📆 Wednesday, March 5
► European stocks surged after Germany announced a plan to exempt defense and infrastructure spending from borrowing limits, marking a significant policy shift. Germany’s future chancellor Merz announced plans to set up a €500 billion infrastructure fund. The Stoxx 600 jumped 1.5%, led by defense stocks such as Rheinmetall (+3.3%) and Saab (+5.7%), while the DAX gained more than 3.3%. The move comes as the EU proposes €150 billion in loans to boost military investment, following Trump’s pause on Ukraine aid. Meanwhile, bond yields soared, with German 10-year bund yields up 23 (!) basis points, their largest jump since 2023, as investors anticipate higher debt issuance. The EUR gained 0.8%, buoyed by expectations of fiscal expansion and a potential US tariff compromise. Meanwhile, Eurozone PMI data reflected ongoing economic struggles—the Eurozone services PMI fell to a three-month low (50.6), highlighting weak business activity and slowing demand. Germany’s composite PMI dipped slightly to 50.4, as weak services sector growth offset a slight improvement in manufacturing. France’s services PMI slumped to 45.3, marking the worst decline since October 2023, with job losses at their highest since 2020. In contrast, Spain’s services PMI surged to 56.2, its highest level in months, fueled by strong domestic demand.
► US markets remain volatile, as Commerce Secretary Howard Lutnick signaled that the US may reach a compromise on tariffs with Mexico and Canada, softening Trump’s aggressive stance. US futures climbed a bit but already lost much of the gains after Tuesday’s turbulent session, where the S&P 500 fell 1.2% before recovering in after-hours trading. Trump defended his protectionist trade measures in an address to Congress, reaffirming 25% tariffs on steel, copper, and aluminum and calling for an end to a $52 billion semiconductor subsidy program. Meanwhile, BlackRock led a consortium to acquire key Panama port operations, marking one of the biggest infrastructure deals of the year. Investors are now awaiting Friday’s nonfarm payrolls report, which could influence Federal Reserve rate cut expectations. Focus also remains on potential news talks between Trump and Ukrainian President Zelensky.
► Asian markets advanced, driven by China’s decision to maintain a 5% GDP growth target for 2025 and expectations of additional stimulus. Hong Kong’s Hang Seng surged 2.84%, while China’s Shanghai Composite rose 0.53%, despite new US tariffs taking effect. Beijing’s response to Trump’s trade war has been measured, with tariffs of 10-15% on select US goods and export restrictions on key American firms, signaling a preference for negotiation over escalation. Meanwhile, Japan’s Nikkei rose slightly (+0.16%), as BOJ Deputy Governor Uchida indicated rate hikes may come sooner than expected, strengthening the JPY toward 150/USD. India’s Sensex gained 1%, led by tech and auto stocks, while Australia’s ASX 200 dropped 0.70%, as weaker-than-expected services PMI overshadowed a positive GDP report.
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