Megacap stocks melt down, crypto and USD lower

• Trump confirms he will impose 25% tariffs on Mexico and Canada Tuesday
• US stocks fall sharply as president vows to press ahead with import charges
• Nvidia plunges 9% on news Singapore is probing illegal routing of chips
• Dollar tumbles on euro strength and weak US economic news

FX: USD fell sharply and back to major support around 106.34/50. ISM manufacturing data came in softer than expected though the prices paid component was hotter than forecast. Later in the day, Trump announced he would press ahead with tariffs today, adding that there was “no room” for last-minute negotiation. This comes after mixed signals from various members of the administration.

EUR jumped on expectations that defence spending could soar. There was also increased pressure for a Ukrainian ceasefire, after weekend talks between European leaders endeavoured to sketch out a way forward following the Trump-Vance-Zelensky furore. A Reuters story suggested there could be a €1trn German fiscal stimulus package centred on infrastructure and defence. Resistance remains around 1.0527/32 with the 100-day SMA just below here at 1.0521.

GBP outperformed again on the day as European currencies found a strong bid on higher spending risks. Resistance above is 1.2766, the midpoint of the September to January decline. The 200-day SMA sits at 1.2785. There’s little on the UK calendar so sterling will follow external factors.

USD/JPY was dragged lower by the CNY and a story late on which speculated that Trump may go after Japan for currency manipulation. That would put pressure on the BoJ to hike rates. Earlier in the session, Japan’s vice Finance Minister Mimura said that a weak yen could hinder growth in real wages, which officials view as a key ingredient to ensure price trends remain positive. Strong support resides around 149.22. The 10-year US Treasury yield, which has a high correlation to this major, fell to new lows.

AUD tried to get back above th 50-day SMA at 0.6258 but failed. Risk appetite was hit hard later in the day after Trump reiterated tariffs would kick off today. GDP is the main data to look out for this week, when it released on Wednesday. USD/CAD initially got to the top end of the recent range near 1.45, allowing for the sharp tariff spikes, before paring gains. But Trump’s announcement sat the major surge beyond 1.45. Expect more headlines and detail and volatility.  

US stocks: The benchmark S&P 500 lost 1.76% to settle at 5,849. The tech-dominated Nasdaq finished down 2.27% at 20,498. The Dow lost 1.48% to close at 43,191. The S&P 500 suffered its worst one-day drop and % decline since mid-December. The benchmark index is now up just 1.16% from US election day in early November. Trump’s tariff confirmation saw sharp selling, with plans to also impose levies on imported agricultural products starting on April 2. Nvidia got hit, along with other chip stocks and tech amid an investigation into whether its chips were illegally routed to avoid US export restrictions on China. Broadcom fell 7% ahead of its earnings report. Energy stocks also tumbled on a breakdown in oil prices to levels last seen in early December. Major support sits around $70 in Brent crude.

Asian stocks: Futures are mixed. APAC stocks kicked off March mostly on a positive note with better-than-expected China PMI helping risk taking. The ASX 200 moved north with tech, telecoms and miners leading gains. The Nikkei 225 partially recovered some of Friday’s big losses though there was a lack of fresh drivers. The Hang Seng and Shanghai Composite were relatively muted even on decent PMI data. Ongoing tariff threats loom large.

Gold found support at $2,857, that’s the minor Fib level (23.6%) of the November to February rally. Prices had spiked lower on Friday to $2,832. Falling yields and the dollar helped bugs steady. The record top is $2,956.

Day Ahead – Tariff deadline day

Border-related 25% tariffs on Canada and Mexico are due to take effect, as well as an extra 10% on China. Discussions between parties were still ‘ongoing’ and markets had expected some kind of deal or more likely another partial delay. There have been all sorts of solutions to this including “fortress North America” which Scott Bessent, the US Treasury Secretary suggested. This would protect it “from the flood of Chinese imports that’s coming out of the most unbalanced economy in the history of modern times”.

US Commerce Secretary Lutnick commented Sunday that the president’s thinking on the approach to border tariffs was “fluid” and noted both Canada and Mexico had made efforts to bolster border controls. But Trump’s announcement late in the day means a full 25% levy would be negative for all, especially US auto, steel and textile sectors. It would very likely also cause a bump in US prices, at a time when surveys are pointing to persistent inflationary pressures.

Chart of the Day – Dax to the moon…?

The most surprising major move in markets this year has arguably been the outperformance of European stocks over their US peers. Big tech has struggled as investors question their high valuations, spending plans to chase the AI boom and stretched positioning. While the benchmark S&P 500 struggles to get in the green in 2025, the German Dax is flying and has risen over 16% this year. It hit another record high yesterday after a healthy pause for breath amid severely overbought conditions.

Improving economic activity, supportive monetary and fiscal policy, and potential peace in Ukraine are bolstering growth and stock performance in Europe. However, much uncertainty lies ahead, with tariffs incoming and geopolitics highly volatile. Bulls are aiming for new round numbers like 23,600. Bears would need to push the index back down through 22,444 and 22,226.

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