Global markets remain volatile following last week’s brutal tariff-led sell-offs. China’s retaliation marked a major escalation of a global trade war after the country imposed 34% tariffs on all imports from the United States last Friday. Investors fear that mounting trade barriers could push the global economy into recession.
This week, market participants will continue monitoring tariff developments from US President Donald Trump and the responses from other major economies. Rising uncertainty is likely to foster further risk aversion in global markets.
Against this backdrop, US inflation data will serve as a critical gauge of the country’s economic trajectory, offering insights into the Federal Reserve’s policy stance. Other key regional events, including Germany’s industrial production report, the Reserve Bank of New Zealand’s rate decision, and China’s inflation data, will also draw investors' attention.
Europe
In the European Union, the 27-member bloc is preparing unified countermeasures in response to Trump’s metal and reciprocal tariffs, joining Canada and China in announcing further retaliatory action. The White House is also expected to announce import levies on copper, pharmaceutical products, semiconductors, and lumber.
On the economic front, Germany will release its industrial production data for February. In January, industrial output rose by 2%, rebounding from a 1.5% decline in December, supported by a recovery in the automotive and food sectors. However, the manufacturing output contracted, and the energy sector also weakened. According to Germany’s Federal Statistical Office, industrial production declined by 1.6% year-on-year and stagnated from November 2024 to January 2025. Consensus suggests that output may have slipped by 0.9% month on month in February.
As for markets, the euro surged following the announcement of Trump’s reciprocal tariffs, with the EUR/USD pair rising to its highest level since October 2024. However, European stock markets plummeted, with both the Euro Stoxx 600 and the DAX declining around 7% last week. These trends are likely to persist amid ongoing uncertainty.
United States
US inflation data for March will be a focal point this week. In February, the annual Consumer Price Index (CPI) rose 2.8%, while core inflation—which excludes volatile items such as food and energy—rose 3.1%. Although both figures were cooler than expected, they remain above the Federal Reserve’s 2% target. Consensus forecasts now suggest headline inflation may have eased to 2.6% in March, while core CPI may have slipped to 3%.
However, the escalation of a global trade war could exert upward pressure on inflation while slowing growth, complicating the Fed’s decision-making. Fed Chair Jerome Powell stated that the central bank does not need to rush into any policy changes and will wait for greater clarity on the economic impact of the Trump administration’s actions. The Federal Open Market Committee (FOMC) meeting minutes, due this week, will also be scrutinised for indications of the Fed’s policy outlook.
Additionally, investors will keep an eye on the US Producer Price Index (PPI) and the preliminary University of Michigan Consumer Sentiment Index. February’s PPI figures aligned with CPI data, pointing to easing inflationary pressures. However, consumer sentiment fell for the third consecutive month in March, dropping to 57—the lowest since November 2022—amid growing concerns about economic conditions. Two-thirds of consumers expect unemployment to rise within a year, the highest rate since 2009. One-year inflation expectations climbed to 5%, also the highest since November 2022. Sentiment is forecast to decline further, reaching 54 in April.
Asia-Pacific (APAC)
China is set to release its March inflation data, which is critical data to gauge the country’s consumer demand. Consumer prices fell by 0.7% year-on-year in February, the first decline since January 2024, partly due to seasonal factors. Inflation is expected to return to modest growth in March, with a forecast annual increase of 0.1%. In response to growing trade tensions with the US, the Chinese government is likely to implement further stimulus measures aimed at boosting domestic demand. Meanwhile, a weaker-than-expected reading may further pressure global market sentiment, particularly in consumer stocks.
The Reserve Bank of New Zealand (RBNZ) is also due to announce its interest rate decision, with expectations of a 25 basis point cut, bringing the Official Cash Rate (OCR) to 3.5%. The RBNZ has delivered three consecutive 50 basis point cuts since October last year, as the country slipped into a technical recession. The central bank is expected to maintain a dovish stance, particularly in light of the global market disruption caused by the Trump administration’s trade policies.
