President Trump touts new tariffs on purchasers of Venezuelan crude

President Trump has announced that a 25% secondary tariff will be placed on any country that buys oil and gas from Venezuela as his dispute with the country over immigration escalates. The move would put further pressure on China in particular, though the wording of the announcement gives the Trump administration some leeway in administering it. President Trump also commented on the upcoming reciprocal tariffs overnight, indicating that there could be some nations that receive exceptions from the measures which are due to be introduced from April 2. He also spoke further on sector-specific tariffs, saying that automobile tariffs would be announced soon, and that tariffs on lumber, semiconductors and pharmaceutical drugs would follow.

The US manufacturing survey slipped to a contractionary 49.8 in March on the preliminary print, down from 52.7 in February and far short of the predicted 51.7. Services, on the other hand, rose to 54.3, up from 51.0 previously and beating expectations that it would remain at the same level. As a result, the composite score moved up to 53.5, from 51.6 the previous month. Business confidence weighed heavily on the manufacturing PMI as respondents cited concern around the potential impact of tariffs on their businesses. Inflation is a particular worry and input costs are already accelerating.

The Eurozone PMI survey for March disappointed as it came in at 50.4 on the composite reading, up from 50.2 previously but missing the predicted 50.7. Nevertheless, this was the strongest reading in seven months. Services PMI fell to 50.4, from 50.6 in February and well short of the consensus forecast of 51.1. Manufacturing on the other hand rose to 48.7 – still contractionary but up from 47.6 on the previous reading and well above the predicted 48.2. The improvement was driven by the two largest economies of Germany and France, both of which saw substantial improvements in their manufacturing PMI surveys in particular, albeit still in sub-50 territory. The uptick was expected given the growing impetus around spending on defence and infrastructure in the single currency bloc, in Germany in particular.

The UK also saw a substantial improvement in its PMI survey as the composite index rose to 52.0, a six-month high for the index and up from 50.5 previously. The improvement was driven by services which rose to 53.2, from 51.0 in February, while manufacturing slipped further into contractionary territory at 44.6, from 46.9 on the prior reading.

India’s manufacturing survey for March stood at 57.6, up from 56.3 on the previous reading and the highest reading since July 2024. The services PMI meanwhile fell to 57.7, down from 59.0 previously, together giving a composite reading of 58.6. Rate cuts from the RBI are expected to be supportive of private sector activity this year.

Today’s Economic Data and Events

13:00 Germany IFO business climate survey, March. Forecast: 86.7

18:00 US Conference board consumer confidence index, March. Forecast: 93.6

18:00 US new home sales, February. Forecast: 680,000

Fixed Income

• USTs lost ground on Monday as President Trump’s indication that some of the planned tariffs will have carve-outs for certain countries led to greater risk-on activity. Yields on the 2yr rose 9bps to 4.0346% while the 10yr also rose 9bps, to 4.3346%.
• Bank of Atlanta President Raphael Bostic told Bloomberg that he now sees just one interest rate cut this year as the most likely outcome, citing potential inflationary pressures from tariffs which he is not convinced will be transitory.

FX

• The dollar index strengthened for a fourth straight session yesterday, adding 0.2% against its basket of peer currencies.
• GBP closed all but flat at 1.2923 as the better-than-expected PMI reading bolstered the currency against the greenback’s boost, but EUR closed down 0.2% at 1.0801 while JPY weakened 0.9% against the dollar to close at 150.70.
• Commodity currencies were mixed with CAD and AUD both adding 0.2% while NZD slipped 0.1%.

Equities

• Renewed risk-on sentiment boosted US stock markets on Monday, with robust gains for all three benchmark indices. The Dow Jones, the S&P 500, and the NASDAQ added 1.4%, 1.8%, and 2.3% respectively.
• European markets were softer, with modest losses across the board. The FTSE 100 closed 0.1% lower, the DAX fell 0.2%, and the CAC ended down 0.3%.
• Locally, the ADX closed flat while the DFM added 0.3%. Saudi Arabia’s Tadawul gained 0.7%. In Turkey, the Borsa Istanbul 100 recouped some recent losses as it closed up 2.8%.

Commodities

• President Trump’s announcement of coming tariffs on nations buying oil from Venezuela combined with general risk-on sentiment to give prices a leg up on Monday.
• Brent futures added 1.2% to close at USD 73.0/b while WTI also closed 1.2% higher, at USD 69.1/b.