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“Yesterday’s tariff focus was mainly on the heightened tensions between Canada and US; today, the focus shifts to the EU-US tit-for-tat.”
Meanwhile, Germany’s fiscal package is expected to face debate in the Bundestag. Mario Cavaggioni, portfolio manager at HY Market, recently outlined the legislative timeline:
- Debate the planned financial package: March 13 and 18.
- Potentially vote on the package: March 18.
- Vote on the two special funds: March 21.
Progress on approving the infrastructure fund, debt brake reforms, and fiscal rules could boost sentiment in key sectors, including construction, defense, energy, telecommunications, IT, and tech.
US Market Recap: Inflation, Tariffs, and Ukraine Developments Drive Sentiment
On Wednesday, March 12, US equity markets delivered mixed performances. Softer headline US inflation and optimism regarding an end to the Ukraine war provided some relief. However, tariff concerns remained a headwind.
The tech sector benefited from the US inflation data, with the Nasdaq Composite Index gaining 1.22%, while the S&P 500 rose 0.49%. However, the Dow bucked the trend, falling 0.20%.
The US annual inflation rate dropped from 3% in January to 2.8% in February, with core inflation easing to 3.1% from 3.3%. However, economists expect the Fed’s preferred Core PCE Price to rise in February, tempering Fed rate cut bets.
Tony Sycamore, market analyst at IG.com, commented:
“The downside surprise was largely driven by a decline in the volatile airfares and car insurance components, neither of which have a significant read through to core PCE – hence, GS Econ now expect that the core PCE price index rose 0.29% in February (vs. their expectation of 0.25% before the CPI release).”
US Labor Market and Producer Prices in Focus
On Thursday, US producer prices will give investors insights into the inflation outlook. Economists expect producer prices to rise 3.3% year-on-year in February, down from 3.5% in January.
A lower-than-expected print could signal softer inflationary pressures, supporting a more dovish Fed rate path. Conversely, a higher-than-expected reading could temper bets on a June Fed rate cut, impacting risk assets.
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