Daily Market Outlook, March 4, 2025 

Patrick Munnelly, Partner: Market Strategy, Tickmill Group

Munnelly’s Macro Minute...

Global markets experienced volatility as President Donald Trump’s tariffs on Canada, Mexico, and China took effect. Oil prices continued to decline. Japan's Nikkei declined by 1.6%, while Taiwan's benchmark fell by 0.5%. The Hang Seng index in Hong Kong decreased by 0.4%, and mainland blue-chip stocks slipped by 0.2%. Asian markets responded to the significant losses experienced on Wall Street recently, as the S&P 500 decreased by 1.8% and the tech-focused Nasdaq saw a drop of 2.6%. In the lead-up to the deadline, US stocks saw their largest drop of the year, Treasury note yields fell to their lowest levels in four months, and oil prices hit a three-month low. The US tariffs on its major trading partners began at midnight New York time as Trump seeks to reshape global trade. In retaliation, Canada introduced a comprehensive set of tariffs, and China responded by placing tariffs of up to 15% on US exports. The additional 10% tariff on Chinese imports, added to the 10% imposed in February to address the U.S. fentanyl crisis, brings the total to 20%. This is on top of up to 25% tariffs from Trump’s first term on $370 billion in imports. Under Biden, tariffs on Chinese semiconductors doubled to a 50% surcharge, and those on electric vehicles quadrupled to over 100%. The new 20% tariff targets consumer electronics like smartphones, laptops, video game consoles, smartwatches, and Bluetooth devices, which were previously exempt. In response, China's commerce ministry vowed countermeasures, accusing the U.S. of wrongly blaming Beijing for the fentanyl crisis. Beijing’s retaliation may focus on U.S. agricultural goods, as reported by the Global Times. U.S. farmers, already hit by Trump’s trade wars, lost $27 billion in export sales and market share to Brazil during his first term.

Recent economic data from the United States highlights the growing impact of Trump's policies. The February Services PMI underscored how reductions in DOGE spending are influencing private sector decisions, while the Manufacturing ISM report, released yesterday, shed light on the ongoing uncertainty surrounding tariffs. The headline index for February came in at 50.3, a modest decline of 0.6 points from January. However, the underlying components revealed notable volatility. For instance, the prices index surged by 7.5 points to 62.4, while the new orders component dropped significantly by 6.5 points to 48.6. This divergence is concerning, as rising prices coincide with signs of activity edging toward contraction. Notably, the employment component also fell below the critical 50 mark. TThis raises questions about how the headline index, which is an equal-weighted average of five subcomponents, managed to stay above 50. Closer analysis suggests this result might be somewhat misleading. The apparent increase in the headline Manufacturing PMI seems to stem from longer supplier delivery times, potentially influenced by port strikes and tariff negotiations. Typically, longer delivery times indicate robust demand, which would boost the overall index; however, that interpretation does not align with the current context. It appears that the shake-up sought by the new administration is underway, but emerging evidence points to waning confidence, largely driven by tariff-related uncertainties.

Overnight Newswire Updates of Note

  • Global Government Borrowing Set To Hit Record $12.3T

  • Trump: China, Canada-Mexico Tariffs Will Take Effect

  • China Hits Back At Trump With Agriculture Tariffs As High As 15%

  • Trump, TSMC Announce $100B Investment In US

  • Trump Pauses Military Aid to Ukraine After Clash With Zelenskiy

  • Europeans Move Towards Seizing €200B Of Russian Assets

  • UK Rental Prices Rise At Slowest Pace In Over 3 Years, Data Shows

  • Japan January Jobless Rate At 2.5%, Job Availability Widens

  • Australia’s Current Account Deficit Narrows To A$12.5 In Q4 FY24

  • Australia's Jan Retail Sales Post Small Gain On Food-Related Spending

  • RBA Signals That Further Cuts Are Not Assured

          (Sourced from reliable financial news outlets)

FX Options Expiries For 10am New York Cut 

(1BLN+ represents larger expiries, more magnetic when trading within daily ATR)

  • EUR/USD: 1.0395-1.0400 (1.7BLN), 1.0450-55 (1.2BLN), 1.0480 (1BLN)

  • 1.0500 (460M), 1.0520-30 (2.3BLN), 1.0550 (845M)

  • USD/CHF: 0.8990 (608M)

  • GBP/USD: 1.2700 (251M). EUR/GBP: 0.8200 (1.2BLN)

  • AUD/USD: 0.6215 (370M), 0.6335 (1.2BLN)

  • USD/CAD: 1.4400-10 (2BLN), 1.4415-25 (1.5BLN), 1.4500 (648M)

  • 1.4575-80 (1.8BLN), 1.4625-30 (923M)

  • USD/JPY: 148.30 (686M), 148.90 (475M), 149.30-35 (560M), 150.00 (310M)

  • EUR/JPY: 155.00 (925M), 157.10 (362M)

CFTC Data As Of 28/2/25

  • CFTC Positions for the Reporting Week Ending February 25th  

  • Speculators reduced their net long position in CBOT US Treasury bonds futures by 6,869 contracts, bringing it down to 40,912.  

  • Speculators decreased their net short position in CBOT US Ultrabond Treasury futures by 18,507 contracts, now totaling 227,735.  

  • Speculators trimmed their net short position in CBOT US 10-year Treasury futures by 9,672 contracts, resulting in a total of 699,855.  

  • Speculators cut their net short position in CBOT US 5-year Treasury futures by 111,760 contracts, which now stands at 1,625,773.  

  • Speculators lowered their net short position in CBOT US 2-year Treasury futures by 140,066 contracts to 1,149,453.  

  • The euro has a net short position of -25,425 contracts.  

  • The Japanese yen has a net long position of 95,980.  

  • The British pound holds a net long position of 4,463.  

  • The Swiss franc shows a net short position.  

  • The net long position for Bitcoin is 204 contracts.

Technical & Trade Views

SP500 Pivot 6040

  • Daily VWAP bullish

  • Weekly VWAP bearish

  • Seasonality suggests bearishness Into March 7th

  • Above 6075 target 6195

  • Below 6045 target 5743

EURUSD Pivot 1.05

  • Daily VWAP bullish

  • Weekly VWAP bearish 

  • Seasonality suggests bearishness into March 30th

  • Above 1.0535 target 1.0634

  • Below 1.0505 target 0.9758

GBPUSD Pivot 1.26

  • Daily VWAP bullish

  • Weekly VWAP bullish 

  • Seasonality suggests bearishness into March 10th

  • Above 1.26 target 1.2810

  • Below 1.25 target 1.24

USDJPY Pivot 151

  • Daily VWAP bullish

  • Weekly VWAP bearish

  • Seasonality suggests bullishness into Apr 9th

  • Above 1.5330 target 154.50

  • Below 151.70 target 148

XAUUSD Pivot 2800

  • Daily VWAP bullish

  • Weekly VWAP bearish 

  • Seasonality suggests volatile bullishness into Feb 22nd

  • Above 2800 target 2997

  • Below 2750 target 2650

BTCUSD Pivot 95k

  • Daily VWAP bearish

  • Weekly VWAP bearish 

  • Seasonality suggests bullishness into Apr 9th

  • Above 95k target 105k

  • Below 95k target 65k