US stocks rallied amid optimism regarding a less aggressive tariff approach - Newsquawk Asia-Pac Market Open

• US stocks rallied on Monday following recent reports that US President Trump's April 2nd tariffs may be more targeted and exclude sector-specific tariffs, while a strong S&P Global Services PMI also supported the risk tone. However, Trump later stated he will be announcing tariffs on autos, lumber and chips over the next few days but may give a lot of countries breaks on tariffs, which helped add to the equity bid. As such, stocks closed around highs and all sectors were in the green with notable outperformance in Consumer Discretionary thanks to near 11% gains in Tesla (TSLA) and 3.6% gains in Amazon (AMZN).
• USD edged higher as a surprise surge in Services PMI for March more than offset the manufacturing slump into contractionary territory. There was a slew of tariff-related headlines with President Trump to announce additional tariffs over next days on autos, lumber and chips although may give a lot of countries breaks on tariffs, while he also announced a secondary tariff on Venezuela and any country that buys oil or gas from Venezuela will be forced to pay a 25% tariff on top of other tariffs.
• Looking ahead, highlights include BoJ Minutes from the January Meeting, Comments from RBA Assistant Governor Jones, Supply from Japan.

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LOOKING AHEAD

• Highlights include BoJ Minutes from the January Meeting, Comments from RBA Assistant Governor Jones, Supply from Japan.
• Click for the Newsquawk Week Ahead.

US TRADE

• US stocks rallied on Monday following recent reports that US President Trump's April 2nd tariffs may be more targeted and exclude sector-specific tariffs, while a strong S&P Global Services PMI also supported the risk tone. However, Trump later stated he will be announcing tariffs on autos, lumber and chips over the next few days but may give a lot of countries breaks on tariffs, which helped add to the equity bid. As such, stocks closed around highs and all sectors were in the green with notable outperformance in Consumer Discretionary thanks to near 11% gains in Tesla (TSLA) and 3.6% gains in Amazon (AMZN).
• SPX +1.76% at 5,768, NDX +2.16% at 20,180, DJI +1.42% at 42,583, RUT +2.55% at 2,109.
• Click here for a detailed summary.

TARIFFS/TRADE

• US President Trump said they will be announcing tariffs on autos, aluminium and pharmaceuticals in the very near future. It was later reported that Trump will announce additional tariffs over the next days on autos, lumber and chips although he may give a lot of countries breaks on tariffs.
• US President Trump posted on Truth that the US "will be putting what is known as a Secondary Tariff on the Country of Venezuela..any Country that purchases Oil and/or Gas from Venezuela will be forced to pay a Tariff of 25% to the United States on any Trade they do" which is to take place from April 2nd. Trump later stated that tariffs for doing business with Venezuela will be on top of existing tariffs and not all tariffs will be included on April 2nd.
• White House official confirmed to CNBC's Javers that the new 25% tariffs on countries that do business with Venezuela will be on top of other tariffs, meaning China tariffs will go to 45% on April 2nd, according to CNBC.
• US Commerce Secretary Lutnick said April 2nd tariff announcements will launch the 'external revenue service'.
• White House Council of Economic Adviser Chair Miran said he does not see short-term pain from tariffs and US consumers are flexible.
• Canadian PM Carney said he is available for a call with US President Trump and that Canada will talk on "our terms as a sovereign country", while he assumes Trump is waiting to see who wins general election before calling the winner.
• WTO said Canada initiated a WTO dispute complaint regarding Chinese duties on agricultural and fishery products. WTO said members are considering China's request for the panel to examine EU EV battery duties, while the EU said it is not ready to accept the establishment of a panel.
• UK is working on options to soften the impact of its digital services tax on US technology companies to help secure a tariffs deal with the White House and is open to a range of possibilities, according to FT.
• EU trade commissioner headed to Washington to meet US Commerce Secretary Lutnick on Tuesday.
• German Agriculture Ministry said Britain removed import restrictions on German animals and animal products imposed after the foot-and-mouth disease case.

NOTABLE HEADLINES

• Fed's Barr (Voter) said interest rates are still high for businesses overall while lending standards became tight in the pandemic and remain so.
• Fed's Bostic (2027 voter) said there's a lot of uncertainty about the economy and forecasting is more challenging than in the past, while he added that business leaders, policymakers or consumers do not know where the economy is heading. Bostic noted he does not see inflation returning to target until some time in 2027 and his dot plot moved to one rate cut this year (prev. 2), according to Bloomberg.
• US President Trump hopes the Fed lowers interest rates and said energy prices are coming down, while Trump said he was very concerned about the economy six months ago and they inherited a very bad situation. It was also reported that Trump said at a cabinet meeting that companies are all coming back to the US and investment numbers are beyond expectations, while he added that the CHIPS act was a disaster.
• US President Trump said money is pouring in and they want to keep it that way, while it was announced that Hyundai is to make a USD 5.5bln investment in Louisiana steel plant which create more than 1400 jobs and Hyundai will not pay have to any tariffs. Furthermore, it was stated that the Hyundai Steel (004020 KS) plant is part of a larger USD 21bln investment in the US and Hyundai Motor (005380 KS) is opening a Georgia plant this week in which production will exceed 1mln units per year.
• US Treasury Secretary Bessent, White House Economic Adviser Hassett, Senate Majority Leader Thune and House Speaker Johnson are to meet on Tuesday regarding the tax bill.
• US Treasury Secretary Bessent said interest rates are going to keep declining as energy costs decline and noted that laid-off workers can go into the private sector.
• US President Trump's administration has asked the US Supreme Court to block the judicial order to rehire thousands of fired US federal workers.

DATA RECAP

• US S&P Global Manufacturing PMI Flash (Mar) 49.8 vs Exp. 51.7 (Prev. 52.7)
• US S&P Global Services PMI Flash (Mar) 54.3 vs Exp. 50.8 (Prev. 51.0)
• US S&P Global Composite PMI Flash (Mar) 53.5 (Prev. 51.6)

FX

• USD edged higher as a surprise surge in Services PMI for March more than offset the manufacturing slump into contractionary territory. There was a slew of tariff-related headlines with President Trump to announce additional tariffs over next days on autos, lumber and chips although may give a lot of countries breaks on tariffs, while he also announced a secondary tariff on Venezuela and any country that buys oil or gas from Venezuela will be forced to pay a 25% tariff on top of other tariffs.
• EUR failed to sustain early gains and briefly dipped beneath the 1.0800 handle amid dollar strength and the tariff threat overhang, while Eurozone PMI data releases were mixed.
• GBP was choppy and returned to flat territory just north of the 1.2900 level, while comments from BoE Governor Bailey did little to spur price action as participants await the Spring Statement and CPI data mid-week.
• JPY weakened which saw USD/JPY climb back above the 150.00 level amid the dollar strength, firmer US yields and the heigthened risk appetite.

FIXED INCOME

• T-notes were sold across the curve on tax revenue and tariff reports, while a strong services PMI accelerated the selling ahead of supply.

COMMODITIES

• Oil prices were underpinned by broader risk sentiment and heightened geopolitical tensions despite several oil-bearish headlines.
• OPEC+ is set to proceed with plans for the next monthly oil output hike in May, according to three OPEC+ sources cited by Reuters.
• Kazakhstan continues oil supply via the CPC pipeline in normal mode, according to IFAX.
• Russian President Putin held a phone call with the UAE President and discussed OPEC+ cooperation and Russia-US talks regarding Ukraine.
• Indian refiners are set to issue fewer tenders for crude oil purchases on the spot market in the coming months as Russian supplies bounce back, according to sources cited by Reuters.
• US issued a Venezuela-related general license which authorises a wind-down of certain transactions related to Chevron (CVX) corporation’s joint ventures in Venezuela through to May 27th.
• US jet fuel imports are set to hit a two-year high in March after Nigeria's Dangote refinery pushed barrels to North America, which should lower prices of the aviation fuel in the peak summer.

GEOPOLITICAL

MIDDLE EAST

• Israeli military said sirens were sounded in several areas in Israel following a projectile that was launched from Yemen, while the missile launched from Yemen was intercepted prior to crossing into Israeli territory.
• Israeli military said forces operating in Rafah fired at a building that belonged to the Red Cross as a result of incorrect identification.
• Egypt put forward a new proposal to try to put the ceasefire between Israel and Hamas back on track.
• Iranian Foreign Ministry warned of the repercussions of the new Israeli escalation against Lebanon, according to Sky News Arabia.
• Iranian Foreign Minister said they will not enter into direct negotiations with the United States under the policy of pressure and threats.
• Iran's Oil Ministry denied what it said were allegations about Iranian tankers being seized by the US, according to Shana.
• EU High Representative for Foreign Affairs and Security Policy Kallas said the “EU supports all diplomatic efforts to that effect” when it comes to containing Iran and its ability to acquire or build a nuclear bomb, according to WSJ's Norman.

RUSSIA-UKRAINE

• US President Trump said they made a deal on rare earths which is to be signed shortly and are talking about territory and power plant ownership.
• US Secretary of State Rubio said the Russia war has to end through negotiation.
• Officials from the US and Ukraine are to hold more talks after the Russia-US meeting in Riyadh ended, according to Reuters.
• Ukraine's Foreign Minister said Russia must stop strikes instead of making hollow statements about peace after a Russian strike on Sumy. It was separately reported that Russian Forces repelled a Ukrainian drone attack on a gas condensate field in Crimea and that Ukraine hit a gas distribution station in the Belgorod region on March 22nd, according to RIA.
• Russia and US delegations are preparing a joint statement, according to TASS. It was earlier reported that Russia's Kremlin said Saudi Arabia negotiations were on technical issues and there were many different aspects related to a settlement in Ukraine that need to be worked out.

OTHER

• Chinese Coast Guards warned and drove away Japanese fishing boats which "illegally" entered Chinese territorial waters between March 21st and 24th.

ASIA-PAC

NOTABLE HEADLINES

• PBoC is to conduct CNY 450bln of 1-year MLF operation on Tuesday.
• China’s Commerce Minister met with Apple (AAPL) CEO Cook and welcomes Apple to expand investment in China, while the minister stated that China is willing to work with the US through equal dialogue to foster a more stable policy environment for businesses. It was also reported that China's Commerce Minister met with Qualcomm’s (QCOM) CEO.
• Democratic senators ask the White House to seek authority from Congress to continue the TikTok sale deadline.

EU/UK

NOTABLE HEADLINES

• UK PM Starmer said he would not consider changing fiscal rules, while it was separately reported that a spokesperson said PM Starmer and US President Trump had a brief call on Sunday evening to discuss progress made on the "Economic Prosperity Deal".
• BoE's Governor Bailey said they face a challenge to raise the potential growth rate of the economy and there are strong headwinds, while he added they must facilitate the growth of AI as the most likely general-purpose technology which can move the needle on growth in the economy. Bailey also said they are seeing businesses delay investment due to uncertainty and that consumption is not climbing with real incomes, as well as noted that businesses are currently keeping all options open on how to respond to the national insurance rise.
• ECB's Escriva said the current environment is extremely uncertain and downside risks are outweighing upside risks at the moment but noted that more disruptive economic scenarios aren't materialising.
• ECB's Makhlouf said not going to comment on rate cuts for April and things are moving in the right direction and disinflation is working. Makhlouf suggested it is a time of extreme uncertainty but is not too worried about the precise timing of when the 2% inflation target is reached, while he remains pretty cautious of how they are going to move from their current stance.

DATA RECAP

• UK Flash Manufacturing PMI (Mar) 44.6 (Prev. 46.9)
• UK Flash Services PMI (Mar) 53.2 (Prev. 51.0)
• UK Flash Composite PMI (Mar) 52.0 (Prev. 50.5)
• German HCOB Manufacturing Flash PMI (Mar) 48.3 vs. Exp. 47.3 (Prev. 46.5)
• German HCOB Services Flash PMI (Mar) 50.2 vs. Exp. 51.5 (Prev. 51.1)
• German HCOB Composite Flash PMI (Mar) 50.9 vs. Exp. 51.0 (Prev. 50.4)
• French HCOB Manufacturing Flash PMI (Mar) 48.9 vs. Exp. 46.5 (Prev. 45.8)
• French HCOB Services Flash PMI (Mar) 46.6 vs. Exp. 46.0 (Prev. 45.3)
• French HCOB Composite Flash PMI (Mar) 47.0 (Prev. 45.1)
• EU HCOB Manufacturing Flash PMI (Mar) 48.7 vs. Exp. 48.4 (Prev. 47.6)
• EU HCOB Services Flash PMI (Mar) 50.4 vs. Exp. 51.0 (Prev. 50.6)
• EU HCOB Composite Flash PMI (Mar) 50.4 vs. Exp. 50.5 (Prev. 50.2)