers. Now President Trump wants the US to make more, and China wants its people to spend more.”
March 6 – Bloomberg (John Authers): “Sometimes you can feel the global economy’s tectonic plates move under your feet. This is one of those times. Late Tuesday, the leaderships of Germany’s traditional two dominant parties, the Social Democrats and Christian Democrats, announced their intention to borrow €900 billion, to be spent on two funds covering defense and infrastructure. To do this, they will amend the constitution in the two weeks before the next legislature is convened. After decades of defiantly running a tightly conservative fiscal ship, this is a sudden ‘whatever it takes’ moment… US Vice President JD Vance appears to be by a wide margin Frankfurt’s most despised living human. His name keeps coming up. Germans see his attempt to interfere in their election, tell them how to deal with their Nazi legacy, and then humiliate Ukraine’s President Volodymyr Zelenskiy, as despicable and unforgivable. It’s the extent of the shock caused by Vance (and Trump) that has shaken the German establishment into action.”
March 5 – Politico (Clea Caulcutt, Jacopo Barigazzi, Gabriel Gavin and Giovanna Faggionato): “The European Union is used to crises. This could be the one to beat them all. As the bloc’s 27 leaders gather in Brussels on Thursday, they know the entire post-1945 security architecture ― one that depends on being buttressed by the United States ― could crumble any day. Since Donald Trump’s return to the White House, leaders have talked a lot about sovereignty and defense… While French President Emmanuel Macron has talked of the need for ‘an incredible awakening’ and German Chancellor-in-waiting Friedrich Merz described Europe as being ‘five minutes to midnight,’ the worry from those close to the discussion is that events are happening more quickly than they can cope with. ‘The nightmare scenario is that the U.S. announces a deal soon that accepts most of Russia’s demands and then tells Ukraine and Europe to take it or leave it,’ said Malcolm Chalmers, deputy director general at the Royal United Services Institute in London.”
March 5 – Financial Times (Henry Foy, Andy Bounds, Paola Tamma and Laura Pitel): “Germany has called for the EU to exempt defence spending from its fiscal rules for longer than Brussels had proposed, marking a significant shift in Berlin’s tough stance on deficit and debt under chancellor-in-waiting Friedrich Merz. The German ambassador to the EU told other national envoys… that Berlin wanted to overhaul EU debt and deficit limits to allow for increased defence spending, according to four officials briefed on the discussion. The ask, which is a complete reversal of Berlin’s previously frugal stance on public spending and borrowing, goes further than a 4-year exemption floated earlier this week by European Commission president Ursula von der Leyen. ‘Berlin wants to make significant defence expenditure possible in the medium- and long-term through an adaptation of the rules,’ said a person familiar…”
March 2 – Axios (Avery Lotz): “Moscow is welcoming the apparent shift in U.S. relations with Ukraine following last week's tense Oval Office meeting… Kremlin officials commended the U.S…, with spokesperson Dmitry Peskov saying the United States’ ‘rapidly changing’ foreign policy configurations ‘largely coincides with our vision.’ Russian Foreign Minister Sergei Lavrov also praised Trump for his ‘common sense’… A spokesperson for Russia's foreign ministry said after the Oval Office meeting that it was a ‘miracle of restraint’ that Trump and Vance didn’t hit Zelensky. Former Russian President Dmitry Medvedev, now deputy chair of Russia's security council, crowed that ‘the insolent pig finally got a proper slap down in the Oval Office.’”
March 6 – Bloomberg (Ellen Milligan): “Ukraine’s former top military commander warned that the US is ‘destroying’ the world’s established order, delivering a sharp critique of Donald Trump’s approach to Russia that risks hampering President Volodymyr Zelenskiy attempt to repair ties. Valerii Zaluzhnyi, a popular general whom Zelenskiy replaced last year, has been viewed as a potential contender to the wartime president in any future election. He is now Ukraine’s envoy to the UK… He broke with a penchant to keep a low profile, accusing the White House of jeopardizing the ‘unity of the Western world’ and warned that the North Atlantic Treaty Organization ‘may cease to exist.’ ‘It is obvious that Washington’s non-recognition of the Russian Federation’s aggression is also a new challenge — not only for Ukraine, but also for Europe… Not only Russia and the axis of evil are trying to destroy the world order, but the United States is actually destroying it completely,’ the ambassador said.”
March 5 - Politico (Victor Goury-Laffont and Clea Caulcutt): “President Emmanuel Macron has warned that France needs to prepare for the possibility of the United States disengaging from Europe by increasing spending on defense needs and rethinking how the country uses its nuclear deterrent. ‘The Russian threat is here and is affecting European countries, affecting us,’ Macron said in a nationally televised speech... ‘I want to believe that the U.S. will stay by our side, but we have to be ready if they don’t.’ Macron warned that the relative peace Western Europe has enjoyed on its soil since the end of World War II appears to be at an end, and that the continent must prepare for the future by beefing up its own defenses.”
March 7 – Reuters (Lili Bayer, Andrew Gray and Michel Rose): “European leaders… backed plans to spend more on defence and continue to stand by Ukraine in a world upended by Donald Trump's reversal of U.S. policies. The European Union's defence summit in Brussels took place amid fears that Russia, emboldened by its war in Ukraine, may attack an EU country next and that Europe can no longer rely on the U.S. to come to its aid. ‘Today we have shown that the European Union is rising to the challenge, building the Europe of defence and standing with Ukraine shoulder to shoulder,’ the chairman of the meeting Antonio Costa told reporters… In a joint statement agreed by all 27 member states, the leaders called on their ministers to examine these proposals in detail urgently. ‘Europe must take up this challenge, this arms race. And it must win it,’ Polish Prime Minister Donald Tusk said at a special defence summit in Brussels.”
March 7 – Wall Street Journal (Bertrand Benoit): “President Trump’s embrace of Russia is causing Europeans to rethink their security and giving currency to an idea the U.S. has long sought to avoid: a nuclear-armed Germany. Friedrich Merz… said Berlin should start talks about expanding the French and British nuclear deterrents to cover Europe, according to an interview… Asked if Germany should pursue its own arsenal, Merz didn’t rule it out, saying ‘there is no need for this today.’”
March 6 – Bloomberg (Samy Adghirni): “President Emmanuel Macron said he’ll enter into talks to use France’s nuclear capabilities to defend European allies, in the latest push by a European country to establish strategic security as the US reduces its footprint on the continent. ‘Our nuclear deterrent protects us,’ Macron said… ‘I have decided to open the strategic debate on the protection, through our deterrent, of our allies on the European continent.’”
March 4 – Bloomberg (Karishma Vaswani): “These are great changes unseen in a century, as the Chinese saying goes. The phrase, which was first used by President Xi Jinping during a speech in 2017 and was born in the aftermath of the Great Recession, is particularly apt today. It reflects his narrative that the US is in decline, and it’s China’s turn to be the global leader. Donald Trump is bringing Xi closer to realizing that ambition with each passing day. The US president’s actions point to an isolationist foreign policy, and a nation that is no longer a reliable partner… Xi is looking to exploit this opportunity, notes Dylan Loh, assistant professor at the Public Policy and Global Affairs program at Singapore-based Nanyang Technological University. ‘The Chinese are positioning themselves as the voice of reason, a sharp change from how they’ve been painted before — as the disruptor,’ he told me. ‘Now the roles have reversed. Under Trump, it’s the US that’s the disruptor.’”
March 5 – Bloomberg (Michael McDonald): “Panama’s president accused Donald Trump of lying to Congress after the US leader reiterated his intention to take over the Panama Canal. Trump told lawmakers… Panama had broken the agreements it made when it took over the waterway a quarter-century ago. ‘Once again, President Trump lies,’ President Jose Raul Mulino said… ‘I reject, in the name of Panama and all Panamanians, this new affront to truth, and to the dignity of our nation.’ Mulino repeated that his government will not negotiate the return of the canal to US control.”
March 5 – Associated Press (Danica Kirka and Stefanie Dazio): “Greenland’s prime minister declared… that ‘Greenland is ours’ and cannot be taken or bought in defiance of a message from U.S. President Donald Trump, who said the United States will acquire the territory ‘one way or another’ even though his administration supports the Arctic island’s right of self-determination. Prime Minister Múte Bourup Egede said the island’s citizens are neither American nor Danish because they are Greenlandic. “
Budget Watch:
March 6 – Reuters (Jeff Cox): “President Donald Trump’s efforts to pare down the federal government workforce left a mark on the labor market in February, with announced job cuts at their highest level in nearly five years, outplacement firm Challenger, Gray & Christmas reported… The firm reported that U.S. employers announced 172,017 layoffs for the month, up 245% from January and the highest monthly count since July 2020… More than one-third of the total came from billionaire entrepreneur Elon Musk’s efforts… Challenger put the total of announced federal job cuts at 62,242, spanning 17 agencies.”
Ukraine War Watch:
March 6 – Wall Street Journal (Editorial Board): “President Trump assures Americans that Vladimir Putin wants ‘peace’ in Ukraine, but the key question is what kind of peace? The answer seems to be a peace of subjugation in which Ukraine is left to defend itself with no outside help until Russia decides to invade again. That’s the implication of Thursday’s comments from Sergei Lavrov, the Russian foreign minister, that the Kremlin won’t tolerate Western European troops on Ukrainian soil. ‘We see no room for compromise,’ Mr. Lavrov told reporters… This is no surprise, as Russia responds to Mr. Trump’s pressure on Ukraine by increasing its demands as part of any agreement with Ukraine.”
March 4 – Reuters (Yuliia Dysa): “Ukrainian President Volodymyr Zelenskiy said… his clash with Donald Trump last week was ‘regrettable’, that he was ready to work under the U.S. president's leadership to bring lasting peace, and that it was ‘time to make things right’. The statement came after Washington paused military aid to Kyiv in a stunning move overnight… ‘Our meeting in Washington, at the White House on Friday, did not go the way it was supposed to be. It is regrettable that it happened this way. It is time to make things right,’ Zelenskiy posted on X. ‘My team and I stand ready to work under President Trump’s strong leadership to get a peace that lasts,’ he said.”
March 4 – Financial Times (Fabrice Deprez and Christopher Miller): “The long unthinkable prospect of Ukraine fighting without US weapons, equipment or intelligence looks set to become a reality after the White House… announced it would cut military aid to Kyiv. A senior Ukrainian intelligence official said that Ukraine would probably run out of the last American military supplies in ‘two or three months’. ‘After that, it will be very difficult for us,’ the official told the Financial Times. ‘It will not be a total collapse, but we will be forced to withdraw from areas more quickly.’ In the fourth year of Russia’s full-scale invasion, tens of thousands of Ukrainian troops are fending off constant Russian attacks from the trenches of eastern and southern Ukraine. Along the 1,000km-long front line, the end of US military aid will have far-reaching consequences for the battered army, even if European allies supplement some of the missing equipment.”
March 7 – Associated Press (Illia Novikov): “Russia attacked Ukrainian energy facilities with dozens of missiles and drones during the night…, hobbling the country’s ability to deliver heat and light to its citizens and to power weapons factories vital to its defenses. The overnight barrage — which also pounded residences and wounded at least 10 people — came days after the U.S. suspended military aid and intelligence to Ukraine to pressure it into accepting a peace deal being pushed by the Trump administration. Without U.S. intelligence, Ukraine’s ability to strike inside Russia and defend itself from bombardment is significantly diminished.”
March 2 – Bloomberg (Alex Wickham and Irina Anghel): “European leaders sought to assemble what Britain called a ‘coalition of the willing’ to secure Ukraine after any US-brokered ceasefire, as they gathered in London to coordinate defense spending hikes amid concerns of an American pullback. UK Prime Minister Keir Starmer, who hosted the emergency security summit on Sunday, said Britain and France and ‘one or two others’ would work with Ukraine on a ‘plan to stop the fighting.’ The summit came after a week of frantic diplomacy marked by a disastrous Oval Office clash between US President Donald Trump and Ukrainian counterpart Volodymyr Zelenskiy…”
March 7 – Politico (Veronica Melkozerova): “Ukraine's military used Mirage 2000 jets provided by France to repel a Russian attack for the first time, deploying the aircraft overnight against Moscow's latest barrage of missiles and drones. Russian forces launched 67 missiles and 194 drones against Ukraine… Army spokesman Dmytro Lykhoviy said it was first massive Russian combined attack since the U.S. stopped aid to push Kyiv to negotiate with Moscow.”
March 6 – Politico (Laura Kayali): “France is providing intelligence to Ukraine despite the Trump administration's decision to stop doing so, French Armed Forces Minister Sébastien Lecornu said… Earlier this week, the U.S. also halted sending military aid to Ukraine, leaving the country vulnerable to aerial attacks by Russia. Lecornu also addressed the idea that U.S. President Donald Trump might be trying to use military aid to Ukraine as negotiation leverage with Russia. ‘If it’s a tool for negotiating and putting pressure on the Ukrainians, it's very hard for them and morally detestable,’ he said.”
March 6 – Bloomberg (Andrea Palasciano and Donato Paolo Mancini): “Italian Prime Minister Giorgia Meloni said Ukraine should be granted the security of NATO without the actual membership in the military alliance. Speaking on the sidelines of a European Union leaders’ meeting…, she said ‘we need to think about more durable solutions’ than sending European peacekeeping troops to Ukraine. Extending the provision of NATO’s Article 5 — the collective defense clause that commits members to protect each other — would be much more effective, she said. The proposal comes as European leaders are seeking ways to shore up Kyiv as the administration of President Donald Trump pushes for a rapid end to the three-year war.”
March 6 – Politico (Jamie Dettmer): “Four senior members of Donald Trump’s entourage have held secret discussions with some of Kyiv’s top political opponents to Volodymyr Zelenskyy, just as Washington aligns with Moscow in seeking to lever the Ukrainian president out of his job. The senior Trump allies held talks with Ukrainian opposition leader Yulia Tymoshenko… and senior members of the party of Petro Poroshenko, Zelenskyy’s immediate predecessor as president…”
Taiwan Watch:
March 3 – Bloomberg (Yian Lee): “President Donald Trump’s heated meeting with Ukraine’s leader has prompted Taiwan to start rethinking how it deals with the US, according to Taipei’s top defense official. ‘We have deeply recognized that one cannot discuss values without also addressing national interests,’ Defense Minister Wellington Koo said… In remarks that referenced Trump and aggression from China’s armed forces, Koo said that ‘facing the rapidly changing international situation and escalating threats from the enemy, we cannot rely on the goodwill of others to maintain peace.’ The comments show the urgency confronting security officials in Taipei and other places that rely on US military backing to counter Beijing, including Japan, South Korea and the Philippines.”
March 7 – Bloomberg (Hadriana Lowenkron): “President Donald Trump is confident that China’s President Xi Jinping won’t make a move on Taiwan when he is in the White House, Treasury Secretary Scott Bessent said… ‘I follow President Trump’s lead and he is confident that President Xi will not make that move during his presidency,’ Bessent said.”
Market Instability Watch:
March 5 – Bloomberg (Greg Ritchie): “German bonds suffered their worst day since the months following the fall of the Berlin Wall on an historic spending plan that will unlock hundreds of billions of euros for defense and infrastructure investments. The yield on the nation’s 10-year bonds recorded biggest jump since March 1990, up 30 bps, after chancellor-in-waiting Friedrich Merz outlined a sweeping fiscal overhaul... The last time benchmark bond yields surged so much, West Germany and East Germany were about to reunify as the Cold War drew to a close.”
March 4 – Bloomberg (Stephanie Lai): “US Treasury Secretary Scott Bessent projected confidence in President Donald Trump’s expansive plans to tariff foreign nations even as the stock market slumped in reaction to the first round of levies on Canada and Mexico. ‘Over the medium term, which is what we’re focused on, it’s a focus on Main Street. Wall Street’s done great, Wall Street can continue to do fine, but we have a focus on small business and consumers,’ Bessent said on Fox News... ‘So we are going to rebalance the economy.’”
March 7 – Bloomberg (Chris Anstey): “Treasury Secretary Scott Bessent warned that the US economy may see some disruption as the Trump administration shifts the basis for growth away from the government and toward the private sector. ‘Could we be seeing this economy that we inherited starting to roll a bit? Sure,’ Bessent said… ‘Look, there’s going to be a natural adjustment as we move away from public spending… The market and the economy have just become hooked, and we’ve become addicted to this government spending,’ Bessent said. ‘There’s going to be a detox period… There’s no put… The Trump call on the upside is, if we have good policies, then the markets will go up.’”
March 4 – Wall Street Journal (Editorial Board): “President Trump won the Presidency a second time by promising working-class voters he’d lift their real incomes. Which makes it all the more puzzling that he’s so intent on imposing tariffs that will punish those same Americans. Tariffs are taxes, and Mr. Trump’s latest tariffs are estimated to be about an annual $150 billion tax increase. Taxes are antigrowth. That’s the message investors are sending this week since Mr. Trump let his 25% tariffs on Canada and Mexico take effect.”
March 3 – Bloomberg (Lu Wang and Denitsa Tsekova): “One of Wall Street’s most-popular option trades just got more popular than ever, fueled by Donald Trump’s volatility-inducing policy agenda… Contracts that expire within 24 hours made up a record 56% of the S&P 500’s total options volume last month, according to… Cboe Global Markets Inc., the exchange that’s at the center of the trading boom.”
March 3 – Bloomberg (Philip Lagerkranser): “Euphoria in digital-asset markets stemming from Donald Trump’s plans for a strategic crypto reserve turned to skepticism on Monday, triggering early losses in cryptocurrencies that worsened throughout the day as investors braced for the US to impose 25% tariffs on Mexico and Canada… All of the cryptocurrencies that Trump said would be included in the reserve posted sharp declines by late afternoon…”
March 3 – Barron's (William Pesek): “As Donald Trump unleashes economic bedlam, the U.S. president is taking Washington's top bankers in Asia for granted in ways sure to backfire on global markets. Central banks in Asia have long been the most reliable hoarders of U.S. Treasury securities. Japan alone holds about $1.06 trillion of Washington's IOUs, while China sits on roughly $759 billion. Put together, Asia’s top dollar stockpilers hold nearly $3 trillion worth of U.S. debt. Yet these holdings are dwindling -- in China's case, to the lowest level since 2009.”
Global Credit and Financial Bubble Watch:
March 5 – Financial Times (Ian Smith, Mari Novik, Olaf Storbeck and Laura Pitel): “German borrowing costs surged by the most in 28 years on Wednesday, as investors bet on a big boost to the country’s ailing economy from a historic deal to fund investment in the military and infrastructure. The yield on the 10-year Bund surged 0.31 percentage points to 2.79%, its biggest one-day move since 1997, with markets braced for extra government borrowing. Chancellor-in-waiting Friedrich Merz… agreed with the rival Social Democrats (SPD) to exempt defence spending above 1% of GDP from Germany’s strict constitutional borrowing limit, set up a €500bn off-balance sheet vehicle for debt-funded infrastructure investment and loosen debt rules for states. Deutsche Bank economists described the deal as ‘one of the most historic paradigm shifts in German postwar history’, adding that both the ‘speed at which this is happening and the magnitude of the prospective fiscal expansion is reminiscent of German reunification’.”
March 3 – Financial Times (Ian Smith): “Global government borrowing is expected to reach a record $12.3tn this year, as a rise in defence and other spending by major economies and higher interest rates combine to push up debt levels. The 3% rise in sovereign bond issuance across 138 countries would take the total debt stock… to a record $76.9tn, according to estimates by S&P Global Ratings. Big economies’ focus on fiscal policy to ‘deal with crisis after crisis continues, and the outcome is you do have a much more indebted sovereign picture’, said Roberto Sifon-Arevalo, global head of sovereigns at S&P. This had been compounded, he added, by a rise in debt-servicing costs…”
March 3 – Bloomberg (Alexandre Rajbhandari): “The rise of private credit will continue to benefit US life insurers, whose growing investments in the asset class bolster returns, allowing for more aggressive pricing, according to Moody’s... Alternative asset managers, emboldened by the boom, will continue buying life insurers or seek more partnerships with them as they hunt for more capital to feed their dedicated funds, Moody’s analysts wrote…”
AI Bubble Watch:
March 4 – Wall Street Journal (Raffaele Huang): “Artificial intelligence has become a buzzword in China’s national development blueprint this year as Beijing intensifies efforts to achieve tech independence. In a speech on Wednesday to the country’s lawmakers, Chinese Premier Li Qiang said AI would be key to boosting China’s digital economy. Li pledged that China would boost support for applications of large-scale AI models and AI hardware, such as smartphones, robots, and smart cars. China’s top economic planning body also said Wednesday that the country aimed to develop a system of open-source models while continuing to invest in computing power and data for AI.”
March 4 – Wall Street Journal (Peter Grant): “Developers of a Utah data center have secured one of the biggest construction loans in recent years, the latest sign of the market’s enormous appetite for facilities that provide the backbone for artificial intelligence. JPMorgan… and Starwood Property Trust have agreed to lend $2 billion for the 100-acre data center campus in West Jordan, Utah... The borrower, a venture of real-estate investor CIM Group and Novva Data Centers, said the facility will be able to provide 175 megawatts of continuous service thanks to a power deal with the local electric utility. That is roughly enough juice to power 175,000 average-size U.S. homes.”
Bubble and Mania Watch:
March 2 – CNBC (Tanaya Macheel): “Cryptocurrencies rallied on Sunday after President Donald Trump announced the creation of a strategic crypto reserve for the United States… ‘A U.S. Crypto Reserve will elevate this critical industry after years of corrupt attacks by the Biden Administration, which is why my Executive Order on Digital Assets directed the Presidential Working Group to move forward on a Crypto Strategic Reserve that includes XRP, SOL, and ADA,’ he said in a post on Truth Social. ‘I will make sure the U.S. is the Crypto Capital of the World.’ ‘And, obviously, BTC and ETH, as other valuable Cryptocurrencies, will be at the heart of the Reserve,’ he said… ‘I also love Bitcoin and Ethereum!’ XRP surged 33% after the announcement while the token tied to Solana jumped 25%. Cardano’s coin soared more than 60%. Bitcoin rose 10% to $94,343.82…”
March 3 – Bloomberg (Conor Sen): “There’s an old Wall Street saying that ‘the stock market is not the economy.’ That’s usually true. But, in this economic cycle, stock market gains have become an increasingly important driver of consumer spending… The Wall Street Journal reported last month that high earners in the US increased their spending by 12% in the year through September 2024, while lower-earning cohorts cut back. The divergence can’t be explained by wage growth... It’s best explained, instead, by the wealth surge for workers and retirees with significant stock market portfolios.”
March 4 – Financial Times (Antoine Gara and Alexandra Heal): “Private equity assets under management fell last year for the first time in decades as investors confronting a $3tn backlog of ageing and unsold deals pulled back from committing new funds to the sector. Buyout firms managed $4.7tn in assets as of June last year — down about 2% from 2023, according to… Bain & Co. The decline in assets was the first since Bain began tracking industry assets in 2005. Even during the 2008 financial crisis, the private equity industry recorded modest asset growth… Fundraising has slowed sharply as private equity groups have struggled to sell assets and return cash to investors…”
March 5 – Bloomberg (Dasha Afanasieva): “Jeff Bezos’ mystery neighbor slashed $50 million off the listing price of an empty waterfront lot next to properties owned by the billionaire in an exclusive neighborhood in South Florida. The plot in Indian Creek Village, an artificial island that has been dubbed ‘Billionaire Bunker,’ was listed about three months ago for $200 million, but its asking price has since been reduced to $150 million…”
U.S./Russia/China/Europe Watch:
March 4 – Politico (Noah Keate, Esther Webber and Laura Kayali): “JD Vance was hit by a wave of criticism from British and French politicians… as he mocked Europe’s plan to deploy troops on the ground in Ukraine to keep the peace. In an interview with Fox News’ Sean Hannity, Vance dismissed peacekeeping assistance from ‘some random country that hasn't fought a war in 30 years’ — interpreted by politicians across the divide in London as an attack on the U.K., which has been pushing such a plan alongside France… The U.K. and France are drawing up a plan with Ukraine to present to the U.S. that would include a peacekeeping force comprised of an as-yet-unspecified ‘coalition of the willing.’”
March 5 – Bloomberg: “China is set to increase its defense spending by about 7.2% in 2025, matching last year’s growth and reflecting President Xi Jinping’s ambition to build a military that can challenge the US. The outlay will rise to about 1.78 trillion yuan ($245bn) this year… China’s rise in defense spending contrasts with the Trump administration’s plans to cut military funding by 8% over the next five years…”
March 3 – Reuters (James Pearson, Polina Nikolskaya, Anton Zverev and Parisa Hafezi): “Several senior Russian missile specialists have visited Iran over the past year as the Islamic Republic has deepened its defence cooperation with Moscow, a Reuters review of travel records and employment data indicates.”
De-globalization Watch:
March 5 – Bloomberg (Craig Trudell and Marilen Martin): “Tesla Inc.’s registrations plummeted in Germany last month as Chief Executive Officer Elon Musk irked voters taking part in the country’s closely contested federal election. Sales plunged 76% to 1,429 cars… Tesla’s showing was in stark contrast with overall electric vehicle registrations, which jumped 31% in February.”
Inflation Watch:
March 4 – Bloomberg (Isis Almeida, Michael Hirtzer and Kim Chipman): “President Donald Trump’s tariffs are expected to hit American grocery aisles, hurting consumers already contending with record food costs after years of supply-chain disruptions. Plans to impose duties on American agriculture imports are set to boost the price of fruit and vegetables as well as sugar and coffee… Meat is also at risk — with the lowest cattle herd in 74 years, the US imported a record $11.7 billion in beef and derived products last year. Further, tariffs on Canadian fertilizers will make it more expensive for American farmers to grow their own crops.”
March 4 – CNBC (Russell Leung): “Best Buy… CEO Corie Barry projected that prices for U.S. consumers would rise as President Donald Trump’s tariffs on China and Mexico go into effect… Barry said China and Mexico are the company’s top two supply chain sources, with about 55% and 20% of its products sourced from those countries, respectively. ‘Trade is critically important to our business and industry. The consumer electronic supply chain is highly global, technical and complex,’ Barry said. ‘We expect our vendors across our entire assortment will pass along some level of tariff costs to retailers, making price increases for American consumers highly likely.’”
March 5 – New York Times (Melissa Rohman): “In recent years, concertgoers have paid eye-popping prices for tickets to see popular artists like Beyoncé, Taylor Swift and Oasis on tour. But Gen Z fans — those born between 1997 and 2012 — are paying much more for concert tickets than previous generations did when they were young adults. In 1996, the average ticket price for the top 100 tours was $25.81…, according to… Pollstar… By 2024, average ticket prices had risen to $135.92. The live music industry has put today’s young adults in an impossibly expensive position.”
March 7 – Bloomberg (Jennifer Epstein): “Being a Manhattan homeowner got even more expensive last year. In the fourth quarter, the monthly costs of owning a condo in the borough surged 8.6% from a year earlier, according to Miller Samuel Inc.”
Federal Reserve Watch:
March 6 – Bloomberg (Chris Anstey and Liz Capo McCormick): “Treasury Secretary Scott Bessent rejected the idea that President Donald Trump’s tariff hikes will ignite a new wave of inflation, and suggested that the Federal Reserve ought to view them as having a one-time impact. ‘I’ve agreed not to talk about prospective Fed policy going forward,’ Bessent said… Still, ‘I would hope that the failed ‘Team Transitory’ could get back together and think that nothing is more transitory than tariffs if it’s a one-time price adjustment.’”
March 3 – Bloomberg (Amara Omeokwe and Billy House): “Congressional Republicans are ramping up scrutiny of the Federal Reserve, just as the central bank confronts stubborn inflation and broader questions about its role as a bank regulator. The opening act in the new effort will come Tuesday at the first hearing of a freshly formed House task force that will home in on the Fed... ‘We needed a particular special focus in using the task force route to look at the Federal Reserve system, literally from the charter in 1913 to present,’ said Frank Lucas, an Oklahoma Republican who will chair the new panel…”
March 4 – Bloomberg (Jonnelle Marte): “Federal Reserve Bank of New York President John Williams said he anticipates tariffs will contribute to inflation, but emphasized there is a lot of uncertainty about how the economy will respond to President Donald Trump’s levies. ‘Based on what we know today, given all the uncertainties around that, I do factor in some effects of tariffs now on inflation, on prices, because I think we will see some of those effects later this year,’ Williams said... You also ‘have to factor in how does that affect economic activity — decisions by businesses to invest, consumers to spend?’ Williams said. ‘And that’s where I think another big uncertainty is.’”
March 6 – Bloomberg (Amara Omeokwe): “Federal Reserve Governor Christopher Waller said he wouldn’t support lowering interest rates in March, but sees room to cut two, or possibly three, times this year. ‘If the labor market, everything, seems to be holding, then you can just kind of keep an eye on inflation,’ Waller said… ‘If you think it’s moving back towards target, you can start lowering rates. I wouldn’t say at the next meeting, but could certainly see going forward.’”
U.S. Economic Bubble Watch:
March 4 – Wall Street Journal (Nick Timiraos): “Stagflation has entered the chat. President Trump’s decision to dramatically raise tariffs on imports threatens the U.S. with an uncomfortable combination of weaker or even stagnant growth and higher prices—sometimes called ‘stagflation.’ The U.S. has imposed 25% tariffs on Mexico and Canada, and another 10% hike on China following last month’s 10% increase. They ‘will be wildly disruptive to business investment plans,’ said Ray Farris, chief economist at Prudential PLC. ‘They will be inflationary, so they will be a shock to real household income just as household income growth is slowing because of slower employment and wage gains,” he said… ‘This thing could get off the rails pretty quickly,’ said Tim Mahedy, chief economist at Access/Macro. ‘This is not at the level of the 1970s or 1980s. But it does have a whiff of stagflation, or a ministagcession.’”
March 5 – Bloomberg (Ann Saphir): “U.S. economic activity has risen slightly but unevenly since mid-January, employment nudged higher, and prices increased modestly, the Federal Reserve said…, with businesses and households expressing continued optimism amid rising uncertainty about how U.S. President Donald Trump's policies will affect future growth, labor demand and prices. ‘Six Districts reported no change, four reported modest or moderate growth, and two noted slight contractions,’ the U.S. central bank said in its summary of observations from the commercial and community contacts of each of the Fed's 12 regional banks. ‘Overall expectations for economic activity over the coming months were slightly optimistic.’”
March 7 – CNBC (Jeff Cox): “Job growth was weaker than expected in February though still stable despite President Donald Trump’s efforts to slash the federal workforce. Nonfarm payrolls increased by a seasonally adjusted 151,000 on the month, better than the downwardly revised 125,000 in January, but less than the 170,000 consensus forecast… The unemployment rate edged higher to 4.1%... Federal government employment declined by 10,000 in February though government payrolls overall increased by 11,000, the BLS said.”
March 6 – Bloomberg (Mark Niquette): “The US trade deficit widened to a record in January as companies scrambled to secure goods from overseas before President Donald Trump imposed tariffs on America’s largest trading partners. The gap in goods and services trade widened 34% from the prior month to $131.4 billion… The value of imports rose 10% to a record $401.2 billion, while exports increased 1.2%.”
March 5 – CNBC (Jeff Cox): “Private sector job creation slowed to a crawl in February, fueling concerns of an economic slowdown, payrolls processing firm ADP reported… Companies added just 77,000 new workers for the month, well off the upwardly revised 186,000 in January and below the 148,000… estimate… ADP said annual pay rose 4.7% in February, the same as the prior month.”
March 6 – Reuters (Lucia Mutikani): “The number of Americans filing new applications for unemployment benefits fell more than expected last week, suggesting that the labor market remained stable in February… Initial claims for state unemployment benefits dropped 21,000 to a seasonally adjusted 221,000 for the week ended March 1… The number of people receiving benefits after an initial week of aid, a proxy for hiring, advanced 42,000 to a seasonally adjusted 1.897 million…”
March 4 – Reuters (Howard Schneider): “The smallest U.S. businesses shed jobs in February and average revenue fell… An index developed by software firm Intuit… estimated that employment at firms with one to nine workers fell by around 125,000 over the month, to 12.5 million, a nearly full percentage point decline. While spanning industries, the drop was proportionately largest in leisure and hospitality, where employment fell by around 21,000, or nearly 1.3%.”
March 6 – Bloomberg (Claire Ballentine): “Car owners are missing their monthly payments at the highest rate in more than 30 years. In January, the share of subprime auto borrowers at least 60 days past due on their loans rose to 6.56%, the most since the data collection began in 1994, according to Fitch... Auto loans have been a particular pain point, with higher car prices and elevated borrowing costs driving a surge in repossessions.”
March 3 – Bloomberg (Alexandre Tanzi): “US factory activity last month edged closer to stagnation as orders and employment contracted, while a gauge of prices paid for materials surged to the highest since June 2022 as tariff concerns mounted. The Institute for Supply Management’s manufacturing index slipped by 0.6 point in February to 50.3… The group’s price measure increased 7.5 points to 62.4… After contracting in September for the first time since 2023, prices paid have shown growth for five straight months.”
March 4 – Bloomberg (Maxwell Adler): “Los Angeles is estimating revenue to come in about $140 million lower than budgeted, deepening the city’s second-straight annual shortfall. The city’s controller… lowered his revenue projection for the current fiscal year, offering the first glimpse into how the historic fires in January impacted the Los Angeles’ tax base.”
China Watch:
March 4 – Financial Times (Joe Leahy, Eleanor Olcott, Kathrin Hille and Arjun Neil Alim): “China has announced an ambitious GDP growth target of ‘around 5%’ for 2025 despite a slowdown in the domestic economy and mounting trade tensions with the US. The figure… was announced in the government’s annual ‘work report’, a review of its achievements last year and economic goals and policies for 2025. The growth figure… signalled Beijing’s determination to maintain growth in the face of renewed trade hostilities with the US, which imposed additional tariffs on China this week.”
March 5 – Bloomberg: “China raised its general budget deficit to the highest level in more than three decades, as Beijing ramps up spending to counter the effects of rising US tariffs. The government set this year’s fiscal deficit target to 5.66 trillion yuan ($780bn), or around 4% of gross domestic product, according to… Premier Li Qiang… That’s the highest level since a major tax overhaul in 1994 revamped the government budget… Li also set a growth goal of about 5%, an ambitious target that would require more stimulus than last year to achieve.”
March 6 – Bloomberg: “China’s exports reached a record so far this year as higher US tariffs, and the threat of more to come, drove frontloading of shipments. The value of sales abroad rose 2.3% in the first two months of the year to $540 billion… Imports unexpectedly fell 8.4%, leaving a record trade surplus of nearly $171 billion.”
March 3 – Bloomberg (Dave Sebastian and Kiuyan Wong): “It’s enough money to buy Alibaba Group Holding Ltd., or pay every resident of Hong Kong nearly $50,000. The figure — more than $353 billion — represents the amount of margin loans sought by the city’s retail investors to bet on red-hot initial public offerings this year.”
Central Bank Watch:
March 6 – CNBC (Sophie Kiderlin): “The European Central Bank… cut interest rates by 25 bps and updated the language in its decision to say monetary policy was becoming ‘meaningfully less restrictive.’ The cut brings the ECB’s deposit facility rate, its key rate, to 2.5%... ECB President Christine Lagarde said… it was a ‘result of substantive discussion,’ with no Governing Council members opposing it…”
Europe Watch:
March 5 – Financial Times (Editorial Board): “Call it a very big bazooka indeed, or Germany’s ‘whatever it takes’ moment. There are few more striking signs of how Donald Trump is upturning the old world order than incoming chancellor Friedrich Merz’s epochal agreement with the rival Social Democrats to loosen Germany’s debt rules to fund massive investment in infrastructure and the military. The resulting stimulus could be the largest since after reunification in 1990. Its partners should celebrate Germany’s move back towards providing the economic, political and defensive leadership Europe needs. The shift is all the more surprising given the ambivalence of Merz and his Christian Democrats towards loosening Germany’s 16-year-old debt brake during the recent election campaign. But the flexibility to dump old opinions when the facts change is a sign of leadership. Merz and his likely coalition partners deserve credit for recognising the realities of the world under Trump, and responding swiftly rather than — as other EU capitals had feared — spending months in argument and indecision.”
March 5 – Financial Times (Anne-Sylvaine Chassany and Laura Pitel): “Chancellor-to-be Friedrich Merz has agreed a deal with his likely coalition partner to inject hundreds of billions in extra funding into Germany’s military and infrastructure, in a ‘fiscal sea change’ designed to revive and re-arm Europe’s largest economy…. Merz said… his Christian Democratic Union (CDU), its Bavarian sister party and the rival Social Democrats (SPD) will jointly present a bill in parliament next week to relax the country’s strict borrowing rules. A provision would exempt defence spending above 1% of GDP from the ‘debt brake’ that caps government borrowing, allowing Germany to raise an unlimited amount of debt to fund its armed forces and to provide military assistance to Ukraine. The future coalition partners will introduce another constitutional amendment to set up a €500bn fund for infrastructure, which would run over 10 years.”
March 4 – Politico (Mark Schroers, Jana Randow and Alexander Weber): “Germany should loosen constitutional borrowing limits to free up as much as €220 billion ($232bn) of fiscal space through 2030 to boost infrastructure and military spending, according to the Bundesbank. In a report Tuesday discussing options for the country’s so-called debt brake, it recommends significantly higher ceilings of as much as 1.4% of gross domestic product for structural net borrowing — primarily to fund investment… The Bundesbank’s suggestion… ‘preserves sound public finances while at the same time facilitating urgently needed investment,’ Bundesbank President Joachim Nagel said…”
March 6 – Bloomberg (Craig Stirling): “Germany’s borrowings may balloon by as much as 13% of gross domestic product within the next half decade to fund its planned spending on defense and infrastructure, according to Scope Ratings. The credit-assessment company… predicted that government debt in Europe’s biggest economy could increase by €625 billion ($677bn) if prospective Chancellor Friedrich Merz manages to implement his proposed investment splurge in due course.”
March 1 – Bloomberg (William Horobin): “S&P Global Ratings put a negative outlook on its assessment of France’s creditworthiness, underscoring enduring uncertainty over the country’s finances after a prolonged period of political turmoil. The change in outlook reflects ‘rising government debt amid weak political consensus for tackling France’s large underlying budget deficits, against a backdrop of more uncertain economic growth prospects,’ the ratings firm said…”
March 7 – Telegraph (Tim Wallace): “Germany’s embattled manufacturing industry faces a fresh slump after new orders plunged by 7pc between December and January. Machinery orders dropped more than 10pc on the month, while ‘other transport equipment’ – the category including planes, ships, trains and military vehicles – plunged by almost 18pc. Consumer goods also slid 2pc. It marks a dire start to the year for an economy which shrank by 0.2pc last year…”
Japan Watch:
March 5 – Bloomberg (Toru Fujioka): “Bank of Japan Deputy Governor Shinichi Uchida signaled that the benchmark interest rate remains on a gradual upward path, in remarks that may quell speculation of an early move. ‘The Bank will accordingly continue to raise the policy interest rate and adjust the degree of monetary accommodation’ if the economic outlook is realized, Uchida said… ‘In this regard, the key point of the outlook is that the bank expects the 2% price stability target to be achieved.’”
Leveraged Speculation Watch:
March 6 – Bloomberg (Carmen Arroyo and Katherine Doherty): “Citadel Securities reported its largest ever trading haul, surpassing the tally at some of Europe’s biggest banks to cement itself among the world’s trading behemoths. Full-year trading revenue rose 55% to $9.7 billion from the previous year... That topped a previous record of $7.5 billion set in 2022.”
March 6 – Bloomberg (Nishant Kumar, Bei Hu, Siddharth Vikram Philip, and Hema Parmar): “Millennium Management, Citadel and other top hedge funds posted lackluster returns in February… Multistrategy firms with an equity market-neutral bias took some of the biggest hits. Those losses were driven by overcrowding in a small group of stocks, particularly health care and technology. Jain Global fell about 1%... Millennium lost 1.3% and Citadel dipped 1.7%. The volatility in late January that persisted into February ‘drove lots of questions around hedge fund performance,’ JPMorgan… analysts wrote...”
March 7 – Bloomberg (Nell Mackenzie): “Hedge fund stock pickers and multi-strategy funds gave up around half their average yearly gains in Thursday's tech-driven equity selloff, a note by Goldman Sachs showed... Wall Street shares have been hit this week by a darkening U.S. economic outlook uncertainty over President Donald Trump's tariff policies, with the Nasdaq on Thursday confirming a correction since peaking in December… Hedge funds were caught in crowded trades that sold off leaving those which pick stocks with a 1% average return on the year so far, said the Goldman Sachs note…”
March 7 – Bloomberg (Nishant Kumar): “Qube Research & Technologies, a secretive hedge fund that has grown into an industry giant, has added billions of dollars more to its assets so far this year. London-based QRT now manages about $28 billion, according to people with knowledge of the matter. That’s $5 billion more than it had at the end of last year.”
Social, Political, Environmental, Cybersecurity Instability Watch:
March 6 – Bloomberg (Antony Sguazzin): “The world needs to prepare to fight global warming without the help of the US as the Trump administration pulls billions of dollars pledged to initiatives funding the green transition, the UK’s climate envoy said… ‘You plan for the worst and hope for the best,’ Rachel Kyte, the envoy, said... ‘We have to plan for a world where the US is not transfusing funds into the green transition.’”
March 5 – Reuters (Tim Cocks, Francesco Guarascio and Fransiska Nangoy): “The United States is withdrawing from the Just Energy Transition Partnership, a collaboration between richer nations to help developing countries transition from coal to cleaner energy, several sources… said. JETP, which consists of 10 donor nations, was first unveiled at the U.N. climate talks in Glasgow, Scotland in 2021. South Africa, Indonesia, Vietnam and Senegal were subsequently announced as the first beneficiaries of loans, financial guarantees and grants to move away from coal.”
March 3 – Bloomberg (Shoko Oda): “Japanese firefighters are struggling to contain a week-long wildfire on the country’s northeastern coast that has spread to become the worst the country has seen in half a century. The blaze near Ofunato in Iwate prefecture had engulfed 6,425 acres as of Tuesday — close to half the area of Manhattan — and was continuing to grow, according to the Fire and Disaster Management Agency, making it the biggest fire in Japan since 1975.”
Geopolitical Watch:
March 5 – Financial Times (Felicia Schwartz, Neri Zilber and Andrew England): “Donald Trump has warned Hamas that ‘it is OVER for you’ unless it hands over the remaining hostages it holds in Gaza, hours after Washington said it had held direct talks with the militant group. In his most belligerent remarks yet on the conflict, the US president added that he was ‘sending Israel everything it needs to finish the job’ in the besieged strip, warning Gazans they would be ‘dead’ if the hostages are not released. ‘I am sending Israel everything it needs to finish the job, not a single Hamas member will be safe if you don’t do as I say,’ Trump wrote… ‘This is your last warning! For the leadership, now is the time to leave Gaza, while you still have a chance. Also, to the People of Gaza: A beautiful Future awaits, but not if you hold Hostages. If you do, you are DEAD!’ he added.”
March 4 – Wall Street Journal (Sudarsan Raghavan, Dov Lieber and Suha Ma’ayeh): “For two decades, Israel’s next-door neighbor was Bashar al-Assad, a hostile dictator who was weakened by Syria’s sectarian divisions. Now, Israel is trying to neutralize what security officials see as a threat: Turkish-backed Islamists trying to unify Syria. In recent days, Israel’s military has targeted more military sites in new areas of southern Syria to keep weapons out of the new government’s hands.”
The S&P500 slumped 3.1% (down 1.9% y-t-d), and the Dow fell 2.4% (up 0.6%). The Utilities declined 1.4% (up 4.5%). The Banks sank 8.8% (down 3.2%), and the Broker/Dealers dropped 5.2% (up 3.3%). The Transports lost 2.4% (down 1.8%). The S&P 400 Midcaps fell 3.5% (down 4.3%), and the small cap Russell 2000 dropped 4.0% (down 6.9%). The Nasdaq100 slumped 3.3% (down 3.9%). The Semiconductors fell 2.9% (down 7.0%). The Biotechs slipped 0.8% (up 4.9%). With bullion rising $50, the HUI gold index jumped 4.5% (up 18.6%).
Three-month Treasury bill rates ended the week at 4.1975%. Two-year government yields added a basis point to 4.00% (down 24bps y-t-d). Five-year T-note yields gained seven bps to 4.09% (down 30bps). Ten-year Treasury yields rose 10 bps to 4.30% (down 27bps). Long bond yields jumped 11 bps to 4.60% (down 18bps). Benchmark Fannie Mae MBS yields rose 10 bps to 5.51% (down 30bps).
Italian 10-year yields surged 42 bps to 3.96% (up 44bps y-t-d). Greek 10-year yields rose 41 bps to 3.65% (up 43bps). Spain's 10-year yields spiked 45 bps higher to 3.50% (down 44bps). German bund yields surged 43 bps to 2.54% (up 47bps). French yields jumped 41 bps to 3.56% (up 36bps). The French to German 10-year bond spread narrowed two to 72 bps. U.K. 10-year gilt yields rose 16 bps to 4.64% (up 7bps). U.K.'s FTSE equities index fell 1.5% (up 6.2% y-t-d).
Japan's Nikkei 225 Equities Index slipped 0.7% (down 7.5% y-t-d). Japanese 10-year "JGB" yields surged 14 bps to 1.52% (up 42bps y-t-d). France's CAC40 was little changed (up 10.0%). The German DAX equities index rallied 2.0% (up 15.6%). Spain's IBEX 35 equities index declined 0.7% (up 14.3%). Italy's FTSE MIB index slipped 0.2% (up 12.9%). EM equities were mostly higher. Brazil's Bovespa index rallied 1.8% (up 4.0%), and Mexico's Bolsa index gained 1.0% (up 6.7%). South Korea's Kospi increased 1.2% (up 6.8%). India's Sensex equities index recovered 1.5% (down 5.3%). China's Shanghai Exchange Index gained 1.6% (up 0.6%). Turkey's Borsa Istanbul National 100 index surged 8.8% (up 6.9%).
Federal Reserve Credit declined $18.5 billion last week to $6.711 TN. Fed Credit was down $2.190 TN from the June 22, 2022, peak. Over the past 286 weeks, Fed Credit expanded $2.984 TN, or 80%. Fed Credit inflated $3.900 TN, or 139%, over the past 643 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt rose $13.9 billion last week at $3.303 TN. "Custody holdings" were down $40.4 billion y-o-y, or 1.2%.
Total money market fund assets surged another $51.1 billion to a record $7.025 TN. Money funds were up $891 billion over 32 weeks (23.6% annualized) and $967 billion y-o-y (16.0%).
Total Commercial Paper jumped gained $14.5 billion to a seven-month high $1.321 TN. CP has increased $234 billion y-t-d and $55 billion, or 4.4%, y-o-y.
Freddie Mac 30-year fixed mortgage rates fell 13 bps this week to a three-month low of 6.63% (down 25bps y-o-y). Fifteen-year rates dropped 15 bps to 5.79% (down 43bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates down 21 bps to 6.83% (down 36bps).
Currency Watch:
For the week, the U.S. Dollar Index sank 3.4% to 103.905 (down 4.2% y-t-d). For the week on the upside, the Swedish krona increased 6.8%, the euro 4.4%, the Norwegian krone 3.7%, the British pound 2.7%, the Swiss franc 2.6%, the South African rand 2.5%, the New Zealand dollar 2.0%, the Japanese yen 1.8%, the Brazilian real 1.6%, the Australian dollar 1.6%, the Singapore dollar 1.5%, the Mexican peso 1.5%, the South Korean won 0.8%, and the Canadian dollar 0.6%. The Chinese (onshore) renminbi gained 0.45% versus the dollar (up 0.74% y-t-d).
Commodities Watch:
March 6 – Financial Times (Susannah Savage): “US grain prices have fallen sharply in recent weeks as retaliatory tariffs on the country’s agricultural exports fuel fears that a trade war will create a supply glut on global markets. Corn, wheat and soyabean prices in Chicago have dropped since mid-February, coming under further pressure this week after China and Canada said they would impose a range of tariffs on US foodstuffs. Traders have been forced to rapidly rethink their outlooks as the major trading partners threaten tariffs on some of their main exports.”
The Bloomberg Commodities Index recovered 2.0% (up 6.1% y-t-d). Spot Gold rose 1.7% to $2,909 (up 10.8%). Silver rallied 4.4% to $32.5375 (up 12.6%). WTI crude sank $2.91, or 4.2%, to $67.04 (down 7%). Gasoline dropped 5.1% (up 4%), and Natural Gas surged 14.7% to $4.399 (up 22%). Copper rallied 3.3% (up 17%). Wheat slipped 0.6% (down 3.2%), while Corn increased 0.5% (down 1%). Bitcoin recovered $2,300, or 2.7%, to $86,530 (down 7.7%).
Trump Administration Watch:
March 4 – Wall Street Journal (Alex Leary and Tarini Parti): “President Trump put his disruptive return to power on full display during a prime-time address to Congress, offering a no-apologies assessment of his decisions to crack down on illegal immigration, slash the federal workforce and impose stiff tariffs on imports. ‘I return to this chamber tonight to report that America’s momentum is back, our spirit is back, our pride is back, our confidence is back,’ Trump said…, describing what he called a ‘swift and unrelenting’ campaign to transform the country. The one-hour, 40-minute address—the longest of its kind in history—gave Trump an opportunity to sell his combative brand of governing to tens of millions of Americans in what was expected to be his largest audience since his inaugural address.”
March 5 – Bloomberg (Jordan Fabian, Josh Wingrove and Akayla Gardner): “President Donald Trump took the lectern Tuesday for his primetime address beset by warning signs about the US economy, and acknowledged to Americans there could be more discomfort ahead. Trump defended his plan to remake the world’s largest economy through the biggest tariff increases in a century, saying it would raise ‘trillions and trillions’ in revenue and rebalance trading relationships he called unfair. He cast the economic pain the levies are expected to cause in the form of higher prices as a ‘little disturbance’ the nation ought to be able to overcome. ‘Tariffs are about making America rich again and making America great again. And it’s happening, and it will happen rather quickly,’ he said. ‘There’ll be a little disturbance, but we’re OK with that. It won’t be much.’”
March 5 – Wall Street Journal (Richard Rubin and Gavin Bade): “President Trump is trying to sell America on an economic plan that promises a new ‘golden age’ but risks raising prices on inflation-weary consumers and shaking the foundations of world trade and the domestic labor market. In his address Tuesday to Congress, Trump painted a picture of a high-tariff, low-immigration, low-tax, low-regulation version of the U.S. economy—and warned of turbulence along the way. ‘Tariffs are about making America rich again and making America great again, and it is happening and it will happen rather quickly,’ he said. ‘There will be a little disturbance, but we are OK with that.’”
March 3 – Financial Times (Myles McCormick): “A little over a month into his second term, Donald Trump’s warp speed overhaul of US policy has already reverberated across the globe. Thousands of federal employees have been sacked. Ukraine fears abandonment in its war with Russia. The population of Gaza faces potential resettlement. North America is on the brink of a trade war. But for Corinne Wooten, a 30-year-old nurse in the Atlanta suburb of Roswell, Georgia, all of that seems a world away. ‘It truly does not affect my life right now, which is maybe a little selfish to say, but it doesn’t,’ said Wooten… ‘Life has been the same. Nothing’s changed for us.’ Her verdict on Trump’s first month back: ‘So far, so good’… ‘Donald Trump is kicking ass,” said Clark Searles, a 64-year-old pharmaceutical worker and military veteran… ‘He’s actually doing what he promised he was going to do, particularly as it relates to getting the fraud out of our government.’”
March 7 – Financial Times (James Politi, Aime Williams and Guy Chazan): “In the Oval Office on Thursday afternoon, Donald Trump signed the latest in a series of executive orders on trade, partially reversing the 25% tariffs on Canada and Mexico that he had imposed just two days earlier. The dizzying policy changes have sparked an equity market sell-off, concern from businesses and panic in foreign capitals fearful of a repeat of the chaotic decision-making of Trump’s first term... ‘There were three changes in 24 hours affecting us as a North American auto supplier, and that’s a little bit disconcerting,’ said Jeff Aznavorian, president of Clips & Clamps Industries, an engineering group… ‘We can’t guess what or how or who at the moment. It’s like a whipsaw.’”
March 7 – Bloomberg (Jennifer A. Dlouhy and Shawn Donnan): “President Donald Trump’s frenzied tariff barrage has been marked by reversals and faulty rollouts, baffling US trading partners and businesses while raising questions about the aims of his signature policy… ‘There are a lot of mixed signals from the administration regarding which tariffs will apply to which goods on which dates,’ said John Veroneau, a former general counsel for the US Trade Representative who is now a partner at Covington & Burling LLP. ‘The uncertainty is challenging for US companies trying to make decisions.’”
March 7 – Bloomberg (Hadriana Lowenkron): “Recently announced measures will lead the US economy to the ‘three or four percent growth that we’re all hoping for,’ White House National Economic Council Director Kevin Hassett says… Hassett says there’s no uncertainty when it comes to President Trump’s announcements. ‘I think in some sense that you’ve got quite a bit of clarity already. There’s no uncertainty. There’s going to be some tariff, it’s going to be reciprocal,’ he says…”
March 3 – New York Times (David A. Fahrenthold, Emily Badger and Jeremy Singer-Vine): “Elon Musk’s Department of Government Efficiency has deleted hundreds more claims from its mistake-plagued ‘wall of receipts,’ erasing $4 billion in additional savings that the group said it had made for U.S. taxpayers. Late Sunday night, the group erased or altered more than 1,000 contracts it had claimed to cancel, representing more than 40% of all the contracts listed on its site last week.”
March 4 – Financial Times: “Businesses have begun stockpiling materials, reviewing manufacturing footprints and preparing to raise prices as Donald Trump’s trade war has entered ‘uncharted territory’ with sweeping tariffs on Canada, Mexico and China. Sectors including manufacturing, retail and food were among those to highlight shocks to their supply chains after the US president imposed 25% duties on imports from its two North American neighbours and raised new tariffs on China to 20%.”
March 5 – Bloomberg (Ilena Peng, Michael Hirtzer and Kim Chipman): “President Donald Trump is asking American growers to bear with him as tariffs threaten to hurt their business and deepen a farm downturn that’s entering a third year… The trade disputes are a blow for American farmers, a key voting bloc for Trump. But in a speech to Congress, the president promised his newly announced duties will yield even better results than the trade deal he struck with China during his first term. ‘It may be a little bit of an adjustment period,’ he told Congress... ‘We had that before when I made the deal with China, $50 billion of purchases and I said ‘just bear with me’ and they did, they did — probably have to bear with me again, and this will be even better.’”
March 4 – Financial Times (Guy Chazan and Taylor Nicole Rogers): “US farmers reacted with fury to President Donald Trump’s tariffs on imports from Canada, Mexico and China, saying a trade war will threaten their markets, push up the cost of inputs such as fertiliser and ‘take a toll on rural America’. Farmers expressed particular concern about the impact of retaliatory tariffs... ‘Contrary to what the president thinks, this means nothing but pain,’ said Aaron Lehman, head of the Iowa Farmers Union. ‘Our domestic markets aren’t prepared to pick up the slack and that means lower prices for what we grow.’”
March 5 - Associated Press (Stephen Groves): “The Department of Veterans Affairs is planning a reorganization that includes cutting over 80,000 jobs from the sprawling agency that provides health care and other services for millions of veterans, according to an internal memo…”
March 4 – Associated Press (Lisa Mascaro): “House Speaker Mike Johnson is encouraging Republican lawmakers to skip town halls that have been filled with protesters decrying the Trump administration’s slashing of federal government, echoing the president’s claims that the demonstration’s are fueled by professional protesters.”
March 1 – Bloomberg (Emily Nicolle): “The US Securities and Exchange Commission has kicked off the new year with a makeover, wiping clean its slate of crypto enforcement actions and turning what was once a hostile landscape for digital assets into a potential haven. In the last month alone, the securities watchdog has dismissed or paused at least eight cases against crypto companies, including those that targeted some of the sector’s most prominent faces.”
March 2 – Reuters (David Ljunggren): “The U.S. Treasury Department said… it would not enforce an anti-money laundering law that obliges millions of business entities to disclose the identities of their real beneficial owners. The Trump administration has opposed the Biden-era Corporate Transparency Act on the grounds that it is a burden on low-risk entities. The act has faced repeated legal challenges.”
March 6 – Bloomberg (Muyao Shen): “President Donald Trump’s decentralized-finance project World Liberty Financial appears to have bought more than $20 million worth of cryptocurrencies including Ether two days before executives at major digital-asset companies are set to visit the White House to discuss crypto policy.”
March 4 – Bloomberg (Janet Lorin and Maria Luiza Rabello): “President Donald Trump threatened to stop all federal funding for colleges that allow ‘illegal’ protests, further escalating his rhetoric targeting US universities. ‘Agitators will be imprisoned/or permanently sent back to the country from which they came,’ Trump said in a post… ‘American students will be permanently expelled or, depending on on the crime, arrested. NO MASKS!’”
Trade War Watch:
March 4 – Politico (Holly Otterbein, Daniel Desrochers, Jordain Carney and Megan Messerly): “It’s dawning on the world — and several Republicans on Capitol Hill — that sometimes President Donald Trump should be taken literally after all. Trump levied sweeping tariffs on key trading partners Mexico, Canada and China early Tuesday morning, sparking retaliation from Beijing and Ottawa, sending the stock market into a tailspin, and alarming government officials around the globe as they brace for potentially the worst trade war in a century. Canadian Prime Minister Justin Trudeau blasted the United States for launching ‘a trade war against Canada’ while ‘they’re talking about working positively with Russia, appeasing Vladimir Putin — a lying, murderous dictator.’ Target CEO Brian Cornell warned that Americans’ grocery prices would go up. John Bozzella, CEO of the Alliance for Automotive Innovation, said that car prices would spike as much as 25%.”
March 4 – Politico (Nick Taylor-Vaisey): “Canadian Prime Minister Justin Trudeau denounced President Donald Trump for launching a trade war with his country, saying that he won’t back down from a tariff fight... ‘Today, the United States launched a trade war against Canada. At the same time, they’re talking about working positively with Russia, appeasing Vladimir Putin — a lying, murderous dictator. Make that make sense,’ Trudeau said... ‘Canadians are reasonable and we are polite, but we will not back down from a fight, not when our country and the well being of everyone in it is at stake… We don’t want this. We want to work with you as a friend and ally, and we don’t want to see you hurt either, but your government has chosen to do this to you,’ he said… ‘It’s not in my habit to agree with The Wall Street Journal, but Donald, they point out that even though you’re a very smart guy, this is a very dumb thing to do… We two friends fighting is exactly what our opponents around the world want to see.’”
March 3 – Bloomberg (Brian Platt): “The Canadian government announced a sweeping package of counter-tariffs against US-made products after President Donald Trump confirmed that his administration will go ahead with levies against Canada and Mexico… The first stage is 25% tariffs on about C$30 billion ($20.6bn) worth of goods from US exporters… A second round of tariffs at the same rate will be placed on C$125 billion of products in three weeks — a list that will include big-ticket items like cars, trucks, steel and aluminum.”
March 4 – New York Times (Keith Bradsher): “Minutes after President Trump’s latest tariffs took effect, the Chinese government said… it was imposing its own broad tariffs on food imported from the United States and would essentially halt sales to 15 American companies. China’s Ministry of Finance put tariffs of 15% on imports of American chicken, wheat, corn and cotton and 10% tariffs on other foods, ranging from soybeans to dairy products. In addition, the Ministry of Commerce said 15 U.S. companies would no longer be allowed to buy products from China except with special permission... Lou Qinjian, a spokesman for China’s National People’s Congress, chastised the United States for violating the World Trade Organization’s free trade rules. ‘By imposing unilateral tariffs, the U.S. has violated W.T.O. rules and disrupted the security and stability of the global industrial and supply chains,’ he said.”
March 4 – Bloomberg (Hallie Gu): “China has halted soybean imports from three US entities, further ratcheting up trade tensions between the world’s two largest economies. The nation halted qualifications for soybean exports from CHS Inc., Louis Dreyfus Company Grains Merchandising LLC and EGT LLC, its General Administration of Customs said… China also suspended log imports from the US…”
March 7 – Bloomberg (Nell Mackenzie): “Mexican President Claudia Sheinbaum said her country would review tariffs on Chinese shipments, a move that could give the Trump administration a win in its push to build a ‘Fortress North America’ that blocks shipments from the Asian nation. ‘We have to review the tariffs that we have with China,’ Sheinbaum said… She pointed to Mexico’s problems in textile and shoe production, saying: ‘Much of the entry of Chinese products into Mexico caused this industry to fall in our country.’”
March 4 – Politico (Camille Gus): “The European Commission condemned the tariffs imposed by U.S. President Donald Trump against Canada and Mexico on Tuesday, as tensions over trade and the war in Ukraine soar between the historic allies. ‘We call on the United States to reconsider its approach and work towards a cooperative, rules-based solution that benefits all parties,’ the European Union executive said… ‘This move risks disrupting global trade, harming key economic partners, and creating unnecessary uncertainty at a time when international cooperation is more crucial than ever,’ it added.”
March 5 – Bloomberg (Laura Curtis, Shawn Donnan and Erik Hertzberg): “Global shipping executives gathered this week in Long Beach, California, for a major annual conference, expecting to discuss market trends and supply chain challenges. Instead, they found themselves in crisis mode… While beefing up tariffs has long been one of Trump’s signature issues, veteran shippers at the S&P Global’s TPM25 conference in Long Beach said they didn’t expect him to follow through so fully. ‘It’s like an earthquake,’ said Cindy Allen, chief executive officer of consultant Trade Force Multiplier… ‘You do your best to prepare, but then when it comes it’s an 8.0 on the Richter scale. It’s a shock,’ she said…”
New World Disorder Watch:
March 5 – Bloomberg: “The difference couldn’t have been more stark: All of China’s lawmakers slow-clapping in unison as Xi Jinping walked into the Great Hall of the People, followed by a raucous US Congress split between two camps alternatively cheering and jeering Donald Trump. The contrasting scenes played out back-to-back in different parts of the world on Wednesday morning in Asia, underscoring the growing divide between two economies that spent much of the past few decades becoming more intertwined, largely with China selling goods to US consumers. Now President Trump wants the US to make more, and China wants its people to spend more.”
March 6 – Bloomberg (John Authers): “Sometimes you can feel the global economy’s tectonic plates move under your feet. This is one of those times. Late Tuesday, the leaderships of Germany’s traditional two dominant parties, the Social Democrats and Christian Democrats, announced their intention to borrow €900 billion, to be spent on two funds covering defense and infrastructure. To do this, they will amend the constitution in the two weeks before the next legislature is convened. After decades of defiantly running a tightly conservative fiscal ship, this is a sudden ‘whatever it takes’ moment… US Vice President JD Vance appears to be by a wide margin Frankfurt’s most despised living human. His name keeps coming up. Germans see his attempt to interfere in their election, tell them how to deal with their Nazi legacy, and then humiliate Ukraine’s President Volodymyr Zelenskiy, as despicable and unforgivable. It’s the extent of the shock caused by Vance (and Trump) that has shaken the German establishment into action.”
March 5 – Politico (Clea Caulcutt, Jacopo Barigazzi, Gabriel Gavin and Giovanna Faggionato): “The European Union is used to crises. This could be the one to beat them all. As the bloc’s 27 leaders gather in Brussels on Thursday, they know the entire post-1945 security architecture ― one that depends on being buttressed by the United States ― could crumble any day. Since Donald Trump’s return to the White House, leaders have talked a lot about sovereignty and defense… While French President Emmanuel Macron has talked of the need for ‘an incredible awakening’ and German Chancellor-in-waiting Friedrich Merz described Europe as being ‘five minutes to midnight,’ the worry from those close to the discussion is that events are happening more quickly than they can cope with. ‘The nightmare scenario is that the U.S. announces a deal soon that accepts most of Russia’s demands and then tells Ukraine and Europe to take it or leave it,’ said Malcolm Chalmers, deputy director general at the Royal United Services Institute in London.”
March 5 – Financial Times (Henry Foy, Andy Bounds, Paola Tamma and Laura Pitel): “Germany has called for the EU to exempt defence spending from its fiscal rules for longer than Brussels had proposed, marking a significant shift in Berlin’s tough stance on deficit and debt under chancellor-in-waiting Friedrich Merz. The German ambassador to the EU told other national envoys… that Berlin wanted to overhaul EU debt and deficit limits to allow for increased defence spending, according to four officials briefed on the discussion. The ask, which is a complete reversal of Berlin’s previously frugal stance on public spending and borrowing, goes further than a 4-year exemption floated earlier this week by European Commission president Ursula von der Leyen. ‘Berlin wants to make significant defence expenditure possible in the medium- and long-term through an adaptation of the rules,’ said a person familiar…”
March 2 – Axios (Avery Lotz): “Moscow is welcoming the apparent shift in U.S. relations with Ukraine following last week's tense Oval Office meeting… Kremlin officials commended the U.S…, with spokesperson Dmitry Peskov saying the United States’ ‘rapidly changing’ foreign policy configurations ‘largely coincides with our vision.’ Russian Foreign Minister Sergei Lavrov also praised Trump for his ‘common sense’… A spokesperson for Russia's foreign ministry said after the Oval Office meeting that it was a ‘miracle of restraint’ that Trump and Vance didn’t hit Zelensky. Former Russian President Dmitry Medvedev, now deputy chair of Russia's security council, crowed that ‘the insolent pig finally got a proper slap down in the Oval Office.’”
March 6 – Bloomberg (Ellen Milligan): “Ukraine’s former top military commander warned that the US is ‘destroying’ the world’s established order, delivering a sharp critique of Donald Trump’s approach to Russia that risks hampering President Volodymyr Zelenskiy attempt to repair ties. Valerii Zaluzhnyi, a popular general whom Zelenskiy replaced last year, has been viewed as a potential contender to the wartime president in any future election. He is now Ukraine’s envoy to the UK… He broke with a penchant to keep a low profile, accusing the White House of jeopardizing the ‘unity of the Western world’ and warned that the North Atlantic Treaty Organization ‘may cease to exist.’ ‘It is obvious that Washington’s non-recognition of the Russian Federation’s aggression is also a new challenge — not only for Ukraine, but also for Europe… Not only Russia and the axis of evil are trying to destroy the world order, but the United States is actually destroying it completely,’ the ambassador said.”
March 5 - Politico (Victor Goury-Laffont and Clea Caulcutt): “President Emmanuel Macron has warned that France needs to prepare for the possibility of the United States disengaging from Europe by increasing spending on defense needs and rethinking how the country uses its nuclear deterrent. ‘The Russian threat is here and is affecting European countries, affecting us,’ Macron said in a nationally televised speech... ‘I want to believe that the U.S. will stay by our side, but we have to be ready if they don’t.’ Macron warned that the relative peace Western Europe has enjoyed on its soil since the end of World War II appears to be at an end, and that the continent must prepare for the future by beefing up its own defenses.”
March 7 – Reuters (Lili Bayer, Andrew Gray and Michel Rose): “European leaders… backed plans to spend more on defence and continue to stand by Ukraine in a world upended by Donald Trump's reversal of U.S. policies. The European Union's defence summit in Brussels took place amid fears that Russia, emboldened by its war in Ukraine, may attack an EU country next and that Europe can no longer rely on the U.S. to come to its aid. ‘Today we have shown that the European Union is rising to the challenge, building the Europe of defence and standing with Ukraine shoulder to shoulder,’ the chairman of the meeting Antonio Costa told reporters… In a joint statement agreed by all 27 member states, the leaders called on their ministers to examine these proposals in detail urgently. ‘Europe must take up this challenge, this arms race. And it must win it,’ Polish Prime Minister Donald Tusk said at a special defence summit in Brussels.”
March 7 – Wall Street Journal (Bertrand Benoit): “President Trump’s embrace of Russia is causing Europeans to rethink their security and giving currency to an idea the U.S. has long sought to avoid: a nuclear-armed Germany. Friedrich Merz… said Berlin should start talks about expanding the French and British nuclear deterrents to cover Europe, according to an interview… Asked if Germany should pursue its own arsenal, Merz didn’t rule it out, saying ‘there is no need for this today.’”
March 6 – Bloomberg (Samy Adghirni): “President Emmanuel Macron said he’ll enter into talks to use France’s nuclear capabilities to defend European allies, in the latest push by a European country to establish strategic security as the US reduces its footprint on the continent. ‘Our nuclear deterrent protects us,’ Macron said… ‘I have decided to open the strategic debate on the protection, through our deterrent, of our allies on the European continent.’”
March 4 – Bloomberg (Karishma Vaswani): “These are great changes unseen in a century, as the Chinese saying goes. The phrase, which was first used by President Xi Jinping during a speech in 2017 and was born in the aftermath of the Great Recession, is particularly apt today. It reflects his narrative that the US is in decline, and it’s China’s turn to be the global leader. Donald Trump is bringing Xi closer to realizing that ambition with each passing day. The US president’s actions point to an isolationist foreign policy, and a nation that is no longer a reliable partner… Xi is looking to exploit this opportunity, notes Dylan Loh, assistant professor at the Public Policy and Global Affairs program at Singapore-based Nanyang Technological University. ‘The Chinese are positioning themselves as the voice of reason, a sharp change from how they’ve been painted before — as the disruptor,’ he told me. ‘Now the roles have reversed. Under Trump, it’s the US that’s the disruptor.’”
March 5 – Bloomberg (Michael McDonald): “Panama’s president accused Donald Trump of lying to Congress after the US leader reiterated his intention to take over the Panama Canal. Trump told lawmakers… Panama had broken the agreements it made when it took over the waterway a quarter-century ago. ‘Once again, President Trump lies,’ President Jose Raul Mulino said… ‘I reject, in the name of Panama and all Panamanians, this new affront to truth, and to the dignity of our nation.’ Mulino repeated that his government will not negotiate the return of the canal to US control.”
March 5 – Associated Press (Danica Kirka and Stefanie Dazio): “Greenland’s prime minister declared… that ‘Greenland is ours’ and cannot be taken or bought in defiance of a message from U.S. President Donald Trump, who said the United States will acquire the territory ‘one way or another’ even though his administration supports the Arctic island’s right of self-determination. Prime Minister Múte Bourup Egede said the island’s citizens are neither American nor Danish because they are Greenlandic. “
Budget Watch:
March 6 – Reuters (Jeff Cox): “President Donald Trump’s efforts to pare down the federal government workforce left a mark on the labor market in February, with announced job cuts at their highest level in nearly five years, outplacement firm Challenger, Gray & Christmas reported… The firm reported that U.S. employers announced 172,017 layoffs for the month, up 245% from January and the highest monthly count since July 2020… More than one-third of the total came from billionaire entrepreneur Elon Musk’s efforts… Challenger put the total of announced federal job cuts at 62,242, spanning 17 agencies.”
Ukraine War Watch:
March 6 – Wall Street Journal (Editorial Board): “President Trump assures Americans that Vladimir Putin wants ‘peace’ in Ukraine, but the key question is what kind of peace? The answer seems to be a peace of subjugation in which Ukraine is left to defend itself with no outside help until Russia decides to invade again. That’s the implication of Thursday’s comments from Sergei Lavrov, the Russian foreign minister, that the Kremlin won’t tolerate Western European troops on Ukrainian soil. ‘We see no room for compromise,’ Mr. Lavrov told reporters… This is no surprise, as Russia responds to Mr. Trump’s pressure on Ukraine by increasing its demands as part of any agreement with Ukraine.”
March 4 – Reuters (Yuliia Dysa): “Ukrainian President Volodymyr Zelenskiy said… his clash with Donald Trump last week was ‘regrettable’, that he was ready to work under the U.S. president's leadership to bring lasting peace, and that it was ‘time to make things right’. The statement came after Washington paused military aid to Kyiv in a stunning move overnight… ‘Our meeting in Washington, at the White House on Friday, did not go the way it was supposed to be. It is regrettable that it happened this way. It is time to make things right,’ Zelenskiy posted on X. ‘My team and I stand ready to work under President Trump’s strong leadership to get a peace that lasts,’ he said.”
March 4 – Financial Times (Fabrice Deprez and Christopher Miller): “The long unthinkable prospect of Ukraine fighting without US weapons, equipment or intelligence looks set to become a reality after the White House… announced it would cut military aid to Kyiv. A senior Ukrainian intelligence official said that Ukraine would probably run out of the last American military supplies in ‘two or three months’. ‘After that, it will be very difficult for us,’ the official told the Financial Times. ‘It will not be a total collapse, but we will be forced to withdraw from areas more quickly.’ In the fourth year of Russia’s full-scale invasion, tens of thousands of Ukrainian troops are fending off constant Russian attacks from the trenches of eastern and southern Ukraine. Along the 1,000km-long front line, the end of US military aid will have far-reaching consequences for the battered army, even if European allies supplement some of the missing equipment.”
March 7 – Associated Press (Illia Novikov): “Russia attacked Ukrainian energy facilities with dozens of missiles and drones during the night…, hobbling the country’s ability to deliver heat and light to its citizens and to power weapons factories vital to its defenses. The overnight barrage — which also pounded residences and wounded at least 10 people — came days after the U.S. suspended military aid and intelligence to Ukraine to pressure it into accepting a peace deal being pushed by the Trump administration. Without U.S. intelligence, Ukraine’s ability to strike inside Russia and defend itself from bombardment is significantly diminished.”
March 2 – Bloomberg (Alex Wickham and Irina Anghel): “European leaders sought to assemble what Britain called a ‘coalition of the willing’ to secure Ukraine after any US-brokered ceasefire, as they gathered in London to coordinate defense spending hikes amid concerns of an American pullback. UK Prime Minister Keir Starmer, who hosted the emergency security summit on Sunday, said Britain and France and ‘one or two others’ would work with Ukraine on a ‘plan to stop the fighting.’ The summit came after a week of frantic diplomacy marked by a disastrous Oval Office clash between US President Donald Trump and Ukrainian counterpart Volodymyr Zelenskiy…”
March 7 – Politico (Veronica Melkozerova): “Ukraine's military used Mirage 2000 jets provided by France to repel a Russian attack for the first time, deploying the aircraft overnight against Moscow's latest barrage of missiles and drones. Russian forces launched 67 missiles and 194 drones against Ukraine… Army spokesman Dmytro Lykhoviy said it was first massive Russian combined attack since the U.S. stopped aid to push Kyiv to negotiate with Moscow.”
March 6 – Politico (Laura Kayali): “France is providing intelligence to Ukraine despite the Trump administration's decision to stop doing so, French Armed Forces Minister Sébastien Lecornu said… Earlier this week, the U.S. also halted sending military aid to Ukraine, leaving the country vulnerable to aerial attacks by Russia. Lecornu also addressed the idea that U.S. President Donald Trump might be trying to use military aid to Ukraine as negotiation leverage with Russia. ‘If it’s a tool for negotiating and putting pressure on the Ukrainians, it's very hard for them and morally detestable,’ he said.”
March 6 – Bloomberg (Andrea Palasciano and Donato Paolo Mancini): “Italian Prime Minister Giorgia Meloni said Ukraine should be granted the security of NATO without the actual membership in the military alliance. Speaking on the sidelines of a European Union leaders’ meeting…, she said ‘we need to think about more durable solutions’ than sending European peacekeeping troops to Ukraine. Extending the provision of NATO’s Article 5 — the collective defense clause that commits members to protect each other — would be much more effective, she said. The proposal comes as European leaders are seeking ways to shore up Kyiv as the administration of President Donald Trump pushes for a rapid end to the three-year war.”
March 6 – Politico (Jamie Dettmer): “Four senior members of Donald Trump’s entourage have held secret discussions with some of Kyiv’s top political opponents to Volodymyr Zelenskyy, just as Washington aligns with Moscow in seeking to lever the Ukrainian president out of his job. The senior Trump allies held talks with Ukrainian opposition leader Yulia Tymoshenko… and senior members of the party of Petro Poroshenko, Zelenskyy’s immediate predecessor as president…”
Taiwan Watch:
March 3 – Bloomberg (Yian Lee): “President Donald Trump’s heated meeting with Ukraine’s leader has prompted Taiwan to start rethinking how it deals with the US, according to Taipei’s top defense official. ‘We have deeply recognized that one cannot discuss values without also addressing national interests,’ Defense Minister Wellington Koo said… In remarks that referenced Trump and aggression from China’s armed forces, Koo said that ‘facing the rapidly changing international situation and escalating threats from the enemy, we cannot rely on the goodwill of others to maintain peace.’ The comments show the urgency confronting security officials in Taipei and other places that rely on US military backing to counter Beijing, including Japan, South Korea and the Philippines.”
March 7 – Bloomberg (Hadriana Lowenkron): “President Donald Trump is confident that China’s President Xi Jinping won’t make a move on Taiwan when he is in the White House, Treasury Secretary Scott Bessent said… ‘I follow President Trump’s lead and he is confident that President Xi will not make that move during his presidency,’ Bessent said.”
Market Instability Watch:
March 5 – Bloomberg (Greg Ritchie): “German bonds suffered their worst day since the months following the fall of the Berlin Wall on an historic spending plan that will unlock hundreds of billions of euros for defense and infrastructure investments. The yield on the nation’s 10-year bonds recorded biggest jump since March 1990, up 30 bps, after chancellor-in-waiting Friedrich Merz outlined a sweeping fiscal overhaul... The last time benchmark bond yields surged so much, West Germany and East Germany were about to reunify as the Cold War drew to a close.”
March 4 – Bloomberg (Stephanie Lai): “US Treasury Secretary Scott Bessent projected confidence in President Donald Trump’s expansive plans to tariff foreign nations even as the stock market slumped in reaction to the first round of levies on Canada and Mexico. ‘Over the medium term, which is what we’re focused on, it’s a focus on Main Street. Wall Street’s done great, Wall Street can continue to do fine, but we have a focus on small business and consumers,’ Bessent said on Fox News... ‘So we are going to rebalance the economy.’”
March 7 – Bloomberg (Chris Anstey): “Treasury Secretary Scott Bessent warned that the US economy may see some disruption as the Trump administration shifts the basis for growth away from the government and toward the private sector. ‘Could we be seeing this economy that we inherited starting to roll a bit? Sure,’ Bessent said… ‘Look, there’s going to be a natural adjustment as we move away from public spending… The market and the economy have just become hooked, and we’ve become addicted to this government spending,’ Bessent said. ‘There’s going to be a detox period… There’s no put… The Trump call on the upside is, if we have good policies, then the markets will go up.’”
March 4 – Wall Street Journal (Editorial Board): “President Trump won the Presidency a second time by promising working-class voters he’d lift their real incomes. Which makes it all the more puzzling that he’s so intent on imposing tariffs that will punish those same Americans. Tariffs are taxes, and Mr. Trump’s latest tariffs are estimated to be about an annual $150 billion tax increase. Taxes are antigrowth. That’s the message investors are sending this week since Mr. Trump let his 25% tariffs on Canada and Mexico take effect.”
March 3 – Bloomberg (Lu Wang and Denitsa Tsekova): “One of Wall Street’s most-popular option trades just got more popular than ever, fueled by Donald Trump’s volatility-inducing policy agenda… Contracts that expire within 24 hours made up a record 56% of the S&P 500’s total options volume last month, according to… Cboe Global Markets Inc., the exchange that’s at the center of the trading boom.”
March 3 – Bloomberg (Philip Lagerkranser): “Euphoria in digital-asset markets stemming from Donald Trump’s plans for a strategic crypto reserve turned to skepticism on Monday, triggering early losses in cryptocurrencies that worsened throughout the day as investors braced for the US to impose 25% tariffs on Mexico and Canada… All of the cryptocurrencies that Trump said would be included in the reserve posted sharp declines by late afternoon…”
March 3 – Barron's (William Pesek): “As Donald Trump unleashes economic bedlam, the U.S. president is taking Washington's top bankers in Asia for granted in ways sure to backfire on global markets. Central banks in Asia have long been the most reliable hoarders of U.S. Treasury securities. Japan alone holds about $1.06 trillion of Washington's IOUs, while China sits on roughly $759 billion. Put together, Asia’s top dollar stockpilers hold nearly $3 trillion worth of U.S. debt. Yet these holdings are dwindling -- in China's case, to the lowest level since 2009.”
Global Credit and Financial Bubble Watch:
March 5 – Financial Times (Ian Smith, Mari Novik, Olaf Storbeck and Laura Pitel): “German borrowing costs surged by the most in 28 years on Wednesday, as investors bet on a big boost to the country’s ailing economy from a historic deal to fund investment in the military and infrastructure. The yield on the 10-year Bund surged 0.31 percentage points to 2.79%, its biggest one-day move since 1997, with markets braced for extra government borrowing. Chancellor-in-waiting Friedrich Merz… agreed with the rival Social Democrats (SPD) to exempt defence spending above 1% of GDP from Germany’s strict constitutional borrowing limit, set up a €500bn off-balance sheet vehicle for debt-funded infrastructure investment and loosen debt rules for states. Deutsche Bank economists described the deal as ‘one of the most historic paradigm shifts in German postwar history’, adding that both the ‘speed at which this is happening and the magnitude of the prospective fiscal expansion is reminiscent of German reunification’.”
March 3 – Financial Times (Ian Smith): “Global government borrowing is expected to reach a record $12.3tn this year, as a rise in defence and other spending by major economies and higher interest rates combine to push up debt levels. The 3% rise in sovereign bond issuance across 138 countries would take the total debt stock… to a record $76.9tn, according to estimates by S&P Global Ratings. Big economies’ focus on fiscal policy to ‘deal with crisis after crisis continues, and the outcome is you do have a much more indebted sovereign picture’, said Roberto Sifon-Arevalo, global head of sovereigns at S&P. This had been compounded, he added, by a rise in debt-servicing costs…”
March 3 – Bloomberg (Alexandre Rajbhandari): “The rise of private credit will continue to benefit US life insurers, whose growing investments in the asset class bolster returns, allowing for more aggressive pricing, according to Moody’s... Alternative asset managers, emboldened by the boom, will continue buying life insurers or seek more partnerships with them as they hunt for more capital to feed their dedicated funds, Moody’s analysts wrote…”
AI Bubble Watch:
March 4 – Wall Street Journal (Raffaele Huang): “Artificial intelligence has become a buzzword in China’s national development blueprint this year as Beijing intensifies efforts to achieve tech independence. In a speech on Wednesday to the country’s lawmakers, Chinese Premier Li Qiang said AI would be key to boosting China’s digital economy. Li pledged that China would boost support for applications of large-scale AI models and AI hardware, such as smartphones, robots, and smart cars. China’s top economic planning body also said Wednesday that the country aimed to develop a system of open-source models while continuing to invest in computing power and data for AI.”
March 4 – Wall Street Journal (Peter Grant): “Developers of a Utah data center have secured one of the biggest construction loans in recent years, the latest sign of the market’s enormous appetite for facilities that provide the backbone for artificial intelligence. JPMorgan… and Starwood Property Trust have agreed to lend $2 billion for the 100-acre data center campus in West Jordan, Utah... The borrower, a venture of real-estate investor CIM Group and Novva Data Centers, said the facility will be able to provide 175 megawatts of continuous service thanks to a power deal with the local electric utility. That is roughly enough juice to power 175,000 average-size U.S. homes.”
Bubble and Mania Watch:
March 2 – CNBC (Tanaya Macheel): “Cryptocurrencies rallied on Sunday after President Donald Trump announced the creation of a strategic crypto reserve for the United States… ‘A U.S. Crypto Reserve will elevate this critical industry after years of corrupt attacks by the Biden Administration, which is why my Executive Order on Digital Assets directed the Presidential Working Group to move forward on a Crypto Strategic Reserve that includes XRP, SOL, and ADA,’ he said in a post on Truth Social. ‘I will make sure the U.S. is the Crypto Capital of the World.’ ‘And, obviously, BTC and ETH, as other valuable Cryptocurrencies, will be at the heart of the Reserve,’ he said… ‘I also love Bitcoin and Ethereum!’ XRP surged 33% after the announcement while the token tied to Solana jumped 25%. Cardano’s coin soared more than 60%. Bitcoin rose 10% to $94,343.82…”
March 3 – Bloomberg (Conor Sen): “There’s an old Wall Street saying that ‘the stock market is not the economy.’ That’s usually true. But, in this economic cycle, stock market gains have become an increasingly important driver of consumer spending… The Wall Street Journal reported last month that high earners in the US increased their spending by 12% in the year through September 2024, while lower-earning cohorts cut back. The divergence can’t be explained by wage growth... It’s best explained, instead, by the wealth surge for workers and retirees with significant stock market portfolios.”
March 4 – Financial Times (Antoine Gara and Alexandra Heal): “Private equity assets under management fell last year for the first time in decades as investors confronting a $3tn backlog of ageing and unsold deals pulled back from committing new funds to the sector. Buyout firms managed $4.7tn in assets as of June last year — down about 2% from 2023, according to… Bain & Co. The decline in assets was the first since Bain began tracking industry assets in 2005. Even during the 2008 financial crisis, the private equity industry recorded modest asset growth… Fundraising has slowed sharply as private equity groups have struggled to sell assets and return cash to investors…”
March 5 – Bloomberg (Dasha Afanasieva): “Jeff Bezos’ mystery neighbor slashed $50 million off the listing price of an empty waterfront lot next to properties owned by the billionaire in an exclusive neighborhood in South Florida. The plot in Indian Creek Village, an artificial island that has been dubbed ‘Billionaire Bunker,’ was listed about three months ago for $200 million, but its asking price has since been reduced to $150 million…”
U.S./Russia/China/Europe Watch:
March 4 – Politico (Noah Keate, Esther Webber and Laura Kayali): “JD Vance was hit by a wave of criticism from British and French politicians… as he mocked Europe’s plan to deploy troops on the ground in Ukraine to keep the peace. In an interview with Fox News’ Sean Hannity, Vance dismissed peacekeeping assistance from ‘some random country that hasn't fought a war in 30 years’ — interpreted by politicians across the divide in London as an attack on the U.K., which has been pushing such a plan alongside France… The U.K. and France are drawing up a plan with Ukraine to present to the U.S. that would include a peacekeeping force comprised of an as-yet-unspecified ‘coalition of the willing.’”
March 5 – Bloomberg: “China is set to increase its defense spending by about 7.2% in 2025, matching last year’s growth and reflecting President Xi Jinping’s ambition to build a military that can challenge the US. The outlay will rise to about 1.78 trillion yuan ($245bn) this year… China’s rise in defense spending contrasts with the Trump administration’s plans to cut military funding by 8% over the next five years…”
March 3 – Reuters (James Pearson, Polina Nikolskaya, Anton Zverev and Parisa Hafezi): “Several senior Russian missile specialists have visited Iran over the past year as the Islamic Republic has deepened its defence cooperation with Moscow, a Reuters review of travel records and employment data indicates.”
De-globalization Watch:
March 5 – Bloomberg (Craig Trudell and Marilen Martin): “Tesla Inc.’s registrations plummeted in Germany last month as Chief Executive Officer Elon Musk irked voters taking part in the country’s closely contested federal election. Sales plunged 76% to 1,429 cars… Tesla’s showing was in stark contrast with overall electric vehicle registrations, which jumped 31% in February.”
Inflation Watch:
March 4 – Bloomberg (Isis Almeida, Michael Hirtzer and Kim Chipman): “President Donald Trump’s tariffs are expected to hit American grocery aisles, hurting consumers already contending with record food costs after years of supply-chain disruptions. Plans to impose duties on American agriculture imports are set to boost the price of fruit and vegetables as well as sugar and coffee… Meat is also at risk — with the lowest cattle herd in 74 years, the US imported a record $11.7 billion in beef and derived products last year. Further, tariffs on Canadian fertilizers will make it more expensive for American farmers to grow their own crops.”
March 4 – CNBC (Russell Leung): “Best Buy… CEO Corie Barry projected that prices for U.S. consumers would rise as President Donald Trump’s tariffs on China and Mexico go into effect… Barry said China and Mexico are the company’s top two supply chain sources, with about 55% and 20% of its products sourced from those countries, respectively. ‘Trade is critically important to our business and industry. The consumer electronic supply chain is highly global, technical and complex,’ Barry said. ‘We expect our vendors across our entire assortment will pass along some level of tariff costs to retailers, making price increases for American consumers highly likely.’”
March 5 – New York Times (Melissa Rohman): “In recent years, concertgoers have paid eye-popping prices for tickets to see popular artists like Beyoncé, Taylor Swift and Oasis on tour. But Gen Z fans — those born between 1997 and 2012 — are paying much more for concert tickets than previous generations did when they were young adults. In 1996, the average ticket price for the top 100 tours was $25.81…, according to… Pollstar… By 2024, average ticket prices had risen to $135.92. The live music industry has put today’s young adults in an impossibly expensive position.”
March 7 – Bloomberg (Jennifer Epstein): “Being a Manhattan homeowner got even more expensive last year. In the fourth quarter, the monthly costs of owning a condo in the borough surged 8.6% from a year earlier, according to Miller Samuel Inc.”
Federal Reserve Watch:
March 6 – Bloomberg (Chris Anstey and Liz Capo McCormick): “Treasury Secretary Scott Bessent rejected the idea that President Donald Trump’s tariff hikes will ignite a new wave of inflation, and suggested that the Federal Reserve ought to view them as having a one-time impact. ‘I’ve agreed not to talk about prospective Fed policy going forward,’ Bessent said… Still, ‘I would hope that the failed ‘Team Transitory’ could get back together and think that nothing is more transitory than tariffs if it’s a one-time price adjustment.’”
March 3 – Bloomberg (Amara Omeokwe and Billy House): “Congressional Republicans are ramping up scrutiny of the Federal Reserve, just as the central bank confronts stubborn inflation and broader questions about its role as a bank regulator. The opening act in the new effort will come Tuesday at the first hearing of a freshly formed House task force that will home in on the Fed... ‘We needed a particular special focus in using the task force route to look at the Federal Reserve system, literally from the charter in 1913 to present,’ said Frank Lucas, an Oklahoma Republican who will chair the new panel…”
March 4 – Bloomberg (Jonnelle Marte): “Federal Reserve Bank of New York President John Williams said he anticipates tariffs will contribute to inflation, but emphasized there is a lot of uncertainty about how the economy will respond to President Donald Trump’s levies. ‘Based on what we know today, given all the uncertainties around that, I do factor in some effects of tariffs now on inflation, on prices, because I think we will see some of those effects later this year,’ Williams said... You also ‘have to factor in how does that affect economic activity — decisions by businesses to invest, consumers to spend?’ Williams said. ‘And that’s where I think another big uncertainty is.’”
March 6 – Bloomberg (Amara Omeokwe): “Federal Reserve Governor Christopher Waller said he wouldn’t support lowering interest rates in March, but sees room to cut two, or possibly three, times this year. ‘If the labor market, everything, seems to be holding, then you can just kind of keep an eye on inflation,’ Waller said… ‘If you think it’s moving back towards target, you can start lowering rates. I wouldn’t say at the next meeting, but could certainly see going forward.’”
U.S. Economic Bubble Watch:
March 4 – Wall Street Journal (Nick Timiraos): “Stagflation has entered the chat. President Trump’s decision to dramatically raise tariffs on imports threatens the U.S. with an uncomfortable combination of weaker or even stagnant growth and higher prices—sometimes called ‘stagflation.’ The U.S. has imposed 25% tariffs on Mexico and Canada, and another 10% hike on China following last month’s 10% increase. They ‘will be wildly disruptive to business investment plans,’ said Ray Farris, chief economist at Prudential PLC. ‘They will be inflationary, so they will be a shock to real household income just as household income growth is slowing because of slower employment and wage gains,” he said… ‘This thing could get off the rails pretty quickly,’ said Tim Mahedy, chief economist at Access/Macro. ‘This is not at the level of the 1970s or 1980s. But it does have a whiff of stagflation, or a ministagcession.’”
March 5 – Bloomberg (Ann Saphir): “U.S. economic activity has risen slightly but unevenly since mid-January, employment nudged higher, and prices increased modestly, the Federal Reserve said…, with businesses and households expressing continued optimism amid rising uncertainty about how U.S. President Donald Trump's policies will affect future growth, labor demand and prices. ‘Six Districts reported no change, four reported modest or moderate growth, and two noted slight contractions,’ the U.S. central bank said in its summary of observations from the commercial and community contacts of each of the Fed's 12 regional banks. ‘Overall expectations for economic activity over the coming months were slightly optimistic.’”
March 7 – CNBC (Jeff Cox): “Job growth was weaker than expected in February though still stable despite President Donald Trump’s efforts to slash the federal workforce. Nonfarm payrolls increased by a seasonally adjusted 151,000 on the month, better than the downwardly revised 125,000 in January, but less than the 170,000 consensus forecast… The unemployment rate edged higher to 4.1%... Federal government employment declined by 10,000 in February though government payrolls overall increased by 11,000, the BLS said.”
March 6 – Bloomberg (Mark Niquette): “The US trade deficit widened to a record in January as companies scrambled to secure goods from overseas before President Donald Trump imposed tariffs on America’s largest trading partners. The gap in goods and services trade widened 34% from the prior month to $131.4 billion… The value of imports rose 10% to a record $401.2 billion, while exports increased 1.2%.”
March 5 – CNBC (Jeff Cox): “Private sector job creation slowed to a crawl in February, fueling concerns of an economic slowdown, payrolls processing firm ADP reported… Companies added just 77,000 new workers for the month, well off the upwardly revised 186,000 in January and below the 148,000… estimate… ADP said annual pay rose 4.7% in February, the same as the prior month.”
March 6 – Reuters (Lucia Mutikani): “The number of Americans filing new applications for unemployment benefits fell more than expected last week, suggesting that the labor market remained stable in February… Initial claims for state unemployment benefits dropped 21,000 to a seasonally adjusted 221,000 for the week ended March 1… The number of people receiving benefits after an initial week of aid, a proxy for hiring, advanced 42,000 to a seasonally adjusted 1.897 million…”
March 4 – Reuters (Howard Schneider): “The smallest U.S. businesses shed jobs in February and average revenue fell… An index developed by software firm Intuit… estimated that employment at firms with one to nine workers fell by around 125,000 over the month, to 12.5 million, a nearly full percentage point decline. While spanning industries, the drop was proportionately largest in leisure and hospitality, where employment fell by around 21,000, or nearly 1.3%.”
March 6 – Bloomberg (Claire Ballentine): “Car owners are missing their monthly payments at the highest rate in more than 30 years. In January, the share of subprime auto borrowers at least 60 days past due on their loans rose to 6.56%, the most since the data collection began in 1994, according to Fitch... Auto loans have been a particular pain point, with higher car prices and elevated borrowing costs driving a surge in repossessions.”
March 3 – Bloomberg (Alexandre Tanzi): “US factory activity last month edged closer to stagnation as orders and employment contracted, while a gauge of prices paid for materials surged to the highest since June 2022 as tariff concerns mounted. The Institute for Supply Management’s manufacturing index slipped by 0.6 point in February to 50.3… The group’s price measure increased 7.5 points to 62.4… After contracting in September for the first time since 2023, prices paid have shown growth for five straight months.”
March 4 – Bloomberg (Maxwell Adler): “Los Angeles is estimating revenue to come in about $140 million lower than budgeted, deepening the city’s second-straight annual shortfall. The city’s controller… lowered his revenue projection for the current fiscal year, offering the first glimpse into how the historic fires in January impacted the Los Angeles’ tax base.”
China Watch:
March 4 – Financial Times (Joe Leahy, Eleanor Olcott, Kathrin Hille and Arjun Neil Alim): “China has announced an ambitious GDP growth target of ‘around 5%’ for 2025 despite a slowdown in the domestic economy and mounting trade tensions with the US. The figure… was announced in the government’s annual ‘work report’, a review of its achievements last year and economic goals and policies for 2025. The growth figure… signalled Beijing’s determination to maintain growth in the face of renewed trade hostilities with the US, which imposed additional tariffs on China this week.”
March 5 – Bloomberg: “China raised its general budget deficit to the highest level in more than three decades, as Beijing ramps up spending to counter the effects of rising US tariffs. The government set this year’s fiscal deficit target to 5.66 trillion yuan ($780bn), or around 4% of gross domestic product, according to… Premier Li Qiang… That’s the highest level since a major tax overhaul in 1994 revamped the government budget… Li also set a growth goal of about 5%, an ambitious target that would require more stimulus than last year to achieve.”
March 6 – Bloomberg: “China’s exports reached a record so far this year as higher US tariffs, and the threat of more to come, drove frontloading of shipments. The value of sales abroad rose 2.3% in the first two months of the year to $540 billion… Imports unexpectedly fell 8.4%, leaving a record trade surplus of nearly $171 billion.”
March 3 – Bloomberg (Dave Sebastian and Kiuyan Wong): “It’s enough money to buy Alibaba Group Holding Ltd., or pay every resident of Hong Kong nearly $50,000. The figure — more than $353 billion — represents the amount of margin loans sought by the city’s retail investors to bet on red-hot initial public offerings this year.”
Central Bank Watch:
March 6 – CNBC (Sophie Kiderlin): “The European Central Bank… cut interest rates by 25 bps and updated the language in its decision to say monetary policy was becoming ‘meaningfully less restrictive.’ The cut brings the ECB’s deposit facility rate, its key rate, to 2.5%... ECB President Christine Lagarde said… it was a ‘result of substantive discussion,’ with no Governing Council members opposing it…”
Europe Watch:
March 5 – Financial Times (Editorial Board): “Call it a very big bazooka indeed, or Germany’s ‘whatever it takes’ moment. There are few more striking signs of how Donald Trump is upturning the old world order than incoming chancellor Friedrich Merz’s epochal agreement with the rival Social Democrats to loosen Germany’s debt rules to fund massive investment in infrastructure and the military. The resulting stimulus could be the largest since after reunification in 1990. Its partners should celebrate Germany’s move back towards providing the economic, political and defensive leadership Europe needs. The shift is all the more surprising given the ambivalence of Merz and his Christian Democrats towards loosening Germany’s 16-year-old debt brake during the recent election campaign. But the flexibility to dump old opinions when the facts change is a sign of leadership. Merz and his likely coalition partners deserve credit for recognising the realities of the world under Trump, and responding swiftly rather than — as other EU capitals had feared — spending months in argument and indecision.”
March 5 – Financial Times (Anne-Sylvaine Chassany and Laura Pitel): “Chancellor-to-be Friedrich Merz has agreed a deal with his likely coalition partner to inject hundreds of billions in extra funding into Germany’s military and infrastructure, in a ‘fiscal sea change’ designed to revive and re-arm Europe’s largest economy…. Merz said… his Christian Democratic Union (CDU), its Bavarian sister party and the rival Social Democrats (SPD) will jointly present a bill in parliament next week to relax the country’s strict borrowing rules. A provision would exempt defence spending above 1% of GDP from the ‘debt brake’ that caps government borrowing, allowing Germany to raise an unlimited amount of debt to fund its armed forces and to provide military assistance to Ukraine. The future coalition partners will introduce another constitutional amendment to set up a €500bn fund for infrastructure, which would run over 10 years.”
March 4 – Politico (Mark Schroers, Jana Randow and Alexander Weber): “Germany should loosen constitutional borrowing limits to free up as much as €220 billion ($232bn) of fiscal space through 2030 to boost infrastructure and military spending, according to the Bundesbank. In a report Tuesday discussing options for the country’s so-called debt brake, it recommends significantly higher ceilings of as much as 1.4% of gross domestic product for structural net borrowing — primarily to fund investment… The Bundesbank’s suggestion… ‘preserves sound public finances while at the same time facilitating urgently needed investment,’ Bundesbank President Joachim Nagel said…”
March 6 – Bloomberg (Craig Stirling): “Germany’s borrowings may balloon by as much as 13% of gross domestic product within the next half decade to fund its planned spending on defense and infrastructure, according to Scope Ratings. The credit-assessment company… predicted that government debt in Europe’s biggest economy could increase by €625 billion ($677bn) if prospective Chancellor Friedrich Merz manages to implement his proposed investment splurge in due course.”
March 1 – Bloomberg (William Horobin): “S&P Global Ratings put a negative outlook on its assessment of France’s creditworthiness, underscoring enduring uncertainty over the country’s finances after a prolonged period of political turmoil. The change in outlook reflects ‘rising government debt amid weak political consensus for tackling France’s large underlying budget deficits, against a backdrop of more uncertain economic growth prospects,’ the ratings firm said…”
March 7 – Telegraph (Tim Wallace): “Germany’s embattled manufacturing industry faces a fresh slump after new orders plunged by 7pc between December and January. Machinery orders dropped more than 10pc on the month, while ‘other transport equipment’ – the category including planes, ships, trains and military vehicles – plunged by almost 18pc. Consumer goods also slid 2pc. It marks a dire start to the year for an economy which shrank by 0.2pc last year…”
Japan Watch:
March 5 – Bloomberg (Toru Fujioka): “Bank of Japan Deputy Governor Shinichi Uchida signaled that the benchmark interest rate remains on a gradual upward path, in remarks that may quell speculation of an early move. ‘The Bank will accordingly continue to raise the policy interest rate and adjust the degree of monetary accommodation’ if the economic outlook is realized, Uchida said… ‘In this regard, the key point of the outlook is that the bank expects the 2% price stability target to be achieved.’”
Leveraged Speculation Watch:
March 6 – Bloomberg (Carmen Arroyo and Katherine Doherty): “Citadel Securities reported its largest ever trading haul, surpassing the tally at some of Europe’s biggest banks to cement itself among the world’s trading behemoths. Full-year trading revenue rose 55% to $9.7 billion from the previous year... That topped a previous record of $7.5 billion set in 2022.”
March 6 – Bloomberg (Nishant Kumar, Bei Hu, Siddharth Vikram Philip, and Hema Parmar): “Millennium Management, Citadel and other top hedge funds posted lackluster returns in February… Multistrategy firms with an equity market-neutral bias took some of the biggest hits. Those losses were driven by overcrowding in a small group of stocks, particularly health care and technology. Jain Global fell about 1%... Millennium lost 1.3% and Citadel dipped 1.7%. The volatility in late January that persisted into February ‘drove lots of questions around hedge fund performance,’ JPMorgan… analysts wrote...”
March 7 – Bloomberg (Nell Mackenzie): “Hedge fund stock pickers and multi-strategy funds gave up around half their average yearly gains in Thursday's tech-driven equity selloff, a note by Goldman Sachs showed... Wall Street shares have been hit this week by a darkening U.S. economic outlook uncertainty over President Donald Trump's tariff policies, with the Nasdaq on Thursday confirming a correction since peaking in December… Hedge funds were caught in crowded trades that sold off leaving those which pick stocks with a 1% average return on the year so far, said the Goldman Sachs note…”
March 7 – Bloomberg (Nishant Kumar): “Qube Research & Technologies, a secretive hedge fund that has grown into an industry giant, has added billions of dollars more to its assets so far this year. London-based QRT now manages about $28 billion, according to people with knowledge of the matter. That’s $5 billion more than it had at the end of last year.”
Social, Political, Environmental, Cybersecurity Instability Watch:
March 6 – Bloomberg (Antony Sguazzin): “The world needs to prepare to fight global warming without the help of the US as the Trump administration pulls billions of dollars pledged to initiatives funding the green transition, the UK’s climate envoy said… ‘You plan for the worst and hope for the best,’ Rachel Kyte, the envoy, said... ‘We have to plan for a world where the US is not transfusing funds into the green transition.’”
March 5 – Reuters (Tim Cocks, Francesco Guarascio and Fransiska Nangoy): “The United States is withdrawing from the Just Energy Transition Partnership, a collaboration between richer nations to help developing countries transition from coal to cleaner energy, several sources… said. JETP, which consists of 10 donor nations, was first unveiled at the U.N. climate talks in Glasgow, Scotland in 2021. South Africa, Indonesia, Vietnam and Senegal were subsequently announced as the first beneficiaries of loans, financial guarantees and grants to move away from coal.”
March 3 – Bloomberg (Shoko Oda): “Japanese firefighters are struggling to contain a week-long wildfire on the country’s northeastern coast that has spread to become the worst the country has seen in half a century. The blaze near Ofunato in Iwate prefecture had engulfed 6,425 acres as of Tuesday — close to half the area of Manhattan — and was continuing to grow, according to the Fire and Disaster Management Agency, making it the biggest fire in Japan since 1975.”
Geopolitical Watch:
March 5 – Financial Times (Felicia Schwartz, Neri Zilber and Andrew England): “Donald Trump has warned Hamas that ‘it is OVER for you’ unless it hands over the remaining hostages it holds in Gaza, hours after Washington said it had held direct talks with the militant group. In his most belligerent remarks yet on the conflict, the US president added that he was ‘sending Israel everything it needs to finish the job’ in the besieged strip, warning Gazans they would be ‘dead’ if the hostages are not released. ‘I am sending Israel everything it needs to finish the job, not a single Hamas member will be safe if you don’t do as I say,’ Trump wrote… ‘This is your last warning! For the leadership, now is the time to leave Gaza, while you still have a chance. Also, to the People of Gaza: A beautiful Future awaits, but not if you hold Hostages. If you do, you are DEAD!’ he added.”
March 4 – Wall Street Journal (Sudarsan Raghavan, Dov Lieber and Suha Ma’ayeh): “For two decades, Israel’s next-door neighbor was Bashar al-Assad, a hostile dictator who was weakened by Syria’s sectarian divisions. Now, Israel is trying to neutralize what security officials see as a threat: Turkish-backed Islamists trying to unify Syria. In recent days, Israel’s military has targeted more military sites in new areas of southern Syria to keep weapons out of the new government’s hands.”