- US President Trump signed a memorandum to introduce a reciprocal tariff plan; delayed implementation provided optimism regarding negotiations.
- APAC stocks were mostly higher following the positive handover from Wall St; S&P 500 and Nasdaq closed with gains of over 1%.
- European equity futures indicate a negative cash market open with Euro Stoxx 50 future down 0.4% after the cash market closed with gains of 1.8% on Thursday.
- USD is steady after yesterday's heavy selling. EUR/USD trades around 1.0450 and Cable sits above 1.2550.
- Looking ahead, highlights include Germany Wholesale Price Index, EZ Employment, US Import/Export Prices, Retail Sales, Industrial Production, Capacity Utilisation & Manufacturing Output, BoC SLOOS, Speakers including ECB’s Panetta & Fed's Logan, Earnings from Moderna, Hermes, Safran, Segro & NatWest.
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US TRADE
EQUITIES
- US stocks and bonds were firmer while the dollar was sold after US President Trump signed a memorandum on reciprocal tariffs which saw two-way price action but ultimately lifted equities and bonds given that the tariffs will be implemented within weeks and that studies will be done by April 1st so tariffs are "ready to go" which helped alleviate some tariff concerns as it allows time for negotiations. Furthermore, Trump stressed that other countries which feel they are being unfairly treated by the US can lower, or eliminate their tariffs on the US.
- SPX +1.04% at 6,115, NDX +1.43% at 22,031, DJIA +0.77% at 44,711, RUT +1.17% at 2,282.
- Click here for a detailed summary.
TARIFFS
- US President Trump signed a memorandum to introduce a reciprocal tariff plan and said the lack of reciprocity is one source of the large and persistent US trade deficit, while he added the annual trade deficit threatens US economic and national security. Trump said he decided to charge a reciprocal tariff and whatever countries charge the US, they will charge them, while they will consider countries that use the VAT tax system with VAT tax to be viewed as a tariff. Trump also stated that provisions will be made for non-monetary tariffs, such as tests on cars, and limitations on trade, while the reciprocal tariff system will bring fairness back and this will be over and above steel tariffs.
- US President Trump expects a lot of countries' tariffs to stay the same and stated don’t expect any exemptions or waivers, while he stated that auto, steel, aluminium and pharma tariffs are coming soon with no exemptions to auto tariffs.
- US President Trump said the EU has 20% VAT and other measures that hurt US companies including Apple (AAPL), while he added that airlines are asking him to help with EU fees and the EU doesn't treat the US right on trade. Trump also said that Canada has been tough on the military and is not paying enough, as well as noted that BRICS will be hit if they play with the dollar and the BRICS tariff could be 100% at least. Furthermore, Trump said he is concerned about countries shifting business to China, while he added Taiwan took their chip business away and they want that business back.
- US President Trump posted on Truth Social that he decided to charge a reciprocal tariff meaning that whatever countries charge the US, we will charge them “No more, no less!”.
- White House official said the USTR will quickly submit a report detailing proposed remedies on a country-by-country basis. Furthermore, the Trump administration could begin to impose some reciprocal tariffs within weeks and will examine the most egregious issues and countries with the biggest US trade surpluses first. It was also stated that they are not ruling out a flat global tariff and reciprocal tariffs will take into account value-added taxes charged by other countries.
- US Commerce Secretary nominee Lutnick said they are going to address each country one by one and studies should be done by April 1st.
- US President Trump said the US is to increase military sales to India and that India announced tariff reductions, while he and Modi are to begin talks on trade disparities, aiming for a trade agreement and the US plans to make up the trade deficit with oil and gas sales. Trump later commented that India will be purchasing US oil, as well as stated that India has the highest tariffs and whatever India charges, we will charge them.
- Indian PM Modi said India has set a target to double bilateral trade to USD 500bln by 2030, while he added that India and the US discussed increasing cooperation on small modular nuclear reactors and the US plays a role in India's defence preparedness. Modi also stated that US and India will work together on AI and semiconductors, as well as noted that the US and India will focus on establishing strong supply chains for strategic minerals.
- Taiwan's President Lai said Taiwan is willing to continue cooperation with the US across all fronts and will deepen collaboration with the US in AI and advanced semiconductors. Lai said Taiwan will strengthen communication with the US regarding concerns about the chip industry and plans to broaden US investments and purchases to balance trade.
- Japan's Industry Minister Muto said they started communicating with the US regarding the reciprocal tariff plan.
- UK Business Minister said the UK can engage with the US on steel and aluminium tariffs.
NOTABLE HEADLINES
- US President Trump said interest rates will be going down and responded "not necessarily" when asked if consumers can expect higher prices, while he expects jobs to increase and said prices could go up somewhat in the short term. It was separately reported that President Trump signed an executive order to establish a Make America Healthy Again Commission and is scheduled to sign executive orders on Friday at 13:00EST/18:00GMT.
- US Treasury Secretary Bessent said if tariffs create inflation, it would be a one-time slight increase, while he also commented that he was barred from looking at payment systems for a few days, according to a Fox interview.
- White House is seeking to renegotiate CHIPS Act awards and said some upcoming payments are to be delayed, according to Reuters citing sources.
- US judge ordered the Trump administration to restore funds for foreign aid programs, according to Politico.
- US State Department said the plane carrying US Secretary of State Rubio to Munich experienced a mechanical issue and was forced to turn around.
APAC TRADE
EQUITIES
- APAC stocks were mostly higher following the positive handover from Wall St, where yields declined following the latest PPI data and stocks benefitted despite US President Trump's reciprocal tariff plan, as the delayed implementation provided optimism regarding negotiations.
- ASX 200 touched a record high with the index led by strength in gold miners, tech and some defensive sectors.
- Nikkei 225 bucked the trend and was pressured by recent currency strength although Sony, Nissan and Honda were among the biggest gainers in the index post-earnings.
- Hang Seng and Shanghai Comp were positive with continued strong momentum in Hong Kong amid a tech surge, although the gains in the mainland were only modest despite the PBoC's recent policy implementation pledges, while this week's open market operations resulted in a net weekly drain of around CNY 575bln.
- US equity futures (ES +0.1%, NQ +0.1%) traded sideways after benefitting from the reciprocal tariff plan with delayed implementation.
- European equity futures indicate a negative cash market open with Euro Stoxx 50 future down 0.4% after the cash market closed with gains of 1.8% on Thursday.
FX
- DXY lacked direction after ultimately weakening yesterday following President Trump's reciprocal tariff memorandum in which he pledged to impose levies on “every country” that America has a trade deficit with and took aim at countries using VAT against the US. This initially boosted the dollar although the knee-jerk reaction quickly reversed given that implementation of the tariffs was delayed with a White House official noting they could begin to impose some reciprocal tariffs within weeks, while US Commerce Secretary nominee Lutnick said they are going to address each country one by one and studies should be done by April 1st, which effectively provides ample time for negotiations.
- EUR/USD held onto most of the prior day's spoils north of 1.0400 after whipsawing on Trump's latest tariff plan.
- GBP/USD plateaued after gradually edging higher during the prior day to reclaim the 1.2500 status which also followed the recent better-than-expected quarterly UK GDP data.
- USD/JPY remained constrained after the recent decline to sub-153.00 territory owing to softer US yields.
- Antipodeans kept afloat amid the mostly positive risk tone but with gains capped in the absence of any pertinent tier-1 releases and ahead of next week's central bank meetings with both the RBA and RBNZ widely expected to cut rates.
- PBoC set USD/CNY mid-point at 7.1706 vs exp. 7.2739 (prev. 7.1719).
- SNB Governing Board Member Tschudin said maintaining price stability is the most important task for the SNB and inflation can be outside the 0-2% target temporarily with the medium-term development more important. She also stated SNB's policy toolbox includes the use of foreign exchange interventions and that negative interest rates remain an important policy instrument if needed.
FIXED INCOME
- 10yr UST futures stalled after hitting resistance at the 109.00 level but held on to most of the prior day's spoils in the aftermath of the PPI data which topped forecasts but showed cooling pressures of the components that feed into PCE.
- Bund futures took a breather following a recent resurgence and with upside capped ahead of the 133.00 level.
- 10yr JGB futures initially followed suit to the advances in global peers but then faded the gains amid a quiet calendar and softer 5yr JGB auction.
COMMODITIES
- Crude futures were rangebound after yesterday's indecisive mood owing to Trump tariffs and hot US PPI data.
- Spot gold sat near the prior day's best levels after the greenback ultimately softened yesterday due to President Trump's reciprocal tariff plan with a delayed implementation.
- Copper futures edged higher with prices underpinned by the mostly constructive risk environment.
CRYPTO
- Bitcoin was indecisive and briefly returned to above the USD 97,000 level before pulling back.
NOTABLE ASIA-PAC HEADLINES
- Chinese Foreign Minister Wang said in a meeting with UK PM Starmer that China and the UK need to strengthen strategic communication and mutual trust, while they need to strengthen cooperation in climate change, AI, and green development. Wang also stated in a meeting with the UK Foreign Secretary that both sides will seek cooperation in financial services, clean energy and AI, while they reached a consensus on a roadmap for bilateral exchanges and cooperation. Furthermore, Wang stated that preparations are underway for dialogues on economy, trade, health, and industry.
- US President Trump said the TikTok deadline could be extended and he hopes to make a deal on TikTok, while they will make it worthwhile for China to approve the TikTok sale. It was separately reported that TikTok's CEO plans more streamlining as talks with the Trump team continue and it is working with a 'key person' in the Trump administration on the US ban issue.
- Japan's lower house voted to approve government nominee Junko Koeda for the BoJ board.
GEOPOLITICS
RUSSIA-UKRAINE
- US President Trump said officials from the US and Russia are to meet in Munich on Friday and Ukraine is also invited. Trump also stated that he had a good conversation with Russian President Putin the other day, while he added that the US is working with Ukrainian President Zelensky and that Russian Putin wants to make a deal but later commented that it is too soon to say what will happen in negotiations on Ukraine.
- Ukrainian President Zelensky warned world leaders not to trust Russian President Putin's claims of readiness to end the war. It was separately reported that Zelensky praised a "good result" on the war front but provided no details or location although he congratulated a specific regiment, appearing to indicate military action was near the frontline city of Pokrovsk, according to Reuters.
- Ukrainian President Zelensky's advisor said Ukraine does not plan talks with the Russian side at the Munich conference, while the adviser stated the US, Europe, and Ukraine need a common position before engaging in talks with Russia.
OTHER
- US President Trump said they had been talking about denuclearising and are going to do it, as well as noted there is no reason to build nuclear weapons and they could halve defence spending. Trump also stated that he wants a conference with Russia and China on defence spending and he will meet with China at some point, while he later commented that he will meet with China and Russia and try to de-escalate.
- Chinese Defence Ministry said Australia deliberately provoked China in the South China Sea on February 11th and has spread false narratives, while it is "invading and breaking into the homes of others". It also stated that Australia must strictly restrain the actions of its front-line naval and air forces and avoid stirring up trouble in the South China Sea, as well as warned that Australia would only harm others and itself.
EU/UK
NOTABLE HEADLINES
- EU is cutting back tech rules to boost AI investment, according to the bloc's digital chief cited by FT.
