Persistent Market Nervousness about U.S. Policy Changes – Currency Thoughts

Persistent Market Nervousness about U.S. Policy Changes

March 10, 2025

(201) U.S. stock market futures show a decline of more than 1% this Monday, and the weighted dollar index has eased another 0.2%, bringing the decline since end-February to 3.4%. The yen gained 0.6% against the dollar overnight. While the 10-year Treasury yield has fallen 26 basis points during the past month, Japan’s 10-year JGB yield has traced a mirror path, rising by 26 basis points. The Swiss franc and euro rose 0.4% and 0.2% overnight, while sterling has held steady against the greenback.

In overseas markets, share prices rose 0.9% in Hong Hong and 0.4% in Japan but fallen 0.6% in Indonesia, 0.3% in India, and 0.2% in China. The German, French, and Spanish stock markets are about 1% lower, while equities in Italy and the U.K. have fallen around a half percent. Ten-year sovereign debt yields overnight dropped six basis points in the United States, four bps in Spain, three bps in Germany, France and Italy, and a basis point in the U.K. but rose five basis points in Japan.

Bitcoin’s price continues to move very erratically, recovering 3.3% so far today. Oil is up 0.5%, while gold dipped 0.3% but remains above the $2900 per ounce threshold.

Whereas President Trump during the presidential campaign last autumn denied any knowledge of the project 2025, his proposed policy changes parallel amazingly closely to that policy blueprint, and financial pundits are very worried that the new agenda will lead to stagflation and ramp up geopolitical tensions. Over the weekend, Trump conceded that America is in a period of economic transition and urged patience.

Today’s menu of economic data releases around the world includes several price and industrial production reports. First prices:

• Chinese consumer price inflation swung from +0.5% in January to an 13-month low of -0.7% in February. Core CPI inflation of -0.1% was negative for the first time in over four years. Chinese producer price inflation (-2.2% in February) has been negative since October 2022 including a trough of -5.4% in June 2023.
• Italian producer prices leaped 1.6% on month and rose to a 23-month year-on-year high of 4.4% in January.
• Norwegian consumer price inflation accelerated to a 10-month high in February of 3.6% from 2.3% in January. Core CPI of 3.4% was at an 8-month high and roughly half as high as the 7.0% peak in June 2023. Norwegian producer price inflation, which had been as negative as -37.4% in August 2024 and unchanged as recently as November had soared to a 29-month high of 23.3% as of last month.
• Danish CPI inflation rose half a percentage point in February to a 9-month high of 2.0%. Such previously fell from 10.1% in October 2022 to 0.1% one year later.
• Lithuanian CPI inflation printed at a 2-month low of 3.5% in February versus 2.1% in December, 0.0% in March 2024, and a peak of 24.1% in September 2022.
• Latvian CPI inflation climbed to an 18-month high of 3.7% last month, having previously cratered from 22.2% in September 2022 to 0.1% in May 2024.
• Greek CPI inflation slid to a 3-month low of 2.5% in February, well below the mid-2022 peak of 12.1%.
• Egyptian CPI inflation almost halved to 12.8% in February from 24.0% in the prior month.

German industrial production rebounded 2.0% on month in January from a 1.5% slide in December but was unchanged in November-January compared to the previous three-month average. January output was 1.6% lower than a year earlier in spite of the monthly rise.

Slovakian industrial production fell 7.3% on month and by 5.2% on year in January. Swedish IP also fell on both monthly (-2.6%) and year-on-year (-2.1%). Alternatively, Slovenian industrial production in January rose 1.6% on month and 3.0% on year, Austrian IP climbed 3.0% on month and 0.5% on year. Finnish output increased 1.1% on month and 0.5% on year. Turkish industrial production fell 2.3% on month, its worst performance in 7 months, but still eked out a 1.2% year-on-year advance.

Several Japanese data were reported. The economy watchers index that measures confidence among service sector workers fell to a 30-month low in February and, at 45.6, was three index points weaker than in January. Japan’s leading and coincident economic indicators both rose to 3-month highs in January. Average cash earnings among Japanese workers (+2.8% nominally) fell to a 3-month low in January. Such was worse than analyst expectations and negative 1.8% in inflation-adjusted terms following increases of 0.5% and 0.6% on such a basis in the final two months of 2024. Japan’s non-adjusted current account swung to a deficit in January for the first time since January 2023.   The seasonally adjusted current account surplus of 1.938 trillion was 30% narrower than December’s surplus.

Consumer confidence in Switzerland fell to a 3-month low of -34 in February from a 31-month high of -29 in January.

The Sentix gauge of investor sentiment toward Euroland improved 9.8 index points to a 9-month high of -2.9 this month, cheered by Germany’s decision to loosen constraints on fiscal stimulus.

Germany’s seasonally adjusted trade surplus narrowed to a 3-month low of EUR 16.0 billion in January, reflecting a 2.5% monthly drop in exports. The unadjusted surplus was only EUR 12.6 billion, down from EUR 22.2 billion in January 2024, as imports shot up by 7.8%.

Analysts were surprised when officials at the State Bank of Pakistan left their key interest rate unchanged at 12.0%, which is far above last month’s year-on-year inflation rate of 1.5%. There had previously been six interest rate cuts since June 2024 that lopped 10 percentage points off the peak level of 22.0% that had been reached initially in June 2023.

Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

Tags: Chinese CPI and PPI, euro area investor confidence, German trade surplus, Japanese current account, State Bank of Pakistan, Swiss consumer confidence

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