Futures Slide As Recession Fears Mount, Trump Warns Of Looming "Disruption"

US equity futures continue their relentless grind lower, as they trade just off session lows, down more than 1% as the "Trump Dump" selloff continues amid growing concerns about the health of the US economy. As JPM notes this morning "today there is a global de-risking but let’s see if Int’l Eqys outperform on the move lower or if the US can see a relief rally"; so far the answer is a resounding no with both European and Asian stocks tumbling, after Trump declined to rule out a recession due to his policies, pointing to a transition period for the economy. As of 8:00am, S&P futures are down 1.2% to 5,705 following the worst week for the benchmark index since September, while Nasdaq 100 futures slide 1.1% with all Mag7 stocks sharply lower to start the week: Tesla shares fell about 3% in premarket trading inching toward erasing their post-election gains, and most other Big Tech names also dropped, including AI bellwether Nvidia. European stocks slipped 0.4%. Treasuries are down 4-6bps amid rising recession fears, while the USD continues its post-Trump slump. In commodities, Ags and Energy are higher green while precious and base metals slide after China’s recent data confirmed deflation has returned to the second largest economy. Today’s macro data focus is on NY Fed’s 1-Year Inflation Expectations.

In premarket trading, Tesla leads losses among the Magnificent Seven stocks as the broader market selloff intensifies amid concerns of slowing economic growth (GOOGL -1%, AMZN -1.2%, AAPL -1.4%, MSFT -1%, META -1.4%, NVDA -1.8% and TSLA -2.6%).  Cryptocurrency-exposed stocks fall as Bitcoin extends losses for a fifth consecutive session after President Donald Trump’s long-awaited order to create a strategic Bitcoin reserve disappointed the market and weighed on digital currencies (MicroStrategy (MSTR) -5%, Riot Platforms (RIOT) -4%). Here are some other notable premarket movers:

• Beam Therapeutics (BEAM) rises 12% after the drug developer gave initial data from an early trial of its investigative therapy for a genetic disease that can cause lung and liver damage.
• Checkpoint Therapeutics (CKPT) soars 67% after the immunotherapy and targeted oncology company agreed to be acquired by Sun Pharmaceutical Industries.
• Coinbase (COIN) drops 6% after the cryptocurrency exchange operator was left out of a reshuffling of the S&P 500 Index on Friday.
• DoorDash (DASH) climbs 3% as the S&P Dow Jones Indices is adding the the food-delivery company to the S&P 500 index.
• Other S&P 500 inductees gain: Williams-Sonoma (WSM) +0.8%, Expand Energy (EXE) +2%
• Intuitive Machines (LUNR) slumps 8%, extending last week’s selloff after it ended a lunar mission early following a flawed landing, the second setback for the company following a similar problem last year.
• Mineralys (MLYS) soars 45% after the drug developer said two trials of its experimental hypertension medicine, lorundrostat, met their main goals.
• Redfin Corp. (RDFN) soars 85% after Rocket Cos. agreed to buy the company in a deal that values the real estate listing site at $1.75 billion. Rocket (RKT) slips 9%.
• Robinhood (HOOD) falls 5% after agreeing to pay $26 million to settle allegations by the Financial Industry Regulatory Authority that it failed to respond to red flags about potential misconduct and didn’t verify the identities of thousands of customers.
• Samsara (IOT) gains 2% after Piper Sandler and BMO upgraded the software company to buy-equivalent ratings in the wake of a stock selloff driven by a lackluster fourth-quarter earnings report.

Mounting unease over the potential fallout from trade tariffs and sweeping government job cuts sent 10-year Treasury yields five basis points lower. The key borrowing rate has dropped more than 20 basis points in the past month, signaling risks that the world’s biggest economy will stall. Bloomberg’s dollar index held just shy of four-month lows. Tariffs and Trump’s policies have started having their “fair share of pressures on the equity markets, plus we have now started seeing a lot of concerns around US growth,” Sanford C. Bernstein strategist Rupal Agarwal said on Bloomberg TV.

Trump said at the weekend the US economy faces “a period of transition,” and there could be disruption in the near-term, suggesting that stocks could extend their slide in the near-term. “There could be a little disruption. You can't really watch the stock market. If you look at China, they have a 100-year perspective… we go by quarters. What we’re doing is building a foundation for the future” Trump told Maria Bartiromo on Sunday. At the same time, Treasury Secretary Scott Bessent earlier warned of disruption to growth. Bessent also ruled out policy shifts to prop up the stock market, the so-called “Trump Put.”

Meanwhile, more analysts are warning of a hit to corporate earnings from tariffs and fiscal spending cuts. Morgan Stanley strategist Michael Wilson said the S&P 500 could slide 5% in the first half of the year, though he expects a recovery by year-end. JPMorgan analysts also said they are turning cautious on risk assets.

A higher open for European stocks didn’t last for long as shares quickly turned negative and the Stoxx 600 is now down 0.6%, with banks, construction and technology shares underperforming. Verallia, Ryanair and energy stocks were among the biggest outperformers, while Traton, Norma and Air France-KLM fall. Here are the biggest movers Monday:

• Verallia shares rise as much as 4.5% after Brazil’s billionaire Moreira Salles family said it will make a voluntary tender offer for shares it doesn’t already own in the French glass-bottle maker
• Ryanair shares jump as much as 6.7%, the most since November 2023, after the airline group said non-EU nationals are allowed to purchase ordinary shares
• European energy stocks outperform Monday after US natural gas futures advanced to the highest level since 2022 on signs the nation could face storage levels below the five-year average this summer
• Watches of Switzerland rises as much as 7.8%, rebounding after ending last week at its lowest level since November, as the luxury watch retailer said it has started a £25 million share buyback
• Assura shares rise as much as 14% to 46.64p after a group comprising KKR and Stonepeak Partners made an indicative, non-binding cash proposal of 49.4p per share for the UK health-care landlord
• Traton shares drop as much as 7.9% after the German truckmaker’s margin guidance for 2025 missed expectations and after the company said it is too early to declare a European turnaround
• Norma shares drop as much as 7%, to the lowest since December, after analysts said the component maker’s guidance, released on Friday, was well below expectations
• Air France-KLM shares slip as much as 3.1% after Bernstein cuts its rating on the airline group to market-perform. Analysts note that the carrier’s unit costs are set to keep rising in 2025
• Clarkson shares slide as much as 20%, their worst one-day loss in seven months, after the shipbroker gave a cautious outlook for 2025 citing uncertainty due to regional conflicts and trade tensions

Earlier, Asian equities fell, led by declines in Hong Kong, as consumer inflation fell below zero for the first time in 13 months, compounding the dour outlook for the world’s second-biggest economy. The MSCI AC Asia Pacific Index fell as much as 0.9%, extending Friday’s losses, which pared the gauge’s best week since September. Tencent, Alibaba and Meituan were among the biggest drags Monday. Hong Kong-listed Chinese stocks dropped more than 2%, while shares gained in South Korea and Australia. China’s consumer inflation dropped below zero for the first time in 13 months and missed expectations. While the data were skewed by an earlier-than-usual Lunar New Year holiday, the reading unsettled the market after last week’s optimism over Beijing’s efforts to support domestic consumption.

“The market is still concerned over the dis-inflation pressure of China, which may be one of the excuses for equity indexes to see near-term corrections,” said Jason Chan, a senior investment strategist at Bank of East Asia. “In the medium run, I think inflation data will improve amid fiscal stimulus and recovery in the property market.”

The risk-averse mood can be seen elsewhere as havens outperform. In FX, the Bloomberg Dollar Spot Index hovered near to a four-month low, while Treasury yields slipped 5-7bps across the curve, as concerns around the US growth outlook mounted. Noway’s krone led Group-of-10 gains climbing over 1% against the dollar; Norwegian inflation accelerated more than expected last month, throwing in doubt Norges Bank’s long-awaited first interest-rate cut
USD/JPY fell as much as 0.7% to 146.99, after Japanese workers saw their base pay rise at the fastest clip in 32 years
USD/CAD steadied around 1.4375, after Mark Carney won the race to become Canada’s next prime minister

In rates, Treasuries lead gains in the bond market, with US 10-year yields dropping ~8 bps to 4.23% as spreading concern about a US growth slowdown fuels a flight-to-quality bid, weighing on equity index futures. A heavy corporate bond slate has been predicted for this week, with as many as 15 offerings viewed as possible for Monday. This week’s Treasury supply kicks off Tuesday and includes 3-, 10- and 30-year notes and bonds. US yields are 5bp-7bp richer across maturities led by intermediates, steepening 5s30s curve by around 2bp; 10-year near 4.24%, richer by 6bp, outperforms bunds and gilts in the sector by 3bp and 5bp. In Japan, 40Y JGB yields rose to the highest on record.

In commodities, oil prices edge higher, with WTI rising 0.3% to $67.20 a barrel. Spot gold falls $5 to around $2,905/oz. Bitcoin falls 1% to near $82,000, having pared an earlier drop to near $80,000.

Looking at today's calendar, US economic data calendar includes February New York Fed 1-year inflations expectations at 11am New York time. Ahead this week are JOLTS job openings, CPI, PPI and University of Michigan sentiment. Fed officials are inn external communications blackout ahead of March 19 policy announcement.

Market Snapshot

• S&P 500 futures down 0.9% to 5,724.50
• STOXX Europe 600 little changed at 552.92
• MXAP down 0.7% to 186.71
• MXAPJ down 0.9% to 585.22
• Nikkei up 0.4% to 37,028.27
• Topix down 0.3% to 2,700.76
• Hang Seng Index down 1.8% to 23,783.49
• Shanghai Composite down 0.2% to 3,366.16
• Sensex little changed at 74,387.84
• Australia S&P/ASX 200 up 0.2% to 7,962.30
• Kospi up 0.3% to 2,570.39
• German 10Y yield down 2.7 bps at 2.82%
• Euro down 0.1% to $1.0821
• Brent Futures little changed at $70.34/bbl
• Gold spot down 0.2% to $2,902.71
• US Dollar Index little changed at 103.92

Top Overnight News

• Ahead of the Friday deadline for a funding bill to pass to avoid a US shutdown, "It doesn’t feel like a shutdown is going to happen, although there’s still a chance because, well, this is Congress" - Punchbowl
• House Republicans announced a spending bill to avert a government shutdown, daring Democrats to vote against it. Trump called on Republicans to pass the bill, warning them to allow “no dissent” in their ranks. BBG
• Fed’s Daly (2027 voter) suggested that economic research shows uncertainty is a source of demand restraint and noted there are plenty of signs that the economy is solid but the market is giving mixed signals which is the reason monetary policy should be careful and deliberate, while she added that the Fed has rates in a good place.
• Trump said he will pick the Federal Reserve Vice Chairman for Bank Supervision fairly soon It was also reported that Trump declined to predict whether the US could face a recession amid stock market concerns about his tariff actions on Mexico, Canada and China over fentanyl, while he said tariffs on Mexico and Canada could go up, according to Reuters citing an interview with Fox News.
• Mark Carney will lead Canada’s Liberal Party and become the country’s next PM as Donald Trump’s trade policies fuel uncertainty. The former central bank chief vowed to maintain retaliatory tariffs until “Americans show us respect” and to make the nation an energy superpower. BBG
• AAPL (Apple) suffered another AI setback when the company confirmed it wouldn’t be releasing an enhanced version of Siri for the foreseeable future. BBG
• A new ceasefire deal between Israel and Hamas is possible within weeks, a US envoy told CNN. Israel halted its supply of electricity to Gaza. BBG
• China’s CPI turned negative for the first time in 13 months, falling 0.7% in February from a year earlier. The core measure, which also slid, highlights the need for policymakers to deliver stimulus quickly. BBG
• China has introduced retaliatory tariffs on about $22bn of US goods, including agricultural exports, targeting President Donald Trump’s rural base in the latest escalation in the trade war between the world’s two largest economies. Beijing’s measures, which were announced last week in response to Trump slapping an additional 10% levy on all Chinese products, are aimed primarily at US farm goods. FT
• Japan's real wages fell in January after two months of slight gains, data showed on Monday, days before the annual rounds of pay negotiations held each spring culminate at the country's major firms. Japan real cash earnings for Jan come in a bit below expectations at -1.8% (vs. the Street -1.6%). RTRS
• German industrial production comes in a bit better than anticipated in Jan (+2% M/M vs. the Street +1.5%) while exports fall short (-2.5% vs. the Street +0.5%). RTRS
• Ukraine will try to convince Washington to resume arms/intelligence assistance during negotiations this Tues in Saudi Arabia, w/Kyiv advocating for a partial ceasefire in the war with Russia. FT

Trade/Tariffs

• US Commerce Secretary Lutnick said President Trump will not ease up on fentanyl-related tariffs and that tariffs will come off if fentanyl ends, while he noted steel and aluminium tariffs take effect on Wednesday and they will revisit fentanyl and reciprocal trade issues on April 2nd.
• Incoming Canadian PM Carney vowed to discover new trade partners and ensure borders, while they will keep tariffs on the US until Americans show them respect. Carney said they cannot let Trump succeed and will ensure that all proceeds from tariffs will be used to protect their workers.
• Canadian Finance Minister LeBlanc said Canada is ready for an immediate review of the USMCA trade agreement and there is still room for talks on steel and aluminium tariffs.
• China’s MOFCOM said it will impose tariffs on some imports from Canada in retaliation for Canadian tariffs on Chinese goods effective March 20th in which it will impose 100% tariffs on Canadian rapeseed oil imports and 25% on port and seafood imports, while it will impose additional tariffs on some other Canadian goods.
• South Korean Acting President Choi ordered to communicate actively with the US about tariff rates and will consult with the US about cooperation in shipbuilding and energy sectors, while they are to review non-tariff measures related to US reciprocal tariffs.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks began the week mixed amid tariff-related concerns and as participants digested the softer-than-expected Chinese inflation data from over the weekend. ASX 200 eked mild gains with outperformance seen in energy, resources and materials but with the upside capped by weakness in defensives and the economic concerns related to Australia's largest trading partner. Nikkei 225 gradually shrugged off the initial indecisiveness and clawed back early losses to reclaim the 37,000 status as participants digested data releases including the slower-than-forecast growth in Labour Cash Earnings. Hang Seng and Shanghai Comp retreated amid deflationary headwinds after CPI data slipped into negative territory for the first time in over a year, while tariff concerns lingered as China's retaliatory tariffs against the US's March 4th additional tariffs took effect today.

Top Asian News

• Deputy to China's National People's Congress (NPC) says China's "around 5%" GDP target for 2025 is certainly challenging and by no means an easy feat, via Global Times. Tian said one of China's biggest challenges is insufficient domestic demand but believes the government's plans, such as increasing the budget deficit to support higher government spending, issuing ultra-long special treasury bonds, and improving investment efficiency will help address the issues.
• China’s Housing Minister said market confidence has been enhanced and the property market shows positive changes, while they will step up lending for ‘White list’ property projects and promote the purchase of existing housing stocks. China will give more autonomy to local governments in purchasing housing stocks for affordable housing and part of China’s local government special bonds will be used for purchasing land and housing stocks.
• China’s Human Resources Minister said they face an arduous task to stabilise and expand employment in 2025 and the external environment for employment could become more complex and severe but added that the employment situation is generally stable. Furthermore, China will step up resources and funding to support employment and will prepare to roll out new policies to support employment.
• South Korean prosecutors decided not to appeal President Yoon’s release.
• Acer (2353 TW) Feb Revenue TWD 17.07bln.
• Key Japanese government panel members called for vigilance to risks of rising inflation hurting the economy.

European bourses (STOXX 600 -0.5%) opened modestly in the green, but quickly succumbed to selling pressure soon after, to display a negative picture in Europe. As it stands, indices currently reside at the bottom end of the day's ranges. European sectors are mixed vs initially opening with a slight positive bias; Real Estate takes the top spot, as yields move lower, whilst Tech is swept away by the risk tone. Novo Nordisk (NOVOB DC) says Cagrisema demonstrates superior weight loss in adults with obesity or overweight and type 2 diabetes in the Redefine 2 trial; People treated with Cagrisema achieved a superior weight loss of 15.7% after 68 weeks. Shares dip -5% on this news. Analysts at HSBC downgrade US equities to Neutral.

Top European News

• Germany's Green party insider says approval of financial package becomes less likely every day, according to Handelsblatt. "Willingness to help the black-red debt package for defence and infrastructure to gain a two-thirds majority in the Bundestag is apparently declining."
• Leaders of Germany’s CDU/CSU and SPD said they have completed preliminary talks on forming a coalition government.
• Germany's AfD has filed an urgent appeal with the Constitutional Court against the session of the outgoing Bundestag on Thursday, via Reuters citing a court spokesperson.
• S&P affirmed Norway at 'AAA'; Outlook Stable.
• ECB's Kazimir says inflation risks remain tilted to the upside; must remain open minded on whether we cut rates or pause. Geopolitical and trade tensions add another layer of unpredictability. Looking for undeniable confirmation that disinflation will stay; tariffs historically slow growth and boost inflation.
• Germany's VDMA says Jan orders -2% Y/Y (domestic -6%, foreign unchanged); Nov-Jan orders -2% Y/Y (domestic 10%, foreign +1%).

FX

• DXY has been choppy thus far, initially topping the 104.00 mark as risk sentiment waned, but is now a little lower thus far; currently trading within a 103.55-104.03 range. The Fed is now in blackout, so focus this week will be on trade developments. Most recently, US President Trump said on Friday regarding Canada that he may do reciprocal tariffs as early as Friday or Monday, while he added the EU has been a terrible abuser on tariffs and India has agreed to cut tariffs way down. Focus ahead will be on US NY Fed SCE.
• EUR price action has been at the whim of a choppy Dollar; currently firmer and trading around 1.0870, in a 1.0806-1.0874 range. As mentioned above, commentary from President Trump who said the EU has been a terrible abuser on tariffs, will garner some attention. On the domestic front, Germany’s CDU/CSU and SPD said they have completed preliminary talks on forming a coalition government. The EU Sentix Index printed above expectations, but had limited impact on the Single-Currency. ECB's Nagel is set to speak this afternoon.
• JPY is one of the better performing G10 currencies today, largely a factor of narrowing yield differentials and as risk sentiment continues to deteriorate in European trade. Overnight, USD/JPY was relatively choppy given the uncertain risk sentiment in Tokyo in APAC trade. USD/JPY currently trading at the bottom end of the day's ranges (146.98-147.96), dipping below 147.00, with Friday's 146.93 thereafter.
• GBP is softer vs. the USD and at the bottom of the G10 leaderboard after a solid showing for Cable last week which saw the pair rally from a 1.2577 opening level last Monday to a YTD peak at 1.2944. UK-specific newsflow has been light and does not pick-up until Friday.
• Antipodeans are firmer today, with modest outperformance in the Kiwi but with upside capped amid downbeat sentiment and with Chinese inflation over the weekend printing below expectations.
• The NOK is stronger today, after the region printed hotter-than-expected inflation data; EUR/NOK fell from 11.7463 to 11.7150 before then paring around half of the move. Following the data, Nordea bank wrote that "Norges Bank need to think twice about cutting rates at all this year. The March cut is definitely off."
• PBoC set USD/CNY mid-point at 7.1733 vs exp. 7.2355 (Prev. 7.1705).
• Former Central Banker Mark Carney won the Liberal Party race to become the next Canadian PM, according to official results cited by Reuters.

Fixed Income

• USTs picked up at the reopening of trade, given the pressure in US equity futures and as the benchmark acknowledged the soft Chinese inflation data on the weekend. The risk-off tone has intensified further with USTs outperforming and at a 111-03 peak, resistance at 111-11+ and 111-15 from last week. Market focus is firmly on tariffs/trade with new measures set to come into play on metals on Wednesday and the prospect of reciprocal tariffs being implemented imminently. Furthermore, President Trump’s sights seem to have turned back to the EU, with him labelling the bloc as a terrible abuser. Finally, focus is also on fiscal matters as the Friday deadline to pass a funding bill to avoid a federal shutdown fast approaches. The House Republicans released their CR on the weekend and following this Punchbowl writes that it does not feel as if a shutdown will occur.
• Bunds opened lower following German political updates; reports indicate that coalition talks for the new Bundestag are progressing well. Elsewhere, for the bloc more broadly, EU Commission President von der Leyen said that “nothing” is off the table for security, including defence eurobonds. All of the above weighed on Bunds to a 127.21 low overnight, just above Friday’s 127.18 base and the contract low from last week at 126.64 below. However, fixed benchmarks generally have been lifting off worst through the European morning as the risk tone deteriorates. On incoming Chancellor Merz's spending plans, recent reporting via Handelsblatt has suggested that the approval of financial package becomes less likely every day, citing a Green party inside. Furthermore, Germany's AfD has filed an urgent appeal with the Constitutional Court against the session of the outgoing Bundestag on Thursday.
• Gilts are trading in tandem with the above as the risk tone soured throughout the European morning. Gapped higher by 22 ticks at the open and has since risen almost the same amount again to a 92.49 peak. A high which surpasses the 92.41 top from last Wednesday but has stopped just shy of Friday’s 92.63 best

Commodities

• Crude is incrementally firmer, in what has been a choppy but fairly lacklustre European morning for the complex thus far, but also in a continuation of the price action seen overnight. In early European trade, oil prices picked up a touch, but gains were soon capped as sentiment waned in Europe. Brent'May sits in a USD 69.84-70.57/bbl range. On the geopolitical front, new Russia/US talks are reportedly not scheduled for this week, according to TASS. And in the Middle East, Al Jazeera reported that Smotrich said that "in light of the lack of progress in negotiations, we will return to fighting in Gaza".
• Spot gold is a little firmer, with a slight bounce in recent trade as the Dollar comes off best levels. Currently trading in a USD 2,896.83-2,918.32/oz range.
• Base metals are mostly lower, given the weak Chinese inflation data and flimsy risk tone. 3M LME Copper currently trading in USD 9,510.35-9,640.6/t range vs the prior close at USD 9,584.63.
• Iraq set the April Basrah medium crude official selling price to Asia at plus USD 2.15/bbl vs Oman/Dubai and the OSP to Europe at minus USD 1.50/bbl vs Dated Brent, while it set the OSP to North and South America at minus USD 0.65/bbl vs ASCI, according to SOMO.
• US is in exploratory talks with Congo about a potential minerals deal, according to FT.

Geopolitics: Middle East

• Hamas says it dealt with mediator efforts with flexibility, now awaiting the result of talks with Israel. Talks focussed on ending the war, Israel's withdrawal from Gaza and reconstruction.
• "Israel Broadcasting Corporation on Smotrich: In light of the lack of progress in negotiations, we will return to fighting in Gaza and the new chief of staff has a more effective combat plan than his predecessor", according to Al Jazeera
• Israel’s Energy Minister ordered the stoppage of electricity transmission to Gaza, according to Israeli broadcaster Kan.
• Hamas said there are positive indicators over negotiations for the second phase of the Gaza ceasefire deal, while it noted its delegation met Egypt’s spy chief in Cairo to discuss the Gaza ceasefire and it urged commitment to all the Gaza ceasefire deal’s articles and the immediate start of talks for the second phase. It was separately reported that a Hamas official said the group is open to releasing American-Israeli hostage Edan Alexander as part of talks to end the Gaza war, according to Al-Aqsa TV.
• US hostage envoy Boehler said meetings with Hamas leaders in recent days were very helpful and that something could come together within weeks on Gaza and hostages, while he thinks all prisoners could get out not just Americans.
• France, Germany, Italy and Britain said they welcome the Arab plan for Gaza reconstruction which they said shows a realistic path to reconstruction of Gaza and are committed to working with the Arab initiative.
• US State Department has not renewed a waiver for Iraq to buy Iranian electricity and noted the decision ensures the US does not allow Iran any degree of economic relief. It was separately reported that the Iraqi PM’s Foreign Affairs advisor Alaaldin said non-renewal of US sanctions waiver for Iraq to purchase Iranian energy presents temporary operational challenges, while Iraq is committed to its strategic goal of achieving energy self-sufficiency.
• Iran Supreme Leader Khamenei said Tehran will not negotiate under pressure from a bullying country and will never accept demands to curb its missile program. It was separately reported that the White House reiterated that Iran's nuclear concern can be dealt with by making a deal or militarily, while it hopes the Iranian regime puts its people and best interests ahead of terror.
• Iran’s mission to the UN said talks on the potential militarisation of Iran’s nuclear program may be considered and Iran will not discuss the dismantlement of its nuclear program.
• Joint naval drills between Iran, Russia and China will begin on Monday in the Chabahar region of Iran.
• US and Russia ask UN Security Council to meet on Monday regarding escalating Syria violence It was separately reported that UN rights chief Volcker Turk said the killing of civilians in coastal areas in northwest Syria must cease immediately.
• UK Foreign Secretary Lammy said reports that a large number of civilians have been killed in coastal areas in Syria in ongoing violence are horrific and authorities in Damascus must ensure the protection of all Syrians and set out a clear path to justice.
• Syrian leader Sharaa said Syria is confronting attempts to drag it into a civil war and that remnants of the former regime have no choice but to surrender immediately, while he added that Syria will not allow any external or local forces to drag it into chaos or civil war.

Geopolitcs: Ukraine

• New Russia/US talks are reportedly not scheduled for this week, according to TASS.
• US President Trump said Ukraine will sign the minerals deal but needs to show more willingness for peace, while Trump also stated they are looking at a lot of things with respect to tariffs on Russia and will make a lot of progress this week, while he is expecting good results coming out of Saudi on Ukraine and stated they have just about lifted the intelligence pause on Ukraine.
• Russian Defence Ministry said it has taken one village in Russia’s Kursk region and another in Ukraine’s Sumy region, while Russia also said it has taken the village of Kostyantynopil in eastern Ukraine’s Donetsk region. Furthermore, it was later reported that Russian forces recaptured three more settlements in the Kursk region.

Geopolitics: Other

• North Korea's Foreign Ministry said US and South Korean military exercises are a dangerous provocative act, according to KCNA. It was separately reported that North Korea unveiled a nuclear-powered submarine under construction for the first time which appears capable of carrying 10 missiles, according to Nikkei.

US Event Calendar

• 11:00: Feb. NY Fed 1-Yr Inflation Expectat, prior 3.00%

Central Bank Speakers

• March 8-March 20: Fed’s External Communications Blackout

DB's Jim Reid concludes the overnight wrap

A week after playing golf in the frost with a snood, balaclava and bobble hat, it was shorts weather here in the UK over the weekend. After golf and parenting I then watched Oscar winning Anora and fell asleep bored and irritated. The third Oscar best film winner in a row I haven’t finished after the dull Oppenheimer and the unwatchable Everything Everywhere All at Once. The previous winner CODA, and Parasite, a couple of years before, were fantastic.

If this year so far was a movie then I’m sure the script would have been thrown out as being too unbelievable, even for Hollywood. I certainly haven’t fallen asleep at my desk. However, relative to the year so far, it was a relatively quiet weekend after one of the more dramatic weeks in living memory, especially in Germany, where 10yr Bunds saw their largest weekly yield sell-off since reunification in 1990. The Euro (+4.41%) saw its biggest weekly gain since March 2009 while the S&P 500 (-3.10%) saw its largest weekly fall in 6 months. As we continue to catch our breath, this week is relatively quiet for data even if I suspect it won't be for news flow. The data highlight is US CPI on Wednesday but the reality is that there are bigger fish for the market to fry at the moment than a monthly inflation report. How times are changing.

Briefly going through the rest of the week’s main highlights. Today sees the NY Fed 1-yr US inflation expectations and German IP; tomorrow sees the US JOLTS and the NFIB small business optimism; Wednesday the BoC decision (-25bps expected) and a 10yr UST auction; Thursday sees US PPI and a 30yr UST auction; and Friday sees the UoM consumer sentiment survey. The fuller day-by-day week ahead is at the end as usual.

In terms of US CPI, headline (+0.27% DB forecast vs. +0.47% previously), and core (+0.26% vs. +0.45%) should ease from the previous month which would allow the YoY rate to fall a tenth and two tenths respectively to 2.9% and 3.1%. See our economists "February CPI preview & webinar registration" for full details. For US PPI the next day, we will likely see a similar +0.3% gain for headline and core but it'll be the sub components that feed into core PCE that will be the most important as usual.

Staying with US inflation, Friday's University of Michigan preliminary consumer sentiment (63.0 expected vs 64.7 last) reading will also contain the fascinating long-run inflation expectations series, which rose three-tenths to 3.5% last month, an almost 30-year high. We will continue to watch the split by political party as the expectations gap between Republicans and Democrats are at crazy wide levels.

Although the weekend was relatively quiet we did hear from both Bessant and Trump and they seem to be telling us that they are prepared for some pain to reorientate the economy. Bessent said, “Could we be seeing that this economy that we inherited starting to roll a bit? Sure. And look, there’s going to be a natural adjustment as we move away from public spending to private spending,” “The market and the economy have just become hooked. We’ve become addicted to this government spending, and there’s going to be a detox period.” Meanwhile Trump told Fox that “There is a period of transition, because what we’re doing is very big. We’re bringing wealth back to America. That’s a big thing.” “What I have to do is build a strong country. You can’t really watch the stock market,” “If you look at China they have a hundred-year perspective". So taken at face value these quote suggest that their pain level is higher than most would have believed a few weeks ago.

Also over the weekend the House Republicans propose a stopgap funding bill taking us to the end of September, attempting to avert a shutdown on March 15th (this Saturday). There will be a vote tomorrow with some House Republicans not that keen to vote for a stopgap that doesn’t contain permanent spending cuts. However the tougher challenge will be when the bill hits the Senate as it will require moderate Democrats to support it for it to pass. One of the issues is that the bill explicitly gives DOGE the licence to carry on what’s it’s doing which may be a struggle for Democrats to support. So one to watch.

We also saw the conservatives and Social Democrats in Germany agree to deepen talks around a coalition on Saturday. So things seem to be moving in the right direction which is helpful as in parallel Merz has two weeks to approve the legislation around the EU500bn infrastructure fund and the associated open ended defence fund. In reality this is the biggest global event over the next two weeks outside of anything the US administration might do.

In geopolitics, EU finance ministers meet today in Brussels for more talks on defence spending. On Wednesday the US is set to impose steel and aluminium tariffs of 25% on the EU. There will also be a G-7 foreign ministers meeting in Canada on Wednesday to Friday.

Over the weekend Chinese inflation fell -0.7% YoY, below the consensus -0.4% and the -0.5% last month. Core inflation fell -0.1% YoY, the first decline since 2021. PPI printed at -2.2% YoY against -2.1% expected and -2.3% the previous month. Overall there was likely some distortion due to the timing of Lunar New Year so we'll get a better read next month.
In political news, Mark Carney has been elected the new leader of Canada's Liberal party, succeeding Justin Trudeau who announced his resignation in January. This victory makes him Canada's new prime minister. Let's see how his relationship with Trump differs from his predecessor's.

Asian equity markets are slipping as I type this morning with the Nikkei (+0.38%), the Kospi (+0.18%) and the S&P/ASX 200 (+0.18%) holding onto earlier gains but with the Hang Seng (-2.06%), CSI (-0.71%) and Shanghai Composite (-0.44%) notably weaker after the weekend deflation news. S&P 500 (-0.48%) and NASDAQ 100 (-0.59%) futures are weak with 10yr USTs -2bps lower at 4.28%.

Early morning data showed that Japan’s real wages fell -1.8% y/y in January, reversing two months of slight gains, days before the annual rounds of pay negotiations held each spring culminate at the country's major firms. The decline followed a revised +0.3% rise in December and a +0.5% gain in November. Meanwhile, total cash earnings rose +2.8% y/y in January (v/s +3.0% expected), slowing from December’s downwardly revised +4.4% rise.

Looking back, it was a truly seismic week for markets last week, as investors grappled with historic fiscal news out of Germany, European rearmament proposals, fresh tariff developments, and a US jobs report on Friday. By the end of the week, that had led to a huge selloff for European sovereign bonds, including the biggest weekly jump in the 10yr bund yield since reunification in 1990, up +43.0bps over the week (+0.3bps Friday) to 2.83%. Moreover, the euro itself saw the biggest weekly gain against the US Dollar since March 2009, up +4.41% last week to $1.0833.

But even as investors were enthusiastic about the fiscal news, the tariff developments led to a broader risk-off move that hit global equity markets. In fact, the S&P 500 posted its biggest weekly decline in 6 months, falling -3.10%. The index did recover by +0.55% on Friday, with a measured speech by Powell, who said “the US economy continues to be in a good place”, catalysing a turn in sentiment. In turn, the VIX retreated from Friday’s intra-day highs of 26.5 to end the week at 23.37, but this still marked a +3.74pts weekly increase and the highest weekly close since August. Meanwhile in Europe, the STOXX 600 also ended its run of 10 consecutive weekly gains, falling -0.69% last week (-0.46% Friday). The main exception to these losses was the German DAX however, where the prospect of a significant fiscal impulse meant the index was up +2.03% last week (-1.75% Friday).

With all that was going on, Friday’s jobs report rather faded into the background, in part because it was basically in line with consensus. Nonfarm payrolls were up +151k (vs. +160k expected), and there weren’t substantial revisions to the previous couple of months. The unemployment rate did tick up a bit to 4.1% (vs. 4.0% expected), but the report didn’t cause alarm, with the risk-off move driven by tariff uncertainty instead.

On the rates side, US Treasury yields saw more modest increases than their European counterparts. The 10yr yield was up +9.4bps over the week (+2.4bps Friday) to 4.30%, while the 2yr yield saw only a +1.0bps rise to 4.00% (+4.0bps Friday). Otherwise, there was a significant widening in US HY spreads, which moved up +11bps to 291bps (-3bps Friday).