Treading water on Tuesday, risk markets saw lower volumes as tariff deadlines loomed. A conditional agreement on pausing hostilities in the Black Sea opened an uncertain path for a partial, temporary ceasefire between Russia and Ukraine. The US directed attention toward China in its Annual Threat Assessment as intelligence officials testified on Capitol Hill and a number of entities were blacklisted. While an EU delegation met with US counterparts seeking to attenuate trade threats and Indian officials contemplated relief in exchange, a March sentiment survey showed US consumer confidence dropping to a four-year low in the face of tariffs and broader economic uncertainty that have aggravated inflation concerns.
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Around the World
Russia-Ukraine:
Further negotiations in Saudi Arabia yielded statements from the US and Russia concerning a potential Black Sea ceasefire that would apply to certain energy infrastructure. Ukraine agreed to narrower terms in principle. Conditionality regarding a lifting of sanctions as well as Russia's demand to reintegrate into the SWIFT payment system left finalization unclear. (AP, Reuters, WSJ)
US-China:
A day after the Trump administration invoked the International Emergency Economic Powers Act of 1977 to order "secondary tariffs" on importers of Venezuelan oil, the US emphasized strategic competition with China in its Annual Threat Assessment as intelligence chiefs testified to geopolitical threats and group chats before the Senate Intelligence Committee; testimony will continue before the House on Wednesday. A number of Chinese firms and subsidiaries were designated for addition to a restricted Entity List. (Reuters, FT)
Confidence:
The Conference Board's consumer confidence gauge for March fell 7.2 points to 92.9, a fourth-straight monthly decline to the lowest level since January 2021 that also missed consensus forecasts. The short-term expectations reading fell to a 12-year-low while recession expectations climbed and "optimism about future income [...] largely vanished".
Central Banks, Governments, and Data
Federal Reserve:
Speaking in Washington, D.C. at the U.S. Hispanic Chamber of Commerce Legislative Summit, Governor Adriana Kugler briefly touched on the economic outlook. Acknowledging "some signs of softness" in economic activity and a slower pace of hiring to begin the year, the labor economist by trade reiterated inflation concerns.
In certain subcategories there is evidence that inflation reaccelerated in recent months. Importantly, while goods inflation was negative in 2024 - as was the norm before the pandemic - it has turned positive in recent months. This development is unhelpful because goods inflation has often kept a lid on total inflation and also affects inflation expectations. In addition to the increase in prices already captured in official data, surveys show that consumers are expecting further increases in the near term. [...] According to comments from survey respondents, much of this uncertainty appears to be tied to trade policy. I am paying close attention to the acceleration of price increases and higher inflation expectations, especially given the recent bout of inflation in the past few years.
In an interview with the Financial Times published early Wednesday, Chicago Fed President Austan Goolsbee indicated that rates could be "a fair bit lower" over a 12 to 18 month horizon but that a resumption of easing could take longer than expected.
Bank of Japan:
Addressing Parliament, BoJ Governor Kazuo Ueda reiterated the central bank's readiness to hike rates further in the face of above-target inflation. (Reuters)
European Central Bank:
Bank of France Governor Francois Villeroy de Galhau addressed the scope for further ECB rate cuts from 2.50% to 2.00% by the end of the Summer. (FAZ via Reuters)
Fiscal:
GOP lawmakers contemplated the addition of a debt ceiling hike as budget reconciliation talks between the House and Senate continued. (Politico)
Moody's warned of widening deficits in the US and lower debt affordability.
The UK's Debt Management Office will release bond issuance estimates for 2025-26 on Wednesday as Finance Minister Reeves provides a budget update to Parliament.
Australia's government lifted projected borrowing needs for the current year.
Economic Releases:
Census data showed that new home sales in the US climbed 1.8% in February while the median home price dropped 1.5%, to $414,500.
Services PPI inflation in Japan came in at 3.0% in February, down from a revised 3.2% in January.
Year-over-year inflation ticked lower in Australia, from 2.5% in January to 2.4% in February.