US futures gain, and the DAX 40 outperforms as CDU/CSU wins the German election - Newsquawk US Market Open

• European bourses mostly firmer with clear outperformance in the DAX 40 after CDU/CSU wins the German election; US futures gain.
• EUR firmer post-German election, but off best levels, USD mixed vs. peers.
• Two-way action in Bunds as Merz secures the Chancellery but a blocking minority exists, Gilts await BoE speak.
• Crude flat, precious metals mixed, and base metals mostly lower amid tariff woes.
• Looking ahead, US National Activity Index, Speakers including BoE’s Ramsden, Dhingra & BoC’s Gravelle, Supply from the US, Earnings from Domino's Pizza, Him & Hers, Riot Platforms, Tempus AI, Cleveland Cliffs & Zoom.

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TARIFFS/TRADE

• US President Trump’s team is reportedly pushing Mexico towards tariffs on Chinese imports, according to Bloomberg.
• US President Trump said on Friday that the US will establish new rules to stop US firms from investing in industries that advance China’s national military-civil fusion strategy and will establish rules to stop China-affiliated people from buying critical US businesses and assets.
• US House Chair Jordan criticised EU tech fines and European taxes on US companies and wants the European Commission to brief the judiciary committee by March 10th and called for EU antitrust chief Ribera to clarify rules reining in big tech.

EUROPEAN TRADE

GERMAN ELECTION

• Prelim. Final Results: CDU/CSU 28.6%, AFD 20.8%, SPD 16.4%, Greens 11.6%, Die Linke 8.8%, FDP 4.3% & BSW 4.9%. This means that FDP and BSW are below the 5% threshold and as such will not be entering the Bundestag. However, given their proximity to the 5% threshold BSW will almost certainly call for a recount.
• Seat Distribution: CDU/CSU 208, AfD 152, SPD 120, Greens 85, Die Linke 64, SSW 1. (316 needed for a majority government)
• CDU/CSU leader Merz will become the next Chancellor. However, he will need to form a coalition to govern. Mathematically, the options are a Grand coalition (CDU/CSU + SPD), Kenya (CDU/CSU + SPD + Greens) or a Midnight coalition (CDU/CSU + AfD). AfD’s Weidel has said that she is open to being in the coalition but expected-Chancellor Merz has made clear this is not an option.
• The most likely outcome is a Grand coalition, though the SPD has made clear that the onus is on Merz to begin talks and find compromises for the government to work.
• Pertinently, the results mean that AfD and Die Linke command a blocking minority with over 1/3 of the Bundestag's seats. This means that the prospects of debt brake reform are reduced, though Merz may be able to come to a deal with Die Linke for non-defense spending related reform.
• Merz has said he ideally wants a functioning government by Easter. However, this is somewhat unlikely given the tense election campaign and political differences between the groups.
• Click for the full newsquawk analysis on the election results

EQUITIES

• European bourses (STOXX 600 +0.2%) opened modestly, and on either side of the unchanged mark (though the DAX 40 outperformed after the German election – details below). At the cash open, some pressure was seen, which then exacerbated in the hour following. Thereafter, a considerable bounce was seen across the complex; as it stands, indices are mostly firmer.
• European sectors are mixed; initially opened with a narrow breadth, but performance is now varied. Utilities takes the top spot, lifted by renewable names after the German Election; Merz has previously favoured their use. Strength in German auto names have lifted the Autos sector. Basic Resources is the laggard thus far, with downside attributed to mostly lower metals prices.
• US equity futures are modestly firmer across the board, with very slight outperformance in the RTY (+0.7%), following significant losses seen in the prior session.
• Click for the sessions European pre-market equity newsflow
• Click for the additional news
• Click for a detailed summary

FX

• DXY is a touch lower and showing a diverging performance vs. peers (softer vs. cyclicals, firmer vs. havens) following a shaky performance last week as soft US data points acted as a drag on the USD. In terms of US newsflow, tariff actions remain in focus with President Trump's team reportedly pushing Mexico towards tariffs on Chinese imports. However, markets place greater weight on the April 1st tariff report deadline. Geopolitical headlines remain aplenty with Ukrainian President Zelensky stating he is willing to quit the presidency if it means peace in Ukraine which he said could be exchanged for NATO membership. DXY printed a fresh YTD low overnight at 106.12 but has since returned within Friday's 106.38-106.74 range.
• EUR is one of the better performers across the majors in the wake of the German election which will likely deliver a Grand Coalition (CDU/CSU + SPD). However, such an outcome would deliver a slim majority of 328/630 seats (316 required) and fall short of the Bundestag's two-thirds majority which is required for constitutional reform (i.e. the debt brake). EUR/USD ventured as high as 1.0528 but stopped shy of the 1.0532 YTD peak and eventually returned to a 1.04 handle.
• USD/JPY printed a fresh YTD low overnight at 148.85 but has since struggled for direction amid the mixed risk appetite in Asia and the absence of Japanese participants for a holiday. To the upside, focus is on a potential reclaim of 150 to the upside.
• GBP is a little firmer vs. the USD but softer vs. the EUR. UK-specific newsflow has been light over the weekend and this week's UK data calendar is a particularly slim one. However, today sees a busy speaker slate with BoE’s Lombardelli, Pill, Ramsden and Dhingra all due on the docket and speaking at the Bank of England’s 2025 BEAR Conference. Cable printed a fresh YTD peak overnight at 1.2690 before fading upside.
• Antipodeans are both a touch higher with not much in the way of fresh newsflow for either of the antipode nations. That being said, some positivity surrounding the Chinese property market overnight (Chinese state-backed developers beginning to buy land at a premium again) is helping to underpin sentiment.
• PBoC set USD/CNY mid-point at 7.1717 vs exp. 7.2495 (prev. 7.1696).
• Barclays FX Month-End rebalancing: Weak USD buying vs. most peers, with moderate signal against the EUR and JPY, via Barclays.
• Click for a detailed summary
• Click for NY OpEx Details

FIXED INCOME

• Bunds opened lower by a handful of ticks after the initial election results, (details on the German Election above) before falling further to a 132.02 low on confirmation that CDU/CSU is the largest party and that both FDP and BSW will not meet the 5% threshold to enter the Bundestag. However, as the full results were released (though likely subject to a recount given BSW coming in just below the 5% threshold) a bounce was seen in Bunds, taking them from the above low to a 132.50 peak and briefly back into the green on the session. A bullish move likely driven by the presence of a blocking minority in the Bundestag, with CSU's stance against Greens being involved in the coalition also a factor.
• USTs were slightly quieter overnight owing to the absence of cash trade as Japan was on holiday. Broadly speaking, USTs have been following their German counterpart but with magnitudes more contained and the early-morning bounce not occurring to quite the same degree with USTs remaining just in the red at all times. The docket ahead is headlined by USD 69bln of 2yr supply, potential remarks from Fed’s Barr (voter) and the January National Activity Index. Currently, USTs are in the red in a narrow 109-16 to 109-21 band.
• Gilts are directionally in-fitting with Bunds though, as with USTs, magnitudes are a little more contained but with Gilts managing to hold in the green for much of the morning. Gapped higher by 18 ticks from Friday’s 92.41 close, as the mentioned bounce in Bunds had already occurred by the time Gilts commenced trade, and then extended to a 92.66 peak. Since, the benchmark has reverted back towards opening levels as we await commentary from the numerous BoE speakers at today’s conference on “The Future of the Central Bank Balance Sheet”. Pill, Ramsden, Lombardelli and Dhingra all scheduled at different points today.
• EU sells EUR 2.392bln vs exp. EUR 2.5bln 2.875% 2027 and EUR 2.277bln vs exp. EUR 2.5bln 3.375% 2039
• Click for a detailed summary

COMMODITIES

• Crude is a little firmer after initially trading sideways for most of the morning; traders are awaiting further updates on geopolitics and OPEC+ amid growing noise surrounding a potential delay to the unwind of voluntary cuts. In recent trade, a slight bounce has been seen in the complex, taking Brent May to a session high of USD 74.35/bbl.
• Mixed trade across precious metals with little in terms of fresh fundamentals driving price action, although spot palladium could be lagging after US President Trump reiterated the auto tariff set to kick in on April 2nd. Spot gold resides in a USD 2,921.47-2,948.88/oz range thus far.
• Subdued trade across base metals as the Dollar recovered and sentiment waned in early European trade, with tariff woes still in the background amid Trump's reiterations. Prices were unfazed by the encouraging reports overnight suggesting Chinese state-backed developers beginning to buy land at a premium again. 3M LME copper trades on either side of USD 9,500/t in a current USD 9,485.00-9,558.55/t range.
• Iraq’s Oil Minister said all procedures for exporting oil through the Turkey pipeline have been completed. It was separately reported that Kurdistan authorities agreed with the federal oil ministry to restart Kurdish crude exports based on available volumes, while Iraq denied reports that it would face US sanctions if oil exports from Kurdistan were not resumed. Furthermore, Iraq is to receive 185k BPD from the Kurdistan region in the first phase after the resumption of oil exports.
• Iraqi oil minister said exports from the Kurdish region will resume in a week. Iraq Oil Minister said they are waiting for Turkey's approval to restart oil flow, Kurdish oil exports will "hopefully be ready" in two days. Iraqi Oil Minister, when questioned if resumption of Kurdish oil exports will affect Iraq's OPEC compliance, said Iraq is committed to OPEC+ decision and exported volumes under control of ministry.
• BofA forecasts Brent crude at USD 75/bbl in 2025 and USD 73/bbl in 2026 with oil markets set to remain in a modest surplus in the near term. BofA said over the medium term, Brent should average between USD 60-80/bbl to keep the global oil market in balance.
• Click for a detailed summary

NOTABLE DATA RECAP

• German Ifo Business Climate New (Feb) 85.2 vs. Exp. 85.8 (Prev. 85.1); Ifo Expectations New (Feb) 85.4 vs. Exp. 85.0 (Prev. 84.2); Ifo Current Conditions New (Feb) 85.0 vs. Exp. 86.3 (Prev. 86.1)
• EU HICP Final MM (Jan) -0.3% vs. Exp. -0.3% (Prev. 0.4%); HICP Final YY (Jan) 2.5% vs. Exp. 2.5% (Prev. 2.5%); HICP-X F&E Final YY (Jan) 2.7% vs. Exp. 2.7% (Prev. 2.7%); HICP-X F,E,A&T Final YY (Jan) 2.7% vs. Exp. 2.7% (Prev. 2.7%); HICP-X F, E, A, T Final MM (Jan) -0.9% vs. Exp. -1.0% (Prev. -1.0%)

NOTABLE EUROPEAN HEADLINES

• ECB's Escriva said monetary policy must be approached with caution given the current extraordinary uncertainty.
• ECB’s Villeroy reaffirmed that the ECB’s Deposit rate should be at 2% by this coming summer and said that European banking sector consolidation is generally speaking, necessary to have European banks that can compete at a global level.
• ECB's Wunsch said the ECB faces the risk of ‘sleepwalking’ into too many rate cuts, while he feels “relatively comfortable” with market expectation of 2% rates by year-end “give or take 50 basis points”, according to FT.
• Hungary's PM Orban said they are to exempt mothers of two or three children from income tax and said this will be a huge expense but the budget deficit and debt will decline, while he added the government is ready to impose food price caps unless talks with retailers on keeping prices under control succeed.
• Austria's biggest centrist parties in parliament hinted they were on the verge of agreeing to form a coalition government which would bring together Austria's conservatives, socialists and liberals, while it would sideline the far-right Freedom Party which won the election in September, according to euro news.
• EU Foreign Representative Kallas to meet with the US Foreign Secretary Rubio on Tuesday within the US.

NOTABLE US HEADLINES

• US President Trump said Elon Musk is doing a good job but he would like to see him get more aggressive. It was separately reported that Elon Musk said consistent with President Trump’s instructions, all federal employees will receive an email requesting to understand what they got done last week and a failure to respond will be taken as a resignation, although some agencies told workers not to reply to Musk’s email.
• US President Trump nominated Air Force Lt General Dan Caine as the next Chairman of the Joint Chief of Staff to replace General Brown, while several other top officials were also pushed out.
• US President Trump reportedly told CEOs of pharmaceutical companies during a meeting to move their production to the US.
• American Airlines (AAL) flight was diverted to Rome over ‘possible security issue’, according to ABC News. However, the airline later stated that the flight landed safely in Rome and after inspection by law enforcement was cleared to re-depart with the issue determined to be non-credible.
• US Republican email systems were reportedly breached by Chinese hackers in summer 2024, via WSJ citing an upcoming book; hackers reportedly had access "for months".
• US Senator Warren has reportedly sent a letter to the White House requesting that Trump's nominee to Chair the Council of Economic Advisers commits to Fed independence, via FT

GEOPOLITICS

MIDDLE EAST

• Israel sent tanks into the West Bank and told troops to prepare for an extended stay, according to Reuters.
• Israeli PM Netanyahu’s office said the release of Palestinian prisoners planned for Saturday was delayed until the release of the next hostages is secured with the delay due to Hamas’s repeated violations.
• Hamas strongly condemned Israel’s decision to postpone the release of Palestinian prisoners and said Israel’s claim that a handover ceremony is humiliating is false and a pretext to evade its obligations.

RUSSIA-UKRAINE

• Ukraine Deputy PM said Ukrainian and US teams are in the finally stages of negotiations on the minerals deal; Kyiv is committed to complete the deal "as swiftly as possible".
• Russia's Kremlin said "we welcome and support new US approach to dialogue with Russia". Russian President Putin is to make an international phone call this morning as part of informing partners about talks with the US. Further talks with US this week will focus on eliminating irritants in ties and on work of foreign missions. "Don't see any possibility to renew dialogue with Europe at the moment; European approach contrasts with the effort we are making with the US"
• Ukrainian President Zelensky said the issue of elections is a step to apply pressure on Ukraine and he is willing to quit the presidency if it means peace in Ukraine which he said could be exchanged for NATO membership, but also commented that false statements about his ratings and the amount of US aid are dangerous steps to weaken Ukraine. Zelensky said he sees Turkey as an important security guarantor for Ukraine and that Ukraine is working on Patriot system alternatives, as well as noted if the US strikes a deal with Russia to end the war, it won’t be successful if Ukraine does not agree to its conditions.
• Ukrainian President Zelensky commented that Ukraine-US talks on a minerals deal are moving forward and all is okay, while he stated that the minerals deal draft said Ukraine should return two dollars for each dollar of aid supplied by the US. Zelensky also said the USD 500bln figure is not being considered in the minerals deal anymore and a top aide said he had a constructive new round of talks with the US on the minerals deal. It was also reported that the US could cut Ukraine’s access to Starlink internet services over minerals, according to sources cited by Reuters.
• US President Trump said he thinks the US is pretty close to a minerals deal with Ukraine and that they are asking for rare earth, oil and anything they can get from Ukraine to recoup the money the US put into Ukraine.
• US Secretary of State Rubio told Ukraine’s Foreign Minister that US President Trump remains committed to ending the conflict in Ukraine.
• US Treasury Secretary Bessent said an economic partnership will protect the Ukrainian people and the US taxpayer, while he added that Ukraine’s economic future in peace can be more prosperous than at any other point and a partnership with the US will ensure this prosperity. Furthermore, Bessent said the US-Ukraine partnership proposal is for revenue received by Ukraine from natural resources, infrastructure and assets to be allocated to a fund focused on reconstruction which the US will have the rights over investments, according to FT. It was separately reported that Bessent said he is quite hopeful when asked if he expected a minerals deal with Ukraine this week.
• US President Trump’s envoy Witkoff said there be an expectation that US companies may do business in Russia if a peace deal is reached in the Russia-Ukraine war, according to CBS News.
• Russian President Putin convened a meeting of his security council and discussed relations with post-Soviet states at the meeting, while he received reports from Foreign Minister Lavrov’s recent trips and asked him to share them with the security council, according to TASS. It was also reported that Putin said boosting Russia’s armed forces and meeting the needs of troops fighting in Ukraine are key strategic priorities.
• Russian sovereign wealth fund chief Dmitriev was appointed Special Envoy on International Economic Cooperation and his new mandate will include ties with the US.
• Russian Deputy Foreign Minister Ryabkov said a second meeting between representatives of Russia and the US is planned for the next two weeks and said that Russia will hold talks with the US to address irritants in bilateral relations, according to TASS. It was separately reported that Ryabkov said the US wants to achieve a quick ceasefire in Ukraine without long-term settlement and he explained to the US that a sole ceasefire in Ukraine is unacceptable, according to RIA.
• Russian Foreign Minister Lavrov is to visit Turkey on Monday and will discuss a range of topics including recent US talks on the Ukraine war and how Turkey can contribute.
• Russian Defence Ministry said Russian forces captured the villages of Ulakly and Novoandriivka in eastern Ukraine’s Donetsk region.
• Greek PM Mitsotakis told Ukrainian President Zelensky that it is up to Ukraine to decide on the peace framework acceptable to it and nothing can be decided without Ukraine.
• Poland’s President Duda told US President Trump that US presence in Poland and central Europe should be boosted.
• Hungary's PM Orban said Ukraine will never be a member of the EU against Hungary’s interests.
• EU Council President Costa said they decided to convene a Special European Council regarding Ukraine and EU defence on March 6th.
• Canadian PM Trudeau and US President Trump spoke on Saturday in which they discussed the war in Ukraine and combating fentanyl.
• Two EU Diplomats say EU Foreign Ministers approve 16th sanctions package against Russia.

OTHER

• China defended its recent naval drills in the Tasman Sea and accused Australia of ‘deliberately hyping’ military exercises.

CRYPTO

• Bitcoin is flat and holds around USD 96k whilst Ethereum is lower and approaches USD 2.7k to the downside.

APAC TRADE

• APAC stocks began the week mixed after last Friday's sell-off on Wall St and amid holiday-quietened trade with Japanese markets closed for the Emperor's Birthday, while participants also reflected on the results from Sunday's German election.
• ASX 200 traded little changed as gains in financials and the defensives were counterbalanced by losses in tech and the commodity-related sectors, while there was also another deluge of earnings updates.
• KOSPI underperformed amid ongoing economic concerns and ahead of tomorrow's BoK rate decision.
• Hang Seng and Shanghai Comp were choppy but were ultimately pressured amid ongoing trade-related frictions, with the US said to be pushing Mexico towards tariffs on Chinese imports. Nonetheless, there were some encouraging reports with Chinese state-backed developers beginning to buy land at a premium again, while agricultural stocks were supported after China pledged to deepen rural reforms as part of efforts to revitalise the agricultural sector and bolster food security in the State Council's annual rural policy blueprint.

NOTABLE ASIA-PAC HEADLINES

• China is to further deepen rural reforms and advance rural revitalisation, while it will monitor and regulate pig production capacity to promote steady growth and will consolidate the results of soybean expansion, and expand rapeseed and peanut production. China is to improve the reward and subsidy systems for major grain-producing and increase support for large grain-producing counties. Furthermore, China will support the development of smart agriculture and expand application scenarios of technologies, while it will use monetary tools to encourage financial institutions to increase funding for rural revitalisation and will encourage local governments to pilot special loan interest subsidies for grain and oil crop cultivation, according to Xinhua.
• Chinese state-backed developers are beginning to buy land at a premium again after the government eased limits on home prices as the number of land parcels that sold for at least 20% above the asking price accounted for 37% of deals this year vs 14% for last year, according to a Bloomberg analysis of transactions worth at least CNY 1bln.
• Shein’s profit slumped in a fresh challenge to long-planned London IPO with its 2024 net profit down almost 40% to USD 1bln although FY sales rose 19% Y/Y to USD 38bln, according to FT.
• A report on Friday stated that a new coronavirus with pandemic potential was discovered in China, according to Daily Mail.
• UK and India relaunch trade talks in bid to boost investment opportunities, according to FT.
• China’s economic growth target is expected to be set at about 5% for 2025, while CPI will probably be lowered to 2% from 3% for previous years, according to a report in Securities Times on Monday, citing economists.