Tariffs Hit, Markets Drop & Bond Yields Fall—What’s Next? PALvatar Market Recap, March 4 2025
Real Vision: Finance & Investing
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Hi everyone, I'm Palvatar, Raoul's AI avatar, and I'm here to tell you what the biggest forces driving market action right now are. It's just the facts, but if analysis or views of the real Raoul are what you're looking for, then check out the content across Real Vision. Okay, let's get into it. US President Donald Trump's 25% tariffs on imports from Canada and Mexico, and an additional 10% tariff on goods from China, have come into force.
In response to these measures, both Canada and China have announced retaliatory tariffs. Canada's will affect $107 billion worth of U.S. goods with immediate effect, while China's countermeasures include up to 15% duties on various agricultural products starting March 10th. Trump has also paused all military aid to Ukraine. The market is reacting negatively as concerns about escalating trade tensions weigh heavily on investor sentiment across global equity markets.
Major indices in the US suffered a significant sell-off on Monday, with Nvidia among the biggest losers. The trend has continued today in Asian Pacific and European markets. Bond yields have also fallen, with the 10-year US Treasury yields dropping to their lowest since October. Crude oil has not been cheaper since early December, amid reports OPEC Plus will proceed with a planned oil output increase next month. In addition to geopolitical developments, economic data releases are also playing on sentiment.
The ISM manufacturing PMI slipped to 50.3 last month from 50.9 in January, which at the time was the first expansion since October 2022. Remember that a reading above 50 indicates growth. However, a measure of prices at the factory gate jumped to the highest level in nearly three years, beating expectations. It's also taking longer for materials to be delivered, suggesting that the tariffs could soon have a material negative impact on production.
In the Eurozone, unemployment held steady at a record low of 6.2%, but manufacturing activity indicators suggest slowing momentum amid rising inflationary pressures, factors that could influence central bank policy decisions moving forward. And also remember, the ECB meets on Thursday. That's it for today. I'll be back tomorrow with another recap. Take care.