Global Macro Monitor

Key Observations:

• U.S. stock indexes broke multi-week losing streaks but remain in correction territory. Value sectors like Utilities and Energy outperformed as investors rotated out of large-cap tech amid rising tariff uncertainty and mixed economic data.
• The Federal Reserve held rates steady and signaled cautious optimism. Despite lowering 2025 GDP projections and raising inflation estimates, Chair Powell emphasized that tariff effects may be “transitory,” contributing to a midweek market rebound.
• Retail and manufacturing data painted a mixed picture of the U.S. economy. February retail sales rose just 0.2%, while the Empire State Manufacturing Survey showed declining optimism, contrasting with stronger housing starts and control group sales.
• European markets gained slightly, bolstered by fiscal hopes but tempered by tariff concerns. The ECB warned U.S. tariffs could cut eurozone GDP by up to 0.5%, while the Swiss National Bank cut rates, signaling diverging policy paths across Europe.
• Asia’s outlook is mixed with Japan steady, China stabilizing, and emerging Asia vulnerable. Japan’s BoJ maintained rates, citing stable inflation and wage dynamics, while China’s strong retail and industrial data were offset by persistent property sector weakness.
• Tariff risks remain the key wildcard across global markets. With U.S. tariff announcements expected on April 2, trade tensions could escalate, impacting inflation and growth projections worldwide, especially in Europe and emerging Asia.
• Investors brace for a data-heavy week to gauge consumer strength and inflation. Key releases—including PMIs, GDP, and the PCE price index—will help clarify whether current macro uncertainty signals a temporary slowdown or a deeper structural concern.

Markets

U.S. equities ended the week with modest gains, snapping multi-week losing streaks across the S&P 500, Nasdaq, and Dow. The S&P 500 rose 0.1%, while the Nasdaq gained 0.5%. However, the underlying trend remains cautious, as major indexes recently entered correction territory. Notably, large-cap tech stocks underperformed again, dragging down the Nasdaq, while value stocks—especially in Utilities, Energy, and Consumer Staples—continued to outperform growth.

The Russell 2000 outperformed other indexes, despite ongoing volatility. Meanwhile, Treasury yields fell, with the 2-year yield down to 3.95% and the 10-year holding at 4.25%, driven by dovish Fed projections.

Globally, European markets posted mild gains, with the STOXX Europe 600 up 0.56%. The UK’s FTSE 100 and Italy’s FTSE MIB also rose, but Germany’s DAX slipped. Japanese equities rallied, with the Nikkei 225 gaining 1.68% on the back of foreign investor demand and BoJ’s policy hold. Chinese markets, in contrast, declined despite better-than-expected retail sales and industrial output.

In emerging markets, Turkey faced volatility following political turmoil, while Brazil’s central bank raised rates again but hinted at a smaller hike ahead. Cryptocurrencies moved in line with equities, and gold extended its rally, signaling investor hedging.

Economics

The U.S. economic landscape remains mixed. Retail sales grew just 0.2% in February, below forecasts, while housing starts surged by 11.2% to 1.5 million units. The Fed left interest rates unchanged at 4.25%–4.5% but lowered GDP growth forecasts and raised inflation projections. Fed Chair Powell’s use of the term “transitory” regarding tariff-related inflationary effects reassured markets, though uncertainty remains elevated.  Nevertheless, credit spreads came in during the week and the Russell outperformed signaling the markets are not too worried about a recession.

Inflationary concerns persist globally. The ECB’s Christine Lagarde warned that retaliatory tariffs could raise eurozone inflation by 0.5%, while the ECB is expected to cut rates in April and June. The Swiss National Bank cut its rate to 0.25%, while the BoE and Sweden’s Riksbank held rates steady, reflecting uncertainty over inflation trajectories.

Japan’s inflation remains sticky, with February’s core CPI at 3.0%. The BoJ maintained its rate but flagged potential rate hikes if wage-price dynamics persist. Meanwhile, China’s data beat expectations, with retail sales and fixed asset investment rising, but property development continued to decline, and unemployment rose to 5.4%.

Emerging Asia faces GDP downgrades due to a harsher U.S. tariff outlook, though China and Hong Kong were spared. Monetary easing is expected across major Asian central banks.

Week Ahead

Markets face a pivotal week with a full slate of economic data. Key U.S. indicators include PMIs (Monday), Consumer Confidence and New Home Sales (Tuesday), Durable Goods Orders and GDP (Wednesday–Thursday), and the PCE inflation report (Friday). These will be closely watched for signs of resilience or weakness in consumer activity and inflation pressures, particularly amid escalating tariff risks.

Technically, the S&P 500 struggles to reclaim the 5,700 resistance level and shows signs of a bear flag, suggesting potential downside. Market breadth is improving, yet momentum remains fragile.

Volatility indicators suggest some easing in hedging activity, which could set the stage for a gradual recovery—more of a “U” bottom than a sharp rebound. With tariff announcements expected by April 2 and geopolitical developments in focus, investor positioning may turn defensive. Expect modest risk appetite amid heightened macro uncertainty.