Euro Rallies on Germany’s €500bn Defence Plan

Friedrich Merz, who's expected to become Germany's next chancellor, has announced a political deal to raise hundreds of billions of Euros in extra spending on defence and security infrastructure. At the heart of his proposals is a special €500bn (￡415bn) Defence Fund to bolster Germany's security forces.

In the wake of Europe's financial crisis, Germany plans to introduce a "debt brake" limiting the budget deficit to 0.35% of national economic output (GDP). Merz also acknowledged a shift in fiscal policy to address global conflict and security challenges.

On Friday the US economy reported an increase of 151,000 jobs in February, a lower reading than the 160,000 forecast. Understandingly it had no real effect on the markets.

In a bit of a U-turn, President Trump expressed optimism about upcoming discussions with Ukrainian officials, indicating a potential resumption of intelligence sharing and support, contingent upon Ukraine's willingness to engage in peace negotiations with Russia.

Meanwhile the US Dollar Index (DXY) declined by 3% over the week, marking its most significant drop since November 2022. Factors include trade tensions, dovish expectations for Federal Reserve policy, and mixed reactions to rhetoric and decision making from President Trump.

Several US Billionaires seem to have experienced significant financial losses in recent weeks. Collectively, their companies have shed approximately $1.43 trillion in market value since Trump’s inauguration. The Presidents own social media platform, Trump Media & Technology Group Corp. (DJT), has seen a 44% decline, resulting in a $1.8 billion loss in his stake. Similarly, Tesla Inc., led by Elon Musk, has experienced a 47.6% drop in shares!

• Former Bank of England Governor Mark Carney has been elected as Canada's Prime Minister. His leadership is anticipated to bring a focus on economic reforms and climate change initiatives.
• Yesterday, the Moscow region experienced a significant drone attack, resulting in heightened geopolitical tensions. While specific details remain limited, the incident has raised concerns about regional stability, potentially influencing investor sentiment and leading to increased volatility in European markets.
• Major Asian indices mirrored the U.S. downturn, with Japan’s Nikkei 225 and Hong Kong’s Hang Seng Index each declining by over 2% yesterday, reflecting investor apprehension over potential economic slowdowns.

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