A Look at the Day Ahead in European and Global Markets

By Vidya Ranganathan

Britain’s government receives another report card on its spending curtailment efforts, while Germany votes on its significant borrowing initiative.

The UK government’s finances report should reveal the extent of its deficit as the financial year concludes, just before finance minister Rachel Reeves’s budget update on March 26.

Departments have been tightening budgets to help Reeves achieve her reduction targets, hindered by rising gilt yields and a slowing economy.

Recently, Prime Minister Keir Starmer vowed to “hack back the thicket of red tape” stifling growth, with the government abolishing NHS England to return the health service to direct ministerial control.

Reeves aims to balance day-to-day spending with tax revenues by the 2029-30 financial year and is expected to announce a rebuilt fiscal buffer of £9.9 billion ($12.83 billion).

In contrast, Germany’s investors celebrate the likely passage of a 500 billion euro ($542 billion) fund for infrastructure and increased defense spending, recently approved in the Bundestag, giving conservative leader Friedrich Merz a boost.

This legislation is expected to clear the Bundesrat today.

Across broader markets, Wall Street’s earlier bullish momentum, driven by the Fed Chair Jerome Powell’s optimistic economic views, appears to be waning. Treasuries and the dollar have risen, reflecting a broader “risk-off” sentiment, along with surging gold prices.

Global policymakers have adopted a cautious stance amid increasing uncertainty in economics and politics, with the U.S. Federal Reserve, Bank of Japan, and Bank of England maintaining steady rates.

Key Developments Influencing Markets on Friday:

• DATA: UK public finances (February), Euro zone current account (January), Euro zone consumer confidence (March flash estimate), Canada retail sales (February)
• SPEAKERS: Chicago Fed President Austan Goolsbee, New York Fed President John Williams, European Central Bank’s Jose Luis Escriva at an event in Barcelona.

($1 = 0.9221 euros)

($1 = 0.7719 pounds)

(By Vidya Ranganathan; Editing by Edmund Klamann)