CANADA DATA: Can Feb Payrolls -49K, Vacancies -20% YOY, Wages +5.4%

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• Markets rallied yesterday after Trump signalled his April 2 reciprocal tariffs may be narrower than anticipated.
• Trump touted a USD$20 billion investment from Hyundai as a "clear demonstration" that tariffs work.
• Trump threatened secondary tariffs on any country that buys Venezuelan O&G.
• The Trump administration is dealing with a major scandal after a journalist was inadvertently included in a Signal chat group that discussed sensitive military operations. The chat included comments likely to rile European allies and opens the door for a Democrat messaging offensive.
• EU trade chief Maros Sefcovic is in Washington today to discuss tariffs with Commerce Secretary Howard Lutnick and USTR Jamieson Greer. An Indian team is also in Washington seeking tariff exemptions.
• The “Big Six” Republican leaders will hold a meeting with White House officials today to discuss Trump’s legislative agenda.
• Senator John Kennedy (R-MS) said Trump is “very interested” in having Congress codify DOGE cuts.
• Trump is cutting around $3 billion from Fiscal Responsibility Act side deals.
• A Florida special election on April 1st will provide hard data on the mood in the electorate.
• US and Russian teams in Riyadh failed to agree on a joint statement after 12 hours of talks yesterday.
• Defense Secretary Pete Hegseth will depart this week on an Indo-Pacific tour
• Poll of the Day: Just 20% of US voters say tariffs should be a priority for Trump.

Full article: US DAILY BRIEF

The Philadelphia Fed's Nonmanufacturing Business Outlook Survey showed a continued deterioration in regional services activity after a brief period of exuberance, mirroring the drop in the neighboring Empire State (NY Fed) survey. The regional general activity index dropped 24 points to -32.5, marking the lowest level since the start of the Covid pandemic. New orders fell to a 23-month low (-19.5) and the 6-month outlook for activity fell to a post-2020 low (-24.0).

• Per the Philadelphia Fed, "The indexes for general activity, new orders, and sales/revenues remained negative, with the former two declining further. On balance, the firms reported a decrease in full-time employment. Both price indexes rose and indicate overall increases in prices. The respondents expect declines in growth overall over the next six months both for their firms and in the region."
• This survey only has data back to 2011 but the currently depressed level of business activity has only been matched in periods of extreme weather (2011) and the Covid pandemic (2020).
• This is a very different story than being told by the flash March S&P PMI which rose to a 3-month high 54.3 in March, so the state of the services sector amid broader government policy uncertainty and possible deterioration in domestic demand remains obscured.
• One clearly consistent theme across these surveys though is inflation: prices paid rose to a 16-month high (36.0), with prices received up to just a 3-month high (8.4), potentially suggesting margin pressures at services firms (the March flash PMI noted an 18-month high in service sector prices paid).
• With manufacturing surveys including the Philly Fed's showing similar price pressures, it is hard not to get a sense of ongoing "stagflation" in the economy, in the soft/survey data at least so far.

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