Global equity markets garnered support Friday from a rally in Chinese stocks

 Global equity markets garnered support Friday from a rally in Chinese stocks to a 3-month high on signs of more policy support.

Global equity markets clocked gains on Friday, as Chinese stocks rallied to a 3-month high on signs of more policy support.

Officials from the finance ministry, commerce ministry, the PBOC, and other government bodies plan to hold a press conference on Monday to announce measures to boost consumption.

The University of Michigan's U.S. Mar consumer sentiment index fell -6.8 to a 2-1/3 year low of 57.9 on Friday, weaker than expectations of 63.0.

The University of Michigan's U.S. Mar 1-year inflation expectations indicator unexpectedly rose to a 2-1/3 year high of +4.9%, higher than expectations of no change at +4.3%. The Mar 5-10 year inflation expectations indicator unexpectedly rose to a 32-year high of +3.9% versus expectations of a decline to +3.4%.

The price of Bitcoin (BTC) rose more than +4% as a stablecoin bill is on a fast track for consideration by the full Senate after the banking committee voted 18-6 to advance the bill late Thursday. The bill, endorsed by President Trump, would govern privately issued, dollar-based stablecoins that could enable cheaper and faster transactions for anyone with a smartphone. Bitcoin also saw support Friday on the recovery in stocks, which promoted more of a risk-on environment.

Stocks have been pressured over the past week from fears that U.S. tariffs will weaken economic growth and corporate earnings. Last Tuesday, President Trump imposed 25% tariffs on Canadian and Mexican goods and doubled the tariff on Chinese goods to 20% from 10%. Mr. Trump also stated that he would be imposing reciprocal tariffs on foreign nations on April 2, as planned. Trade tensions escalated on Wednesday when the European Union imposed tariffs on up to $28.3 billion of U.S. goods, including soybeans, beef, and poultry, in retaliation for U.S. tariffs on steel and aluminum imports. Also, Canada announced 25% counter-tariffs on about $20.8 billion of U.S.-made items, such as computers and sporting goods, along with U.S. steel and aluminum products.

The markets are discounting the chances at 1% for a -25 bp rate cut at the next FOMC meeting on March 18-19.

Overseas stock markets rose on Friday. The Euro Stoxx 50 rose +1.42%. China's Shanghai Composite Index rallied to a 3-month high and closed up +1.81%. Japan's Nikkei Stock 225 closed up +0.72%.

Interest Rates

June 10-year T-notes (ZNM25) on Friday fell -9 ticks. The 10-year T-note yield rose +4.6 bp to 4.314%. June T-notes fell on reduced safe-haven demand as stocks rallied after Senate Democratic leader Schumer said he would not block the Republican bill to keep funding the government, likely averting a government shutdown. T-notes were also pressured by carryover weakness from a slide in German bund prices following a report that German parties have agreed on a debt package. T-notes remained lower after Friday's report from the University of Michigan showed U.S. inflation expectations unexpectedly rose, a hawkish factor for Fed policy.

European bond yields were mixed. The 10-year German bund yield rose +2.1 bp to 2.876%. The 10-year UK gilt yield fell -1.1 bp to 4.666%.

German Feb CPI (EU harmonized) was revised downward to +0.5% m/m and +2.6% y/y from the previously reported +0.6% m/m and +2.8% y/y.

ECB Governing Council member Holzmann said interest rates in the Eurozone are already at neutral levels, and he supports pausing ECB rate cuts next month. He added that a resurgence in inflation is the greater risk, and higher European spending could force the ECB to hike interest rates.

Handelsblatt reported Friday that German chancellor-in-waiting Merz reached an agreement with the Green party on a fiscal reform package for large investments in infrastructure and defense.

Swaps are discounting the chances at 53% for a -25 bp rate cut by the ECB at the April 17 policy meeting.

US Stock Movers

The Magnificent Seven stocks all rose on Friday, boosting the broader market. Nvidia (NVDA) rose more than +5% to lead gainers in the Dow Jones Industrials. Tesla (TSLA) rose more than +3%. Meta Platforms (META), Microsoft (MSFT) and Amazon.com (AMZN) rose more than +2