📰 Market Report.
📉 The financial media continue to insist that investors are moving from US equities to Europe and China, but as we have already indicated in our reports, this is a mirage.
🐉 The Chinese stock market is still in recovery mode, still below 2021 levels. And in Europe, Germany, the leading power, is doing a political shambles to break its own rules of fiscal discipline and forcibly revive its comatose economy. None of this should be a cause for investor optimism.
💬 However, the US Treasury Secretary Scott Bessent said yesterday there are “no guarantees” there will not be a recession in the United States, although there could be an adjustment. Bessent ruled out the chance of a financial crisis, stating that while there are no guarantees, the country needs to be weaned off massive government spending. Bessent acknowledged that an adjustment could lead to a recession, but said “there is no reason that it has to.” He emphasized that the administration is focused on putting in robust policies that will be durable, and stated “We are going to have a transition, and we are not going to have a crisis.”
⚖️ In Germany, Plans for the significant rise in state borrowing to support military and spur economic development were approved by the parliamentary budget committee on Sunday. In a parliamentary vote on Tuesday, the bill—which contains a 500 billion euro ($540 billion) fund for infrastructure and modifications to borrowing regulations—will need a two-thirds majority.
🛑 Nobody says it, but it is not the first time that Germany has tried to escape from an industrial recession by increasing public spending on the arms industry, and it did not end well for the European continent, 1945.
💼 However, Civilian industry is not satisfied with the plans. Airbus, Dassault Systemes, and over 90 other European technology companies and lobby groups have urged European Commission President Ursula von der Leyen to create a sovereign infrastructure fund to increase public investments in cutting-edge technologies. They argue that Europe needs to become more technologically independent across all layers of its critical digital infrastructure, from software to hardware, to address security and reliability risks and boost growth. They propose that a sovereign infrastructure fund is key to financing this goal, especially in capital-intensive areas like quantum technologies and chips.
📊 Asia: China’s retail sales growth quickened in January-February, a welcome sign for policymakers’ efforts to boost domestic consumption. However, the data also showed rising joblessness and easing factory output, underscoring the strains on the economy facing fresh U.S. tariff pressure. As We menitoned previously, the strategy is made expanding domestic demand a top priority this year to cushion the impact of U.S. tariffs on China’s export engine. Measures to boost consumption in China include a 300 billion yuan consumer goods trade-in scheme and a “special action plan” to increase residents’ income and establish a childcare subsidy scheme.
🛍️ The plan to boost domestic consumption, including measures such as increasing residents’ income and introducing childcare subsidies. Additionally, financial regulators have pledged to relax consumer credit quotas and loan terms, providing long-term support to inject substantial funds into the economy.
💷 UK: Finance minister Rachel Reeves will deliver an update on the public finances on March 26, based on an assessment by the Office for Budget Responsibility. Reeves says her fiscal rules, which aim to balance day-to-day spending and reduce public sector liabilities, are non-negotiable, but investors fear this could hurt the investment needed for long-term growth. Britain has the biggest current account deficit among advanced economies (4.8%), except France and US, and relies heavily on short-term foreign capital, which can be pulled away easily in a sell-off. The UK economy has shown weak growth, and there are concerns about the government’s ability to generate greater revenues given the increase on tax rates. There are signs of market vulnerability, with bond yields, stock outflows, and volatility in the gilt market indicating investor concerns.
🌍 Geopolitics:
🛢️ Oil prices traded higher today after the United States vowed to keep attacking Yemen’s Houthis until the Iran-aligned group ends its assaults on shipping. The U.S. airstrikes done during the weekend, which the Houthi-run health ministry said killed at least 53 people, are the biggest U.S. military operation in the Middle East since President Donald Trump took office.
🇨🇳 The announced done by China of a new efforts to boost domestic consumption, including increasing residents’ income and establishing a childcare subsidy scheme, has supported oil prices as well.
🤝 The British Prime Minister, Keir Starmer, managed to get some 25 allies to commit to maintaining funding for the war despite Trump’s attempts to stop it. The million-dollar question is how the EU will continue to support the war while the US is pressuring Ukraine to end it. US VP Vance recently accused Zelensky of lying in the past, trying to force a confrontation that would unleash World War III, when Zelensky assured Western allies that a missile that hit Poland was Russian, when in fact it was Ukrainian.
✈️ El Salvador has accepted hundreds of Venezuelan gang members who were illegally living in the US, and sent 23 MS-13 members, including two ringleaders, to face justice. The deportations come as a US judge ordered the Trump administration to halt deportations under the Alien Enemies Act. However, the planes carrying the gang members had already arrived in El Salvador before the judge’s order. President Nayib Bukele offered to take in illegal immigrants of any nationality facing deportation in the US and house them in El Salvador’s notorious CECOT prison, with the US paying a low fee for housing the deportees.
📈 Market View:
📉 U.S. futures are attempting to recover ground after more than two weeks of losses. The S&P 500 futures, which managed to close above 5600 —a level we emphasized as crucial during a Bloomberg interview on Friday— start the week with slight declines but remain, for now, above the 5600 mark. Meanwhile, NASDAQ-100 futures are facing a similar situation, currently losing the 19,600 level.
💵 The dollar remains static and virtually unchanged, with the DXY index hovering around the 104 mark, currently trading at 103.75. The EUR/USD pair is holding just below 1.09, now trading at 1.0880. U.S. bond yields continue to rise, with the 2-year yield above 4% and the 10-year yield also climbing.
📊 In Europe, however, the DAX 40 remains close to historical highs, seemingly unaffected by the economic realities facing the region. As of now, the DAX 40 is trading at 22,975 points, a mirage fueled by expectations of increased European defense spending.
🛢️ Brent and West Texas crude have recovered from the declines seen in the first week of the month. Factors such as the attacks on Yemen and the potential rise in Chinese consumption following stimulus packages are contributing to higher prices, both on the supply and demand sides. Brent crude recently reached $71.75 per barrel.
💰 Gold, which previously breached the $3,000 level, is holding near that threshold, currently trading at $2,995.
