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April 2, 2025
  
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Today


Do Americans feel freer today now that “Liberation Day” has arrived? Ontario Premier Doug Ford would disagree with any liberating feelings as he has called today “Termination Day”, citing the layoffs that would occur should Trump follow through on tariff threats, which he says would inevitably stymie growth. All eyes are on Trump this afternoon for a 4 pm Rose Garden address where he will likely announce sweeping tariffs against a list of nations. The market has so far reacted poorly to the prospect of a global trade war with U.S. equity markets falling from their all-time highs. The S&P 500 just finished its worst quarter since 2022 and is down -8.3% from its February high. Canada, due to its exposure the materials sector, i.e. gold, managed to finish the quarter positive. Stock futures and bond yields are lower, while gold flirts with its record high this morning.

China has restricted local companies from investing in the U.S., potentially giving Beijing more leverage in trade negotiations. The National Development and Reform Commission has instructed branches to halt registration and approval of new U.S. investments, though existing commitments remain unaffected. This move adds uncertainty for firms seeking to shift production abroad to bypass trade barriers and follows increased scrutiny of outbound investments amid capital outflows and yuan pressure. The decision comes ahead of Trump’s expected tariff announcement, heightening global trade tensions, with trading desks around the globe bracing for increased stock market volatility. Concerns are mounting that Trump’s trade policies could hurt corporate earnings and disrupt supply chains. Major firms like Goldman Sachs, JPMorgan, and Barclays warn that market uncertainty is a key risk, with some predicting the S&P 500 could drop below 5,500 or even 5,400 if tariffs are implemented. 

Tough calls ahead for the ECB. Euro-area inflation eased to 2.2% in March, down from 2.3% in February, bringing it closer to the ECB’s 2% target. Services inflation moderated to 3.4%, and underlying price pressures slowed to 2.4%. The ECB is now considering whether to cut interest rates further, with some officials concerned about the inflationary impact of U.S. tariffs. However, there is disagreement within the bank, with some focusing on the potential hit to GDP rather than inflation. The outlook remains uncertain as the ECB awaits clearer economic signals, including the effects of increased military spending and infrastructure investment in Europe. 

Speaking of stymieing growth, U.S. manufacturing contracted for the first time this year in March, with the ISM index dropping to 49 amid rising costs and tariff uncertainty. Prices paid for materials rose to their highest since June 2022, while orders, production, and employment declined. Businesses are stockpiling inventory ahead of expected trade restrictions, further disrupting supply chains. Seven industries, including wood and plastics, shrank, while nine, such as textiles and petroleum, grew. With cooling demand, manufacturers may struggle to pass higher costs to consumers, adding to economic uncertainty. 

The picture was also not very rosy north of the border as Canadian manufacturing activity also contracted in March, with the PMI falling to 46.3, its lowest since December 2023, as escalating global trade tensions led to the steepest drop in new orders since the early days of the pandemic. U.S. tariffs on vehicles, steel, and aluminum hit Canadian exports, with the new orders index plunging to 42.3 and future output expectations at a record low. Inflationary pressures also rose, with input prices reaching their highest since August 2022, prompting concerns that the Bank of Canada may pause its rate-cutting plans at its April 16 meeting. 

Record fili-busted. Sen. Cory Booker set a new record for the longest Senate speech in history, surpassing 24 hours and 18 minutes, as he condemned the current administration’s policies. Beginning Monday evening, the New Jersey Democrat vowed to disrupt Senate proceedings for as long as physically possible, citing concerns over tariffs, deportations, and federal workforce cuts. His remarks, streamed on TikTok, went viral, drawing widespread attention and questions (i.e. was he allowed to take a bathroom break?). While Booker remained standing without ever leaving the floor (he would have lost control of the senate floor if he did), he was intermittently joined by Democratic colleagues who offered support. His speech, which included letters from constituents and tributes to civil rights icon John Lewis, delayed Senate business, including a planned vote on a NATO ambassador nomination. 


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Company news


Rogers Communications shares are under pressure after stating it announced its 12-year broadcast renewal deal with the NHL for C$11 billion ($7.7 billion). The agreement is worth more than double the previous C$5.2 billion deal that Rogers signed in 2013. That contract gave Rogers national broadcast rights, including to the valuable Hockey Night in Canada package of games that airs on Saturday nights. Rogers incurred less than C$3 billion in operating costs from the original deal, one analyst estimated. Rogers’ sports portfolio also includes the Toronto Blue Jays baseball team. In September, the company said it would purchase BCE Inc.’s stake in MLSE, which owns the Maple Leafs and the Toronto Raptors basketball franchise.

Walmart is continuing to push Chinese suppliers to cut prices to offset Trump’s tariffs, even after Beijing officials summoned the U.S. retailer’s executives last month to discuss the issue. The world’s largest retailer has not backed down from its requests to suppliers to cut prices by as much as 10% for each round of tariffs, essentially asking them to shoulder Trump’s duties. The ongoing negotiations, which are common for Walmart and its vast network of vendors, also show the lengths to which American businesses are going to offset added costs. These are only set to grow after Trump announces new reciprocal tariffs against major U.S. trading partners this week, which would add to duties of 20% that Trump has already implemented on Chinese imports. Negotiations between Walmart and suppliers are happening across product categories, not by countries of origin. 

Banco Santander SA has won a Canadian banking license as it continues its expansion across the Americas. Canada’s banking regulator, the Office of the Superintendent of Financial Institutions, issued an order for Santander Consumer Bank to “commence and carry on business” early last month. A representative for Santander confirmed it had secured a Canadian banking license but declined to elaborate on its plans for the country. Spain’s largest bank has been hiring in the U.S. and rolling out a new digital bank in the country as well as in Mexico as it seeks to expand across the region.  


Commodities


Oil prices are lower, pausing last month’s rally as traders position themselves for impending tariff announcements. The tariffs add to a number of conflicting drivers since Trump came into office. Sanctions threaten to curb supply from Russia and Iran, even as a production boost by OPEC and its allies starting this month exacerbates concerns a glut is looming later this year. The U.S. may further pressure Russia, as a group of 50 Republican and Democratic senators introduced a sanctions package on the third-largest oil producer and countries that buy its fuel if President Vladimir Putin refuses to engage in good-faith ceasefire negotiations with Ukraine, or breaches an eventual agreement. On the supply side, data from the American Petroleum Institute showed U.S. crude inventories rose by a 6 million barrels last week, while levels at Cushing, Oklahoma (the delivery point for WTI) rose by 2.2 million barrels. This would be the largest build since January 2023 if confirmed by official data later today.

Palm oil is on track for its highest close in more than two weeks on expectations that rising prices of rival soybean oil will boost demand for the tropical commodity. Soyoil jumped almost 6% in Chicago on Tuesday, following forecasts that soybean production in top supplier Brazil will be less than expected. Both palm and soybean oils are used to prepare food, as well as in the production of biofuels. Soybean output in Brazil is expected at 167.5 million tons in 2024-25 marketing year, compared with 168.3 million tons estimated in March, according to StoneX. Palm oil is getting support from external markets, even as the tropical oil’s fundamentals are weak, and there are expectations that production is going to rise from now onward in the second-biggest grower Malaysia as workers return to plantations after the Ramadan festival. 



Fixed income and economics


Bonds are continuing to rally with global trade tensions centre stage ahead of President Trump’s tariff announcement. The U.S. 10-year yield fell two basis points to 4.15%, close to the lowest in nearly a month, after a report that China has taken steps to restrict local companies from investing in the U.S. Markets are eager for clarity on the scope of the tariffs to assess their impact on the already wobbly U.S. economy. Fears that a trade war will dampen consumer sentiment and require more interest-rate cuts from the Federal Reserve to support activity have pushed yields lower in the past weeks. Options are showing that Treasuries will extend their rally, as seen in big wagers on lower yields and expectations of deeper-than-expected Fed cuts reflected in interest rate-linked derivatives. Also, the premium investors are paying for calls relative to put options stands at its highest level since August 2024. Money markets are almost fully pricing three quarter-point interest-rate cuts from the Fed this year. Expectations of more easing have helped knock the 10-year Treasury yield from a one-year high around 4.8% in January, as markets prepare for uncertainties surrounding Trump’s tariff policies to continue even after Wednesday’s announcement.

The trade war is set to plunge Canadian provinces into deeper deficits, revitalizing a quiet corner of the credit market. Provinces are expecting wider deficits and higher funding needs, which means selling more bonds. The seven provinces that have proposed budgets so far reported a combined deficit of $32 billion for the 2025-2026 fiscal year, double the estimates for the year prior, according to a note from National Bank of Canada. Bond dealers are mitigating their risks by compressing the time between building the book, gathering orders and assigning allocations, and completing the sale of the bonds. So far, investors are receptive. Demand has risen to meet supply as the market gets more robust, and the risk premium for provincial bonds has generally remained tight compared with Canada’s federal debt. 


Chart of the day

 


Markets


Quote of the day

 

To be prepared is half the victory

Miguel de Cervantes

Contributors: A. Innis, A. Nguyen, P. Kwon

Charts are sourced to Bloomberg unless otherwise noted.

The opinions expressed in this report are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Richardson Wealth Limited or its affiliates. Assumptions, opinions and estimates constitute the author’s judgment as of the date of this material and are subject to change without notice. We do not warrant the completeness or accuracy of this material, and it should not be relied upon as such. Before acting on any recommendation, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Past performance is not indicative of future results. Richardson Wealth Limited, Member Canadian Investor Protection Fund. Richardson Wealth is a trademark of James Richardson & Sons, Limited used under license.

 

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