Daily Market Outlook - Friday, March 21

By Patrick Munnelly of Tickmill

Friday, March 21, 2025 7:30 AM EDT

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Asian stock markets faced sharp declines on Friday, driven by concerning signals from US corporate earnings and ambiguous outcomes from several central bank meetings, which left key questions about the global economy unresolved. In Hong Kong, technology stocks came under heavy selling pressure, dragging a major index down by over 3% after a recent rally. A broader index tracking Chinese stocks in the city was headed for its steepest two-day drop of the year. Meanwhile, markets in Indonesia and Taiwan also posted losses, though Japanese stocks managed to eke out slight gains. US futures indicated modest declines as well. Asian equity investors are grappling with an increasingly uncertain global economic outlook, as worries over tariffs and disappointing corporate earnings weigh on sentiment. US President Donald Trump announced that both broad-based reciprocal tariffs and targeted sectoral tariffs would take effect on April 2, further heightening risks to the global economic environment. Attention is now shifting to upcoming earnings reports from major Chinese companies, including Xiaomi, Tencent, and e-commerce leader Meituan, which are set to release their financial results soon. Meanwhile, US-listed shares of PDD Holdings rose after the company exceeded earnings expectations, though it acknowledged challenges stemming from mounting global uncertainties.

The UK’s February's public finances painted a concerning picture ahead of next week’s Spring Forecast. Borrowing hit £10.7bn, exceeding the OBR’s £6.5bn estimate. Total borrowing for 2024-25 now stands at £132.2bn, surpassing the OBR benchmark by £20bn and exceeding the full-year target by nearly £5bn with March data pending. For gilt markets anticipating the 2025-26 funding remit post-Chancellor’s statement, risks to current estimates are evident. The Central Government Net Cash Requirement (CGNCR) reached £8.4bn in February, far above the expected £3bn surplus, with a £22bn overshoot versus the OBR’s path. While a £6bn early cash flow might reverse next month, the CGNCR is still likely £16bn above forecast for 2024-25. Any underfunding this year will increase the 2025-26 funding need, suggesting gilt sales could exceed the projected £315bn, given the shortfall now appears closer to £16bn rather than the previously assumed £5bn.

The key takeaway from the March Bank of England meeting was the 8-1 vote to keep the Bank Rate at 4.5%, with only Dhingra favoring a 25bp cut—less dovish than expected. Previously, the vote was 6-3 during an off-month for easing. While Ramsden's alignment was anticipated, it was surprising that neither Taylor nor Mann joined Dhingra. This signals a shift towards a less dovish stance. The minutes caution against assuming a pre-set path for monetary policy, casting doubt on expectations of rate cuts at alternate meetings. However, guidance on a "gradual and careful" pace of easing and maintaining restrictive policy remains unchanged. Upcoming factors like the UK fiscal event, German debt reforms, and global trade uncertainty will shape the May MPR, where a rate cut is still likely but with waning conviction.

Macro updates that could influence markets on Friday: Eurozone current account (January), Eurozone consumer confidence (March, flash estimate), retail sales in Canada (February). Speakers from the central banks: Austan Goolsbee of the Chicago Fed, John Williams of the New York Fed, and Jose Luis Escriva of the European Central Bank attended an event in Barcelona.

Overnight Newswire Updates of Note

GfK: UK Consumer Morale Inches Up To 3 Month High In March
Central Bankers Move Slowly Through Fog Of Trump’s Trade Wars
BoC Macklem: Tariff Inflation To Limit Support For Economy
European Military Powers Work On Plans To Replace US In Nato
NATO To Ask Europe, Canada For 30% Boost In Military Capacity
US Seeks To Reopen Terms Of Ukraine Minerals Deal
China Starts Marketing Debut Sovereign Green Bonds In London
China’s Property Market Edges Toward An Inflection Point
Hang Seng Index And Mainland China Markets Extend Losses
Japan's Core CPI Hits 3% In February, Keeps Alive BoJ Hike Bets
NZ Records A $510M Feb Trade Surplus As Dairy Exports Soar
FedEx Cuts Outlook, Despite Higher Profit, Sales
Nike Forecast Steeper Q4 Sales Drop in Early Days Of Turnaround

(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: 1.0700 (794M), 1.0720 (254M), 1.0750 (605M)
1.0785 (913M), 1.0800 (1.54BLN), 1.0850 (576M), 1.0825 (440M)
1.0850 (1.1BLN), 1.0860-65 (447M), 1.0870-75 (1.22BLN)
1.0900 (1.8BLN)
USD/JPY: 147.00 (1.9BLN), 147.50 (320M), 147.75 (530M)
148.00 (1.1BLN), 148.35 (309M), 148.50 (758M)
149.00 (2.81BLN), 149.50 (319M), 149.60-70 (1.44BLN)
149.85 (881M), 150.00 (1.62BLN), 150.50 (241M)
EUR/JPY: 155.25 (884M), 159.70 (263M)
USD/CHF: 0.8775 (450M), 0.8845-50 (445M), 0.8970 (920M)
EUR/CHF: 0.9500 (476M), 0.9525 (1.33BLN), 0.9550 (511M)
0.9650 (201M), 0.9675 (.2BLN), 0.9700 (337M)
EUR/GBP: 0.8350-55 (787M), 0.8400 (675M), 0.8425 (303M)
0.8525 (1.1BLN)
GBP/USD: 1.2880 (497M)
AUD/USD: 0.6150 (425M 0.6200 (327M), 0.6300 (1.01BLN)
NZD/USD: 0.5650 (270M)
USD/CAD: 1.4280 (1.04BLN), 1.4290-00 (4.04BLN), 1.4315-20 (539M)
1.4340 (390M), 1.4350-65 (794M), 1.4390-00 (985M), 1.4565 (1.2BLN)
USD/ZAR: 18.20 (299M), 18.50 (205M)

CFTC Data As Of 14/3/25

Speculators have significantly adjusted their positions across various financial instruments. In CBOT US Treasury Bonds futures, net short positions rose by 16,407 contracts to a total of 34,204. Similarly, CBOT US Ultrabond Treasury futures saw an increase of 19,490 contracts in net short positions, reaching 251,394. The net short position for CBOT US 2-year Treasury futures surged by 50,916 contracts to 1,222,215, while CBOT US 5-year Treasury futures experienced a significant rise of 75,006 contracts, bringing the total to 1,873,367. For CBOT US 10-year Treasury futures, the net short position increased by 25,035 contracts, now standing at 737,075.
On the equity side, speculators reduced their S&P 500 CME net short position by 87,266 contracts, bringing it down to 204,619. Concurrently, equity fund managers trimmed their S&P 500 CME net long position by 59,714 contracts, lowering the total to 841,841.
In the currency markets, the Japanese yen holds a net long position of 133,902 contracts, while the euro has a net long position of 13,090 contracts. The British pound reflects a net long position of 29,193 contracts, whereas the Swiss franc shows a net short position of -36,957. Meanwhile, Bitcoin maintains a net long position of 1,529 contracts..