On his Truth Social platform, Donald Trump threatened to impose a 200% tariff on all alcoholic products from European Union countries in retaliation for the 50% tariffs imposed by the EU on whiskey. “This will be great for wine and champagne businesses in the United States,” he wrote.

No Inflation, So No Stagflation in the U.S. (For Now)

The Producer Price Index (PPI), considered a leading indicator of inflationary pressures, remained unchanged over the month after rising 0.6% in January, according to seasonally adjusted figures. Economists surveyed by Dow Jones had expected a 0.3% increase. A 0.2% decline in service prices offset a 0.3% rise in goods prices. Two-thirds of the increase in goods came from a 53.6% surge in egg prices, according to the Bureau of Labor Statistics (BLS). Egg prices spiked partly due to the avian flu affecting supply, although signs indicate that prices dropped in March as outbreaks slowed.

Excluding food and energy, the core PPI fell 0.1%, against expectations of a 0.3% increase, marking its first negative reading since July. Core prices, excluding trade services, rose 0.2%, also below the expected 0.3% increase. Year-over-year, producer prices increased 3.2%, still well above the Fed’s 2% target, but lower than January’s 3.7%. The core PPI rose 3.4% in February, 0.4 percentage points lower than in January.

Europe Feels the Impact of Trump’s Announcements

In Switzerland, the SMI closed down 0.25%. Nestlé (+0.2%) supported the index, while Roche (-1.4%) dragged it down. In Paris, the CAC 40 lost 0.64%. Germany’s DAX fell 0.63%. The FTSE 100 in the UK stood out with a 0.02% gain, supported by the defensive healthcare sector.

French spirits companies took a hit from Trump’s latest threats:

• Pernod Ricard lost 3.97%
• Rémy Cointreau dropped 4.67%
• LVMH fell 1.11%

In the bond market, Germany’s 10-year Bund yield fell 3.5 basis points to 2.855%, after reaching a 17-month high of 2.938%. Meanwhile, the German Parliament has begun debating a €500 billion special fund and the reform of the “debt brake” policy.

Trade War Still Weighing on U.S. Markets

The Dow Jones dropped 1.30%, while the Nasdaq declined 1.96%. The broad-based S&P 500 fell 1.39% to 5,521.52 points, entering correction territory, meaning it has lost 10% from its yearly high on February 19.

The “Magnificent Seven” tech stocks all declined:

• Tesla (-2.99%)
• Alphabet (-2.53%)
• Amazon (-2.51%)
• Meta (-4.67%)
• Apple (-3.36%)
• Microsoft (-1.17%)
• Nvidia (-0.15%)

Software giant Adobe plummeted 13.85%, despite better-than-expected Q1 earnings, as investors found its quarterly forecast disappointing. Meanwhile, Intel soared 14.60% after appointing Lip-Bu Tan as CEO, a move seen as a potential turnaround for the struggling company.

In the bond market, the yield on 10-year U.S. Treasury bonds eased to 4.27%, down from 4.31% the previous day.

Gold remained stable at $2,986.45 per ounce, after hitting a record high of $2,989.46.

• Silver fell 0.3%
• Platinum rose 0.3%
• Palladium gained 0.7%

Commodities Remain Weak

Concerns over economic outlook and global oil supply-demand forecasts pushed oil prices lower:

• Brent crude fell 0.94% to $70.28 per barrel
• West Texas Intermediate (WTI) dropped 1.18% to $66.87

Soybean and corn futures in Chicago declined slightly on Friday, both on track for weekly losses. Trade disputes and ample supply from South America weighed on prices. Wheat also retreated but remained set for a weekly gain due to expectations of lower Russian exports.

This Morning in Asia

Optimism over a likely U.S. government shutdown avoidance boosted Asian markets in early trading. Senate Democrat Chuck Schumer announced he would vote to advance a Republican stopgap funding bill.

• The MSCI Asia-Pacific index (ex-Japan) gained 0.2%
• Japan’s Nikkei reversed early losses to rise 0.12%
• Hong Kong’s Hang Seng climbed 1%, though it was set for a 2.3% weekly decline
• China’s CSI300 rose 1.4%, heading for a 0.6% weekly gain

One key reason for optimism? Cheap Chinese stocks:

• Chinese stocks trade 30% below their 2021 highs
• The Hang Seng Index is valued at 7x forward earnings, compared to 20x for the S&P 500, according to LSEG data

The U.S. dollar regained some ground:

• The euro edged down 0.1% to $1.0841
• The British pound slipped 0.05% to $1.2944
• The dollar rose 0.3% against the yen to 148.25