Sunset Market Commentary

Markets

The US Supreme Court (SCOTUS) injected a fresh dose of uncertainty by striking down president Trump’s signature IEEPA tariffs end last week. Trump responded by introducing a flat 15% global rate (using a different legal base) that keeps the average tariff rate +/- the same. This Section 122 (balance of payment emergency) levy comes with a max term of 150 days during which the Trump administration will build country- or product-specific cases to apply tariffs based on for example Section 232 (threat to national security and used as basis for current levies on steel, copper and aluminum) or Section 301 (unfair foreign trade policies, used particularly against China). For some, the situation isn’t dramatically different from before. The euro area for example had struck a 15% tariff deal and the exemptions agreed are still applicable today. The European Parliament nevertheless decided to freeze the approval of the deal given the uncertainty. Others, including the UK (10% in the trade deal) are worse off, while the likes of China, India and Brazil see their rates currently lower. Needless to say the latter will now be dragging their feet in the ongoing negotiations. Trump already threatened countries “that play games” with higher tariffs. Apart from what the SCOTUS decision means for the earlier trade deals, there are open questions in terms of tariff repayment to US importers. This matter needs to be brought to lower courts and could spell the beginning of a long legal battle that probably only big-enough companies are willing to fight. It also brings the outsized US deficits back into the attention. In the Congressional Budget Office’s fiscal update earlier this month, tariffs would recoup some $3tn of the $4.7tn (over the next decade) in Trump’s deficit-widening Big Beautiful Bill.

What it all means going forward is impossible to tell at this stage. So markets kicked off today the way you’d expect them to: with caution. European stocks slipped in the red but then gradually recovered. WS opens with 0.5% losses. Core bonds whipsawed and are currently marginally higher on the day, Treasuries outperforming Bunds. Net daily changes in the US vary between -0.4-2.8 bps. Bund yields are down around 1-1.5 bps. The US dollar initially lost ground through rising risk premia but found a stronger footing in European dealings. EUR/USD is now changing hands in the 1.18 area, virtually unchanged from Friday’s closing level (which factored in some minor USD weakness after the SCOTUS ruling got public). There was some volatility in DXY too before steadying near 97.64. JPY outperforms in the G10 landscape, pushing USD/JPY down to 154.6. Sterling trades resilient near the EUR/GBP’s YtD highs (0.873).

News & Views

Statistics Poland today reported stronger than expected January retail sales. On a seasonally adjusted basis, real sales were up 0.5% M/M and 5.1% compared to January 2025. On a non-seasonally adjust basis, sales decreased by 17.8%. Even so, the agency analyzed that sales were higher in most product groups compared to the same period last year. This especially applies to textiles, clothing, footwear (by 17.6%), furniture, radio, TV and household appliances (by 10.5%), pharmaceuticals, cosmetics (by 9.6%). Sales of food, beverages and tobacco products also rose 4.2% Y/Y. A decrease in sales was noted in the group motor vehicles, motorcycles, parts (by 4.5%). Decent sales data come as the National Bank of Poland (NBP) next week holds a policy meeting. Despite decent domestic demand, markets are positioned for the NBP to deliver a finetuning rate cut, lowering the policy rate by 25 bps to 3.75% as inflation (2.2% Y/Y in January) returned to the 2.5% target. The zloty continues to trade within an extremely tight sideways consolidation pattern against the euro with EUR/PLN hovering near 4.22.

The Business Confidence indicator of the National Bank of Belgium (NBB) dropped sharply in February, dropping from -8.8 in January to -13.7 and more than reversing the January uptick. Confidence fell back to a similarly low level as in May of last year. All sectors worsened, except for the building industry. Trade recorded the largest decline in confidence. While demand expectations and forecasts of orders to suppliers improved significantly last month, they fell by even more this month. In the manufacturing industry, all components of the confidence indicator declined. Along with a significant deterioration in the assessment of total order books, expectations concerning both demand and employment turned much more pessimistic while stock levels were viewed considerably more negatively. Confidence in business-related services dropped for the third consecutive month on more dire views on current and future levels of activity.