Εβδομαδιαία Επισκόπηση: Διεθνής Οικονομία & Αγορές, 31/03/25

US equities underperformed in Q1:2025 (-5%) due to trade concerns and US equity markets’ IT jitters

Volatility continues in global equities, with the MSCI ACWI down by -1.4% in the past week, in view of growing concerns regarding US economic activity and elevated policy uncertainty ahead of April 2nd, when President Trump is set to make announcements regarding international trade policies (“Liberation Day”).  

The S&P500 shed -1.5% wow, with the bulk of the decline occurring at the end of the past week, on account of US macro data somewhat corroborating economic concerns. US stocks stabilized on Monday 31st (5612) remaining though circa -9% lower from their record highs on February 19th (6144).

Concerns for slower economic growth broadly offset concerns for higher inflation (see below). As a result, the US Treasury 10-year yield was roughly unchanged on a weekly basis, at 4.26%, before declining marginally below 4.20% on Monday 31st. Gold prices rose substantially to fresh record highs, breaking above the $3100/ounce threshold (+18% ytd).

Increased US import tariffs are, inter alia, expected to be announced, covering a wide range of products and countries-of-origin. Non-tariff trade barriers could also be on the cards. Retaliation from affected countries will be closely monitored, with a possible tit-for-tat, representing a meaningful downside risk for global economic activity. 

Recall that President Trump announced, on March 26th, new tariffs of 25% on imports of passenger vehicles & light trucks (effective as of April 3rd) and certain respective components (effective as of May 3rd). The new levy comes on top of existing ones (indicatively, mostly 2.5% for car imports).

The total import value of the aforementioned product categories stands at c. $440 bn (13.4% of total US goods imports). Nevertheless, the exact quantification of the affected merchandise value is challenging at this point, as some clarifications regarding certain items to be affected are pending. 

More importantly, particularly for imports from Mexico and Canada of automobiles & light trucks (c.45% of total) and components (c.51%), the portion of an item’s cost arising from US-originated inputs (“US content”) is to be identified and to be excluded from the new tariffs.

Regarding US macro, personal spending increased slightly by +0.1% mom in February 2025 in constant price terms, following a contraction of -0.6% mom in January. The Atlanta Fed’s GDPNowcast model points to a weak +0.3% gain in quarterly annualized terms for real private consumption in Q1:2025 (+2.7% yoy), from +4.0% qoq saar (+3.1% yoy) in Q4:2024.

At the same time, the annual growth of the Personal Consumption Expenditure Price Index, the Federal Reserve’s preferred metric to gauge consumer inflation, held steady at +2.5% in February, as expected. The respective pace for the core though (i.e. excluding energy and food), accelerated to +2.8% from an upward revised (by +0.1 pp) +2.7% in January. 

In the United Kingdom, according to the Office for Budget Responsibility (“OBR”), a weaker than expected GDP in H2:2024 (roughly stagnant) and, more importantly, higher assumptions for debt interest costs (10-year Gilt yield of 4.8% on average from 2025 to 2029, instead of 4.4% assumed in the respective exercise in October 2024), led to a deterioration of fiscal projections.