Please see below article received from Brooks Macdonald this morning, which provides a global market update.
What has happened
Yesterday saw more tariff headlines, and with it, more tariff-whiplash for markets. Investors have been struggling to keep pace with the policy-pivots from US president Trump, often in the space of hours, let alone days, and that tariff volatility and uncertainty continued through yesterday. In equity markets, the US S&P500 index finished up +1.12%, and the pan-European STOXX600 index gained +0.91%. The biggest gains (and headlines) however, were over in Germany where its plans to ramp up defence and infrastructure spending has lit a fire under the German stock market, with the country’s DAX30 index up +3.38% yesterday, all in local currency terms.
Tariff watch latest
Just a day after the US imposed 25% trade tariffs on Canada and Mexico on Tuesday, Trump announced yesterday that he has was suspending for one month those tariffs for auto makers – it looks like Trump blinked first, bowing to lobbying from the big US auto companies – Ford, GM, and Stellantis (which includes Chrysler). That said, the US Trump administration continued to stress the coming 2 April implementation date of ‘reciprocal’ trade tariffs with countries around the world that levy US trade currently.
Germany’s fiscal plans are a big deal
More details are shaping up around Germany’s hastily-drawn up plans for possibly as much as EUR 900 billion worth of fiscal spending, which will be split between two funds, one for defence, and one for infrastructure. The sudden zeal of German politicians is being driven by two factors: (1) the unprecedented US withdrawal from providing defence guarantees to Europe going forwards; and (2) the need for German politicians to ram this legislation through the old parliamentary term which has around two weeks left, as there is much less likelihood of securing the two-thirds vote needed to overturn the country’s fiscal debt-brake rule when the new parliament (with different party seat-numbers post the recent German Federal election) takes over later this month.
What does Brooks Macdonald think
Our Brooks Macdonald Asset Allocation Committee guides to a neutral outlook on Developed Europe ex-UK equities, with a broadly in-line-weight across our risk bands relative to our PIMFA benchmarks. While Germany has the debt-to-GDP ratio headroom to allow for this huge ramp in fiscal spending, the same cannot be said of the other major European countries. Supporting this neutral outlook, there are also still significant headwinds for the region, including US tariff risks, increased export-competition from China in autos in particular, and fragile regional economic growth risks more broadly.
Please check in again with us soon for further relevant content and market news.
Chloe
06/03/2025