ADVERTISEMENT

Risk-off sentiment prevailed in the global markets last week after US President Donald Trump confirmed that he would proceed with auto and reciprocal tariffs on Wednesday this week. Adding to concerns, hotter-than-expected US Personal Consumption Expenditure (PCE) data fuelled worries that the US economy may be slipping into stagflation, with potential repercussions for global markets.

Against this backdrop, this week’s US employment data will be closely scrutinised, as any signs of a weakening labour market could accelerate the downturn in equities. Investors will also monitor the economic fallout from Trump’s tariffs and possible retaliatory measures from Canada, the European Union, and China. Other major economic data to be watched include the eurozone’s flash inflation data and the Reserve Bank of Australia’s (RBA) interest rate decision.

Europe

In mid-March, the European Commission announced plans to impose import duties on €26 billion worth of American goods in April. These measures include the reinstatement of countermeasures against €8 billion worth of US exports, set to take effect on Tuesday. Following Trump’s tariff announcement, European equity markets retreated sharply from near-record highs last week, with the automotive, healthcare, and industrial sectors bearing the brunt of the selloff. Further declines may follow if market sentiment continues to deteriorate.

On the economic front, Germany is scheduled to release its preliminary CPI for March on Monday. Annual inflation stood at 2.3% in February, unchanged from the previous month, while the monthly CPI is forecast to rise by 0.3% in March.

The eurozone’s flash inflation report, due on Wednesday, will be another key focus. Recent CPI data from France and Spain suggest inflationary pressures may have eased further this month. In February, inflation in the eurozone slowed to 2.3% year-on-year, down from 2.5% in January, while core inflation fell to 2.6%, its lowest level since January 2022. Consensus forecasts indicate that headline inflation may decline to 2.2%, with core inflation expected to register at 2.5%.

United States

The US non-farm payroll report for March is scheduled for release on Friday. The labour market remains resilient despite a significant reduction in the federal workforce. In February, 151,000 new jobs were added, while the unemployment rate edged higher to 4.1% from 4.0% in January. Average hourly earnings rose by 0.3% month on month, slightly down from 0.4% in the previous month.

Consensus estimates suggest that job creation may have slowed in March. However, the unemployment rate is expected to remain steady at 4.1%. A continued strong employment market would be a positive indicator for the US economy and stock markets but could also dampen expectations of further interest rate cuts by the Federal Reserve.

Additionally, the ISM Manufacturing and Services Purchasing Managers’ Index (PMI) data for March will be closely watched as a key indicator of US business activity amid Trump’s expanding tariffs.

Asia-Pacific (APAC)

The Reserve Bank of Australia is set to announce its interest rate decision, with expectations that the bank will keep its official cash rate (OCR) unchanged. In February, the RBA initiated its easing cycle, lowering the OCR by 25 basis points to 4.1% amid cooling inflation. Annual inflation fell to 2.4%, while core inflation eased to 2.7%, both within the central bank’s target range. However, the unemployment rate remains lower than the RBA’s “inflation-neutral” level, making a second consecutive rate cut unlikely this week.