US ISM manufacturing for March registered at 49.0, slightly below the expected 49.5. February’s JOLTs job openings were reported at 7.568 million, under the estimate of 7.616 million.
Construction spending in February increased by 0.7%, surpassing the expected 0.3%. Reports indicate that Trump is reviewing three tariff proposals, with implications for competition and trade relations.
Gdpnow Revision Sparks Concern
The Atlanta Fed’s GDPNow estimate fell to -3.7% from -2.8%. Canada’s Carney expressed intentions to retaliate against US tariffs in discussions with Mexico.
WTI crude oil prices declined 28 cents to $71.18, and US 10-year Treasury yields fell by 7.4 basis points to 4.17%. The S&P 500 rose by 0.4%, while gold decreased by $6 to 3117.
Market sentiment faced challenges from a potential 20% tariff, leading to lower stock futures and Treasury yields. However, a subsequent report suggested this option was less likely, resulting in a rebound for equities.
The Canadian dollar and Mexican peso experienced gains, with USD/CAD dropping 80 pips to 1.4301. Upcoming market activities on Wednesday are anticipated to be significant.
Manufacturing And Labor Cooling
With the ISM manufacturing reading holding below 50, it still points to a subtle contraction in US industrial output. Though not sharply negative, a reading under that threshold typically indicates that activity in the sector is shrinking rather than expanding. When we consider the JOLTs data, which measures the number of job openings, we’re seeing modest declines there as well—another hint that labour demand isn’t holding as robustly as before.
Construction spending came in stronger than projected, which gives a marginal boost to confidence about underlying investment. Still, that uptick hasn’t done much to offset concerns around the weaker forward-looking GDP estimate from the Atlanta Fed, which now sees a deeper contraction. When a central bank model sharply revises growth expectations downwards, particularly into negative territory, we treat that as an early signal to reassess near-term positioning—especially around rate-sensitive sectors.
On trade, the introduction of three new tariff proposals has started to stir anxiety, even if implementation appears less immediate after recent clarifications. The fact that equity markets bounced back following the suggestion that the harshest proposal might not materialise shows just how jittery sentiment is. That sharp reaction—down and then partly up—reminds us that volatility risks remain tied closely to policy headlines. Trade policy noise remains a reliable driver of directional movement.
Oil slid modestly, and Treasury yields dropped again, reflecting a softening growth outlook and mild risk-off undertones. The decline in yields, specifically the 10-year note drawing 7.4 basis points lower, is one of the more tangible signs that markets are interpreting economic cues as deflationary. What truly underlines that shift is the performance of the Canadian and Mexican currencies, which tracked commodity and trade expectations higher. USD/CAD’s reversal tells us that participants were rotating away from dollar exposure, possibly anticipating more amicable North American negotiations after pushback from Ottawa and hints of trilateral discussions.
Market reactions have not only reflected these fundamentals. Technical flows and positioning likely played a role, especially given how compressed volatility measures have been. Should yield curves adjust further, with short-term rates remaining elevated relative to long-dated ones, we’d expect pressure on carry trades and longer-duration derivatives. For those of us watching macro signals more closely, there’s growing incentive to hedge equity and fixed income exposures in tandem rather than in opposition.
We anticipate Wednesday’s data and events could act as definable market catalysts. Forward guidance from monetary officials, clarity on tariffs, or any unexpected data shifts could trigger repositioning across rate products and FX crosses. It would be prudent to examine delta and gamma exposures here, especially where convexity risk builds quickly in thin liquidity periods. Keeping contracts lean and volatility-priced reflects current risk appetite more accurately than outright directional bets.
