Investors flee to Europe

Welcome back to SovereignBeat!

• Weak payrolls, rising unemployment hit U.S. outlook.

• Dollar slides as Europe aims to boost defense spending.

• Germany’s $500B infrastructure bond pulls capital from U.S. to Europe.

• China targets 5% growth and commits to fiscal stimulus.

• U.S. stocks drop, China markets rally

• Oil remains stuck in a prolonged bear market.

Let’s dissect

We Also Recommend

This smart home company grew 200%…

No, it’s not Ring or Nest—it’s RYSE, a leader in smart shade automation, and you can invest for just $1.90 per share.

RYSE’s innovative SmartShades have already transformed how people control their window coverings, bringing automation to homes without the need for expensive replacements.

This year alone, RYSE has seen revenue grow by 200% year over year and expanded into 127 Best Buy stores, with international markets on the horizon. Plus, with partnerships with major retailers like Home Depot and Lowe’s already in the works, they’re just getting started.

Now is your chance to invest in the company disrupting home automation—before they hit their next phase of explosive growth. But don’t wait; this opportunity won’t last long.

Invest today at $1.90 per share and receive up to 25% bonus shares.

Past performance is not indicative of future results. Email may contain forward-looking statements. See US Offering for details. Informational purposes only.

Markets Snapshot

Macro and Fixed Income Markets

• US : Trade policy uncertainty dominated the week, as Tuesday marked the deadline for President Trump’s tariffs, which included 25% duties on Canadian and Mexican imports and 10% on Chinese goods. In response, these trading partners imposed retaliatory tariffs, prompting U.S. officials to announce a one-month exemption for goods covered under the U.S.-Mexico-Canada Agreement, though shifting policies and uncertainty continue weighing on investor sentiment.

• The economic calendar began Monday with the ISM Manufacturing PMI, which indicated modest expansion in February at 50.3%, a 0.6 percentage point decline from January. However, the new orders index fell sharply into contraction at 48.6%, down from 55.1%, while the prices index surged to 62.4% from 54.9%. Meanwhile, the ISM Services PMI rose to 53.5%, marking eight consecutive months of expansion, with the services employment index climbing to 53.9%, the highest since December 2021.

• On Friday, the Labor Department released the nonfarm payroll report, showing the economy added 151,000 jobs in February, slightly below forecasts but exceeding January’s 125,000. The strongest job growth came from health care, financial activities, and transportation and warehousing, while federal government employment saw the largest decline following DOGE’s firing spree. Job growth has been slowing overall, as monthly jobs gains averaged 168,000 over the past 12 months. The unemployment rate edged up to 4.1% from 4.0%. U.S. Treasuries rallied after the report but later reversed course.

• The U.S. dollar index fell 2.4% for the week as of Friday afternoon, marking its steepest weekly drop since November 2022. Meanwhile, the euro recorded its largest weekly gain against the dollar since 2009, following announcements of increased stimulus spending by European governments (see below).

• A Consumer Price Index (CPI) report set for release on Wednesday will indicate whether higher-than-expected inflation persisted in February. In January, core CPI—which excludes energy and food prices—rose 3.3% yoy, exceeding economists’ forecasts and slightly surpassing December’s annual rate.

• EU: The European Central Bank (ECB) reduced its key deposit rate by 0.25 percentage points for its sixth policy meeting in a row to 2.5%. ECB President Christine Lagarde described rates as now being “meaningfully less restrictive” and highlighted uncertainty related to potential trade wars and other risks. This uncertainty has already impacted investment and exports, leading the ECB to lower its eurozone economic growth forecast for 2025 to 0.9%. The inflation projection for 2025 was revised upward to 2.3% from the previous 2.1% estimate. Eurozone annual inflation slowed to 2.4% in January from 2.5% in December, while core inflation, which excludes energy and non-alcoholic beverages, declined to 2.6% from 2.7%.

• Germany: In Germany, Friedrich Merz’s conservative alliance and the Social Democratic Party, currently negotiating a coalition government, agreed to establish a EUR 500 billion off-balance sheet infrastructure fund, exempt defense spending above 1% of GDP from the constitutional borrowing limit, and ease debt restrictions for states. The proposals will be presented to parliament next week. Following the announcement, Germany’s 10-year Bund yield recorded its largest daily increase since 1990, shortly after the Berlin Wall fell. On Saturday, Merz moved closer to forming a government as the CDU/CSU bloc and the Social Democrats (SPD), led by outgoing Chancellor Olaf Scholz, concluded exploratory talks on Saturday and agreed to start formal coalition negotiations.

• Meanwhile, European Union leaders expressed support for a EUR 150 billion joint borrowing plan to bolster military spending amid growing concerns over Europe's reliance on U.S. military aid.

• China: At the recent National People’s Congress (NPC) meeting, China outlined its economic priorities for 2025, setting a 5% growth target for the third consecutive year. The government also raised its fiscal deficit goal to 4% of GDP, the highest since 1994, while lowering its annual inflation target to 2%, the lowest since 2003, reflecting ongoing deflationary pressures.

• The increase in the fiscal deficit breaks China’s long-standing 3% cap, signaling higher government borrowing and spending to support growth. Boosting consumption remains the government’s top priority for 2025, as stated by Premier Li Qiang, though Beijing provided limited details on specific measures in its annual work report.

Equity Markets

• US: Market declines continued as trade tensions pressured equities, with the S&P 500 posting its largest weekly drop since last September, marking its third consecutive week of losses. The index fell 3.1%, faring slightly better than the NASDAQ, which declined 3.8%, while the Dow dropped 2.5%.

• The NASDAQ officially entered correction territory on Thursday, having fallen more than 10% from its recent peak amid steep losses in technology stocks. In contrast, while the S&P 500 and Dow also saw sharp declines, neither crossed the 10% correction threshold.

• Large-cap growth stocks significantly fared better than value stocks, reinforcing the value style's 2024 resurgence after an extended period of growth leadership. For the week, the growth index lost 3.9%, while the value index fell 2.4%.

• China: Stock indexe rose for the week after Beijing set economic growth targets in line with expectations and indicated further stimulus measures amid escalating trade tensions with the U.S. The CSI 300 Index gained 1.39%, while the Shanghai Composite Index rose 1.56% in local currency terms. In Hong Kong, the Hang Seng Index climbed 5.94%.

Commodities

• Oil: OPEC+ plans to increase production in April, a move viewed as bearish for oil prices. The decision was more aggressive than expected, though OPEC+ may adjust supply increments based on market conditions. Higher production could also provide the U.S. with more flexibility to impose sanctions on Iran and Venezuela. Brent crude fell over 3% to $70, with Citigroup forecasting a decline to $60-65/bbl within 6-12 months.

Thank you for checking out the latest SovereignBeat newsletter! Share your thoughts on the topics covered and let us know if there's anything specific you'd like us to explore.

Read our other publications here

Our Further Reading Recommendations

• The Bond Market’s Trump Trade Is Looking Like a Recession Trade (Bloomberg)