Seeking Safety Over Risk on Final Day of the Quarter

March 31, 2025

(198) The main theme in financial markets today has been a flight to safety, with stock markets tumbling 4.2% in Taiwan, 4.1% in Japan, 1.5% in Thailand and Vietnam, and 1.3% in Hong Kong. Major euro area stock markets so far show drops of 1.5-2.0%.The British FTSE is 1.4% weaker, and Nasdaq futures are down 1.5%. Ten-year sovereign debt yields are five basis points lower in the United States and Japan, while the price of gold appreciated over 1% to touch a new record high of $3,159.30 per ounce. Bitcoin’s price slid 0.5%, while oil edged up 0.3% so far.

The dollar benefited only slightly from safe-haven demand perhaps because America has been the prime creator of enhanced uncertainty surrounding geopolitics and the world economy. Overnight greenback appreciation was led by 0.6% gains against the New Zealand and Australian dollars but mitigated by drops of 0.2% against the yen and 0.1% versus sterling. Rises against the euro and Swiss franc have been held to just 0.2%.

Not only does March 31 mark the end of a month and the first quarter, it is also the last day of the fiscal year in several economies including India, Great Britain, Hong Kong, South Africa, Canada, Singapore, and Japan. Several Islamic countries are observing Eid-al fitr such as Pakistan, Malaysia, Indonesia, Singapore and Bangladesh. But the biggest force behind today’s market angst is the fast-approaching imposition of additional U.S. tariffs on April 2, dubbed Liberation Day by President Trump. Extremely few details of what’s happening then emerged over this past weekend, and what there was proved typically inconsistent. There was one threat that tariffs of up to 50% could be imposed on Russia if Putin continues to stall agreement ending the war with Ukraine. Iran was another specific target related to a non-trade issue, namely Iran’s persistent push toward developing nuclear bomb capability.

Several Japanese economic data releases arrived. Retail sales in February grew less than expected, rising 0.5% on month and posting the smallest 12-month increase (1.4%) in four months. Industrial production jumped 2.5% on month but recorded a smaller 0.3% 12-month rate of increase in February. Housing starts (up 2.4% on year) and construction orders (down 3.3%) respectively posted their biggest gain in ten months and largest on-year drop in three months.

China’s government-authorized NBS-compiled manufacturing purchasing managers index edged just 0.3 points higher in March to 50.5, but that was good enough to signal the fastest rate of improvement in 12 months. The non-manufacturing PMI rose 0.4 index points to a 3-month high of 50.8.

In South Korea, retail sales in February rose 1.5%, the largest monthly advance in a half year, but still posted a 2.3% year-on-year drop. Industrial production rose 1.6% on month and 7.0% compared to the level in February 2024.

Germany’s preliminary March consumer price inflation estimate revealed a 0.1 percentage point dip to a 4-month low of 2.2%. Germany also released February import price data, showing an overall 3.6% year-on-year pace (most in 25 months) led by an acceleration in the energy component to 9.8% from 6.2% in January and 0.4% in December.

Italian CPI inflation, on the other hand, accelerated to a year and a half high of 2.0% last month from 1.6% in February and last year’s low of 0.7% in September. Still, 2.0% aligns with the ECB target and is well down from the 2022 peak of 11.8%. Moreover, core consumer price inflation held steady at 1.7%.

German retail sales unexpectedly followed January’s 0.7% increase with an 0.8% advance in February that resulted in the largest 12-month increase (4.9%) since Russia invaded Ukraine in February 2022.

Some of the other European data reports today showed

Upwardly revised Danish GDP growth. GDP went up 1.8% in 4Q 2024 and was 4.4% greater than a year earlier, which almost matched the 4.7% increase between the final quarters of 2022 and 2023.
Portuguese consumer price inflation receded half a percentage point to a 7-month low of 1.9% in March.
Portugal’s jobless rate returned to 6.4% in February from 6.3% in January, which had matched the cyclical low in April 2024.
Producer price inflation in Hungary of 8.2% in February was its lowest in 3-months but well above -7.2% at the end of 2023.
In March, consumer price inflation rose 0.4 percentage points to a 2-month high of 2.0% in Slovenia and by 0.2 percentage points to a 2-month high of 4.9% in Poland.
In February, industrial production 4.7% in month but fell 3.9% in Croatia.

Tags: German CPI and import prices, Japanese retail sales and industrial production

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on Monday, March 31st, 2025 at 7:02 am and is filed under New Overnight Developments Abroad – Daily Update.
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