US tariff policy forces stock markets into correction mode
US President Donald Trump's tariff policy is causing uncertainty on the markets and fueling fears of inflation. The US stock market corrected the most, but the other major investment regions were also negative. Gold, on the other hand, was in high demand and reached an all-time high above the USD 3,000 per troy ounce threshold.
The international stock markets fell in March. The German DAX share index recorded the smallest decline, followed by the Hang Seng Index in Hong Kong. The broad European index Stoxx Europe 600 and the Japanese Nikkei index suffered somewhat heavier losses. The broad S&P 500 and the Nasdaq technology index in the USA recorded the sharpest falls. Global equities, as measured by the MSCI World Index, fell significantly.
Volatility on the stock markets was at a high level over the course of the month, particularly until the middle and end of the month. The sell-off in the US was driven by the announcement of new tariffs by the Trump administration and the resulting ongoing uncertainty for the US economy and international relations. The correction continues to affect the US technology sector the most.
As the tariffs have a price-increasing effect, investors have become increasingly concerned about a rise in inflation, especially as it is still above the target of 2.0% in the major economies: 2.8% in the US in February and 2.2% in the eurozone (previous month: 3.0% and 2.3% respectively). Rising inflation expectations had a negative impact on leading indicators such as the purchasing managers' index, consumer sentiment and consumer confidence in the US. The latter fell to its lowest level since January 2021.
In contrast, Europe continued to outperform the US. In Europe, hopes of massive investment from the upcoming German fiscal package - a special fund of €500 billion for investment in infrastructure and defense - are supporting the stock market. At the same time, the EU Commission signaled that the member states could significantly increase their defence budgets without violating the EU's deficit rules. The European stock market was also supported by a further 25 basis point cut in the ECB's key interest rate. The main refinancing rate fell to 2.65% and the deposit facility to 2.50%.
As in previous years, China set itself a growth target of "around 5%". In addition, the National People's Congress decided to boost consumption through fiscal stimulus measures in order to achieve the target. As the real estate market has stabilized somewhat but remains challenging, Chinese domestic consumption remains weak for the time being. However, it is likely to be difficult to rely on an increase in exports in view of the US tariff policy. However, the Hong Kong stock exchange bucked the market trend in March.
Against this backdrop, the bond markets performed inconsistently. In Germany, the announcement of the special fund led to a significant rise in yields. At 2.74%, 10-year German government bonds yielded 33 basis points higher than at the beginning of the month. In contrast, their US counterparts were almost unchanged from the previous month with a yield of 4.20%. As in previous months, gold was in high demand. Above all, the prevailing uncertainty about the effects of US customs policy drove up the price of gold. The troy ounce rose by 9.30% from USD 2,857.83 to USD 3,123.57, exceeding the USD 3,000 threshold for the first time in history.
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