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Improving business sentiment could spur investment and job creation, potentially boosting consumer confidence and spending. Despite improved sentiment, the prospect of tariff-related risks kept expectations for ECB rate cuts intact.
US Consumer Confidence Slump Supports Risk Sentiment
US data also influenced risk appetite. The US CB Consumer Confidence Index dropped to 92.9 in March, down from 100.1 in February. Consumer concerns about income, the labor market, and the economy pressured sentiment.
Weaker consumer confidence could adversely impact spending and dampen demand-driven inflation. With private consumption accounting for over 60% of US GDP, reduced spending may slow GDP growth and support a more dovish Fed stance. Weaker growth and bets on multiple Fed rate cuts supported demand for risk assets.
US Markets Advance on Tariff Relief and Fed Bets
US equity markets consolidated Monday’s gains on Tuesday, March 25. The Nasdaq Composite Index rose 0.46%, while the Dow and the S&P 500 gained 0.01% and 0.16%, respectively.
Nonetheless, ongoing tariff uncertainty and concerns about the US economy capped the gains.
Key Market Focus: US Durable Goods and Tariffs
Turning to the US session on Wednesday, March 26, durable goods orders will draw investor interest. Economists expect durable goods orders to decline by 1% month-on-month in February after surging 3.1% in January.
- A steeper-than-expected drop could signal waning demand, fueling recessionary fears. Increasing concerns about the US economy may overshadow Fed rate cut optimism, potentially impacting US markets.
- Conversely, a surprise rise in orders may ease concerns about weakening demand and recession concerns, boosting risk appetite.
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