The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.

0744 GMT - Yields on U.K. government bonds, or gilts, drop to multi-week lows, tracking declines in the U.S. and eurozone peers, as demand for safe-haven assets persists following last week's U.S. tariffs announcement. Markets worry about a global growth slowdown which is also likely to result in more central bank interest-rate cuts, supporting bonds further. The 10-year gilt yields falls around 7 basis points to a 16-week low of 4.371%, Tradeweb data show. (miriam.mukuru@wsj.com)

0739 GMT - German industrial production continues to move sideways at a low level, a disappointing result given stronger recent sentiment readings, Commerzbank's Joerg Kraemer says in a note. Output declined 1.3% on month in February, weaker than expected. The slight recovery in sentiment indicators, such as the Ifo business climate index, had offered a glimmer of hope, he says. But the massive increase in U.S. import tariffs is set to have a significant negative impact on German exports. Any damage to output could be reduced by talks between the EU and Trump administration. However, if negotiations fail to produce any results at all, there is a risk of a recession this year, Kraemer says. (edward.frankl@wsj.com)

0727 GMT - The European Central Bank looks set to cut interest rates again due to the economic blow from President Trump's tariffs, though it risks inflation spiking again ahead, economists Claus Vistesen and Melanie Debono at Pantheon Macroeconomics write in a note. Money markets are now fully pricing in a cut to the ECB's key rate at this month's meeting. While the bank may previously have chosen to hold rates in the face of uncertainty, it now looks likely to bring rates lower, especially in light of falling energy prices, Vistesen and Debono say. Still, a shift toward a more enclosed European economy as tariffs go up could mean the ECB keeps rates at the higher end of a neutral rate due to stagflationary trends, they say. (joshua.kirby@wsj.com; @joshualeokirby)

0723 GMT - The flight to safety in the FX markets spurred by U.S. tariffs continues to favor the JPY and CHF, ING's Economic and Financial Analysis Division says in a research report. The JPY and CHF are liquid currencies backed by countries with large current-account surpluses, say three members of the division. "The U.S. current-account deficit of 4% of GDP leaves the dollar vulnerable, unless this turns into a financial crisis," they say. Also, emerging-market and commodity currencies are likely to be hit hard by the tariffs, they add. USD/JPY is little changed at 145.44; USD/CHF slips 0.9% to 0.8470. (ronnie.harui@wsj.com)

0710 GMT - The euro could extend its gains against the dollar on a weaker U.S. economic outlook and fiscal stimulus plans in the eurozone, Danske Bank analyst Frederik Romedahl Poulsen says in a note. The rising risk of a U.S. recession, alongside President Trump's policy stance, poses a growing drag on the U.S. structural growth outlook, he says. The gap between the U.S. real rate adjusted for inflation compared to elsewhere could narrow, reducing support for the dollar. There's also early, clear signs of capital rotation out of U.S. assets. "On the euro side, Europe's fiscal reform push is beginning to support sentiment." Danske expects the euro to rise to $1.14 in six months. It last trades up 1.0% at $1.0996, having hit a 6-month high of $1.1148 on Thursday, according to FactSet. (renae.dyer@wsj.com)

0706 GMT - South Korea's benchmark Kospi slumped to a 17-month low on a broad selloff amid U.S. tariff concerns. The index fell 5.6% to close at 2328.20--the lowest level since Oct. 31, 2023, extending losses for a fourth consecutive session. Foreign investors were net sellers. The Korea Exchange briefly suspended program trading to help ease market volatility, for the first time since August 2024. Index heavyweight Samsung Electronics fell 5.2%. Memory-chip maker SK Hynix tumbled 9.6%. Carmaker Hyundai Motor slid 6.6%. USD/KRW settled 2.3% higher at 1,467.80, compared with Friday's Seoul onshore trading close. South Korea's 10-year government bond yield was down 2.3 bps at 2.669%. (kwanwoo.jun@wsj.com)

0703 GMT - Barclays lowers its forecast for U.K. real gross domestic product growth--or growth adjusted for inflation--for 2025 to 0.5% from 0.7% previously following last week's tariffs announcement from U.S. President Trump. "Tariff announcements on the U.K. were broadly in line with our existing assumption, but more intense global tariffs and heightened uncertainty lead us to revise down our real GDP forecast for 2025," Jack Meaning, Barclays chief U.K. economist says in a note. The bank's real GDP growth forecast for 2026 is unchanged at 1.3%. (miriam.mukuru@wsj.com)

0701 GMT - The U.S. tariffs are likely to prompt the Bank of Japan to adopt a wait-and-see stance, dependent on data and market developments for the time being, JPMorgan's Ayako Fujita says in a research note. "We think the U.S. tariff announcement and the subsequent market reaction have ruled out the possibility of a rate hike at the (April 30-May 1) meeting and reduced the likelihood of a rate hike even in the coming months," the chief Japan economist says. However, if the global economy doesn't enter a severe recession, the BOJ will probably at least keep its commitment to normalize policy toward the lower bound of the neutral rate, at 1%, the economist adds. (ronnie.harui@wsj.com)

0644 GMT - The world may be entering a new era of trade protectionism, Natixis economists say in a research note. They reckon that China opted for a direct retaliation for this round of tariff due to the size and full coverage of the U.S. levies and China's leverage in future negotiations. However, Natixis thinks most other countries will likely prefer negotiations with the U.S., especially Southeast Asian countries. The U.S. could extend the negotiation window longer to allow more time to coordinate with multiple countries, they say. For China and the U.S., issues like the Panama port and TikTok could be bundled into the talks, but the two sides will likely prolong the economic stand-off based on self interest. (sherry.qin@wsj.com)

0642 GMT - The banking sector is set to benefit from the opportunity created by U.S. tariffs that will lead to the long-term reorganization of supply chains of large corporates and small-and-medium enterprise exporters, JP Morgan says in a research note. Companies will call on banks for services such as payments, lending facilities and custody, analysts write. "Corporate expansion in the U.S. (i.e. near-shoring) will be an ongoing theme and Banks with [investment banking]/corporate counterparty expertise in this new tariff world will be well positioned," they note. However, the industry will first have to face the negative effects of slower global growth and its consequences on the setting of interest rates, on asset quality and loss provisions, they add. (elena.vardon@wsj.com)

0638 GMT - Eurozone government bonds kick off the week firmer, with yields falling amid growing concerns over the possibility of a global recession to be brought about by U.S. tariffs. "Throughout the week, the spotlight remains on the trade war, with potential deals or retaliation plans under scrutiny," Danske Bank Research's Emilie Herbo says in a note. The EU is expected to announce a retaliation proposal on Monday. The 10-year Bund yield falls 5.5 basis points to 2.514%, according to Tradeweb. Other eurozone bond yields also trade mostly lower but to less extent. Italy's 10-year BTP yield is up 3bps at 3.787% after Fitch Ratings affirmed Italy's BBB rating with a positive outlook. (emese.bartha@wsj.com)

0634 GMT - The dollar falls as concerns about the U.S. economic fallout of President Trump's tariff policy continue to weigh. "The U.S. economy is barrelling rapidly towards recession, and will probably end up taking most of the rest of the world with it," Pepperstone strategist Michael Brown says in a note. The dollar has taken a battering as it's the most exposed asset to Trump's "tariff incoherence" with the Japanese yen and Swiss franc being the safe havens of choice, he says. The DXY dollar index falls 0.5% to 102.466. It reached a six-month low of 101.267 Thursday after Trump announced sweeping tariffs.(renae.dyer@wsj.com)

(END) Dow Jones Newswires

April 07, 2025 03:44 ET (07:44 GMT)

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