Weekly Market Note_04.11.2025
Global Markets & Economic Data:
The situation remains fluid. Intraday on Wednesday fixed income market conditions were nearing a breaking point resulting in Trump finally revealing his proverbial “put” strike level, leading to a “pause” on tariffs for all countries besides China. Whether government officials can contain market volatility going forward is uncertain given ill-advised US trade policy has set in motion a cascading series of market events.
US: CPI figures surprised to the downside. Weekly mortgage applications spiked amid falling rates last week (which reversed course this week). US home values appreciated by 80% since 2020. NFIB Small Business sentiment is cratering.
Europe: UK 30-year yields hit their highest level in 27 years, negatively impacting housing sentiment. The euro is making its largest weekly gains versus the US dollar since 2008. The Swiss franc hit an all-time high versus the euro.
Asia: Japan's PPI beat expectations. China's FX continues to hit multi-year lows versus the USD and implied volatility of the offshore renminbi is surging. China's PPI measures remain in deflationary territory and the market is pricing in further PBOC rate cuts. Asian exports spiked in Q1 ahead of impending tariffs. New Zealand's RBNZ cut rates by 25bps. India's RBI cut rates by 25bps to 6%.
The Fiscal Gap: US receipts and Expenses
Adding more tax to foreign imports is forecast by the US presidential administration to help close the gap between spending and revenue.
DOGE cuts have resulted in a modest improvement in the spread in March. However, US government spending on interest rate debt service payments remains an expensive cost.