Non-Financial Debt (NFD) expanded $3.467 TN during 2024, to a record $76.731 TN. Debt growth was down slightly from 2023’s $3.594 TN – while still about 90% above the two-decade (2000-2019) annual average of $1.836 TN. NFD inflated $21.583 TN, or 39%, over the past 20 quarters. For comparison, NFD expanded $11.074 TN, or 25%, over the preceding 20 quarters (Q4 ’14 to Q4 ’19). Since 2008, NFD has inflated $40.851 TN, or 114%.
As has been the case throughout this late-super cycle phase, government finance dominates the Credit system.
Treasury Securities increased (nominal) $589 billion during Q4, with one-year growth of $2.040 TN. Over the past five years, Treasury Securities has inflated $12.316 TN, or 57.1%. Since 2007, Treasuries have ballooned $25.837 TN, or 321%. After ending 2007 at 55.5%, Treasury Securities as a percentage of GDP inflated to 96.4% to end 2024.
Agency Securities rose $111 billion to a record $12.249 TN, the strongest quarterly growth since the banking crisis Q1 2023. Agency Securities inflated $2.906 TN, or 31.1%, over 21 quarters. Why do the agencies continue such rapid expansion? Treasury and Agency Securities combined to expand $2.186 TN over the past year to a record $40.389 TN – or 136% of GDP – with historic five-year growth of $14.576 TN, or 58%.
Total Debt Securities rose $493 billion during the quarter to a record $62.004 TN, with one-year growth of $2.910 TN. Debt Securities ballooned $18.974 TN, or 44%, over 22 quarters. Debt Securities closed 2024 at 209% of GDP (ended ‘08 at 201%).
Equities rose $1.124 TN during Q4 to a record $92.852 TN, with one-year growth of $15.317 TN, or 19.8%. Equities inflated an historic $42.084 TN, or 83%, over 22 quarters. Equities ended the year at 312% of GDP, up from previous cycle peaks 187% (Q3 2007) and 210% (Q1 2000). Total (Debt and Equities) Securities surged $18.227 TN, or 13.3%, last year to a record $154.856 TN, with 22-quarter growth of $61.058 TN, or 65%. Total Securities ended the quarter at 521% of GDP, dwarfing previous cycles peaks of 375% (Q3 ’07) and 357% (Q1 2000).
Historic debt and securities inflation directly inflated the household balance sheet and perceived household wealth. Household Assets were up slightly ($101 billion) to $190.151 TN during Q4. With Household Liabilities down $63 billion to $20.790 TN, Household Net Worth rose $164 billion to a record $169.361 TN.
Household Real Estate holdings dipped $400 billion to $52.138 TN. Real Estate rose $3.054 TN, or 6.2%, over the past year, and $17.275 TN over 18 quarters, or 49.6%. Household RE ended the year at 175% of GDP, somewhat below the 190% peak from Q3 2006. Financial Assets increased $375 billion to a record $128.870 TN, with one-year growth of $10.806 TN, or 9.2%. Household Financial Asset holdings ballooned $34.955 TN, or 36.7%, over 18 quarters – to 434% of GDP. For perspective, Financial holdings posted a mortgage finance Bubble peak of $54.328 TN, or 356% of GDP, during Q3 2007.
Total (Equities and Mutual Funds) Equities ended 2024 at a record $50.061 TN, with a one-year gain of $7.740 TN, or 18.3% - and 18-quarter growth of $20.538 TN, or 69.6%. Total Equities ended the year at 168% of GDP, greatly surpassing previous cycle peaks of 105% during Q2 2007 and 115% for Q1 2000.
Households continue their unprecedented “money” accumulation. Total Household Deposits rose $303 billion (8.4% annualized) to a record $14.789 TN, while Money Fund holdings surged $275 billion (25.4% annualized) during Q4 to a record $4.600 TN. Combined Deposits and Money Funds surged $578 billion for the quarter (12.3% annualized), $1.194 TN for the year (6.6%), and $4.018 TN, or 26.1%, over 18 quarters. Combined Deposits, Money Funds, Treasuries and Agency Securities holdings ballooned a historic $6.294 TN, or 36.7%, over 18 quarters.
Bank (“Private Depository Institutions”) assets increased slightly ($26 million) to a record $27.812 TN. Meanwhile, Total Loans expanded $190 billion (5.2% annualized), the strongest quarterly growth in two years. Non-mortgage/consumer loans (business loans “not elsewhere classified”) surged $247 billion, the largest gain since pandemic Q1 2020. Led by declines in Agency/MBS ($103bn) and Corporate Bonds ($67bn), bank Debt Securities holdings fell $128 billion (first decline in 5 quarters) to $6.176 TN.
Curious Q4 happenings within the Broker/Dealers balance sheet. Total Assets declined $239 billion during Q4 to $5.270 TN (‘24 growth of $384bn, or 8.1%). The majority of this contraction is explained by the $142 billion drop in “repo” assets (to $1.690 TN). Data away from the Z.1 pointed to significant year-end “repo” positioning adjustments (for reporting purposes). For example, the Fed’s reverse repo liability (where institutions park cash balances) spiked $375 billion during the final 11 days of 2024, likely associated with a year-end pullback in Wall Street “repo”.
Meanwhile, Broker/Dealer Loans (generally for client securities purchases) jumped $49 billion (28% annualized) to $753 billion, the largest increase since Q1 2021. Loans expanded $102 billion during 2024, or 15.6%. Debt Securities holdings added $26 billion to $627 billion (high since ’08) – with one-year growth of $179 billion, or 40.0%. Treasury holdings jumped $73 billion to a record $408 billion, with 2024 growth of $139 billion, or 52%.
The money market fund complex remains at the epicenter of the critical intermediation of massive issuance of increasingly risky government debt into perceived safe and liquid “money” (enjoying insatiable demand). Money funds are massive buyers of short-term Treasury and agency securities. As major “repo” market operators, money funds are also a primary source of securities finance for leveraged speculation – in a process that essentially transforms longer-term Treasury bonds into “money” (money market shares backed by “repo” holdings). And especially after the past few years of historic ballooning, it’s alarming that traditional concerns for money market fund stability have gone MIA.
Money Market Fund Assets (MMFA) surged $404 billion during Q4, or 23.6% annualized, to a record $7.243 TN. For the year, MMFA expanded a record $1.100 TN, or 17.9%, surpassing 2023’s record $920 billion growth. In one of history’s great monetary inflations, MMFA ballooned $3.241 TN, or 81%, over the past five years. MMFA “repo” holdings declined $68 billion to $2.620 TN during Q4. Meanwhile, Treasury holdings jumped $335 billion to a record $2.995 TN, with one-year growth of $725 billion, or 32%. It’s worth noting that MMFA Treasury holdings were up $1.872 TN, or 167%, over five years. Agency Securities holding rose $93 billion during Q4, or 47% annualized, to $886 billion (one-year growth $178 billion, or 25.2%).
Q4 Rest of World (ROW) data comes with some (end of cycle) intrigue. Total holdings of U.S. financial assets increased only $656 billion, the slowest expansion in five quarters. Debt Securities holdings contracted $337 billion, a sharp reversal from Q3’s $689 billion gain, and was the largest decline since Q3 2022 (UK bond market crisis). Treasury holdings fell $179 billion to $8.494 TN, following Q3’s $462 billion surge. Corporate bond holdings contracted $128 billion to $4.354 TN, reversing much of Q3’s $161 billion rise – and the largest decline since Q3 2022.
ROW Repo assets contracted $80 billion to $1.383 TN, the largest decline since Q3 2018. Still, repo assets jumped $523 billion, or 61%, over 17 quarters. Repo liabilities dropped $143 billion during Q4 to $1.612 TN, a record quarterly decline. ROW Total Equities holdings gained $593 billion to a record $17.983 TN, with one-year growth of $3.428 TN, or 23.5%. Total Equities ballooned $7.876 TN, or 78%, over 17 quarters.
Let’s talk markets. Acutely unstable markets saw de-risking this week intensify into fledgling Credit market deleveraging.
March 12 – Financial Times (Costas Mourselas and George Steer): “Hedge funds have slashed their bets on equities and cut their borrowings from banks as they struggle to deal with surging market volatility triggered by US President Donald Trump’s global trade war. A sharp stock market sell-off in recent weeks on concerns about Trump’s tariffs has hit the sector particularly hard. Goldman Sachs’ Hedge Industry VIP index… has tumbled 12.5% since February 19… The reduction in gross positions — the combination of bets on and bets against shares — by hedge funds on Friday and Monday was the largest in four years… and one of the largest in the past 15 years. ‘There is a lot of pain out there,’ said an executive at one large hedge fund. ‘The only way to defend yourself in the environment today is to cut your leverage’… ‘These policy changes have been massive and fast,’ said one executive. ‘It’s a different environment now. We have never seen this.’”
Risk aversion and waning liquidity erupted (as it does) this week at the “periphery.” High yield bond spreads surged 22 bps Thursday, the largest daily increase since global deleveraging day, August 5th, 2024. Prior to Friday’s 14 bps narrowing, high yield spreads were 44 wider w-t-d at Thursday’s close. This was the largest widening move since the 55 bps increase for the week of August 2nd (preceding August 5th instability). At Thursday’s close, high yield spreads had widened 79 bps since February 18th – to the high since August 14th.
Investment grade spreads had widened 10 bps w-t-d by Thursday’s close (narrowed 4 Friday), which was the largest weekly spread widening since the week of August 2nd (12bps). Spreads closed Thursday at 97 bps, up 20 bps since February 19th to the widest level since September 12th. The levered short Treasury/long higher-yielding corporate debt “carry trade” – that has minted big returns over recent years – is suddenly under pressure.
Bank Credit default swap (CDS) prices surged this week. Morgan Stanley CDS jumped seven to 60 bps, the largest increase since the week of August 2nd. Bank of America CDS rose 5.5 to 59 bps, also the largest increase since August – to the highest level since August. Goldman Sachs CDS rose six to 62 bps, near the high since August. JPMorgan CDS gained five to 44 bps, the largest increase since August.
Leveraged loan new deal volume this week was the slowest of 2025. According to Bloomberg, there have been six offerings “pulled from syndication in the last few weeks...” It's worth noting that the stocks of leading public “private credit” firms have been under heavy selling pressure. Apollo Global Management is down 18.4% y-t-d, Blackstone 17.6%, and KKR 23.3%. “Subprime” Credit Bubble instability has a tendency to erupt quickly, with wide ramifications.
To fulfill all the manic AI hype will require trillions of Credit - private and public. The unfolding instability of private Credit is another major blow for the now deflating AI/tech Bubble. Before Friday’s 2.8% rally, the Bloomberg Mag 7 Index was down 5.3% w-t-d as of Thursday’s close – trading to lows back to mid-September.
The Nasdaq100 rallied 2.5% in Friday trading, with the Semiconductors recovering 3.3%. Next Friday is quarterly options expiration. Recent market weakness and associated hedging ensure enormous quantities of put options mature next week. Similar backdrops have seen intense short squeezes and the unwind of hedges into expiration. Bear market rallies tend to be the most ferocious, and I feel increasingly confident that speculative deleveraging marks the beginning of a major bear market. But a crash scenario is not a low probability event.
In the event of a squeeze and equities rally, it will be interesting to monitor bond market dynamics. Ten-year Treasury yields closed the week at 4.31%, down about 50 bps from January highs. Treasury performance has been notable in the face of surging global yields. German bund yields spiked 47 bps in two weeks to 2.88%, the high back to October 23rd. French yields rose 42 bps in two weeks, Italian yields 46 bps, Spanish 46 bps, and Greek yields 44 bps. UK yields were up 18 bps in two weeks, Australia 13 bps, New Zealand 16 bps, and Canada 17 bps. Japanese 10-year yields traded Monday (1.575%) to the high since 2008.
The market is pricing less than 1% probability of a Fed rate cut at next Wednesday’s FOMC meeting. Markets will focus on quarterly revisions to the Statement of Economic Projections (“dot plot”) and, of course, Chair Powell’s press conference. Details from the preliminary March University of Michigan consumer survey highlight the Fed’s dilemma. Expectations sank 10 points to a 30-month low of 54.2, while one-year inflation expectations jumped six-tenths to a 28-month high of 4.9%. Tariff and trade war uncertainties risk a further jump in prices and inflation expectations. Meanwhile, shocks to consumer and business confidence pose major economic risk.
Tariff, inflation, and recession risks weigh on market confidence. But I also believe there is escalating fear of four years of erratic and incoherent policymaking. It’s worth repeating: This is no environment for aggressive leveraging. And I don’t see history’s greatest speculative Bubble, which succumbed to manic “blow off” excess in 2024, surviving a major deleveraging dynamic. At this point, the Trump “put” looks like a big, beautifully overhyped dud.
Hamstrung by elevated inflation and trade war risks, the Fed “put” is also suspect. It likely comes lower and later than markets anticipate. I doubt the Fed appreciates the amount of QE that will be required to stabilize a major deleveraging event. And listening to the President’s speech this afternoon at the Justice Department only reinforced the darkness that is enveloping our nation.
For the Week:
The S&P500 fell 2.3% (down 4.1% y-t-d), and the Dow lost 3.1% (down 2.5%). The Utilities rallied 1.5% (up 6.0%). The Banks dropped 2.7% (down 5.8%), and the Broker/Dealers slumped 3.6% (down 0.4%). The Transports sank 6.2% (down 7.9%). The S&P 400 Midcaps fell 2.0% (down 6.2%), and the small cap Russell 2000 declined 1.5% (down 8.3%). The Nasdaq100 dropped 2.5% (down 6.2%). The Semiconductors dipped 0.7% (down 7.7%). The Biotechs lost 2.5% (up 2.2%). With bullion jumping $75, the HUI gold index rose 4.9% (up 24.4%).
Three-month Treasury bill rates ended the week at 4.19%. Two-year government yields added two bps to 4.02% (down 22bps y-t-d). Five-year T-note yields were unchanged at 4.09% (down 29bps). Ten-year Treasury yields added a basis point to 4.31% (down 26bps). Long bond yields increased two bps to 4.62% (down 16bps). Benchmark Fannie Mae MBS yields increased three bps to 5.58% (down 27bps).
Italian 10-year yields gained four bps to 4.00% (up 48bps y-t-d). Greek 10-year yields increased four bps to 3.68% (up 47bps). Spain's 10-year yields were unchanged at 3.50% (down 44bps). German bund yields gained four bps to 2.88% (up 51bps). French yields added one basis point to 3.57% (up 37bps). The French to German 10-year bond spread narrowed three to 69 bps. U.K. 10-year gilt yields increased three bps to 4.67% (up 10bps). U.K.'s FTSE equities index dipped 0.5% (up 5.6% y-t-d).
Japan's Nikkei 225 Equities Index recovered 0.4% (down 7.1% y-t-d). Japanese 10-year "JGB" yields were unchanged at 1.52% (up 42bps y-t-d). France's CAC40 declined 1.1% (up 8.8%). The German DAX equities index was little changed (up 15.5%). Spain's IBEX 35 equities index dropped 1.9% (up 12.2%). Italy's FTSE MIB index added 0.2% (up 13.1%). EM equities were mixed. Brazil's Bovespa index rose 3.1% (up 7.2%), while Mexico's Bolsa index declined 0.7% (up 6.0%). South Korea's Kospi was about unchanged (up 7.0%). India's Sensex equities index declined 0.7% (down 6.0%). China's Shanghai Exchange Index gained 1.4% (up 2.0%). Turkey's Borsa Istanbul National 100 index jumped 3.2% (up 10.3%).
Federal Reserve Credit increased $1.4 billion last week to $6.712 TN. Fed Credit was down $2.189 TN from the June 22, 2022, peak. Over the past 287 weeks, Fed Credit expanded $2.985 TN, or 80%. Fed Credit inflated $3.901 TN, or 139%, over the past 644 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt dipped $0.9 billion last week to $3.302 TN. "Custody holdings" were down $45 billion y-o-y, or 1.4%.
Total money market fund assets slipped one billion to a near-record $7.024 TN. Money funds were up $890 billion over 33 weeks (22.8% annualized) and $947 billion y-o-y (15.6%).
Total Commercial Paper jumped $38.2 billion to $1.360 TN - the high back to 2009. CP has increased $272 billion y-t-d and $66 billion, or 5.1%, y-o-y.
Freddie Mac 30-year fixed mortgage rates increased two bps this week to 6.65% (down 9bps y-o-y). Fifteen-year rates added a basis point to 5.780% (down 36bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates down four bps to 6.79% (down 31bps).
Currency Watch:
March 10 – Bloomberg (Iris Ouyang): “Doubts over US exceptionalism are giving China a much needed break from strongly defending its currency, as the yuan’s strength allows it to dial back support via its daily reference rate. The gap between the People’s Bank of China’s daily reference rate versus narrowed to 675 pips on Monday, the least since early December. While the so-called fixing remains near the strongest level since November, its smaller spread with estimates signals weakening official support for the currency.”
March 11 – Bloomberg (David Finnerty): “Macro hedge funds are increasingly seeking currency option trades that exclude the dollar as they navigate the market turbulence stemming from worries about the US economy. Trades involving the euro and haven yen were in demand Monday. The two currencies were easily the most traded on The Depository and Trust Clearing Corp., involved in over half of all trades, as US tech stocks tumbled by the most since 2022. Option data shows long euro positions are the highest since 2020…”
For the week, the U.S. Dollar Index slipped 0.2% to 103.718 (down 4.4% y-t-d). For the week on the upside, the Norwegian krone increased 1.9%, the Mexican peso 1.6%, the Brazilian real 0.8%, the New Zealand dollar 0.7%, the euro 0.4%, the Australian dollar 0.3%, the South African rand 0.3%, and the British pound 0.1%. On the downside, the Swiss franc declined 0.6%, the Swedish krona 0.4%, the Japanese yen 0.4%, the South Korean won 0.3%, and the Singapore dollar 0.2%. The Chinese (onshore) renminbi increased 0.12% versus the dollar (up 0.86% y-t-d).
Commodities Watch:
The Bloomberg Commodities Index was little changed (up 6.2% y-t-d). Spot Gold jumped 2.6% to $2,984 (up 13.7%). Silver surged 3.9% to $33.7993 (up 16.9%). WTI crude increased 14 cents, or 0.2%, to $67.18 (down 6%). Gasoline rallied 1.9% (up 6%), while Natural Gas dropped 6.7% to $4.104 (up 14%). Copper jumped 3.9% (up 22%). Wheat rallied 2.2% (down 1%), while Corn dropped 2.1% (down 3%). Bitcoin dropped $2,300, or 2.7%, to $84,230 (down 10%).
Trump Administration Watch:
March 10 – CNBC (Jeff Cox): “President Donald Trump and other senior White House officials have spent the past several days bracing Americans for a potential economic slowdown that they say will then lead to stronger growth ahead… ‘There is a period of transition, because what we’re doing is very big,’ Trump said… on… Fox News… ‘We’re bringing wealth back to America. That’s a big thing. ... It takes a little time, but I think it should be great for us.’”
March 11 – Financial Times (Claire Jones, Sam Fleming and James Politi): “Donald Trump and his team of economic advisers are racing ahead with an attempt to radically reshape the US economy from a consumption behemoth with a huge trade deficit to a manufacturing powerhouse… ‘Markets are going to go up and they’re going to go down but, you know what, we have to rebuild our country,’ the president said…”
March 11 – Axios (Sareen Habeshian): “The Department of Education is cutting its workforce of more than 4,100 people by nearly 50%... Education Secretary Linda McMahon confirmed to Fox News the action was the first step toward President Trump’s plans for a total shutdown of the agency. Trump floated the idea of ‘disbanding’ the agency on the 2024 election campaign trail. ‘That was the president’s mandate,’ McMahon said on Fox News…’His directive to me, clearly, is to shut down the Department of Education which we know we'll have to work with Congress to get that accomplished.’”
March 14 – CNN (Samantha Delouya): “Bill Pulte, who was confirmed by the US Senate on Thursday to lead the Federal Housing Finance Agency for the Trump administration, said he’s in no rush to privatize Fannie Mae and Freddie Mac… ‘Fannie and Freddie shouldn’t be in conservatorship forever,’ Pulte told CNN... ‘But it’s critical to ensure any discussion about exiting conservatorship needs not only to ensure safety and soundness but how it would affect mortgage rates.’ In 2019, Trump’s first administration tried — and failed — to wrest Fannie and Freddie from the government conservatorship that’s been in place since the 2008 financial crisis.”
March 12 – BBC (Phil McCausland): “Mahmoud Khalil, a prominent figure during the Gaza war protests at Columbia University in the spring of 2024, has drawn global attention after the Trump administration arrested and moved to deport him. The case has raised questions about free speech on college campuses and the legal process that would allow for the deportation of a US permanent resident. Mr Khalil will remain in detention in Louisiana following a court hearing on Wednesday, where lawyers argued over whether he should be moved back to New York. Born in Syria, the Columbia graduate's arrest by immigration agents was linked to President Donald Trump's promise to crack down on student demonstrators he accuses of ‘un-American activity’.”
March 12 – Financial Times (Stefania Palma and Suzi Ring): “Donald Trump has widened his crackdown on Big Law, mandating a review of government contracts with companies that have represented his opponents and launching a wide-ranging investigation into diversity policies that have sent a chill through the legal industry. The White House has issued two executive orders in the past fortnight… Thursday’s order also directed US attorney-general Pam Bondi to investigate ‘racial discrimination’ at ‘large law firms’, including reserving roles for ‘preferred races’ — part of the industry’s drive for diversity in its workforce.”
Trade War Watch:
March 12 – Associated Press (Josh Boak, Paul Wiseman and Rob Gillies): “President Donald Trump openly challenged U.S. allies… by increasing tariffs on all steel and aluminum imports to 25% as he vowed to take back wealth ‘stolen’ by other countries, drawing quick retaliation from Europe and Canada. The Republican president’s use of tariffs to extract concessions from other nations points toward a possibly destructive trade war and a stark change in America’s approach to global leadership. It also has destabilized the stock market and stoked anxiety about an economic downturn. ‘The United States of America is going to take back a lot of what was stolen from it by other countries and, frankly, by incompetent U.S. leadership,’ Trump told reporters... ‘We’re going to take back our wealth, and we’re going to take back a lot of the companies that left.’”
March 12 – Associated Press (Lane Cook and David McHugh): “The European Union… announced retaliatory trade action with new duties on U.S. industrial and farm products, responding within hours to the Trump administration’s increase in tariffs… The EU measures will cover goods from the United States worth some 26 billion euros ($28bn), and not just steel and aluminum products, but also textiles, home appliances and agricultural goods. Motorcycles, bourbon, peanut butter and jeans will also be hit…”
March 13 – Associated Press (Aamer Madhani): “President Donald Trump… threatened a 200% tariff on European wine, champagne and spirits if the European goes forward with a planned tariff on American whiskey. The European tariff was expected to go into effect on April 1. Trump in a social media posting called the EU ‘one of the most hostile and abusive taxing and tariffing authorities in the World, which was formed for the sole purpose of taking advantage of the United States.’ ‘If this Tariff is not removed immediately, the U.S. will shortly place a 200% Tariff on all WINES, CHAMPAGNES, & ALCOHOLIC PRODUCTS COMING OUT OF FRANCE AND OTHER E.U. REPRESENTED COUNTRIES… This will be great for the Wine and Champagne businesses in the U.S.,’ Trump added.”
March 9 – Bloomberg: “Chinese tariffs on a slew of American farm products have officially come into effect, the latest retaliation in the unfolding trade war between the world’s top two economies. China’s willingness to use food as a countermeasure against the US, historically one of its biggest providers, underscores both the government’s success in boosting agricultural self-sufficiency and the impact of a slowing economy on demand. The agricultural tariffs, which run from 10% to 15% on an expansive list of items including grains, proteins, cotton, and fresh produce, follow initial action focused on energy and critical metals. Soybean imports from three US firms, as well as all American timber purchases, have also been halted.”
March 12 – Bloomberg (Thomas Seal): “After US President Donald Trump imposed global tariffs on steel and aluminum, Canada… revealed a list of retaliatory duties that apply to C$29.8 billion ($20.7bn) of American goods… Canadian counter-tariffs on steel and aluminum account for C$15.6 billion of the new import controls, which apply until the US withdraws its 25% metal tariffs. It’s the second wave in Canada’s response after an initial reply to Trump’s 25% tariffs on Canada and Mexico hit C$30 billion of US goods, including whiskey and orange juice. Wednesday’s new tariff schedule of 539 targets spans a gamut of other goods that reach beyond metals, from the mundane to the surprising.”
March 10 – Bloomberg: “Talks between the US and China on trade and other issues are stuck at lower levels, people familiar with the matter said, with both sides talking past each other and failing to agree on the best way to proceed. While representatives from the two countries have had contact, officials in Beijing say the US hasn’t outlined detailed steps they expect from China on fentanyl in order to have the tariffs lifted, according to the people, who asked not to be identified. The second wave of duties imposed last week took working-level officials on both sides by surprise.”
March 14 – Bloomberg (Samy Adghirni, David Gura, and Andrea Palasciano): “China stands to gain from the ongoing trade wars between the US and its allies, the European Union’s foreign policy chief Kaja Kallas said… ‘Who is laughing on the side or looking at the side is China,’ Kallas said… on the sidelines of a Group of Seven meeting in Canada. ‘It’s really benefiting from the US having a trade war with Europe.’”
March 11 – Associated Press (Mari Yamaguchi): “Japan’s trade minister said… he has failed to win assurances from U.S. officials that the key U.S. ally will be exempt from tariffs… Yoji Muto was in Washington for last ditch negotiations over the tariffs on a range of Japanese exports including cars, steel and aluminum. Muto said… that Japan, which contributes to the U.S. economy by heavily investing and creating jobs in the United States, ‘should not be subject to’ 25% tariffs on steel, aluminum and auto exports to America.”
March 12 – Bloomberg (Ben Westcott): “Australia has failed to secure an exemption from US steel and aluminum tariffs despite an extensive lobbying campaign by Prime Minister Anthony Albanese’s government, in a blow to ties between the longtime allies… Albanese told reporters… the Trump administration’s actions were ‘entirely unjustified’ and an act of ‘economic self-harm’ on the part of the US… ‘This is against the spirit of our two nations’ enduring friendship and fundamentally at odds with the benefits that our economic partnership has delivered over more than 70 years,’ Albanese said…”
Canada Friend and Ally Watch:
March 9 – Politico (Mickey Djuric and Nick Taylor-Vaisey): “Mark Carney, a political rookie but experienced banker with a history of helming state financial institutions during crises, won the race to replace Justin Trudeau on Sunday. The new Liberal Party leader arrives with a colossal task at the top of his to-do list: Defend Canada from Donald Trump. ‘America is not Canada. And Canada never, ever, will be part of America in any way, shape or form,’ Carney said… ‘We didn’t ask for this fight, but Canadians are always ready when someone else drops the gloves’… ‘The Americans want our resources, our water, our land, our country… Think about it. If they succeed, they will destroy our way of life.’”
March 10 – Bloomberg (Brian Platt): “Mark Carney laid the groundwork to take over as Canada’s prime minister as soon as this week, appointing a chief of staff and promising a speedy transition to a new cabinet that he says will be focused on the economy and fighting back against US tariffs… The transition to a new administration ‘will be seamless and it will be quick,’ Carney said. He also met with Liberal lawmakers. ‘We know this is a crucial time for our country. We’re united to serve Canadians and we will build this country,’ he said.”
March 12 – Bloomberg (Thomas Seal): “World leaders from New Delhi to Brussels facing tariffs from President Donald Trump’s administration are watching Canada to get a preview of what happens when you hit back. Canadian officials have gone hostile in their responses to Trump’s trade war… Mark Carney… called the US ‘a country we can no longer trust,’ and said his new government will keep its retaliatory tariffs in place ‘until the Americans show us respect.’”
March 9 – Bloomberg (Paula Sambo): “Canada will keep in place its retaliatory tariffs against US-made products as long as President Donald Trump persists with a trade war, said Mark Carney, the Canadian prime minister-designate. ‘The Canadian government is rightly retaliating with our own tariffs,’ Carney said during his victory speech... ‘My government will keep our tariffs on until the Americans show us respect — and make credible, reliable commitments to free and fair trade.’”
March 12 – Wall Street Journal (Vipal Monga and Ryan Dubé): “Canada is hunting for ways to respond to President Trump’s tariff threats, and some of the most forceful pushback has come not from national leaders but from Doug Ford, the head of the country’s most populous province. When Trump said earlier this month that he would levy 25% tariffs on many Canadian goods, it was Ford who announced that Ontario would in turn levy a 25% export tax on electricity that the province sends to 1.5 million homes in Minnesota, New York and Michigan. The next day, Ford backed off after Trump threatened to double the tariff on Canadian steel and aluminum, and Ford spoke directly with Commerce Secretary Howard Lutnick.”
March 10 – Financial Times (Editorial Board): “Nowhere has Donald Trump’s return as US president shaken up domestic politics quite as much as in Canada. It is remarkable enough that Mark Carney, a former central banker with no experience in politics or parliamentary seat, has been catapulted into the prime minister’s job with at least a fighting chance of winning an election that had seemed lost to his Liberal party. More remarkable still is that a Canadian leader should be faced with such a moment of peril for the country’s economy and sovereignty, after Trump’s tariff threats and talk of turning Canada into America’s 51st state. ‘The Americans want our resources, our water, our land, our country,’ he said in his acceptance speech. ‘Canada never, ever, will be part of America in any way, shape or form.’”
March 10 – Bloomberg (Layan Odeh and Mathieu Dion): “US President Donald Trump’s back-and-forth tariff threats are galvanizing an ‘invest in Canada’ movement that’s prodding pensions to keep more of their cash at home. The country’s biggest pensions, known as the Maple Eight, oversee roughly C$2.3 trillion ($1.6 trillion), about a quarter of which is invested in Canada... Many Canadian politicians and business people aim to make that portion grow much larger — putting further pressure on the country’s pension model.”
March 12 – Bloomberg (Devika Krishna Kumar and Alix Steel): “Tit-for-tat tariffs between Canada and the US will create pain on both sides, Canada’s Energy Minister said, urging the US to have a constructive dialogue on trade. ‘We are concerned about the impact of the steel tariffs on the Canadian economy,’ Jonathan Wilkinson said… “All Canadians are feeling pretty shocked that Canada is being treated in a manner that is actually worse than China,” Wilkinson said. ‘I’m not sure exactly how Canada got into that position with a country that has always been a friend,’ he said, adding that markets need certainty for the economy to work effectively.”
March 11 – Bloomberg (Josh Wingrove and Hadriana Lowenkron): “President Donald Trump’s administration is preparing a new travel rule that could force Canadians planning to stay in the country for more than 30 days to register their information with the US government and submit to fingerprinting. The draft rule, which is set to take effect April 11, expands requirements for registration and fingerprinting of foreign nationals who cross the US-Canada land border and stay in the US longer for more than a month.”
New World Disorder Watch:
March 9 – Bloomberg (Editorial Board): “Suddenly, Germany’s probable new chancellor, Friedrich Merz, has done what seemed impossible. Together with his fellow centrist leaders, he has unveiled a plan to override a long-running constraint on government borrowing, recognizing the urgent need to ramp up investment in defense and economic revival. This is a big step forward — not only for Germany, but also for Europe and the world. Introduced in 2009 under Merz’s Christian Democratic Union, the so-called debt brake — which places a hard ceiling on deficit spending — was much more than a mere budget rule. It reflected Germans’ deep-seated aversion to borrowing and to the burden-sharing required for a viable European Union.”
March 9 – Bloomberg (Ros Krasny): “Billionaire Elon Musk threw his weight behind a US exit from NATO, saying on his social media platform that it ‘doesn’t make sense for America to pay for the defense of Europe.’ The senior adviser to US President Donald Trump was responding to a post on X early Sunday that asserted the US should ‘Exit NATO *now*!’ ‘We really should,’ the Tesla Inc. co-founder and chief executive officer said.”
March 11 – Reuters (Elizabeth Pineau and John Irish): “More than 30 army chiefs among Washington’s closest allies met in Paris on Tuesday without their U.S. counterparts, seeking to take on more responsibility over the Ukraine war given President Donald Trump's unpredictability and rapprochement with Moscow. The closed-door gathering of 34 army chiefs, including NATO alliance and EU members as well as Japan and Australia, was a rare - and possibly unprecedented - convening without the U.S. The talks aimed in part to assess options and capabilities to guarantee Ukraine's security in the event of a ceasefire, including potential European peacekeepers, and to maintain Kyiv's long-term military strength. ‘The political message is we can do it together and without the United States, but it’s clear there are things we can't do and the problem with Russia is we need to have deterrence,’ said a European diplomat involved in the talk…”
March 12 – Politico (Mickey Djuric and Sue Allan): “Foreign Minister Mélanie Joly plans to welcome her G7 counterparts to Charlevoix, Quebec, with a warning: ‘If the U.S. can do this to us, their closest friend, then nobody is safe.’ On the official agenda this week as Canada hosts the G7 foreign ministers: Ukraine, the Middle East, Haiti and Venezuela, but nothing about President Donald Trump’s trade war or sovereignty threats. Yet Joly told reporters in Ottawa on Wednesday that she plans to raise the issue with the European and British members, while advising them that ‘Canada is the canary in the coal mine.’”
March 13 – Reuters (John Irish and Daphne Psaledakis): “Foreign ministers of leading Western democracies sought to show a united front in Canada on Thursday after seven weeks of rising tensions between U.S. allies and President Donald Trump over his upending of foreign policy on Ukraine and imposing of tariffs. The Group of Seven ministers from Britain, Canada, France, Germany, Italy, Japan and the United States, along with the EU, convened in the remote tourist town of La Malbaie, nestled in the Quebec hills, for two days of meetings that in the past have broadly been consensual on the issues they face.”
March 12 – Financial Times (Raphael Minder): “Poland’s president has called on the US to transfer nuclear weapons to Polish territory as a deterrent against future Russian aggression, a request that is likely to be perceived as highly provocative in Moscow. Andrzej Duda said it was ‘obvious’ that President Donald Trump could redeploy US nuclear warheads stored in western Europe or the US to Poland… ‘The borders of Nato moved east in 1999, so 26 years later there should also be a shift of the Nato infrastructure east. For me this is obvious,’ Duda said… ‘I think it’s not only that the time has come, but that it would be safer if those weapons were already here.’”
March 10 – Financial Times (Gideon Rachman): “Donald Trump will never win the Nobel Peace prize. But he should be a strong contender for the Charlemagne prize — which is awarded each year to the person who has made the greatest contribution to European unity. The US president has courted Russia, undermined faith in the Nato alliance, threatened the EU with tariffs and boosted the far right in Europe. All this has had a galvanising effect on the EU. Fundamental steps towards greater European unity — stalled for decades — are now under way.”
March 9 – Bloomberg (Ben Westcott and Haidi Lun): “A former Australian prime minster said the Trump administration’s treatment of longtime allies was providing an opportunity for China, in remarks that came shortly before the US president delivered a personal rebuff. Malcolm Turnbull, who led Australia from 2015 until 2018, said the world is seeing a more ‘undiluted’ version of Donald Trump in his second term in office. Such behavior would be viewed as an ‘advantage’ for China’s President Xi Jinping in international relations over the next four years. ‘President Xi will aim to be the exact opposite of Trump,’ Turnbull said… ‘Where Trump is chaotic, he will be consistent. Where Trump is rude and abusive, he’ll be respectful. Where Trump is erratic, he will be consistent.’”
March 11 – Bloomberg (David Ramli): “Billionaire investor Ray Dalio invoked 1930s Germany to illustrate his concerns about the global implications of the current trade war, while highlighting how countries that are neutral will fare well during such conflicts… The Bridgewater Associates founder said what the world is witnessing is an extension of the patterns of history. He cited Germany in the 1930s, saying there was writedown of debt, a hike in tariffs to drive revenue and a buildup of its domestic base. ‘Be nationalistic, be protectionist, be militaristic. That’s the way these things operate,’ he said. ‘So I would say lessons from the past of what that looks like, and the issue is really the confrontation of all of this, the fighting of all of this.’”
Budget Watch:
March 12 – Bloomberg (Chris Anstey and Daniel Flatley): “The US budget deficit continued to swell in February, pushing the shortfall to $1.15 trillion over the first five months of the fiscal year… For February alone, the deficit grew to $307 billion… The gap for the fiscal year, which began Oct. 1, is 17% larger than the prior year after adjusting for differences in the calendar… For the fiscal year to date, revenues came in at $1.89 trillion, up an adjusted 2% on 2024. Outlays totaled $3.04 trillion, and were up 7% after accounting for calendar differences… Among the categories showing the biggest increases in spending was the Medicare program, where costs for the past five months climbed by $124 billion from the prior fiscal year, to $518 billion. Interest on the public debt increased by $45 billion to $478 billion. Social Security outlays rose by $49 billion to $663 billion.”
March 13 – Wall Street Journal (Siobhan Hughes and Lindsay Wise): “The leader of Senate Democrats moved to take the threat of a government shutdown off the table, following a grueling intraparty fight in which lawmakers struggled with how best to resist President Trump’s fast-paced efforts to slim down federal agencies. Senate Minority Leader Chuck Schumer (D., N.Y.) said he would vote to advance a Republican measure… to fund the government through the rest of the year… ‘I will vote to keep the government open and not shut it down,’ Schumer said on the Senate floor, characterizing Democrats’ alternatives as a Hobson’s choice with no good option. He said the GOP proposal was bad, but the prospect of a shutdown was worse, giving Trump the ‘keys to the city, the state, and the country.’”
Ukraine War Watch:
March 11 – Axios (Barak Ravid): “Ukraine ‘expressed readiness to accept’ a U.S. proposal for an immediate 30-day ceasefire with Russia, the two countries said in a joint statement after a key meeting between U.S. and Ukrainian officials in Saudi Arabia. A ceasefire, if implemented, would be a major diplomatic breakthrough in the three-year war between Russia and Ukraine. But the Kremlin has yet to weigh in on the U.S. proposal. ‘The ball is now in their court. We hope the Russians will reciprocate,’ Secretary of State Marco Rubio said… A source close to the Ukrainian government told Axios U.S. military assistance resumed on Tuesday. Intelligence sharing with the U.S. was fully restored.”
March 11 – Wall Street Journal (Georgi Kantchev and Isabel Coles): “Ukraine launched its biggest drone attack on Moscow, targeting the Russian capital and other regions, hours before senior U.S. and Ukrainian officials sat down to discuss ways to bring an end to the war, including an initial aerial cease-fire. The general staff of Ukraine’s armed forces said drones had struck ‘a number of Russian strategic objects enabling armed aggression,’ including a Moscow oil refinery. The Russian Ministry of Defense said it had downed more than 300 Ukrainian drones, 91 of which had targeted Moscow.”
U.S./Russia/China/Europe Watch:
March 14 – Bloomberg: “China and Russia joined Iran in denouncing US sanctions and backed efforts to restore a landmark nuclear deal with Tehran that President Donald Trump abandoned in his first term and now wants to replace. The three countries — all sanctioned by the US to varying degrees — stressed the need to end unilateral restrictions and urged the resumption of international talks over Iran’s atomic activities at a meeting in Beijing on Friday… Russia and China were key participants in the Obama-era agreement that restricted Iran’s nuclear activity in exchange for sanctions relief, before Trump’s withdrawal in 2018.”
March 14 – New York Times (Keith Bradsher): “The Chinese government has strongly criticized a planned deal by a Hong Kong conglomerate to sell ports in Panama and elsewhere to an investment group led by an American asset manager, warning that the deal would deprive China of needed influence over key shipping routes. The criticism marks an abrupt shift in Chinese policy toward Panama and the control of seaports around the world. When President Trump raised concerns soon after taking office that China had too much power in the Panama Canal, his comments were initially ridiculed by Beijing.”
March 12 – Bloomberg: “China said it has forcefully cracked down on the fentanyl trade and condemned President Donald Trump’s tariffs, as the world’s two largest economies remain at odds over the conditions for any talks to cool tensions… A Foreign Ministry official said Beijing has done the US a favor and Washington should have said a ‘big thank you’ instead of slapping levies on Chinese imports. He also called on the Trump administration to return to dialogue and expressed willingness to continue working with the US.”
March 10 – Wall Street Journal (Jack Pitcher and Costas Paris): “World leaders rolled their eyes when President Trump kicked off his second term by threatening to take back the Panama Canal. Yet within weeks a massive sale put the waterway’s biggest ports and dozens of others in American hands—reshaping the global shipping business. BlackRock, the world’s largest asset manager, last week said it was leading a consortium that would pay $22.8 billion to buy more than 40 ports around the world, including crucial berths on either end of the Panama Canal, from Hong Kong-based CK Hutchison, controlled by one of Asia’s richest men.”
Taiwan Watch:
March 9 – Bloomberg (Yian Lee): “The US is trying to speed up arms shipments to Taiwan, according to the de facto ambassador to Taipei, comments likely to reassure officials in Taipei worried about the Trump administration pausing military aid for Ukraine. ‘We are actively working to accelerate delivery timelines, particularly for equipment related to asymmetric warfare as this is especially crucial for Taiwan’s defense,’ Raymond Greene, director of the American Institute in Taiwan, said…”
March 13 – Bloomberg (Cindy Wang and Chien-Hua Wan): “Taiwan’s central bank spent a record amount of money defending its currency last year and may need to do more, given worsening stock market outflows and escalating trade tensions. The central bank sold $16.4 billion on a net basis in the foreign exchange market in 2024… The dollar sales were a third year in a row and the most since data going back to 2018. Governor Yang Chin-long presented the report to lawmakers... ‘Together with Trump 2.0-induced uncertainties, concentrated and massive short-term foreign capital flows bring challenges to the stability of our foreign exchange market,’ the report said.”
Market Instability Watch:
March 10 – Reuters (Carolina Mandl): “Hedge funds unwound positions in single stocks on Friday at the largest amount in over two years, with some activity comparable to March 2020… Goldman Sachs said… U.S. major stock indexes plummeted on Monday, with the Nasdaq down 4%, amid fears that President Donald Trump's tariff policy will drive the world's largest economy into a recession. ‘It was a classic de-leveraging crunch,’ said James Koutoulas, CEO at hedge fund Typhon Capital Management… Hedge funds' unwinding comes at a time when leverage in the industry is at a record level. A separate Goldman Sachs note showed overall hedge funds’ leverage in equity positions was at 2.9 times their books, a record level over the last five years.”
March 11 – Financial Times (Joshua Franklin, George Steer, James Politi and Ian Smith): “Investors fear Donald Trump’s tolerance for a steep stock sell-off is far higher than it was in his first term as they lose faith that financial markets will restrain the US president’s tariffs and spending cuts… Many investors and Wall Street banks had bet Trump would ultimately back off his most severe tariff threats and cuts to the federal government if markets respond violently, but hopes for a so-called Trump put have dimmed as markets shudder. ‘Markets are questioning the notion that the Trump administration would adapt policies in response to equity market volatility or economic growth concerns,’ UBS told clients…”
March 11 – Bloomberg (Kat Hidalgo and Neil Callanan): “Private credit’s rush to attract money from retail investors is making the sector more vulnerable to the kind of liquidity mismatches found in traditional lenders, the Bank for International Settlements warned… Direct lenders usually provide long-term loans that match the duration of their funds, a setup that allows many in the industry to argue that private credit doesn’t pose systemic risk. But money managers have increasingly turned to structures that allow mom and pop investors to regularly redeem a portion of their investment, creating a potential problem if investors were to demand money back during market turmoil.”
March 10 – Reuters (Jan Strupczewski): “Euro zone finance ministers are worried that the change of policy under the new U.S. administration to embrace cryptocurrencies could affect euro zone monetary sovereignty and financial stability, top officials said… ‘Policy developments in other jurisdictions can have important consequences for us here in Europe,’ the chairman of the ministers Paschal Donohoe told a news conference after the ministers discussed U.S. cryptocurrency developments. ‘These discussions are fundamentally linked to our own autonomy and to the resilience of our currency,’ he said…”
Global Credit and Financial Bubble Watch:
March 10 – Reuters (Alun John, Tom Westbrook and Dhara Ranasinghe): “A sea change in German fiscal policy is rapidly transforming global bond markets as it is expected to increase the pool of top-rated, safe-haven debt and propel Germany into a new era of structurally higher government bond yields. The parties hoping to form Germany's next government agreed last week to create a 500 billion euro ($543bn) infrastructure fund and overhaul borrowing rules. In response, Germany's bond market suffered its biggest weekly selloff since the 1990s, pushing 10-year bond yields up more than 40 bps to around 2.9%, as investors anticipated a jump in bond sales to fund increased spending.”
March 11 – Bloomberg (Ethan M Steinberg and Josyana Joshua): “The fear sweeping through stocks and other risk assets is slowly bleeding across US corporate bond markets, raising new worries that debt that has rallied for the last two years could be due for a correction. About 10 US high-grade companies postponed bond sales they had planned on Monday as anxiety about the health of the US economy spread through markets. The average risk premium on US investment-grade debt sits at the widest since September…”
March 12 – Financial Times (Will Schmitt): “Investors are souring on America’s riskiest corporate borrowers as fears deepen that Donald Trump’s aggressive trade agenda is slowing growth in the world’s largest economy. The gap in borrowing costs between junk-rated companies and the US government has jumped by 0.56 percentage points since the middle of February to a six-month high of 3.22 percentage points… The pressure on the junk bond market comes as Trump’s chaotic rollout of tariffs on the US’s biggest trading partners has alarmed businesses and rattled stocks. The reversal in investor sentiment follows a prolonged rally in the riskiest part of the corporate bond market fuelled by a buoyant US economy and record highs for stocks.”
March 12 – Bloomberg (Finbarr Flynn, Sagarika Jaisinghani and Abhishek Vishnoi): “Goldman Sachs… is turning more cautious on US credit and equity markets… Goldman strategists sharply raised their forecasts for US credit spreads, citing tariff risks and signs that the White House is willing to tolerate short-term economic weakness… ‘We are revising our spread forecasts wider to levels that demonstrate a more persistent repricing of risk premium, especially in the USD market,’ Goldman credit strategists led by Lotfi Karoui wrote…”
March 13 – Bloomberg (James Hirai): “France’s long-term borrowing costs are nearing the highest level in over a decade ahead of a possible downgrade of the nation’s sovereign rating on Friday. The 30-year bond yield rose five basis points to 4.15% on Thursday, just one basis point away from the most elevated since 2011. The rate is up more than 40 bps this month due to the selloff in European bond markets ignited by Germany’s plans to boost spending.”
March 10 – Bloomberg (Mia Glass): “Japan’s benchmark 10-year government bond yield rose to its highest since 2008 on Monday… The yield climbed to a high of 1.575% as data on base pay showed the fastest gain in more three decades, supporting a path of continued gradual hikes from the BOJ.”
AI Bubble Watch:
March 12 – Bloomberg (Georgia Hall): “Goldman Sachs..., Citigroup Inc., JPMorgan… and other Wall Street firms are warning investors about new risks from the increasing use of artificial intelligence, including software hallucinations, employee-morale issues, use by cybercriminals and the impact of changing laws globally. The dangers newly flagged in the bank’s annual reports include flawed or unreliable AI models, increased competition and new regulations restricting use of AI. JPMorgan, for example, said AI could cause ‘workforce displacement’ that might affect staff morale and retention, and increase competition for hiring employees with the necessary technological skills…”
March 9 – Financial Times (George Hammond): “US start-ups are raising more cash than at any point since 2021 thanks to investor bullishness about artificial intelligence, but the venture capital market has tilted sharply towards funding a handful of huge private tech companies. More than $30bn has been invested into fledgling groups this quarter, according to PitchBook... A further $50bn of fundraising is also in train, as venture capitalists work on major deals… The fervour over AI has led investors to spend at their fastest rate since the market’s peak in 2021, a period in which $358bn flooded into tech groups, saddling many with unrealistic valuations.”
March 12 – Financial Times (Elaine Moore): “To have faith in the recent uptick of multibillion-dollar valuations for tech start-ups that have no profits, no sales and no product to speak of, you have to believe normal rules do not apply. This, of course, is exactly what founders of artificial intelligence companies want you to think. DeepMind co-founder Sir Demis Hassabis remembers feeling indignant when investors asked him about returns a decade ago. ‘I’m telling you this is the most important thing of all time,’ he says… ‘And you’re asking me how you’re going to make money? What’s your product? It’s like, so prosaic a question.’ To secure funding, DeepMind says it had to find people who wanted to invest not because they thought it was the best investment decision, but because they thought it was cool.”
Bubble and Mania Watch:
March 14 – Bloomberg (Josyana Joshua): “Just a few months into the year and Wall Street credit analysts are ripping up their forecasts and penciling in a new, grimmer outlook after this week’s jolt to the market. Prognosticators from Barclays Plc to Goldman Sachs Group Inc. were caught flatfooted this week and had to revise their estimates as the selloff rippling through the markets drove corporate bond spreads wider and saw a series of borrowers postpone sales.”
March 11 – New York Times (Ben Casselman and Colby Smith): “President Trump made a lot of promises on the campaign trail last year. Investors and business leaders enthusiastically cheered some, like lower taxes and relaxed regulation, and expressed wariness about others, like tariffs and reduced immigration. But when Mr. Trump won the election, there was little sign of that ambivalence: Stock prices soared, as did measures of business optimism. Investors at the time offered a simple explanation: They believed Mr. Trump, backed by a Republican-controlled Congress, would follow through on the parts of his agenda that they liked and scale back the more disruptive policies like tariffs if financial markets started to get spooked. It is increasingly clear they were wrong.”
March 12 – Bloomberg (Claire Ballentine, Bailey Lipschultz, and Charlie Wells): “It’s never been easier for everyday Americans to trade stocks. And, for the past two years, that’s largely meant one thing: making money. On platforms from Fidelity to Robinhood to Coinbase, almost everything seemed to come up green in 2023 and 2024… But the recent US stock plunge, coming as President Donald Trump’s chaotic trade war rattles investors and corporate America’s C-suites, has shattered the notion that stocks only go up… ‘The wealth effect was helping consumers dramatically,’ said Steve Sosnick, chief strategist at Interactive Brokers. ‘People who were in a position to invest in the market saw the gains and that was influencing their spending and their mood.’”
March 12 – Bloomberg (Jennifer Epstein): “Manhattan apartment rents soared to a record high in February amid intense competition, including bidding wars in a more than a quarter of all deals. New leases were signed at a median of $4,500 last month, according to appraiser Miller Samuel Inc. and brokerage Douglas Elliman. That’s up 6.4% from a year earlier, and $100 more than the previous record, reached in the summer of 2023.”
March 9 – Bloomberg (Youkyung Lee): “A sudden swoon in US tech stocks is dealing a blow to South Korea’s mom-and-pop investors who have placed billions of dollars of leveraged bets on the cohort. The country’s retail investors held at least 11% of two exchange-traded funds that place amplified wagers on the Nasdaq 100 Index… They held 14% of a GraniteShares product that tracks twice the moves of Nvidia Corp., whose stock has tumbled 25% from a January high.”
March 13 – Bloomberg (Caleb Mutua and Olivia Raimonde): “Global banks appear to be giving top clients private information to win corporate-bond trading business, according to a new study showing the $56 billion-a-day market is stacked in favor of the most active investors with the broadest dealer networks. The study examined the profitability of trades by insurance companies, which are whales in the credit world. It found that those with the best access to Wall Street’s bond-trading desks often had better outcomes than other investors ahead of market-moving events, such as mergers and acquisitions and rating downgrades. Critically, the more important an insurer is to a dealer’s business, the more prescient their trades ahead of M&A transactions tend to be — especially if the dealer is part of a bank also involved in the takeover.”
De-globalization Watch:
March 14 – Bloomberg (Iain Marlow): “Secretary of State Marco Rubio said South Africa’s ambassador to the US ‘is no longer welcome’ in the country after the top envoy made comments about President Donald Trump… Rubio made the announcement in a post on X, linking to a Breitbart News article on a lengthy conversation that Ambassador Ebrahim Rasool had with a think-tank in Johannesburg. Rasool said that Trump and his Make America Great Again supporters are effectively a ‘supremacist’ movement projecting ‘white victimhood.’ ‘Ebrahim Rasool is a race-baiting politician who hates America and hates @POTUS,’ Rubio wrote… ‘We have nothing to discuss with him and so he is considered PERSONA NON GRATA.’”
Inflation Watch:
March 12 – Associated Press (Christopher Rugaber): “U.S. inflation slowed last month for the first time since September and a measure of underlying inflation fell to a four-year low… The consumer price index increased 2.8% in February from a year ago…, down from 3% the previous month. Core prices, which exclude the volatile food and energy categories, rose 3.1% from a year earlier, down from 3.3% in January. The core figure is the lowest since April 2021.
March 11 – Bloomberg (Yvonne Yue Li and Jack Farchy): “American manufacturers are paying much higher prices for aluminum, steel and copper than rival plants overseas, in a trend that’s sapping business confidence and stoking worries about inflation even before tariffs on metals come into effect. US prices for the three key industrial raw materials have been ratcheting higher for weeks, partly driven by manufacturers’ efforts to build up stocks before US President Donald Trump imposes tariffs on the metals. In the process, they’ve decoupled from prices that manufacturers are paying in other major industrial economies including China, Germany and Japan.”
March 13 – Reuters (Lucia Mutikani): “U.S. producer prices were unchanged in February… The unchanged reading in the producer price index for final demand last month, the first since July, followed an upwardly revised 0.6% increase in January… In the 12 months through February, the PPI climbed 3.2% after rising 3.7% in January… Goods prices rose 0.3%, with a 53.6% surge in wholesale egg prices accounting for two-thirds of the increase. Goods prices rose 0.6% in January. A raging bird flu outbreak is driving egg prices higher, boosting the cost of food. Wholesale food prices shot up 1.7% after increasing 1.0% in January. Energy prices fell 1.2%. Excluding the volatile food and energy components, goods prices jumped 0.4% after gaining 0.2% in the prior month.”
March 12 – Associated Press (Dee-Ann Durbin and Anne D-Innocenzio): “Steel and aluminum are ubiquitous in Americans’ lives. A stainless steel refrigerator holds aluminum soda cans. A stainless steel drum tumbles inside an aluminum washing machine. They’re the metals used in cars and airplanes, phones and frying pans, skyscrapers and zippers. That’s why President Donald Trump’s 25% tariffs on all steel and aluminum imports — which went into effect Wednesday — could have widespread impact on manufacturers and consumers.”
Federal Reserve Watch:
March 12 – Bloomberg (Carter Johnson and Alex Harris): “More than 1,600 financial firms and their subsidiaries tapped the Federal Reserve’s emergency lending program created to support the industry during the regional banking turmoil two years ago. Beal Bank USA and First Republic Bank took out the biggest loans through the Bank Term Funding Program, which was established in March 2023 to bolster liquidity within the financial system after the collapse of Silicon Valley Bank. At their peak, they each borrowed loans in excess of $8 billion from the Fed…”
March 13 – Associated Press (Matt Ott): “The number of Americans filing for unemployment benefits fell slightly last week, indicating a still-healthy U.S. labor market. U.S. jobless claims filings fell by 2,000 to 220,000 for the week ending March 8… That’s fewer than the 226,000 new applications analysts forecast… The four-week average, which evens out some of the week-to-week swings, ticked up by 1,500 to 226,000. The total number of Americans receiving unemployment benefits for the week of March 1 fell by 27,000 to 1.87 million.”
U.S. Economic Bubble Watch:
March 10 – Reuters (Michael S. Derby): “Americans grew more worried about the economic outlook in February even as their expectations of the future path of inflation were little changed, a report… from the Federal Reserve Bank of New York said. According to the bank’s latest Survey of Consumer Expectations, inflation a year from now is seen at 3.1%, up a hair from January’s 3% reading, while the projected level of inflation three and five years from now was unchanged relative to January at 3%... The bank’s relatively calm outlook for inflation contrasted, however, with expectations of accelerating price increases for food, rent, gasoline, college and medical costs…”
March 11 – Yahoo Finance (Dani Romero): “Small business owners were feeling uncertain about the future in February as they continued to deal with lingering inflation and labor challenges. The National Federation of Independent Business' optimism index fell by 2.1 points in February to 100.7, just below economist forecasts for a reading of 101… ‘Uncertainty is high and rising on Main Street, and for many reasons,’ the NFIB's Bill Dunkelberg and Holly Wade said... ‘How future developments are resolved will shape the economy’s future.’”
March 11 – Associated Press (Paul Wiseman): “U.S. job openings rose at the start of the year, another sign the job market was solid when President Donald Trump returned to the White House. U.S. employers posted 7.7 million vacancies in January…, up from 7.5 million.”
March 11 – Wall Street Journal (Dean Seal and Connor Hart): “Several top airlines cut their guidance over fears that an incoming recession could further erode travel demand after a choppy start to the year, weighing on the battered sector’s shares. Executives… warned that demand from consumers, businesses and government customers has come under pressure in the first quarter. The most common factor: mounting economic uncertainty. ‘What we’re seeing now is a kind of broad softness in the macro economy’, Southwest Airlines Chief Executive Bob Jordan said... ‘It’s hard to attribute to any one thing.’”
March 13 – Wall Street Journal (Jesse Newman and Laura Cooper): “Americans are stopping for gas, but they aren’t grabbing their usual snacks or smokes. The change in behavior is hurting U.S. sales of Doritos, Twinkies, Heath bars and Newports. U.S. convenience-store sales volume fell by 4.3% as prices rose in the year ended Feb. 23, according to… Circana. Among snacks purchased in those stores, rice cakes dropped most sharply, followed by items such as dips, nuts and jerky. Refrigerated products dropped about 7% by sales volume, and chocolate candy fell by 6%...”
March 12 – Bloomberg (Vince Golle): “The average US 30-year mortgage rate declined for a sixth straight week to the lowest level since early December, sparking a pickup in purchase and refinancing activity. The contract rate on a 30-year mortgage slipped 6 basis bps to 6.67% in the first week of March… The rate on a 15-year fixed mortgage decreased to 6.04%, the lowest since October, while the average on a 30-year jumbo was the cheapest in more than five months.”
March 11 – Axios (Emily Peck): “Not only have home prices soared over the past decade, but it's the ‘affordable’ homes that have seen the biggest price increases. Rising prices, exacerbated by a shortage of affordable homes, put homeownership out of reach for many, driving them to a rental market that’s also seen remarkable cost increases. It’s a doom loop. A shortage of affordable homes means that buyers compete fiercely for the cheapest ones, pushing up prices. Prices for the bottom third of homes are up 124% since 2015, while the top third increased 77%, per… Moody's Analytics. The most desirable cities are becoming affordable only to the wealthy, while many of those of more modest means are forced into longer commutes, creating more traffic, more environmental strain, and greater social division, Mark Zandi, Moody’s Analytics chief economist, wrote…”
March 11 – Bloomberg (David Wethe and Alix Steel): “Scott Sheffield, the retired shale impresario who built a fortune drilling for Permian Basin oil, has grim advice for former rivals as President Donald Trump pushes for ‘drill baby drill’ to bring down energy prices. ‘You’ve really got to hunker down,’ Sheffield said... ‘You may have to lay off some people. You’ve got to focus on your best prospects. We’ll see what happens over the next two or three years.’”
China Watch:
March 9 – Bloomberg: “China’s consumer inflation dropped far more than expected to fall below zero for the first time in 13 months, an assessment skewed by seasonal distortions but also a sign of deflationary pressures persisting in the economy. The consumer price index declined 0.7% from a year earlier…, compared with a 0.5% gain in the previous month.”
Central Bank Watch:
March 12 – Bloomberg (Erik Hertzberg and Randy Thanthong-Knight): “The Bank of Canada cut interest rates by a quarter percentage point and called the trade battle with the US a ‘new crisis,’ but pushed back on expectations that policymakers were on a predetermined cutting path. Policymakers… lowered the policy rate to 2.75%..., the lowest level since September 2022… ‘We’re now facing a new crisis. Depending on the extent and duration of new US tariffs, the economic impact could be severe,’ Macklem said…”
March 14 – Bloomberg (Mark Schroers): “Higher government spending could force the European Central Bank to start raising interest rates again, Governing Council member Robert Holzmann told Germany’s Platow Brief. Such measures would present a ‘very strong fiscal stimulus’ that usually leads to more inflation, the hawkish Austrian official said… ‘In this case, monetary policy would probably have to go in the other direction again.’”
March 7 – Bloomberg (Jana Randow): “Euro-zone inflation is more likely to get stuck above the European Central Bank’s target than to durably slow, said Executive Board member Isabel Schnabel. In her opening salvo before a pivotal decision in April on whether to pause interest-rate cuts, the institution’s official in charge of markets shares concerns on prospects for consumer prices in a Handelsblatt article… ‘The risk that inflation will remain above 2% longer than expected is higher than the risk that it falls sustainably below 2%,’ Schnabel said…”
March 12 – Bloomberg (Mark Schroers, Jana Randow and Alexander Weber): “European Central Bank President Christine Lagarde said abrupt shifts in global trade and the region’s defense architecture will make it harder to keep inflation stable… Lagarde said the changes represent ‘two-sided shocks’ that, along with climate change, complicate policymaking. ‘Maintaining stability in a new era will be a formidable task,’ she said... ‘It will require an absolute commitment to our inflation target, the ability to parse which types of shocks will require a monetary reaction and the agility to react appropriately.’”
Europe Watch:
March 13 – Bloomberg (Edward Clark): “Distress among UK companies has risen for a third consecutive year, to its highest level since the onset of the Covid-19 pandemic, according to… consulting firm Alvarez & Marsal. The consultancy found that 11.2% of UK corporates suffered from some combination of weak profitability, insufficient liquidity and inadequate capital structure last year. The figure stood at 9.8% in 2023 that and 8.5% the year before that. Surging costs and a rapid rise in interest rates in recent years has put significant strain on businesses.”
EM Watch:
March 12 – Bloomberg (Andrew Rosati): “Brazil’s Luiz Inacio Lula da Silva has weathered financial crises, corruption scandals and even a coup attempt. But now it’s the soaring cost of food that’s posing the biggest hazard for his presidency. Galloping price hikes of staples like beef, coffee and eggs are enraging citizens and dragging the president’s job rating to record-low levels… Consumer prices surged 1.31% in February, the biggest monthly gain in three years… Annual inflation soared well past the top of the central bank’s tolerance range, with food and beverage costs spiking 7%...”
Japan Watch:
March 12 – Bloomberg (Toru Fujioka): “Bank of Japan Governor Kazuo Ueda indicated he’s not too concerned about the recent ascent of the nation’s benchmark yield to the highest since 2008, adding that only a sudden, exceptional spike might warrant action. ‘My understanding is that the rising trend since last year reflects the market’s views on the economy and inflation, or shifts in interest rates overseas,’ Ueda said… ‘There is no major gap between our views and the market’s.’”
March 14 – Wall Street Journal (Megumi Fujikawa): “Japanese companies are again offering workers the biggest pay increase in three decades, the nation’s largest labor union group said Friday, signaling wage growth that gives the Bank of Japan a fresh reason to keep raising interest rates. Preliminary data from the Japanese Trade Union Confederation, known as Rengo, showed that 760 member unions secured wage increases of 5.46% on average this year. That is higher than last year’s 5.10% increase and the biggest rise since 1991.”
March 10 – Bloomberg (Erica Yokoyama): “Japanese Prime Minister Shigeru Ishiba called on unions and companies to boost workers’ pay, just as their annual pay negotiations are set to heat up this week. ‘I would like to ask both labor and management to cooperate in achieving a significant wage increase, building on the momentum of last year, which was the highest level in 33 years,’ Ishiba said… His comments come as workers and their employers are deep in wage negotiations all week.”
Leveraged Speculation Watch:
March 12 – Reuters (Carolina Mandl): “Global hedge funds accelerated the unwinding of stock positions on Monday, and this trend is likely to continue, as portfolio managers seek to reduce risk amid a selloff in U.S. stocks, according to Goldman Sachs. ‘Through yesterday, our best guess is that we are currently in the middle innings of this (de-risking) episode,’ said Goldman Sachs Vice President Vincent Lin in a note about hedge funds' flows, although he pointed out determining a de-risking duration is difficult… The unwinding on Friday and Monday represented the largest two-day deleveraging in four years, with industrials leading the pack, Goldman Sachs said…, adding that the exit from industrials was at a record high.”
March 12 – Bloomberg (Hema Parmar and Bei Hu): “Hedge funds moved to unwind bullish and bearish wagers in Asia on Monday, after dumping bets in the US and Europe on Friday, Goldman Sachs Group Inc. said in a note to clients… The Wall Street bank saw the largest decline in hedge fund positions in the region on Monday in four years…”
March 7 – Wall Street Journal (Peter Rudegeair): “About $900 million in losses spread across two teams at hedge fund Millennium Management contributed to the firm’s worst monthly performance in over six years in February. Millennium lost 1.3% last month… The losses… stand out in light of Millennium’s long record of consistently positive returns and sharp risk management. The firm has only had one down year since Chief Executive Israel ‘Izzy’ Englander founded it in 1989 and hadn’t lost more than 1% in a given month since late 2018.”
March 12 – Bloomberg (Justina Lee): “A JPMorgan… quant unit has amassed a $100 billion derivatives-powered trading book, offering hedge fund-like investing on the cheap to investors of all stripes. The bank’s Strategic Indices business has been at the forefront of the boom in what are known as Quantitative Investment Strategies, or QIS, which turn well-known systematic trades into swaps or structured notes — making copycat products that are easier and more cost-effective to deploy. QIS have been a hit with the likes of insurers and pension funds for providing classic hedge fund-style exposures such as trend following and options selling at a fraction of the cost. And lately even the fast money — once-hostile to these competing investing products — has been warming up to the strategies.”
Social, Political, Environmental, Cybersecurity Instability Watch:
March 12 – Bloomberg (Ari Natter and Jennifer A. Dlouhy): “The Trump administration is launching a sweeping overhaul of US environmental mandates in a campaign it billed as the ‘biggest deregulatory action’ of its kind in US history. The Environmental Protection Agency said… it will formally reconsider more than a dozen Obama- and Biden-era regulations… as it aims to deliver on President Donald Trump’s pledge to speed US energy development. The agency described the effort as ‘historic actions’ that ‘will roll back trillions in regulatory costs and hidden taxes on US families.’ ‘We are driving a dagger straight into the heart of the climate change religion to drive down cost of living for American families, unleash American energy, bring auto jobs back to the US and more,’ EPA Administrator Lee Zeldin said…”
March 7– Financial Times (Andres Schipani in New Delhi and Michael Pooler): “The threat of a trade war and rising security tensions alongside the US withdrawal from the Paris climate accord will ‘drain’ resources away from efforts to curb global warming, leading to ‘civilisation doom’, Brazil’s environment minister warned. ‘It is clear that the withdrawal of the Paris agreement of the world’s second-largest emitter, the world’s largest economic and technological power, is a loss. We cannot be deniers — it is a loss,’ Marina Silva said. The confluence of the US withdrawal from climate action, new trade tariffs and the resurgence of geopolitical conflicts would have a ‘triple negative effect’ on climate action.”
March 13 – Financial Times (Lee Harris): “Insurers have warned that mass firings at US science agencies could threaten the critical weather and geospatial data that the industry uses to manage natural disaster risks and potentially raise prices for consumers. The Reinsurance Association of America, a trade group, is lobbying US commerce secretary Howard Lutnick to preserve data collection at the National Oceanic and Atmospheric Administration (Noaa), after the department said that it would fire more than 1,000 staff. The agency oversees the National Weather Service and monitors the vast oceanic and atmospheric conditions of the nation, including ‘Hurricane Hunter’ jets which provide real-time storm data critical to accurate forecasts.”
Geopolitical Watch:
March 11 – Bloomberg (Sherif Tarek and Mohammed Hatem): “The Houthi militant group in Yemen said it would resume attacks on Israeli ships for the first time in about two months after demanding the country end a ban on aid entering Gaza. The decision, which the Houthis said would take effect immediately, will likely further deter container ships and tankers — including non-Israeli ones — from sailing through the Suez Canal and southern Red Sea… ‘Any Israeli ship that tries to defy the ban in the announced operation areas will be targeted,’ Yahya Saree, a Houthi spokesman said... Israeli vessels will be targets until aid, including food and medicine, is allowed into the Palestinian territory…”
March 12 – Bloomberg (Arsalan Shahla): “Iran’s Supreme Leader Ayatollah Ali Khamenei said his country is not pursuing nuclear weapons and dismissed US President Donald Trump’s calls for negotiations as a ‘trick.’ While doubling down on his position opposing talks with the Trump administration about Tehran’s atomic activities, Khamenei said he isn’t after a war but that Iran would “definitely” hit back in the event of a military attack.”
March 11 – Reuters (Parisa Hafezi): “President Masoud Pezeshkian said Iran would not negotiate with the U.S. while being threatened, telling President Donald Trump to ‘do whatever the hell you want’, Iranian state media reported… ‘It is unacceptable for us that they (the U.S.) give orders and make threats. I won’t even negotiate with you. Do whatever the hell you want’, state media quoted Pezeshkian as saying.”
March 10 – Financial Times (Sarah Dadouch and Malaika Kanaaneh Tapper): “When forces loyal to ousted President Bashar al-Assad launched attacks along Syria’s coast last week, it appeared to realise a fear that had gripped the country since his fall: that former regime loyalists would rise up. A shadowy new armed group headed by a former Assad army commander, the Military Council to Liberate Syria, announced an insurgency against the country’s new rulers, calling on Syrians to join its fight against the government led by Islamist group Hayat Tahrir al-Sham, which toppled Assad in December.”
The S&P500 fell 2.3% (down 4.1% y-t-d), and the Dow lost 3.1% (down 2.5%). The Utilities rallied 1.5% (up 6.0%). The Banks dropped 2.7% (down 5.8%), and the Broker/Dealers slumped 3.6% (down 0.4%). The Transports sank 6.2% (down 7.9%). The S&P 400 Midcaps fell 2.0% (down 6.2%), and the small cap Russell 2000 declined 1.5% (down 8.3%). The Nasdaq100 dropped 2.5% (down 6.2%). The Semiconductors dipped 0.7% (down 7.7%). The Biotechs lost 2.5% (up 2.2%). With bullion jumping $75, the HUI gold index rose 4.9% (up 24.4%).
Three-month Treasury bill rates ended the week at 4.19%. Two-year government yields added two bps to 4.02% (down 22bps y-t-d). Five-year T-note yields were unchanged at 4.09% (down 29bps). Ten-year Treasury yields added a basis point to 4.31% (down 26bps). Long bond yields increased two bps to 4.62% (down 16bps). Benchmark Fannie Mae MBS yields increased three bps to 5.58% (down 27bps).
Italian 10-year yields gained four bps to 4.00% (up 48bps y-t-d). Greek 10-year yields increased four bps to 3.68% (up 47bps). Spain's 10-year yields were unchanged at 3.50% (down 44bps). German bund yields gained four bps to 2.88% (up 51bps). French yields added one basis point to 3.57% (up 37bps). The French to German 10-year bond spread narrowed three to 69 bps. U.K. 10-year gilt yields increased three bps to 4.67% (up 10bps). U.K.'s FTSE equities index dipped 0.5% (up 5.6% y-t-d).
Japan's Nikkei 225 Equities Index recovered 0.4% (down 7.1% y-t-d). Japanese 10-year "JGB" yields were unchanged at 1.52% (up 42bps y-t-d). France's CAC40 declined 1.1% (up 8.8%). The German DAX equities index was little changed (up 15.5%). Spain's IBEX 35 equities index dropped 1.9% (up 12.2%). Italy's FTSE MIB index added 0.2% (up 13.1%). EM equities were mixed. Brazil's Bovespa index rose 3.1% (up 7.2%), while Mexico's Bolsa index declined 0.7% (up 6.0%). South Korea's Kospi was about unchanged (up 7.0%). India's Sensex equities index declined 0.7% (down 6.0%). China's Shanghai Exchange Index gained 1.4% (up 2.0%). Turkey's Borsa Istanbul National 100 index jumped 3.2% (up 10.3%).
Federal Reserve Credit increased $1.4 billion last week to $6.712 TN. Fed Credit was down $2.189 TN from the June 22, 2022, peak. Over the past 287 weeks, Fed Credit expanded $2.985 TN, or 80%. Fed Credit inflated $3.901 TN, or 139%, over the past 644 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt dipped $0.9 billion last week to $3.302 TN. "Custody holdings" were down $45 billion y-o-y, or 1.4%.
Total money market fund assets slipped one billion to a near-record $7.024 TN. Money funds were up $890 billion over 33 weeks (22.8% annualized) and $947 billion y-o-y (15.6%).
Total Commercial Paper jumped $38.2 billion to $1.360 TN - the high back to 2009. CP has increased $272 billion y-t-d and $66 billion, or 5.1%, y-o-y.
Freddie Mac 30-year fixed mortgage rates increased two bps this week to 6.65% (down 9bps y-o-y). Fifteen-year rates added a basis point to 5.780% (down 36bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates down four bps to 6.79% (down 31bps).
Currency Watch:
March 10 – Bloomberg (Iris Ouyang): “Doubts over US exceptionalism are giving China a much needed break from strongly defending its currency, as the yuan’s strength allows it to dial back support via its daily reference rate. The gap between the People’s Bank of China’s daily reference rate versus narrowed to 675 pips on Monday, the least since early December. While the so-called fixing remains near the strongest level since November, its smaller spread with estimates signals weakening official support for the currency.”
March 11 – Bloomberg (David Finnerty): “Macro hedge funds are increasingly seeking currency option trades that exclude the dollar as they navigate the market turbulence stemming from worries about the US economy. Trades involving the euro and haven yen were in demand Monday. The two currencies were easily the most traded on The Depository and Trust Clearing Corp., involved in over half of all trades, as US tech stocks tumbled by the most since 2022. Option data shows long euro positions are the highest since 2020…”
For the week, the U.S. Dollar Index slipped 0.2% to 103.718 (down 4.4% y-t-d). For the week on the upside, the Norwegian krone increased 1.9%, the Mexican peso 1.6%, the Brazilian real 0.8%, the New Zealand dollar 0.7%, the euro 0.4%, the Australian dollar 0.3%, the South African rand 0.3%, and the British pound 0.1%. On the downside, the Swiss franc declined 0.6%, the Swedish krona 0.4%, the Japanese yen 0.4%, the South Korean won 0.3%, and the Singapore dollar 0.2%. The Chinese (onshore) renminbi increased 0.12% versus the dollar (up 0.86% y-t-d).
Commodities Watch:
The Bloomberg Commodities Index was little changed (up 6.2% y-t-d). Spot Gold jumped 2.6% to $2,984 (up 13.7%). Silver surged 3.9% to $33.7993 (up 16.9%). WTI crude increased 14 cents, or 0.2%, to $67.18 (down 6%). Gasoline rallied 1.9% (up 6%), while Natural Gas dropped 6.7% to $4.104 (up 14%). Copper jumped 3.9% (up 22%). Wheat rallied 2.2% (down 1%), while Corn dropped 2.1% (down 3%). Bitcoin dropped $2,300, or 2.7%, to $84,230 (down 10%).
Trump Administration Watch:
March 10 – CNBC (Jeff Cox): “President Donald Trump and other senior White House officials have spent the past several days bracing Americans for a potential economic slowdown that they say will then lead to stronger growth ahead… ‘There is a period of transition, because what we’re doing is very big,’ Trump said… on… Fox News… ‘We’re bringing wealth back to America. That’s a big thing. ... It takes a little time, but I think it should be great for us.’”
March 11 – Financial Times (Claire Jones, Sam Fleming and James Politi): “Donald Trump and his team of economic advisers are racing ahead with an attempt to radically reshape the US economy from a consumption behemoth with a huge trade deficit to a manufacturing powerhouse… ‘Markets are going to go up and they’re going to go down but, you know what, we have to rebuild our country,’ the president said…”
March 11 – Axios (Sareen Habeshian): “The Department of Education is cutting its workforce of more than 4,100 people by nearly 50%... Education Secretary Linda McMahon confirmed to Fox News the action was the first step toward President Trump’s plans for a total shutdown of the agency. Trump floated the idea of ‘disbanding’ the agency on the 2024 election campaign trail. ‘That was the president’s mandate,’ McMahon said on Fox News…’His directive to me, clearly, is to shut down the Department of Education which we know we'll have to work with Congress to get that accomplished.’”
March 14 – CNN (Samantha Delouya): “Bill Pulte, who was confirmed by the US Senate on Thursday to lead the Federal Housing Finance Agency for the Trump administration, said he’s in no rush to privatize Fannie Mae and Freddie Mac… ‘Fannie and Freddie shouldn’t be in conservatorship forever,’ Pulte told CNN... ‘But it’s critical to ensure any discussion about exiting conservatorship needs not only to ensure safety and soundness but how it would affect mortgage rates.’ In 2019, Trump’s first administration tried — and failed — to wrest Fannie and Freddie from the government conservatorship that’s been in place since the 2008 financial crisis.”
March 12 – BBC (Phil McCausland): “Mahmoud Khalil, a prominent figure during the Gaza war protests at Columbia University in the spring of 2024, has drawn global attention after the Trump administration arrested and moved to deport him. The case has raised questions about free speech on college campuses and the legal process that would allow for the deportation of a US permanent resident. Mr Khalil will remain in detention in Louisiana following a court hearing on Wednesday, where lawyers argued over whether he should be moved back to New York. Born in Syria, the Columbia graduate's arrest by immigration agents was linked to President Donald Trump's promise to crack down on student demonstrators he accuses of ‘un-American activity’.”
March 12 – Financial Times (Stefania Palma and Suzi Ring): “Donald Trump has widened his crackdown on Big Law, mandating a review of government contracts with companies that have represented his opponents and launching a wide-ranging investigation into diversity policies that have sent a chill through the legal industry. The White House has issued two executive orders in the past fortnight… Thursday’s order also directed US attorney-general Pam Bondi to investigate ‘racial discrimination’ at ‘large law firms’, including reserving roles for ‘preferred races’ — part of the industry’s drive for diversity in its workforce.”
Trade War Watch:
March 12 – Associated Press (Josh Boak, Paul Wiseman and Rob Gillies): “President Donald Trump openly challenged U.S. allies… by increasing tariffs on all steel and aluminum imports to 25% as he vowed to take back wealth ‘stolen’ by other countries, drawing quick retaliation from Europe and Canada. The Republican president’s use of tariffs to extract concessions from other nations points toward a possibly destructive trade war and a stark change in America’s approach to global leadership. It also has destabilized the stock market and stoked anxiety about an economic downturn. ‘The United States of America is going to take back a lot of what was stolen from it by other countries and, frankly, by incompetent U.S. leadership,’ Trump told reporters... ‘We’re going to take back our wealth, and we’re going to take back a lot of the companies that left.’”
March 12 – Associated Press (Lane Cook and David McHugh): “The European Union… announced retaliatory trade action with new duties on U.S. industrial and farm products, responding within hours to the Trump administration’s increase in tariffs… The EU measures will cover goods from the United States worth some 26 billion euros ($28bn), and not just steel and aluminum products, but also textiles, home appliances and agricultural goods. Motorcycles, bourbon, peanut butter and jeans will also be hit…”
March 13 – Associated Press (Aamer Madhani): “President Donald Trump… threatened a 200% tariff on European wine, champagne and spirits if the European goes forward with a planned tariff on American whiskey. The European tariff was expected to go into effect on April 1. Trump in a social media posting called the EU ‘one of the most hostile and abusive taxing and tariffing authorities in the World, which was formed for the sole purpose of taking advantage of the United States.’ ‘If this Tariff is not removed immediately, the U.S. will shortly place a 200% Tariff on all WINES, CHAMPAGNES, & ALCOHOLIC PRODUCTS COMING OUT OF FRANCE AND OTHER E.U. REPRESENTED COUNTRIES… This will be great for the Wine and Champagne businesses in the U.S.,’ Trump added.”
March 9 – Bloomberg: “Chinese tariffs on a slew of American farm products have officially come into effect, the latest retaliation in the unfolding trade war between the world’s top two economies. China’s willingness to use food as a countermeasure against the US, historically one of its biggest providers, underscores both the government’s success in boosting agricultural self-sufficiency and the impact of a slowing economy on demand. The agricultural tariffs, which run from 10% to 15% on an expansive list of items including grains, proteins, cotton, and fresh produce, follow initial action focused on energy and critical metals. Soybean imports from three US firms, as well as all American timber purchases, have also been halted.”
March 12 – Bloomberg (Thomas Seal): “After US President Donald Trump imposed global tariffs on steel and aluminum, Canada… revealed a list of retaliatory duties that apply to C$29.8 billion ($20.7bn) of American goods… Canadian counter-tariffs on steel and aluminum account for C$15.6 billion of the new import controls, which apply until the US withdraws its 25% metal tariffs. It’s the second wave in Canada’s response after an initial reply to Trump’s 25% tariffs on Canada and Mexico hit C$30 billion of US goods, including whiskey and orange juice. Wednesday’s new tariff schedule of 539 targets spans a gamut of other goods that reach beyond metals, from the mundane to the surprising.”
March 10 – Bloomberg: “Talks between the US and China on trade and other issues are stuck at lower levels, people familiar with the matter said, with both sides talking past each other and failing to agree on the best way to proceed. While representatives from the two countries have had contact, officials in Beijing say the US hasn’t outlined detailed steps they expect from China on fentanyl in order to have the tariffs lifted, according to the people, who asked not to be identified. The second wave of duties imposed last week took working-level officials on both sides by surprise.”
March 14 – Bloomberg (Samy Adghirni, David Gura, and Andrea Palasciano): “China stands to gain from the ongoing trade wars between the US and its allies, the European Union’s foreign policy chief Kaja Kallas said… ‘Who is laughing on the side or looking at the side is China,’ Kallas said… on the sidelines of a Group of Seven meeting in Canada. ‘It’s really benefiting from the US having a trade war with Europe.’”
March 11 – Associated Press (Mari Yamaguchi): “Japan’s trade minister said… he has failed to win assurances from U.S. officials that the key U.S. ally will be exempt from tariffs… Yoji Muto was in Washington for last ditch negotiations over the tariffs on a range of Japanese exports including cars, steel and aluminum. Muto said… that Japan, which contributes to the U.S. economy by heavily investing and creating jobs in the United States, ‘should not be subject to’ 25% tariffs on steel, aluminum and auto exports to America.”
March 12 – Bloomberg (Ben Westcott): “Australia has failed to secure an exemption from US steel and aluminum tariffs despite an extensive lobbying campaign by Prime Minister Anthony Albanese’s government, in a blow to ties between the longtime allies… Albanese told reporters… the Trump administration’s actions were ‘entirely unjustified’ and an act of ‘economic self-harm’ on the part of the US… ‘This is against the spirit of our two nations’ enduring friendship and fundamentally at odds with the benefits that our economic partnership has delivered over more than 70 years,’ Albanese said…”
Canada Friend and Ally Watch:
March 9 – Politico (Mickey Djuric and Nick Taylor-Vaisey): “Mark Carney, a political rookie but experienced banker with a history of helming state financial institutions during crises, won the race to replace Justin Trudeau on Sunday. The new Liberal Party leader arrives with a colossal task at the top of his to-do list: Defend Canada from Donald Trump. ‘America is not Canada. And Canada never, ever, will be part of America in any way, shape or form,’ Carney said… ‘We didn’t ask for this fight, but Canadians are always ready when someone else drops the gloves’… ‘The Americans want our resources, our water, our land, our country… Think about it. If they succeed, they will destroy our way of life.’”
March 10 – Bloomberg (Brian Platt): “Mark Carney laid the groundwork to take over as Canada’s prime minister as soon as this week, appointing a chief of staff and promising a speedy transition to a new cabinet that he says will be focused on the economy and fighting back against US tariffs… The transition to a new administration ‘will be seamless and it will be quick,’ Carney said. He also met with Liberal lawmakers. ‘We know this is a crucial time for our country. We’re united to serve Canadians and we will build this country,’ he said.”
March 12 – Bloomberg (Thomas Seal): “World leaders from New Delhi to Brussels facing tariffs from President Donald Trump’s administration are watching Canada to get a preview of what happens when you hit back. Canadian officials have gone hostile in their responses to Trump’s trade war… Mark Carney… called the US ‘a country we can no longer trust,’ and said his new government will keep its retaliatory tariffs in place ‘until the Americans show us respect.’”
March 9 – Bloomberg (Paula Sambo): “Canada will keep in place its retaliatory tariffs against US-made products as long as President Donald Trump persists with a trade war, said Mark Carney, the Canadian prime minister-designate. ‘The Canadian government is rightly retaliating with our own tariffs,’ Carney said during his victory speech... ‘My government will keep our tariffs on until the Americans show us respect — and make credible, reliable commitments to free and fair trade.’”
March 12 – Wall Street Journal (Vipal Monga and Ryan Dubé): “Canada is hunting for ways to respond to President Trump’s tariff threats, and some of the most forceful pushback has come not from national leaders but from Doug Ford, the head of the country’s most populous province. When Trump said earlier this month that he would levy 25% tariffs on many Canadian goods, it was Ford who announced that Ontario would in turn levy a 25% export tax on electricity that the province sends to 1.5 million homes in Minnesota, New York and Michigan. The next day, Ford backed off after Trump threatened to double the tariff on Canadian steel and aluminum, and Ford spoke directly with Commerce Secretary Howard Lutnick.”
March 10 – Financial Times (Editorial Board): “Nowhere has Donald Trump’s return as US president shaken up domestic politics quite as much as in Canada. It is remarkable enough that Mark Carney, a former central banker with no experience in politics or parliamentary seat, has been catapulted into the prime minister’s job with at least a fighting chance of winning an election that had seemed lost to his Liberal party. More remarkable still is that a Canadian leader should be faced with such a moment of peril for the country’s economy and sovereignty, after Trump’s tariff threats and talk of turning Canada into America’s 51st state. ‘The Americans want our resources, our water, our land, our country,’ he said in his acceptance speech. ‘Canada never, ever, will be part of America in any way, shape or form.’”
March 10 – Bloomberg (Layan Odeh and Mathieu Dion): “US President Donald Trump’s back-and-forth tariff threats are galvanizing an ‘invest in Canada’ movement that’s prodding pensions to keep more of their cash at home. The country’s biggest pensions, known as the Maple Eight, oversee roughly C$2.3 trillion ($1.6 trillion), about a quarter of which is invested in Canada... Many Canadian politicians and business people aim to make that portion grow much larger — putting further pressure on the country’s pension model.”
March 12 – Bloomberg (Devika Krishna Kumar and Alix Steel): “Tit-for-tat tariffs between Canada and the US will create pain on both sides, Canada’s Energy Minister said, urging the US to have a constructive dialogue on trade. ‘We are concerned about the impact of the steel tariffs on the Canadian economy,’ Jonathan Wilkinson said… “All Canadians are feeling pretty shocked that Canada is being treated in a manner that is actually worse than China,” Wilkinson said. ‘I’m not sure exactly how Canada got into that position with a country that has always been a friend,’ he said, adding that markets need certainty for the economy to work effectively.”
March 11 – Bloomberg (Josh Wingrove and Hadriana Lowenkron): “President Donald Trump’s administration is preparing a new travel rule that could force Canadians planning to stay in the country for more than 30 days to register their information with the US government and submit to fingerprinting. The draft rule, which is set to take effect April 11, expands requirements for registration and fingerprinting of foreign nationals who cross the US-Canada land border and stay in the US longer for more than a month.”
New World Disorder Watch:
March 9 – Bloomberg (Editorial Board): “Suddenly, Germany’s probable new chancellor, Friedrich Merz, has done what seemed impossible. Together with his fellow centrist leaders, he has unveiled a plan to override a long-running constraint on government borrowing, recognizing the urgent need to ramp up investment in defense and economic revival. This is a big step forward — not only for Germany, but also for Europe and the world. Introduced in 2009 under Merz’s Christian Democratic Union, the so-called debt brake — which places a hard ceiling on deficit spending — was much more than a mere budget rule. It reflected Germans’ deep-seated aversion to borrowing and to the burden-sharing required for a viable European Union.”
March 9 – Bloomberg (Ros Krasny): “Billionaire Elon Musk threw his weight behind a US exit from NATO, saying on his social media platform that it ‘doesn’t make sense for America to pay for the defense of Europe.’ The senior adviser to US President Donald Trump was responding to a post on X early Sunday that asserted the US should ‘Exit NATO *now*!’ ‘We really should,’ the Tesla Inc. co-founder and chief executive officer said.”
March 11 – Reuters (Elizabeth Pineau and John Irish): “More than 30 army chiefs among Washington’s closest allies met in Paris on Tuesday without their U.S. counterparts, seeking to take on more responsibility over the Ukraine war given President Donald Trump's unpredictability and rapprochement with Moscow. The closed-door gathering of 34 army chiefs, including NATO alliance and EU members as well as Japan and Australia, was a rare - and possibly unprecedented - convening without the U.S. The talks aimed in part to assess options and capabilities to guarantee Ukraine's security in the event of a ceasefire, including potential European peacekeepers, and to maintain Kyiv's long-term military strength. ‘The political message is we can do it together and without the United States, but it’s clear there are things we can't do and the problem with Russia is we need to have deterrence,’ said a European diplomat involved in the talk…”
March 12 – Politico (Mickey Djuric and Sue Allan): “Foreign Minister Mélanie Joly plans to welcome her G7 counterparts to Charlevoix, Quebec, with a warning: ‘If the U.S. can do this to us, their closest friend, then nobody is safe.’ On the official agenda this week as Canada hosts the G7 foreign ministers: Ukraine, the Middle East, Haiti and Venezuela, but nothing about President Donald Trump’s trade war or sovereignty threats. Yet Joly told reporters in Ottawa on Wednesday that she plans to raise the issue with the European and British members, while advising them that ‘Canada is the canary in the coal mine.’”
March 13 – Reuters (John Irish and Daphne Psaledakis): “Foreign ministers of leading Western democracies sought to show a united front in Canada on Thursday after seven weeks of rising tensions between U.S. allies and President Donald Trump over his upending of foreign policy on Ukraine and imposing of tariffs. The Group of Seven ministers from Britain, Canada, France, Germany, Italy, Japan and the United States, along with the EU, convened in the remote tourist town of La Malbaie, nestled in the Quebec hills, for two days of meetings that in the past have broadly been consensual on the issues they face.”
March 12 – Financial Times (Raphael Minder): “Poland’s president has called on the US to transfer nuclear weapons to Polish territory as a deterrent against future Russian aggression, a request that is likely to be perceived as highly provocative in Moscow. Andrzej Duda said it was ‘obvious’ that President Donald Trump could redeploy US nuclear warheads stored in western Europe or the US to Poland… ‘The borders of Nato moved east in 1999, so 26 years later there should also be a shift of the Nato infrastructure east. For me this is obvious,’ Duda said… ‘I think it’s not only that the time has come, but that it would be safer if those weapons were already here.’”
March 10 – Financial Times (Gideon Rachman): “Donald Trump will never win the Nobel Peace prize. But he should be a strong contender for the Charlemagne prize — which is awarded each year to the person who has made the greatest contribution to European unity. The US president has courted Russia, undermined faith in the Nato alliance, threatened the EU with tariffs and boosted the far right in Europe. All this has had a galvanising effect on the EU. Fundamental steps towards greater European unity — stalled for decades — are now under way.”
March 9 – Bloomberg (Ben Westcott and Haidi Lun): “A former Australian prime minster said the Trump administration’s treatment of longtime allies was providing an opportunity for China, in remarks that came shortly before the US president delivered a personal rebuff. Malcolm Turnbull, who led Australia from 2015 until 2018, said the world is seeing a more ‘undiluted’ version of Donald Trump in his second term in office. Such behavior would be viewed as an ‘advantage’ for China’s President Xi Jinping in international relations over the next four years. ‘President Xi will aim to be the exact opposite of Trump,’ Turnbull said… ‘Where Trump is chaotic, he will be consistent. Where Trump is rude and abusive, he’ll be respectful. Where Trump is erratic, he will be consistent.’”
March 11 – Bloomberg (David Ramli): “Billionaire investor Ray Dalio invoked 1930s Germany to illustrate his concerns about the global implications of the current trade war, while highlighting how countries that are neutral will fare well during such conflicts… The Bridgewater Associates founder said what the world is witnessing is an extension of the patterns of history. He cited Germany in the 1930s, saying there was writedown of debt, a hike in tariffs to drive revenue and a buildup of its domestic base. ‘Be nationalistic, be protectionist, be militaristic. That’s the way these things operate,’ he said. ‘So I would say lessons from the past of what that looks like, and the issue is really the confrontation of all of this, the fighting of all of this.’”
Budget Watch:
March 12 – Bloomberg (Chris Anstey and Daniel Flatley): “The US budget deficit continued to swell in February, pushing the shortfall to $1.15 trillion over the first five months of the fiscal year… For February alone, the deficit grew to $307 billion… The gap for the fiscal year, which began Oct. 1, is 17% larger than the prior year after adjusting for differences in the calendar… For the fiscal year to date, revenues came in at $1.89 trillion, up an adjusted 2% on 2024. Outlays totaled $3.04 trillion, and were up 7% after accounting for calendar differences… Among the categories showing the biggest increases in spending was the Medicare program, where costs for the past five months climbed by $124 billion from the prior fiscal year, to $518 billion. Interest on the public debt increased by $45 billion to $478 billion. Social Security outlays rose by $49 billion to $663 billion.”
March 13 – Wall Street Journal (Siobhan Hughes and Lindsay Wise): “The leader of Senate Democrats moved to take the threat of a government shutdown off the table, following a grueling intraparty fight in which lawmakers struggled with how best to resist President Trump’s fast-paced efforts to slim down federal agencies. Senate Minority Leader Chuck Schumer (D., N.Y.) said he would vote to advance a Republican measure… to fund the government through the rest of the year… ‘I will vote to keep the government open and not shut it down,’ Schumer said on the Senate floor, characterizing Democrats’ alternatives as a Hobson’s choice with no good option. He said the GOP proposal was bad, but the prospect of a shutdown was worse, giving Trump the ‘keys to the city, the state, and the country.’”
Ukraine War Watch:
March 11 – Axios (Barak Ravid): “Ukraine ‘expressed readiness to accept’ a U.S. proposal for an immediate 30-day ceasefire with Russia, the two countries said in a joint statement after a key meeting between U.S. and Ukrainian officials in Saudi Arabia. A ceasefire, if implemented, would be a major diplomatic breakthrough in the three-year war between Russia and Ukraine. But the Kremlin has yet to weigh in on the U.S. proposal. ‘The ball is now in their court. We hope the Russians will reciprocate,’ Secretary of State Marco Rubio said… A source close to the Ukrainian government told Axios U.S. military assistance resumed on Tuesday. Intelligence sharing with the U.S. was fully restored.”
March 11 – Wall Street Journal (Georgi Kantchev and Isabel Coles): “Ukraine launched its biggest drone attack on Moscow, targeting the Russian capital and other regions, hours before senior U.S. and Ukrainian officials sat down to discuss ways to bring an end to the war, including an initial aerial cease-fire. The general staff of Ukraine’s armed forces said drones had struck ‘a number of Russian strategic objects enabling armed aggression,’ including a Moscow oil refinery. The Russian Ministry of Defense said it had downed more than 300 Ukrainian drones, 91 of which had targeted Moscow.”
U.S./Russia/China/Europe Watch:
March 14 – Bloomberg: “China and Russia joined Iran in denouncing US sanctions and backed efforts to restore a landmark nuclear deal with Tehran that President Donald Trump abandoned in his first term and now wants to replace. The three countries — all sanctioned by the US to varying degrees — stressed the need to end unilateral restrictions and urged the resumption of international talks over Iran’s atomic activities at a meeting in Beijing on Friday… Russia and China were key participants in the Obama-era agreement that restricted Iran’s nuclear activity in exchange for sanctions relief, before Trump’s withdrawal in 2018.”
March 14 – New York Times (Keith Bradsher): “The Chinese government has strongly criticized a planned deal by a Hong Kong conglomerate to sell ports in Panama and elsewhere to an investment group led by an American asset manager, warning that the deal would deprive China of needed influence over key shipping routes. The criticism marks an abrupt shift in Chinese policy toward Panama and the control of seaports around the world. When President Trump raised concerns soon after taking office that China had too much power in the Panama Canal, his comments were initially ridiculed by Beijing.”
March 12 – Bloomberg: “China said it has forcefully cracked down on the fentanyl trade and condemned President Donald Trump’s tariffs, as the world’s two largest economies remain at odds over the conditions for any talks to cool tensions… A Foreign Ministry official said Beijing has done the US a favor and Washington should have said a ‘big thank you’ instead of slapping levies on Chinese imports. He also called on the Trump administration to return to dialogue and expressed willingness to continue working with the US.”
March 10 – Wall Street Journal (Jack Pitcher and Costas Paris): “World leaders rolled their eyes when President Trump kicked off his second term by threatening to take back the Panama Canal. Yet within weeks a massive sale put the waterway’s biggest ports and dozens of others in American hands—reshaping the global shipping business. BlackRock, the world’s largest asset manager, last week said it was leading a consortium that would pay $22.8 billion to buy more than 40 ports around the world, including crucial berths on either end of the Panama Canal, from Hong Kong-based CK Hutchison, controlled by one of Asia’s richest men.”
Taiwan Watch:
March 9 – Bloomberg (Yian Lee): “The US is trying to speed up arms shipments to Taiwan, according to the de facto ambassador to Taipei, comments likely to reassure officials in Taipei worried about the Trump administration pausing military aid for Ukraine. ‘We are actively working to accelerate delivery timelines, particularly for equipment related to asymmetric warfare as this is especially crucial for Taiwan’s defense,’ Raymond Greene, director of the American Institute in Taiwan, said…”
March 13 – Bloomberg (Cindy Wang and Chien-Hua Wan): “Taiwan’s central bank spent a record amount of money defending its currency last year and may need to do more, given worsening stock market outflows and escalating trade tensions. The central bank sold $16.4 billion on a net basis in the foreign exchange market in 2024… The dollar sales were a third year in a row and the most since data going back to 2018. Governor Yang Chin-long presented the report to lawmakers... ‘Together with Trump 2.0-induced uncertainties, concentrated and massive short-term foreign capital flows bring challenges to the stability of our foreign exchange market,’ the report said.”
Market Instability Watch:
March 10 – Reuters (Carolina Mandl): “Hedge funds unwound positions in single stocks on Friday at the largest amount in over two years, with some activity comparable to March 2020… Goldman Sachs said… U.S. major stock indexes plummeted on Monday, with the Nasdaq down 4%, amid fears that President Donald Trump's tariff policy will drive the world's largest economy into a recession. ‘It was a classic de-leveraging crunch,’ said James Koutoulas, CEO at hedge fund Typhon Capital Management… Hedge funds' unwinding comes at a time when leverage in the industry is at a record level. A separate Goldman Sachs note showed overall hedge funds’ leverage in equity positions was at 2.9 times their books, a record level over the last five years.”
March 11 – Financial Times (Joshua Franklin, George Steer, James Politi and Ian Smith): “Investors fear Donald Trump’s tolerance for a steep stock sell-off is far higher than it was in his first term as they lose faith that financial markets will restrain the US president’s tariffs and spending cuts… Many investors and Wall Street banks had bet Trump would ultimately back off his most severe tariff threats and cuts to the federal government if markets respond violently, but hopes for a so-called Trump put have dimmed as markets shudder. ‘Markets are questioning the notion that the Trump administration would adapt policies in response to equity market volatility or economic growth concerns,’ UBS told clients…”
March 11 – Bloomberg (Kat Hidalgo and Neil Callanan): “Private credit’s rush to attract money from retail investors is making the sector more vulnerable to the kind of liquidity mismatches found in traditional lenders, the Bank for International Settlements warned… Direct lenders usually provide long-term loans that match the duration of their funds, a setup that allows many in the industry to argue that private credit doesn’t pose systemic risk. But money managers have increasingly turned to structures that allow mom and pop investors to regularly redeem a portion of their investment, creating a potential problem if investors were to demand money back during market turmoil.”
March 10 – Reuters (Jan Strupczewski): “Euro zone finance ministers are worried that the change of policy under the new U.S. administration to embrace cryptocurrencies could affect euro zone monetary sovereignty and financial stability, top officials said… ‘Policy developments in other jurisdictions can have important consequences for us here in Europe,’ the chairman of the ministers Paschal Donohoe told a news conference after the ministers discussed U.S. cryptocurrency developments. ‘These discussions are fundamentally linked to our own autonomy and to the resilience of our currency,’ he said…”
Global Credit and Financial Bubble Watch:
March 10 – Reuters (Alun John, Tom Westbrook and Dhara Ranasinghe): “A sea change in German fiscal policy is rapidly transforming global bond markets as it is expected to increase the pool of top-rated, safe-haven debt and propel Germany into a new era of structurally higher government bond yields. The parties hoping to form Germany's next government agreed last week to create a 500 billion euro ($543bn) infrastructure fund and overhaul borrowing rules. In response, Germany's bond market suffered its biggest weekly selloff since the 1990s, pushing 10-year bond yields up more than 40 bps to around 2.9%, as investors anticipated a jump in bond sales to fund increased spending.”
March 11 – Bloomberg (Ethan M Steinberg and Josyana Joshua): “The fear sweeping through stocks and other risk assets is slowly bleeding across US corporate bond markets, raising new worries that debt that has rallied for the last two years could be due for a correction. About 10 US high-grade companies postponed bond sales they had planned on Monday as anxiety about the health of the US economy spread through markets. The average risk premium on US investment-grade debt sits at the widest since September…”
March 12 – Financial Times (Will Schmitt): “Investors are souring on America’s riskiest corporate borrowers as fears deepen that Donald Trump’s aggressive trade agenda is slowing growth in the world’s largest economy. The gap in borrowing costs between junk-rated companies and the US government has jumped by 0.56 percentage points since the middle of February to a six-month high of 3.22 percentage points… The pressure on the junk bond market comes as Trump’s chaotic rollout of tariffs on the US’s biggest trading partners has alarmed businesses and rattled stocks. The reversal in investor sentiment follows a prolonged rally in the riskiest part of the corporate bond market fuelled by a buoyant US economy and record highs for stocks.”
March 12 – Bloomberg (Finbarr Flynn, Sagarika Jaisinghani and Abhishek Vishnoi): “Goldman Sachs… is turning more cautious on US credit and equity markets… Goldman strategists sharply raised their forecasts for US credit spreads, citing tariff risks and signs that the White House is willing to tolerate short-term economic weakness… ‘We are revising our spread forecasts wider to levels that demonstrate a more persistent repricing of risk premium, especially in the USD market,’ Goldman credit strategists led by Lotfi Karoui wrote…”
March 13 – Bloomberg (James Hirai): “France’s long-term borrowing costs are nearing the highest level in over a decade ahead of a possible downgrade of the nation’s sovereign rating on Friday. The 30-year bond yield rose five basis points to 4.15% on Thursday, just one basis point away from the most elevated since 2011. The rate is up more than 40 bps this month due to the selloff in European bond markets ignited by Germany’s plans to boost spending.”
March 10 – Bloomberg (Mia Glass): “Japan’s benchmark 10-year government bond yield rose to its highest since 2008 on Monday… The yield climbed to a high of 1.575% as data on base pay showed the fastest gain in more three decades, supporting a path of continued gradual hikes from the BOJ.”
AI Bubble Watch:
March 12 – Bloomberg (Georgia Hall): “Goldman Sachs..., Citigroup Inc., JPMorgan… and other Wall Street firms are warning investors about new risks from the increasing use of artificial intelligence, including software hallucinations, employee-morale issues, use by cybercriminals and the impact of changing laws globally. The dangers newly flagged in the bank’s annual reports include flawed or unreliable AI models, increased competition and new regulations restricting use of AI. JPMorgan, for example, said AI could cause ‘workforce displacement’ that might affect staff morale and retention, and increase competition for hiring employees with the necessary technological skills…”
March 9 – Financial Times (George Hammond): “US start-ups are raising more cash than at any point since 2021 thanks to investor bullishness about artificial intelligence, but the venture capital market has tilted sharply towards funding a handful of huge private tech companies. More than $30bn has been invested into fledgling groups this quarter, according to PitchBook... A further $50bn of fundraising is also in train, as venture capitalists work on major deals… The fervour over AI has led investors to spend at their fastest rate since the market’s peak in 2021, a period in which $358bn flooded into tech groups, saddling many with unrealistic valuations.”
March 12 – Financial Times (Elaine Moore): “To have faith in the recent uptick of multibillion-dollar valuations for tech start-ups that have no profits, no sales and no product to speak of, you have to believe normal rules do not apply. This, of course, is exactly what founders of artificial intelligence companies want you to think. DeepMind co-founder Sir Demis Hassabis remembers feeling indignant when investors asked him about returns a decade ago. ‘I’m telling you this is the most important thing of all time,’ he says… ‘And you’re asking me how you’re going to make money? What’s your product? It’s like, so prosaic a question.’ To secure funding, DeepMind says it had to find people who wanted to invest not because they thought it was the best investment decision, but because they thought it was cool.”
Bubble and Mania Watch:
March 14 – Bloomberg (Josyana Joshua): “Just a few months into the year and Wall Street credit analysts are ripping up their forecasts and penciling in a new, grimmer outlook after this week’s jolt to the market. Prognosticators from Barclays Plc to Goldman Sachs Group Inc. were caught flatfooted this week and had to revise their estimates as the selloff rippling through the markets drove corporate bond spreads wider and saw a series of borrowers postpone sales.”
March 11 – New York Times (Ben Casselman and Colby Smith): “President Trump made a lot of promises on the campaign trail last year. Investors and business leaders enthusiastically cheered some, like lower taxes and relaxed regulation, and expressed wariness about others, like tariffs and reduced immigration. But when Mr. Trump won the election, there was little sign of that ambivalence: Stock prices soared, as did measures of business optimism. Investors at the time offered a simple explanation: They believed Mr. Trump, backed by a Republican-controlled Congress, would follow through on the parts of his agenda that they liked and scale back the more disruptive policies like tariffs if financial markets started to get spooked. It is increasingly clear they were wrong.”
March 12 – Bloomberg (Claire Ballentine, Bailey Lipschultz, and Charlie Wells): “It’s never been easier for everyday Americans to trade stocks. And, for the past two years, that’s largely meant one thing: making money. On platforms from Fidelity to Robinhood to Coinbase, almost everything seemed to come up green in 2023 and 2024… But the recent US stock plunge, coming as President Donald Trump’s chaotic trade war rattles investors and corporate America’s C-suites, has shattered the notion that stocks only go up… ‘The wealth effect was helping consumers dramatically,’ said Steve Sosnick, chief strategist at Interactive Brokers. ‘People who were in a position to invest in the market saw the gains and that was influencing their spending and their mood.’”
March 12 – Bloomberg (Jennifer Epstein): “Manhattan apartment rents soared to a record high in February amid intense competition, including bidding wars in a more than a quarter of all deals. New leases were signed at a median of $4,500 last month, according to appraiser Miller Samuel Inc. and brokerage Douglas Elliman. That’s up 6.4% from a year earlier, and $100 more than the previous record, reached in the summer of 2023.”
March 9 – Bloomberg (Youkyung Lee): “A sudden swoon in US tech stocks is dealing a blow to South Korea’s mom-and-pop investors who have placed billions of dollars of leveraged bets on the cohort. The country’s retail investors held at least 11% of two exchange-traded funds that place amplified wagers on the Nasdaq 100 Index… They held 14% of a GraniteShares product that tracks twice the moves of Nvidia Corp., whose stock has tumbled 25% from a January high.”
March 13 – Bloomberg (Caleb Mutua and Olivia Raimonde): “Global banks appear to be giving top clients private information to win corporate-bond trading business, according to a new study showing the $56 billion-a-day market is stacked in favor of the most active investors with the broadest dealer networks. The study examined the profitability of trades by insurance companies, which are whales in the credit world. It found that those with the best access to Wall Street’s bond-trading desks often had better outcomes than other investors ahead of market-moving events, such as mergers and acquisitions and rating downgrades. Critically, the more important an insurer is to a dealer’s business, the more prescient their trades ahead of M&A transactions tend to be — especially if the dealer is part of a bank also involved in the takeover.”
De-globalization Watch:
March 14 – Bloomberg (Iain Marlow): “Secretary of State Marco Rubio said South Africa’s ambassador to the US ‘is no longer welcome’ in the country after the top envoy made comments about President Donald Trump… Rubio made the announcement in a post on X, linking to a Breitbart News article on a lengthy conversation that Ambassador Ebrahim Rasool had with a think-tank in Johannesburg. Rasool said that Trump and his Make America Great Again supporters are effectively a ‘supremacist’ movement projecting ‘white victimhood.’ ‘Ebrahim Rasool is a race-baiting politician who hates America and hates @POTUS,’ Rubio wrote… ‘We have nothing to discuss with him and so he is considered PERSONA NON GRATA.’”
Inflation Watch:
March 12 – Associated Press (Christopher Rugaber): “U.S. inflation slowed last month for the first time since September and a measure of underlying inflation fell to a four-year low… The consumer price index increased 2.8% in February from a year ago…, down from 3% the previous month. Core prices, which exclude the volatile food and energy categories, rose 3.1% from a year earlier, down from 3.3% in January. The core figure is the lowest since April 2021.
March 11 – Bloomberg (Yvonne Yue Li and Jack Farchy): “American manufacturers are paying much higher prices for aluminum, steel and copper than rival plants overseas, in a trend that’s sapping business confidence and stoking worries about inflation even before tariffs on metals come into effect. US prices for the three key industrial raw materials have been ratcheting higher for weeks, partly driven by manufacturers’ efforts to build up stocks before US President Donald Trump imposes tariffs on the metals. In the process, they’ve decoupled from prices that manufacturers are paying in other major industrial economies including China, Germany and Japan.”
March 13 – Reuters (Lucia Mutikani): “U.S. producer prices were unchanged in February… The unchanged reading in the producer price index for final demand last month, the first since July, followed an upwardly revised 0.6% increase in January… In the 12 months through February, the PPI climbed 3.2% after rising 3.7% in January… Goods prices rose 0.3%, with a 53.6% surge in wholesale egg prices accounting for two-thirds of the increase. Goods prices rose 0.6% in January. A raging bird flu outbreak is driving egg prices higher, boosting the cost of food. Wholesale food prices shot up 1.7% after increasing 1.0% in January. Energy prices fell 1.2%. Excluding the volatile food and energy components, goods prices jumped 0.4% after gaining 0.2% in the prior month.”
March 12 – Associated Press (Dee-Ann Durbin and Anne D-Innocenzio): “Steel and aluminum are ubiquitous in Americans’ lives. A stainless steel refrigerator holds aluminum soda cans. A stainless steel drum tumbles inside an aluminum washing machine. They’re the metals used in cars and airplanes, phones and frying pans, skyscrapers and zippers. That’s why President Donald Trump’s 25% tariffs on all steel and aluminum imports — which went into effect Wednesday — could have widespread impact on manufacturers and consumers.”
Federal Reserve Watch:
March 12 – Bloomberg (Carter Johnson and Alex Harris): “More than 1,600 financial firms and their subsidiaries tapped the Federal Reserve’s emergency lending program created to support the industry during the regional banking turmoil two years ago. Beal Bank USA and First Republic Bank took out the biggest loans through the Bank Term Funding Program, which was established in March 2023 to bolster liquidity within the financial system after the collapse of Silicon Valley Bank. At their peak, they each borrowed loans in excess of $8 billion from the Fed…”
March 13 – Associated Press (Matt Ott): “The number of Americans filing for unemployment benefits fell slightly last week, indicating a still-healthy U.S. labor market. U.S. jobless claims filings fell by 2,000 to 220,000 for the week ending March 8… That’s fewer than the 226,000 new applications analysts forecast… The four-week average, which evens out some of the week-to-week swings, ticked up by 1,500 to 226,000. The total number of Americans receiving unemployment benefits for the week of March 1 fell by 27,000 to 1.87 million.”
U.S. Economic Bubble Watch:
March 10 – Reuters (Michael S. Derby): “Americans grew more worried about the economic outlook in February even as their expectations of the future path of inflation were little changed, a report… from the Federal Reserve Bank of New York said. According to the bank’s latest Survey of Consumer Expectations, inflation a year from now is seen at 3.1%, up a hair from January’s 3% reading, while the projected level of inflation three and five years from now was unchanged relative to January at 3%... The bank’s relatively calm outlook for inflation contrasted, however, with expectations of accelerating price increases for food, rent, gasoline, college and medical costs…”
March 11 – Yahoo Finance (Dani Romero): “Small business owners were feeling uncertain about the future in February as they continued to deal with lingering inflation and labor challenges. The National Federation of Independent Business' optimism index fell by 2.1 points in February to 100.7, just below economist forecasts for a reading of 101… ‘Uncertainty is high and rising on Main Street, and for many reasons,’ the NFIB's Bill Dunkelberg and Holly Wade said... ‘How future developments are resolved will shape the economy’s future.’”
March 11 – Associated Press (Paul Wiseman): “U.S. job openings rose at the start of the year, another sign the job market was solid when President Donald Trump returned to the White House. U.S. employers posted 7.7 million vacancies in January…, up from 7.5 million.”
March 11 – Wall Street Journal (Dean Seal and Connor Hart): “Several top airlines cut their guidance over fears that an incoming recession could further erode travel demand after a choppy start to the year, weighing on the battered sector’s shares. Executives… warned that demand from consumers, businesses and government customers has come under pressure in the first quarter. The most common factor: mounting economic uncertainty. ‘What we’re seeing now is a kind of broad softness in the macro economy’, Southwest Airlines Chief Executive Bob Jordan said... ‘It’s hard to attribute to any one thing.’”
March 13 – Wall Street Journal (Jesse Newman and Laura Cooper): “Americans are stopping for gas, but they aren’t grabbing their usual snacks or smokes. The change in behavior is hurting U.S. sales of Doritos, Twinkies, Heath bars and Newports. U.S. convenience-store sales volume fell by 4.3% as prices rose in the year ended Feb. 23, according to… Circana. Among snacks purchased in those stores, rice cakes dropped most sharply, followed by items such as dips, nuts and jerky. Refrigerated products dropped about 7% by sales volume, and chocolate candy fell by 6%...”
March 12 – Bloomberg (Vince Golle): “The average US 30-year mortgage rate declined for a sixth straight week to the lowest level since early December, sparking a pickup in purchase and refinancing activity. The contract rate on a 30-year mortgage slipped 6 basis bps to 6.67% in the first week of March… The rate on a 15-year fixed mortgage decreased to 6.04%, the lowest since October, while the average on a 30-year jumbo was the cheapest in more than five months.”
March 11 – Axios (Emily Peck): “Not only have home prices soared over the past decade, but it's the ‘affordable’ homes that have seen the biggest price increases. Rising prices, exacerbated by a shortage of affordable homes, put homeownership out of reach for many, driving them to a rental market that’s also seen remarkable cost increases. It’s a doom loop. A shortage of affordable homes means that buyers compete fiercely for the cheapest ones, pushing up prices. Prices for the bottom third of homes are up 124% since 2015, while the top third increased 77%, per… Moody's Analytics. The most desirable cities are becoming affordable only to the wealthy, while many of those of more modest means are forced into longer commutes, creating more traffic, more environmental strain, and greater social division, Mark Zandi, Moody’s Analytics chief economist, wrote…”
March 11 – Bloomberg (David Wethe and Alix Steel): “Scott Sheffield, the retired shale impresario who built a fortune drilling for Permian Basin oil, has grim advice for former rivals as President Donald Trump pushes for ‘drill baby drill’ to bring down energy prices. ‘You’ve really got to hunker down,’ Sheffield said... ‘You may have to lay off some people. You’ve got to focus on your best prospects. We’ll see what happens over the next two or three years.’”
China Watch:
March 9 – Bloomberg: “China’s consumer inflation dropped far more than expected to fall below zero for the first time in 13 months, an assessment skewed by seasonal distortions but also a sign of deflationary pressures persisting in the economy. The consumer price index declined 0.7% from a year earlier…, compared with a 0.5% gain in the previous month.”
Central Bank Watch:
March 12 – Bloomberg (Erik Hertzberg and Randy Thanthong-Knight): “The Bank of Canada cut interest rates by a quarter percentage point and called the trade battle with the US a ‘new crisis,’ but pushed back on expectations that policymakers were on a predetermined cutting path. Policymakers… lowered the policy rate to 2.75%..., the lowest level since September 2022… ‘We’re now facing a new crisis. Depending on the extent and duration of new US tariffs, the economic impact could be severe,’ Macklem said…”
March 14 – Bloomberg (Mark Schroers): “Higher government spending could force the European Central Bank to start raising interest rates again, Governing Council member Robert Holzmann told Germany’s Platow Brief. Such measures would present a ‘very strong fiscal stimulus’ that usually leads to more inflation, the hawkish Austrian official said… ‘In this case, monetary policy would probably have to go in the other direction again.’”
March 7 – Bloomberg (Jana Randow): “Euro-zone inflation is more likely to get stuck above the European Central Bank’s target than to durably slow, said Executive Board member Isabel Schnabel. In her opening salvo before a pivotal decision in April on whether to pause interest-rate cuts, the institution’s official in charge of markets shares concerns on prospects for consumer prices in a Handelsblatt article… ‘The risk that inflation will remain above 2% longer than expected is higher than the risk that it falls sustainably below 2%,’ Schnabel said…”
March 12 – Bloomberg (Mark Schroers, Jana Randow and Alexander Weber): “European Central Bank President Christine Lagarde said abrupt shifts in global trade and the region’s defense architecture will make it harder to keep inflation stable… Lagarde said the changes represent ‘two-sided shocks’ that, along with climate change, complicate policymaking. ‘Maintaining stability in a new era will be a formidable task,’ she said... ‘It will require an absolute commitment to our inflation target, the ability to parse which types of shocks will require a monetary reaction and the agility to react appropriately.’”
Europe Watch:
March 13 – Bloomberg (Edward Clark): “Distress among UK companies has risen for a third consecutive year, to its highest level since the onset of the Covid-19 pandemic, according to… consulting firm Alvarez & Marsal. The consultancy found that 11.2% of UK corporates suffered from some combination of weak profitability, insufficient liquidity and inadequate capital structure last year. The figure stood at 9.8% in 2023 that and 8.5% the year before that. Surging costs and a rapid rise in interest rates in recent years has put significant strain on businesses.”
EM Watch:
March 12 – Bloomberg (Andrew Rosati): “Brazil’s Luiz Inacio Lula da Silva has weathered financial crises, corruption scandals and even a coup attempt. But now it’s the soaring cost of food that’s posing the biggest hazard for his presidency. Galloping price hikes of staples like beef, coffee and eggs are enraging citizens and dragging the president’s job rating to record-low levels… Consumer prices surged 1.31% in February, the biggest monthly gain in three years… Annual inflation soared well past the top of the central bank’s tolerance range, with food and beverage costs spiking 7%...”
Japan Watch:
March 12 – Bloomberg (Toru Fujioka): “Bank of Japan Governor Kazuo Ueda indicated he’s not too concerned about the recent ascent of the nation’s benchmark yield to the highest since 2008, adding that only a sudden, exceptional spike might warrant action. ‘My understanding is that the rising trend since last year reflects the market’s views on the economy and inflation, or shifts in interest rates overseas,’ Ueda said… ‘There is no major gap between our views and the market’s.’”
March 14 – Wall Street Journal (Megumi Fujikawa): “Japanese companies are again offering workers the biggest pay increase in three decades, the nation’s largest labor union group said Friday, signaling wage growth that gives the Bank of Japan a fresh reason to keep raising interest rates. Preliminary data from the Japanese Trade Union Confederation, known as Rengo, showed that 760 member unions secured wage increases of 5.46% on average this year. That is higher than last year’s 5.10% increase and the biggest rise since 1991.”
March 10 – Bloomberg (Erica Yokoyama): “Japanese Prime Minister Shigeru Ishiba called on unions and companies to boost workers’ pay, just as their annual pay negotiations are set to heat up this week. ‘I would like to ask both labor and management to cooperate in achieving a significant wage increase, building on the momentum of last year, which was the highest level in 33 years,’ Ishiba said… His comments come as workers and their employers are deep in wage negotiations all week.”
Leveraged Speculation Watch:
March 12 – Reuters (Carolina Mandl): “Global hedge funds accelerated the unwinding of stock positions on Monday, and this trend is likely to continue, as portfolio managers seek to reduce risk amid a selloff in U.S. stocks, according to Goldman Sachs. ‘Through yesterday, our best guess is that we are currently in the middle innings of this (de-risking) episode,’ said Goldman Sachs Vice President Vincent Lin in a note about hedge funds' flows, although he pointed out determining a de-risking duration is difficult… The unwinding on Friday and Monday represented the largest two-day deleveraging in four years, with industrials leading the pack, Goldman Sachs said…, adding that the exit from industrials was at a record high.”
March 12 – Bloomberg (Hema Parmar and Bei Hu): “Hedge funds moved to unwind bullish and bearish wagers in Asia on Monday, after dumping bets in the US and Europe on Friday, Goldman Sachs Group Inc. said in a note to clients… The Wall Street bank saw the largest decline in hedge fund positions in the region on Monday in four years…”
March 7 – Wall Street Journal (Peter Rudegeair): “About $900 million in losses spread across two teams at hedge fund Millennium Management contributed to the firm’s worst monthly performance in over six years in February. Millennium lost 1.3% last month… The losses… stand out in light of Millennium’s long record of consistently positive returns and sharp risk management. The firm has only had one down year since Chief Executive Israel ‘Izzy’ Englander founded it in 1989 and hadn’t lost more than 1% in a given month since late 2018.”
March 12 – Bloomberg (Justina Lee): “A JPMorgan… quant unit has amassed a $100 billion derivatives-powered trading book, offering hedge fund-like investing on the cheap to investors of all stripes. The bank’s Strategic Indices business has been at the forefront of the boom in what are known as Quantitative Investment Strategies, or QIS, which turn well-known systematic trades into swaps or structured notes — making copycat products that are easier and more cost-effective to deploy. QIS have been a hit with the likes of insurers and pension funds for providing classic hedge fund-style exposures such as trend following and options selling at a fraction of the cost. And lately even the fast money — once-hostile to these competing investing products — has been warming up to the strategies.”
Social, Political, Environmental, Cybersecurity Instability Watch:
March 12 – Bloomberg (Ari Natter and Jennifer A. Dlouhy): “The Trump administration is launching a sweeping overhaul of US environmental mandates in a campaign it billed as the ‘biggest deregulatory action’ of its kind in US history. The Environmental Protection Agency said… it will formally reconsider more than a dozen Obama- and Biden-era regulations… as it aims to deliver on President Donald Trump’s pledge to speed US energy development. The agency described the effort as ‘historic actions’ that ‘will roll back trillions in regulatory costs and hidden taxes on US families.’ ‘We are driving a dagger straight into the heart of the climate change religion to drive down cost of living for American families, unleash American energy, bring auto jobs back to the US and more,’ EPA Administrator Lee Zeldin said…”
March 7– Financial Times (Andres Schipani in New Delhi and Michael Pooler): “The threat of a trade war and rising security tensions alongside the US withdrawal from the Paris climate accord will ‘drain’ resources away from efforts to curb global warming, leading to ‘civilisation doom’, Brazil’s environment minister warned. ‘It is clear that the withdrawal of the Paris agreement of the world’s second-largest emitter, the world’s largest economic and technological power, is a loss. We cannot be deniers — it is a loss,’ Marina Silva said. The confluence of the US withdrawal from climate action, new trade tariffs and the resurgence of geopolitical conflicts would have a ‘triple negative effect’ on climate action.”
March 13 – Financial Times (Lee Harris): “Insurers have warned that mass firings at US science agencies could threaten the critical weather and geospatial data that the industry uses to manage natural disaster risks and potentially raise prices for consumers. The Reinsurance Association of America, a trade group, is lobbying US commerce secretary Howard Lutnick to preserve data collection at the National Oceanic and Atmospheric Administration (Noaa), after the department said that it would fire more than 1,000 staff. The agency oversees the National Weather Service and monitors the vast oceanic and atmospheric conditions of the nation, including ‘Hurricane Hunter’ jets which provide real-time storm data critical to accurate forecasts.”
Geopolitical Watch:
March 11 – Bloomberg (Sherif Tarek and Mohammed Hatem): “The Houthi militant group in Yemen said it would resume attacks on Israeli ships for the first time in about two months after demanding the country end a ban on aid entering Gaza. The decision, which the Houthis said would take effect immediately, will likely further deter container ships and tankers — including non-Israeli ones — from sailing through the Suez Canal and southern Red Sea… ‘Any Israeli ship that tries to defy the ban in the announced operation areas will be targeted,’ Yahya Saree, a Houthi spokesman said... Israeli vessels will be targets until aid, including food and medicine, is allowed into the Palestinian territory…”
March 12 – Bloomberg (Arsalan Shahla): “Iran’s Supreme Leader Ayatollah Ali Khamenei said his country is not pursuing nuclear weapons and dismissed US President Donald Trump’s calls for negotiations as a ‘trick.’ While doubling down on his position opposing talks with the Trump administration about Tehran’s atomic activities, Khamenei said he isn’t after a war but that Iran would “definitely” hit back in the event of a military attack.”
March 11 – Reuters (Parisa Hafezi): “President Masoud Pezeshkian said Iran would not negotiate with the U.S. while being threatened, telling President Donald Trump to ‘do whatever the hell you want’, Iranian state media reported… ‘It is unacceptable for us that they (the U.S.) give orders and make threats. I won’t even negotiate with you. Do whatever the hell you want’, state media quoted Pezeshkian as saying.”
March 10 – Financial Times (Sarah Dadouch and Malaika Kanaaneh Tapper): “When forces loyal to ousted President Bashar al-Assad launched attacks along Syria’s coast last week, it appeared to realise a fear that had gripped the country since his fall: that former regime loyalists would rise up. A shadowy new armed group headed by a former Assad army commander, the Military Council to Liberate Syria, announced an insurgency against the country’s new rulers, calling on Syrians to join its fight against the government led by Islamist group Hayat Tahrir al-Sham, which toppled Assad in December.”
