- SNAPSHOT: Equities up, Treasuries up, Crude down, Dollar down.
- REAR VIEW: Zelensky told to leave White House after fiery meeting with Trump/Vance; US and Ukraine minerals deal not signed & US-Ukraine relations subside; US Core & headline PCE in line; Atlanta Fed GDPnow (Q1) now sees contraction; US advanced goods trade balance deficit soars; China to take necessary countermeasures against Trump's last announced tariffs; Cool French CPI, Germany comes in line; Tokyo CPI beneath expectations; Israel attempts to extend first phase of Gaza ceasefire.
- COMING UP: Data: EZ HICP, US ISM Manufacturing, Japanese Unemployment Rate. Speakers: Fed’s Musalem. Earnings: Bunzl.
- WEEK AHEAD: Highlights include US PCE, NVDA earnings, German election, China NPC, PBoC MLF, ECB Minutes, Australian and Tokyo CPI. To download the full report, please click here.
- CENTRAL BANK WEEKLY Previewing ECB, CBRT; Reviewing ECB minutes, RBA minutes PBoC MLF, BoK. To download the full report, please click here.
More Newsquawk in 2 steps:
- 1. Subscribe to the free premarket movers reports
- 2. Trial Newsquawk’s premium real-time audio news squawk box for 7 days
MARKET WRAP
US indices endured a choppy session but closed notably in the green, and at highs as they saw a notable bid into settlement amongst month-end, despite the initial sell-off seen post-US open. US January PCE was the scheduled data highlight, but turned out to be a damp squib, in terms of market reaction, as both headline and core metrics M/M and Y/Y printed in line. At the same time, US advanced goods trade balance deficit soared ~26% M/M as imports surged amid potential front-loading ahead of tariffs. In the wake of the data, the latest Atlanta Fed GDPnow model for Q1 forecasted -1.5% from +2.3%, which prompted risk-off trade - US equity futures sold, Treasuries bid, and Yen firmed. Nonetheless, the session highlight came after a fiery and argumentative meeting between US President Trump and Ukraine President Zelensky. Summarising, Trump told Zelensky "You are gambling with World War III", "You either make a deal or we are out". Following the meeting, where a joint press conference was originally scheduled, Trump posted on Truth, that Zelensky disrespected the US and he could come back when ready for peace. Summarising the fallout, a minerals deal was not signed, the joint presser was cancelled, and leaders throughout Europe have announced their solidarity with Ukraine. In the wake of the fireworks, the Dollar and WTI saw upside, with the latter's move to the detriment of all G10 FX peers. Elsewhere, the crude complex settled slightly lower, but well off earlier lows, following Trump and Zelensky's aforementioned fiery meeting, whereby Zelensky was asked to leave the White House. Meanwhile, the Treasuries rally resumed as concerns over the US economy returned and geopolitical tensions climbed.
US
PCE: US January PCE was in line with expectations as Headline M/M and Y/Y printed 0.3% (exp. 0.3%, prev. 0.3%, unrounded 0.3254%) and 2.5% (exp. 2.5%, prev. 2.6%), respectively. Meanwhile, Core M/M came in at 0.3% or 0.2847% unrounded (exp. 0.3%, prev. 0.2%), while Y/Y was 2.6% (exp. 2.6%, prev. 2.9%). The 6-mnth annualised rate climbed to 2.5% (prev. 2.3%), while the 3-mnth annualised rate was unchanged at 2.2%. Capital Economics notes that favourable base effects mean downward progress on core inflation is likely to continue over the next few months, before it is cut short when some combination of Trump’s reciprocal and wider tariffs come into effect. Elsewhere, Personal income rose 0.9% (exp. 0.3%, prev. 0.4%). Adj. consumption eased 0.2% (exp. 0.1%, prev. 0.8%), while real consumption declined 0.5% (prev. +0.5%). For the latter, CapEco notes while it is tempting to pin the fall entirely on harsh winter weather last month, the breakdown shows that spending in some typically weather-related categories (food services and accommodation) outperformed. CapEco adds, that it's not to say the weather did not have any impact and they do expect consumption to rebound this month. Even so, as the fall was greater than they forecasted, it poses a downside risk to CapEco’s Q1 GDP estimate of 1.5%. Note, the latest Atlanta Fed GDPnow (Q1) sees a decline of 1.5% (prev. 2.3%). Ahead, with the inflation rate still too hot for the Fed’s liking and, with inflationary tariff measures pilling up, Capital Economics stand by its view that rate cuts are off the table this year.
INTERNATIONAL TRADE: US international trade deficit notably widened to USD 153.26bln in January, from December’s USD 122.01bln. Exports of goods printed USD 172.2bln, USD 3.3bln more than December exports, but Imports of goods surged to USD 325.4bln, rising USD 34.6bln M/M, which is clear evidence that importers are attempting to front-run tariffs. ING notes imports surged 11.9% M/M, with industrial supply imports soaring to USD 89.3bln (prev. USD 67bln in Dec) and consumer goods imports jumping USD 6bln to USD 78.2bln.
FIXED INCOME
T-Notes rally resumes as concerns over the US economy return and geopolitical tensions climb. At settlement, 2s -8.5bps at 3.995%, 3s -7.8bps at 3.981%, 5s -7.7bps at 4.028%, 7s -7.0bps at 4.129%, 10s -6.0bps at 4.227%, 20s -4.6bps at 4.545%, 30s -4.7bps at 4.507%.
INFLATION BREAKEVENS: 5yr BEI +1.7bps at 2.536%, 10yr BEI +1.9bps at 2.381%, 30yr BEI +2.4bps at 2.272%.
THE DAY: T-Notes ground higher in early trade as the risk-off sentiment seen across markets on Thursday continued in the Asian session, and at the European Open, following a Tech selloff and more tariff fears sparked by US President Trump. In the US morning, the highlight was the US PCE report. Headline and core January measures aligned with expectations, while personal income surged above expectations, and personal consumption decreased from the prior. Additionally, the trade deficit rose 26% M/M amid potential front loading ahead of tariffs. Thereafter, trade was choppy, but ultimately Treasuries drifted higher as the latest Atalanta Fed GDPNow (Q1) surprised markets, forecasting a contraction of 1.5% after seeing 2.3% GDP growth. Behind the huge swing in the forecast, a slump in net exports and a fall in real personal consumption expenditure growth weighed. This took Treasuries to fresh session highs, with T-Notes peaking at 111-06 from the earlier induced PCE lows of 111-02. On geopolitics, tensions were high, with expectations over the minerals deal being signed between the US and Ukraine crushed. Ultimately, the press conference between Trump and Ukrainian President Zelensky was cancelled after the meeting between the two was heated, tense, and most importantly futile. Trump later via Truth Social, said he disrespected the US, and Zelensky can come back when he is ready for peace. Ahead, it's unclear how US-Ukraine relations will develop from here, and what consequences today's meeting will have on the war between Ukraine and Russia. Focus over the weekend will be if Zelensky stays in the US and conversations continue, while also being on Tuesday's deadline for the US tariffs on Canada/Mexico.
STIRS/OPERATIONS
- Market Implied Fed Rate Cut Pricing: March 2bps (prev. 1bps), May 9bps (prev. 8bps), June 26bps (prev. 22bps), Dec 70bps (prev. 60bps).
- NY Fed RRP op demand at USD 234blnbln (prev. 182bln) across 50 counterparties (prev. 41)
- SOFR at 4.36% (prev. 4.33%), volumes at USD 2.557tln (prev. 2.487tln).
- EFFR at 4.33% (prev. 4.33%), volumes at USD 110bln (prev. 108bln).
CRUDE
WTI (J5) SETTLED USD 0.59 LOWER AT 69.76/BBL; BRENT (K5) SETTLED USD 0.76 LOWER AT 72.81/BBL
The crude complex settled slightly lower, but pared some losses following Trump and Zelensky's fiery meeting, and Zelensky asked to leave the White House. On Friday, and heading into the meeting, benchmarks were seeing weakness and gave back some of Thursday's gains amid a couple of bullish factors. The EZ session was largely devoid of headline catalysts, and the selling off could simply been a case of participants locking in profit ahead of month end, and ahead of an uncertain weekend. As such, WTI and Brent hit troughs of USD 69.14/bbl and 72.32/bbl, respectively. However, the crude complex was already climbing off lows heading into the meeting, but quickly pushed to highs amid the conclusion of the Trump/Zelensky meeting. Recapping, comments already showed it was a fiery exchange, and highlighted by headlines noting "Trump, Zelensky, and Vance argue in the Oval office." Shortly after the chat finished, Trump posted on Truth "I have determined that President Zelensky is not ready for Peace if America is involved...and he can come back when he is ready for Peace”, which saw WTI and Brent lift to session peaks of USD 70.29/bbl and 73.37/bbl, respectively. The later live press conference was cancelled and the minerals deal was not signed. For the record, in the weekly Baker Hughes Rig Count, Oil fell 2 to 486, Nat Gas rose 3 to 102, leaving the total up 1 to 593.
EQUITIES
CLOSES: SPX +1.59% at 5,955, NDX +1.62% at 20,884, DJI +1.39% at 43,841, RUT +1.09% at 2,163
SECTORS: Real Estate +0.81%, Materials +0.86%, Health +1.22%, Consumer Staples +1.33%, Industrials +1.34%, Communication Services +1.37%, Utilities +1.41%, Energy +1.53%, Technology +1.71%, Consumer Discretionary +1.8%, Financials +2.07%.
EUROPEAN CLOSES: DAX: -0.25% at 22,495, FTSE 100: +0.61% at 8,810, CAC 40: +0.11% at 8,112, Euro Stoxx 50: -0.09% at 5,467, AEX: -0.43% at 922, IBEX 35: +0.58% at 13,347, FTSE MIB: +0.08% at 38,655, SMI: +0.35% at 13,016, PSI: -0.64% at 6,800.
STOCK SPECIFICS:
- Dell Technologies (DELL): Revenue light; EPS topped, raised cash dividend and approved a USD 10bln increase to share buyback programme.
- HP (HPQ): Disappointing next quarter profit guide amid rising component costs and tariffs on Chinese imports.
- Autodesk (ADSK): EPS topped and announced restructuring plan; Next quarter and FY guidance impressed.
- NetApp (NTAP): Top line missed with weak outlook.
- Monster Beverage (MNST): Sales and GMs topped accompanied by upbeat commentary.
- Rocket Lab (RKLB): Greater loss per shr. and weak next quarter revenue. guide.
- Walgreens Boots Alliance (WBA): Downgraded to 'Sell' from 'Hold' at Deutsche Bank, noting the potential take-private deal from Sycamore Partners is unlikely to be consummated at a premium to the current share price.
- Intel (INTC): Delayed its Ohio chip factory to 2030 or 2031, via Tech Crunch.
FX
The Dollar saw broad-based strength to end the week as a disastrous meeting was seen between US President Trump and Ukrainian President Zelensky. Summarising, there was discourse between Zelensky, Trump, and US VP Vance, and it was contentious and confrontational, with Trump saying "Your are gambling with World War III", "You either make a deal or we are out". Following the meeting, where a joint press conference was originally scheduled, Trump posted on Truth, that Zelensky disrespected the US and he could come back when ready for peace. Summarising the fallout, a minerals deal was not signed, the joint presser was cancelled, and leaders throughout Europe have announced their solidarity with Ukraine. Before the geopolitical updates, the DXY drifted throughout the Asian and European sessions, as price action vs. peers was mixed. January's US PCE report had little sway over price action, with the core and headline figures as expected, while income was notably above expectations. Later, Atalanta Fed GDP Now, surprised markets, forecasting a contraction of 1.5% in Q1 from the prior forecast of 2.3% GDP growth. Behind the move, a slump in net exports (imports surged) and personal consumption expenditure growth weighed. Going forward, uncertainty remains over the US-Ukraine relations and whether a resolution can be found while Zelensky remains in the US. Updates over the weekend will also be heeded for developments between the US and Canada/Mexico given the Tuesday deadline is in close sight.
G10FX was entirely in the red as aforementioned geopolitical tensions sparked weakness in the space. Hit the hardest by the risk-off tone was Antipodeans, with the Aussie down for its sixth consecutive session, putting AUD/USD below 0.62 into the weekend. For the Yen, typical haven outperformance was absent to end the week as a softer-than-expected Tokyo CPI, 2.9% Y/Y (exp. 3.3%, prev. 3.4%) weighed. USD/JPY ends the week ~150.50. For the Pound, relative outperformance was seen alongside the CAD, with the former residing around 1.2570.
EUR/USD was hit on the relationship between Trump and Zelensky souring. The Euro was immediately lower on the news, with the downside remaining for the rest of the day, putting EUR/USD below its 50 DMA of 1.0387. From here on attention looms on if US-Ukraine relations can be repaired, with Treasury Secretary Bessent noting it's up to Trump whether he wants to continue negotiating. Additionally, the conversation will be over the response to the fallout from Europe, and whether pickup is seen in turning the recent rhetoric of increased EU defence spending into action. On data, French CPI was on the soft side, while Germany's inflation report was in line with expectations.
EMFX: MXN was weaker on the day, but to a markedly less extent than its LatAm peers. Prompting the resilience to USD strength was likely the more appeasing approach Mexico has been taking towards the US in reaching a deal such that incoming US tariffs are avoided. Bloomberg reported Mexico is open to new tariffs on China to avoid Trump duties, focusing on cars and auto parts. Meanwhile, Mexico Economy Minister Ebrard called the meeting with US Commerce Secretary Lutnick "cordial". Measures to pacify relations were also seen from Brazil, with the government considering cutting ethanol import tax in a nod to Trump in an attempt to persuade President Donald Trump to make an exception for Brazil, O Globo reports.
