Daily Market Outlook - Tuesday, March 11

By Patrick Munnelly of Tickmill

Tuesday, March 11, 2025 7:45 AM EDT

Businessman, Internet, Continents

Image Source: Pixabay

Asian equities suffered a sharp decline on Tuesday as a persistent market sell-off deepened, driven by mounting fears that an escalating trade conflict could hurt U.S. economic growth and potentially lead to a recession. This uncertainty spurred anxious investors to seek safety in the Japanese yen. The downturn in Asian markets mirrored Wall Street’s performance, where the S&P 500 dropped 2.7% on Monday, marking its steepest single-day decline of the year. Meanwhile, the Nasdaq plunged 4.0%, its largest one-day percentage loss since September 2022. Concerns over a slowing economy have wiped $4 trillion off the S&P 500’s peak value from just last month. Despite the gloomy outlook, S&P and Nasdaq futures pared earlier losses during early Asian trading on Tuesday, edging slightly higher ahead of the European market opening. Investor anxiety heightened following remarks by President Donald Trump in a Fox News interview, where he referred to a "period of transition" but avoided predicting whether his tariffs might trigger a U.S. recession. These remarks further eroded risk appetite, dragging down stock prices and putting pressure on the U.S. dollar and Treasury yields. The dollar index, which gauges the U.S. dollar against six other currencies, was hovering close to a four-month low. It has declined more than 4% this year. Trump appears set on maintaining his current approach this time, unlike in his first term when any hint of trouble in the economy or stock market would likely change trade policy. In Asia, markets faced broad-based losses, with Japan’s Nikkei and Taiwan’s shares tumbling to their lowest levels since September. The yield on the two-year U.S. Treasury note fell to a five-month low, typically aligning with Federal Reserve interest rate expectations, and was recently down 1.5 basis points to 3.8808%. U.S. traders are now pricing in 85 basis points of rate cuts from the Federal Reserve this year, up from 75 basis points projected on Monday. The increase reflects growing speculation that weak economic growth will compel the Fed to ease monetary policy again. However, the release of the U.S. consumer price index (CPI) report on Wednesday could challenge these expectations if it indicates that inflation remains high enough to justify the Fed maintaining a tighter stance. Last month’s unexpectedly high CPI data showed a 0.5% rise in January inflation, the largest monthly increase since August 2023. For February, analysts surveyed by Reuters anticipate a more modest 0.3% increase in the CPI. Investors remain wary as they await further clarity on the inflation trajectory and its implications for monetary policy.

The British Retail Consortium (BRC) reported a notable slowdown in February retail sales growth to 0.9% y/y, down from 2.5% in January. This non-seasonally adjusted data can be erratic due to factors like Black Friday or Easter timing. However, the drop from January's above-average growth to below-average in February seems significant. The December/January boost from holiday sales now appears to be the outlier for 2024. February's growth came entirely from food sales, likely driven by price increases rather than actual volume growth. With inflation rising, even reported retail sales values weakening suggests a decline in consumer goods volumes. Official ONS data for February, due March 28, may confirm this trend.

Fiscal negotiations in Germany are intensifying as the Greens push back against a major defense and infrastructure spending proposal, aiming to prioritize climate measures. Talks with CDU/CSU and SPD will likely focus on infrastructure project specifics, with concessions expected from all sides. Despite reports of a potential deal by next week, the Greens’ stance suggests prolonged discussions. Chancellor-in-waiting Friedrich Merz must finalize a fiscal package before the new parliament convenes by 25 March to avoid a blocking minority from AfD and The Left. Germany’s fiscal developments are impacting Eurozone markets, with more indebted issuers like Italy and France facing greater vulnerability compared to Germany’s stronger debt/GDP ratio (~63%).

Overnight Newswire Updates of Note

UK Retail Sales Rise ‘Modestly’ As Consumers Remain Cautious
UK’s PM Calls For ‘Positive’ US-Ukraine Talks In Call With Trump
Trump Envoy Plans Putin’s Russia Visit After US-Ukraine Summit
Trump-Backed Plan To Avert Shutdown Heads For House Vote
Trump To Address Top CEOs, Wall Street Bank Executives Tuesday
Trump: Will Buy A Tesla To Show Support For Musk
Citi Downgrades US Stocks, Performance Stalls; Upgrades China
China’s $41B Consumption Boost, A Start, Deflationary Deepen
BoJ’s Former Executive Kazuo Momma: Next Hike Is Likely In June
Japan Revises Q4 GDP Lower, Complicating BoJ’s Rate Outlook
Australia’s NAB Business Conf Negative As Cost Pressures Persist
Westpac Survey: Australian Consumer Conf Hits 3Y High In March
Oracle Misses On Earnings But Touts Data Center Growth From AI
SocGen Chief: ‘Nothing Is Sacred’ As French Bank Seeks Cost Cuts

(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: 1.0750 (971M), 1.0800 (488M), 1.0815 (336M), 1.0875-85 (2.1BLN)
USD/CHF: 0.8860 (370M)
GBP/USD: 1.2750 (427M), 1.2850 (250M), 1.2895 (204M)
EUR/GBP: 0.8425-30 (653M)
AUD/USD: 0.6275 (932M), 0.6300 (842M), 0.6385 (2.7BLN)
NZD/USD: 0.5645 (651M)
USD/CAD: 1.4390-1.4400 (1BLN), 1.4415 (410M), 1.4470 (697M), 1.4500 (488M)
USD/JPY: 146.00 (505M), 146.50-65 (1.2BLN), 147.00 (372M), 148.00 (430M)
EUR/JPY: 159.55 (460M)

CFTC Data As Of 7/3/25

CFTC positions for the week concluding on March 4th
The net long position in Japanese yen stands at 133,651 contracts.
The net short position in euros stands at -10,106 contracts.
The net long position in Bitcoin stands at 614 contracts.
The Swiss franc records a net short position of 37,775 contracts.
The net long position for the British pound stands at 18,574 contracts.
Equity fund speculators reduced the S&P 500 CME net short position by 48,053 contracts, bringing the total to 291,884.
Speculators raise activity at CBOT. The net short position in US Ultrabond Treasury futures decreased by 4,169 contracts, totalling 231,904. Equity Fund Managers reduced their net long position in the S&P 500 CME by 10,497 contracts, bringing it to 901,555. Speculators have shifted positions on CBOT. US Treasury bond futures reflect a net short position of 17,797 contracts, a decrease from 40,912 net longs recorded the previous week.
Speculators raised the net short position in CBOT US 2-Year Treasury futures by 21,846 contracts, bringing the total to 1,171,299.
Speculators raised their net short position in CBOT US 10-Year Treasury futures by 12,185 contracts, totalling 712,040. Additionally, they increased their net short position in CBOT US 5-Year Treasury futures by 172,588 contracts, reaching 1,798,361.