Wild market week ends calmly, but more turbulence looms

Making sense of the forces driving global markets Happy Friday! Well, what a week that was. From Germany’s historic fiscal U-turn to the head-spinning uncertainty surrounding U.S. tariffs, from U.S. recession warnings to the snowballing selloff on Wall Street, investors had barely a minute to catch their breath.

And these are only some of the news and events, twists and turns that made up a tumultuous week on world markets. The rollercoaster could be just as bumpy next week.

There is definitely a sense that momentum is building in many asset classes, perhaps nowhere more so than U.S. equities, where the gloom appears to be deepening, despite the reprieve on Friday.

President Donald Trump’s ‘on-off’ tariff policy – which is literally changing on a daily basis – is corroding investor, consumer and business sentiment, and dramatically reducing visibility for company executives and fund managers.

And the Federal Reserve, as Chair Jerome Powell nodded to on Friday.

Trade war fears are a major reason why the recession alarm bells are ringing – real-time models are flagging deep U.S. GDP contraction in Q1, in large part because of record trade deficits which, in turn, are in large part down to a surge in imports before tariffs kick in.

It’s a different, and brighter, story across the Atlantic. Berlin’s plans to loosen the purse strings with a fiscal support package worth up to 20% of GDP have lit a fire under German stocks and the euro, sent bond yields spiraling higher, and lifted euro zone growth forecasts.

The divergence between Wall Street and Europe widened this week, but cooled on Friday. Will it pick up again next week?

It’s not just Germany and European governments pulling the fiscal levers to rev up growth. China this week outlined plans to steer its economy toward 5% growth this year to be fueled in large part by increased spending that will widen the budget deficit to a historic 4% of GDP.

Attention in Japan, however is leaning heavily towards the Bank of Japan ahead of its March 18-19 policy meeting. No change is expected, but with wages and food prices on the rise, more tightening this year is expected. The only question, it seems, is when.

This Week’s Key Market Moves

* The euro soars 4.5% against the dollar for its best week in 16 years, as Germany eyes its biggest spending spree – on defense and infrastructure – since reunification.

* Germany’s 10-year Bund yield posts its biggest weekly rise since reunification, leaping 45 basis points.

* The U.S.-German 10-year yield spread collapses 35 basis points, the biggest weekly narrowing since the GFC in December 2008.

* The Nasdaq 100 closes below its 200-day moving average for the first time in two years. The Nasdaq composite enters correction territory, down 10% from its December peak.

* Japan’s 10-year yield rises 15 bps for its biggest weekly rise since 2008, swept up in the Berlin-triggered wave of bond selling and rising expectations of more Bank of Japan tightening.

Germany’s benchmark 10-year yield rocketed on news that Europe’s largest economy could be poised to unleash its biggest public spending program since reunification in 1990. It rose 35 basis points on the week, its biggest rise since 1990 also.

What could move markets on Monday?

* China producer and consumer price inflation

* Eurogroup meeting, ECB President Christine Lagarde participates too

* Germany trade, industrial production

Here are some of the best things I read, watched and listened to this week:

1. Recession risks rise for all three North American economies over US tariff chaos

2. DOGE job cuts bring pain to Trump heartland

3. Zelenskiy-Trump clash at White House sparks global rethink by US allies

4. ECB may fear stumbling into stimulus

5. Spending U-turn puts Germany back in Europe’s driving seat

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