Did Trump just blink?
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Hello and welcome to the Saxo Market Call. It is Tuesday, March 25th, 2025, or at least it is when you are listening to this. I am recording this very late in the day after the close of the U.S. session on Monday the 24th.

but releasing on the 25th. So let's have a look at a pretty interesting day to say the least. We saw quite a comeback in risk sentiment. The obvious headline leading to that was Trump apparently set to go lighter, quote unquote, on tariffs on April 2nd. So that's next Wednesday. And the question has to be, you know, to what degree is this the Trump put in action or Trump blinking or however we want to phrase it?

And that's something the market is celebrating. And this, after we had sort of found support in risk sentiment, we're turning back and forth, all recognizing we're waiting for the big blow to come next week. And, you know, the talk of the town being the one we had been talking about on the way down, which is that this sort of trade of U.S. exceptionalism is unwinding. And we're even seeing speculators position it for the opposite. So U.S. unexceptionalism.

But in any case, we rallied quite strongly. We're not out of the woods on slide two in today's slide deck, and you can find the slides in the link in the podcast description. You can see that the NASDAQ 100, which is our more technical index we like to follow for key levels, has not yet reached that 200-day moving average, which we've touted as so important. 20,325 is... Actually, I think that's the...

That number is the 31.8% retracement. It's around 20,300, 20,300, the 200-day moving average. Need to close above there as sort of a first step, and I still would argue that we're pretty much in the shadows of a large sell-off here as long as we stay below even the 61.8% retracement, which is way up around 21,000 plus, so 21,050.

We also saw on the same day that we're seeing Trump apparently set to go lighter on tariffs that he says he will impose on

25% tariffs, as I'm sure you've all seen, on any country that is importing Venezuelan crude. And at least according to one source I was looking at, around 68% of Venezuelan crude is exported to China, where he has already slapped on an additional 30% tariff. So pretty big and obvious sort of Monroe Doctrine move there. This is Michael Every's grand macro strategy in action, if you will, as well.

The U.S., by the way, itself imports some quarter of Venezuelan crude. I don't know if you can tariff yourself. And then some other minor importers, the likes of Spain, Cuba, and India. I would imagine countries like Spain and India would be happy to find alternate suppliers for those small amounts there. But a key move there, one of the excuses for this was

Venezuela sending illegal immigrants to the US. So they try to have the immigration and national security angle on that one. And we kind of see across the speculative space here some pretty healthy risk sentiment and all the most speculative assets, the cluster of things like Tesla and up some 10% today, or at least it was at one point not long ago when I looked at it. And

Bitcoin as well, trying to get up into that really key area that's above 90,000. It's not there yet. Palantir SE is up around 5%. We still need some ways to go on many of these, of course, for it to be a relevant rally relative to the scale of the sell-off. For something like Bitcoin, that's above at least 90,000, arguably a bit more than that as well.

So we're still, again, not in the clear. We're still in the shadow of a major sell-off here. And we have to ask ourselves, is this going to be enough to turn things? And I think we probably won't know the answer to that until at least that April 2nd date in a day or two of the price action ensuing in the wake of that. Now, rolling forward in our slide deck, we have the earnings up this week. There's so few and far between that it's really almost not worth mentioning anything.

I did put in Hennis and Maurits as a highlight more on just out of curiosity, looking at the valuation of this company. Pays a 5% dividend, priced quite reasonably, I think, because it's not growing in terms of that 5% dividend. But if it can stay stable, which it has been and is predicted to be, even maybe increasing its margin slightly in the next year or two.

If they can just get any kind of sort of growth upside and margin expansion at this company, even going halfway towards the margin that you're seeing in a company like Inditex, which is the parent company of Zara and Bershka and other brands, there's an interesting valuation potential there. But, of course, they have to perform, and they haven't been performing other than to sort of stabilize the business there. So an interesting one on their guidance as well as –

other names like Lululemon, et cetera, but there really is a thin set of earnings this week. I put in, by the way, on slide three with the earnings overview slide,

with this double bubble trouble, if you will, with a chart of how many companies there are that are selling for 20 times sales. And you can see that that was the case back in the internet bubble years around 2000. We had it again pre-pandemic, or not pre-pandemic, post-pandemic with all the stimulus. And then we saw a big sell-off, of course, into the 2022 lows, the revaluation from rising interest rates.

And we got even back to a new peak, all-time peak in that metric recently before this latest sell-off.

Just one of these remarkable ways to look at this. Of course, it's a very specific lens, and there are some very specific stories out there like AI that are driving these types of valuations. But it does argue that we could be, and likely are, in some kind of bubble, at least for some stocks. I actually mentioned last week, I'd be curious to see if there's any sort of anecdotal evidence from key earnings reports coming from very cyclical or discretionary type of spending consumer names.

There's no real clear picture that's emerging there from the handful that were reporting last week. We had Williams-Sonoma. It's a furniture company. They had pretty strong results on the top line. They said the year ahead could be minus 1.5 to plus 1.5%. That's due to them having one less week to work with in the year. So arguably, that's about a 2% blow right there. So

You would think furniture might be a discretionary category that if people were hurting, they would spend less on it. Not seeing that. As well, Darden Restaurants, so parent company of Olive Garden, sort of an eat-in place with waitstaff, etc. You're seeing rising price targets from the analysts. They did miss the top line a little bit, but they're expecting, and this is a bit company-specific, but they had a fairly strong outlook. And the

The stock traded quite positively after reporting. Uber Delivery is doing some work with them as well. They expect some upside on that. And then a company like Nike, I think a lot of that is very company specific. They've dealt with some ugly competition that has really burned them from Adidas with a more popular brand.

sneaker line. They are supposedly coming up with their own sort of retro looks that'll help out, but they're dealing with tons of inventory. Concerned about tariffs, looks like 18% of their production is in China. They also produce in Mexico. So they took a pretty big hit, at least initially, on their stock there. And FedEx, a little bit like Nike, they're doing weekly and they keep marking their anticipation or their forward guidance lower and lower with every quarter.

And they did it again this year and said they're only going to perform if things stop getting worse. They're trying to spin out their freight division, and there's all this hanging around, not just FedEx, but for everybody is how they're going to deal with this so-called de minimis uncertainty. So they wanted initially when they assessed the tariffs on China especially to also include the tariffs on China.

any package of any size. So whether it's under this $800 de minimis or not. And this is such an overwhelming logistic complexity on how to assess this, that they've had to delay that and make a decision later. And we're talking about enormous volumes of goods, many tens of billions of dollars, at least, of goods that are going through on this de minimis exemption. So we'll have to look for news on that. I don't think we'll see anything forthcoming

April 2nd on that. But it's an important issue for the outlook for China. And then finally, among the discretionary names, there was Carnival Cruise. You would think booking a cruise is not something you're going to do if you're feeling uncertain about the future. They sounded very positive on their guidance. They're at 80% of their 2025 capacity, meaning there's only 20% left of their total capacity this year that's not yet booked. And there was no guidance that there was any kind of slowdown in the month of March, which would have seen if this latest stock market sell-off was spooking anybody,

They weren't seeing signs of that. So at least anecdotally from this handful of random names, we're not seeing necessarily a slowdown. I've got a couple of links suggesting there is a slowdown, especially in consumption, but I'll save that for the links section later on, the must-reads and links in the appendix. All right, moving swiftly on, foreign exchange has been hit by this news today, obviously.

This was a smack in the face to the unwinding of the US exceptionalism trade.

Trump supposedly going lighter on tariffs, sending US rates sharply higher, and the usual suspect there, the usual victim is going to be the Japanese yen. No big surprise, it goes screaming above $1.50 yen, and the yen crosses as well, squeezing higher. That's always going to be the case, it seems, unless there are some kind of heroic efforts to do something about this currency relationship with rates by the Japanese officialdom.

And positioning got quite violently short of dollar-yen before, at least in the U.S. futures market, but before this latest episode. So it is sort of the pain trade if U.S. yields continue higher. What are some levels you can look at? You can actually roll forward to slide five. I've got a chart in there looking at some of these levels. 151 is an area of contention and slightly above there is a key Fibonacci retracement of the entire sell-off from the highs in January.

The ultimate sort of, not ultimate, but the sort of a key, really key level if we're going to continue to squeeze higher, let's say the U.S. 10-year goes to 4.5% again, is something like the 61.8% retracement just above 154. Still looking for a turnaround further out. I do think Japan wants this yield lower, but if, or wants the yen, this exchange rate lower, the yen higher,

But if if US rates continue to squeeze higher, they're going to have a hard time reaching that eventuality So that was that one there and then your dollar also hit but pretty mildly I would say your dollar trading a little bit below 108 that figure held quite well So I think the 108 area as long as it remains sticky could be an area for people to get involved again but still it's been such a big move and if US yields continue higher and

And we see a bit more energy off the back of this trade here. We might have to start looking down to further retracements. Lower 107.28. And sort of the ultimate support area, I think, for this late rally, just below 106. So that 106 level is not holding. We just have, it's a game changer. We have to sort of go back to the drawing board and understand, try to understand what is going on.

But going back to the FX board, you can see so the yen weakness is beginning to gather some momentum. The Norwegian kroner really powering higher and gold taking a little bit of a breather today.

As a friendly Trump is a less everybody run for gold trade or less supportive of that trade. And we have things like Dollar Canada risking rolling over to a negative trend, as I'm pointing out on the individual pairs below. And Aussie dollar is in a positive trend, sort of the opposite of that, but it's barely increasing.

barely hanging in there. So we're still waiting for status on the dollar and some pairs here and it's flip-flopping back and forth. The Euro-dollar trade is waiting some fresh momentum and the yen crosses are virtually all moving into an uptrend. Dollar-yen is one of the last ones standing there of the major yen pairs. You can see they're barely in a negative reading. It wouldn't take much for it to slip over into positive, although we still consider it likely that we'll find some resistance at some point.

Looking at some of the economic data that rolled in today, we had the flash February, sorry, flash March PMIs out of Europe. These were generally in line with expectations on the, or nothing massively surprising, at least on the services side in France, 46.6%.

slightly better than expected. We saw services a bit stronger, sorry, a bit weaker in Germany, 50.2 versus the 52.2 expected and 51.1 prior month. More important for Germany, the manufacturing side, a bit of a more positive surprise there, 48.3, so still shrinking, but at far less bad of a pace than the 47.0 expected and the 46.5 in February. And then the manufacturing in France,

surprising a more considerable to the upside 48.9 versus the 46.1 expected in that awful 45.8 reading the prior month.

We also saw the UK numbers and those were horrible in manufacturing. Manufacturing, however, is so small in the UK that it doesn't get much attention and certainly Sterling was not suffering in particular. But the service is quite strong in the UK, 53.2 versus the 51.0 expected. So very solid services activity there in the UK. And then in the US, very few people pay much attention to these S&P Global, the private PMI surveys.

You know, ought to have a look every month anyway. 49.8 on the manufacturing, so a bit of a surprise there given that 51.7 was expected and 52.7 was the reading for February. Is this a little bit of tariff uncertainty setting in, a lack of ability to take an action because people don't know what to do? I don't know, but I think it's kind of interesting to see that weak manufacturing reading.

And then on the services side, really strong there, 54.3 versus the 51.0 expected. But these soft surveys don't really leave us very much the cleverer month to month, and especially the ISM services felt like just a random walk that doesn't give us much of a bead on what is going on here. I think better to get a bead on things in some of the links that I'll be talking about there on slide six in the appendix.

I'll skip down to the one in terms of where the economy is and especially where the consumer is and where inflation is. That's what I think is most interesting about this link. It's actually two parts. It really gets into the weeds if you want to really dive into inflationary components here, how they're calculated, and especially this truflation.

a metric which traditionally is correlated very closely with the official US CPI readings, you should basically get a good idea 45 days ahead of the fact of those monthly CPI reports from the BLS where that is by just looking at the trufflation. And it looks like that February reading in particular was quite off relative to development.

Daniel DiMartino Booth points out that the trufflation had dipped all the way down to 1.32% in early March from these readings in excess of 3% in December. And keep in mind, the official CPI reading in the U.S. for February was 2.8. So trufflation currently running, that 1.32%, by the way, was quite a low level in early March. It has backed up a little bit, but it's still running at 1.78%.

which suggests that the March readings should be much lower, or at least March or April readings at least, should be much lower if those trufflation levels remain anywhere near where they have been currently. And then she points out, and a lot of interesting bits in there, really goes off in the weeds on housing,

And I think there is a potential for housing to suffer a very significant correction. Affordability is just awful with these mortgage rates still as high as they are. And if we do have a weakening economy, a materially weakening economy, people will be forced to move and that starts to force more supply into existing homes where the price discovery happens a bit more viciously than when you have a low volume market and people aren't listing their homes because

because they're staying put because of the low mortgage rates they've been enjoying from the pandemic years 2020, 2021, etc. So that's an important forward risk. But as well how housing is exaggerating where inflation is currently, some rents are an absolute or outright deflation. And she also points out and from it infers that the consumer is doing quite poorly and

in that a lot of discretionary spending categories are also in deflation from clothing to things like recreation and culture. And then there's this, she makes the argument as well that the tariffs can cause sort of a feedback loop, an adverse feedback loop as she puts it. As you put in tariffs, a lot of companies, if it's a weak demand environment, can't pass on the costs to the end consumer. They end up taking a hit themselves.

compresses margins. And that means they have to lay off employees. And those employees that have laid off, they can't afford to buy things. And you get that adverse feedback loop. She also points to this remarkable University of Michigan sentiment survey that saw the crazy, was it 3.9% number on long-term inflation that has become just a very odd and possibly very political poll there. And she says a better one is to look at the CEO inflation expectations, which are not

any cause for concern. And let's all recall the Fed dot plot for March has CPI inflation at the core for PCE at 2.8% for this year. So if she's right and we do see inflation coming in

In the coming months this could mean that we see more Fed cuts that are currently priced And this does not have anything to do with the longer-term stagflation call. This is about this economic cycle, by the way I don't know I'm sent by anybody's Arguments at all times I just think it's interesting to hear a voice that is calling for inflation to be far less of a problem when so many are saying that inflation is here and you know sort of building right now already again and

Some other links on that slide six worth following. Michael Pettis responding to a Barry Eichengreen piece on the future of the dollar, makes some great comments on what this is all about. The fact that basically the system has been really gamed by China and that the U.S. has to change the structure here, and this is not sort of incorporated into Eichengreen's piece. Eichengreen, by the way, great author of great books about, for example, the gold standard,

called Golden Fetters, if you want to read that about the history of how that caused notorious problems in the interwar years and leading up really to World War II. There's a great conversation with Michael Every and a couple of others on a long-form podcast called The Great Simplification. It's a podcast I'd never heard of talking about geopolitics and energy.

And war, by the way, as well. So a good listen there and a great conversation bringing in some of those topics together. Then we have every once again, a new piece, this one on shipping, really a key angle that the U.S. is picking up on with its plans, apparently to start charging for imports that are carried on Chinese vessels.

A whole new angle on China. And again, is this part of the, together with that Venezuela news, and of course these tariffs that have already been applied and consistently so against China, is this the U.S. saying to China and saying in its policy mix that it wants essentially to decouple from China from here? And we haven't seen much of a Chinese response other than this sort of weak form news on China.

Wow, I shouldn't maybe call it week form, but this news on rolling out stimulus measures for consumption. Okay, so the calendar highlights for the rest of the week. So if you're listening to this on Tuesday, you'll have that IFO survey. That's the one you really want to look at from here really for how much industry is gearing up in Germany linked to anticipation of fiscal growth.

and the state of the German industrial economy as well. This is far better than the ZEW for that. It's going to be too early. Maybe the expectations component is starting to get a bit more excited about how things are shaping up.

and the present situation is what it is. That one unlikely to be affected for quite some time, the present situations, until we have the actual spending plans emerging and flowing through into demand. We have some new home sales data out of the US later on, CPI key data point for Australia tonight. And then for the rest of the week, coming up tomorrow on Wednesday, we have the UK spring budget statement. The UK is really beset with problems on the budget side once again.

And it does appear that this labor government is taking things seriously, is trying to pre-announce that it will do things like cut 10,000 civil servant jobs of the total of 540,000. There are in that sector, talking about cuts to operating costs and efficiencies needed. So they're taking it seriously. This is helping to keep quite a stable sterling here.

But if this turns into austerity, we're going to have to see some maybe retrenchment in sterling and more Bank of England cuts than are currently priced. But it's too early a call for that one. It's just more of a signal value on the Labour government taking this seriously. And then on to the rest of the week. Thursday, Norway has its bank decision out. They pre-announced more or less a cut at the January meeting that would be the first cut for the cycle cut.

Most of that anticipation has been priced out after a very hot CPI print. So we've got the Norwegian Krona galloping higher here. What if they go ahead and cut? There could be a bit of a backup and a bit of a stunner there, but it could just be a one-and-done kind of situation. Still, I think it's a material risk, since they kind of pre-committed to that cut, that it happens anyway, and as this has been quite a...

A vicious move, we've probably got a lot of people positioned for it. Could be some quite volatile price action in the Norwegian Krona over that Thursday decision. Mexican Central Bank also aiming to cut the rate. It is also meeting on Thursday.

Just lots of little bits and pieces there. We'll have the latest weekly claims data from the US. And by the way, there's some interesting stuff on the gig economy and gig workers, at least I believe it was in that DiMartino booth link on Malden economics. Have a look at that.

So there's some weird shock absorbers in the U.S. labor market that were just not there in the previous cycles. People able to take on multiple gig jobs to supplement their incomes perhaps rather than filing for claims. I don't know, but we'll have to see how that shapes up.

maybe differently from prior cycles. Certainly, you would expect claims to start to show some stress traditionally before, if the labor market is, of course, weakening. And so far, we've only seen a slight elevation in the continuing claims

suggesting that people, once they are in claims, are having a hard time finding new jobs. And then a Japanese Tokyo CPI data point on Friday. German consumer confidence, maybe interesting that one. And then the flash CPI number for France on Friday, warming up for the rest of those inflation numbers next week. And then the USPCE inflation data point

of this Friday. It's always late for the PCE one, but it's in this one for February this time around. And then we get this University of Michigan sentiment survey we don't really know what to do with in terms of the inflation expectations, but there are other parts of that survey that are quite interesting on overall sentiment. But still, there's a big grain of salt with that one nowadays because of the political angle on things, as with all things political polling of late.

But more importantly than all of these are next to Wednesday, sorry, April 2nd, those U.S. reciprocal tariffs, which will be announced apparently on those countries that are doing tariffs on the U.S., so sort of a one-to-one responses. But we should not expect some of these sector things, so things like copper and aluminum that have been done on, sorry, things that have been done on aluminum and steel, we shouldn't expect those types of sector tariffs to be announced today.

next Wednesday. That could be coming later, but some sort of reciprocal slash retaliatory tariffs will be announced next Wednesday. All right. Maybe a couple of comments on being over here in the U.S. I'm sitting here in a hotel room recording this podcast on a sunny afternoon in Houston, Texas last week.

I was on a road trip with my brother across some rural areas of, well, East Texas into Louisiana and over into Mississippi and back. Did not see one single electric vehicle. I thought that was quite interesting. My permanent residence is in Denmark where the use of, buying of course, and use of electric vehicles is.

is taking over in terms of new vehicle sales. I think it's reached sort of the two-thirds level of new cars now being sold in Denmark are EVs. It's pretty remarkable to, you go out in the countryside here on a highway, a busy highway with thousands of vehicles, you see over the course of the day, do not see one single EV. You see these massive old school 18-wheeler trucks that I remember so well from my youth and they look exactly the same as they did from my youth in many cases as well.

So, yeah, I just find that an interesting point. And even back here in a large city like Houston, you just don't see very many of these EVs at all, a tiny fraction of the percentage. Another thing, by the way, on the EV front is BYD. I saw this just flashing across my screen before recording this podcast. The EU is investigating Hungary for possible illegal Chinese subsidies, I guess, to produce BYD cars in Hungary.

So the Hungary just getting the wrong way around with the EU once again, not only on Russia policy and otherwise, but now even as sort of a gateway for Chinese mercantilism on European soil. So an interesting one there, I think, to follow up on what is the fate of Hungary within the EU, etc.

Otherwise, inflation levels here in the US feels to me like hotel rooms are very, very expensive still and have gotten more so. I think the food level, food price levels have seem high to me for prepared foods, restaurants, but do not seem particularly shocking in grocery stores, at least for the few items that I look at. I don't seem to have moved much in price from the last time I was here. The big shock to me was when I came over in 2023. That

was the first time I'd been here in a few years, a trip I was meant to take in 2020 got canceled because of the pandemic. And it was really a shock for me coming over at that time. It seems like the inflation levels have leveled off this time around. So

Yeah, hopefully I'll have another comment or two on the way things are going over here in this one tiny little corner of a vast, vast nation. Houston, Texas is not by any means, and rural Louisiana, Mississippi are by no means representative of all of the U.S. It is a truly massive country. You respect that when you get here after living in a country like Denmark. So, yeah.

Interesting times. Will be very interesting to see how the market absorbs, continues to absorb what just unfolded today and supposedly in terms of Trump's plans to impose less vicious tariffs. And we'll see how things develop. And I'll be back probably not until next week with the next Saxo Market Call.