- US stocks were pressured and all major indices closed in the red with underperformance in the Dow following dismal guidance from Walmart, while risk sentiment was also not helped by weaker-than-expected data and the geopolitical uncertainty amid tensions between US and Ukraine with White House National Security Advisor Waltz telling Ukraine to tone it down although sources later noted that the US has given Ukraine a new "improved" draft of the minerals deal.
- USD was softer against all G10 peers which dragged the DXY to a fresh YTD low firmly beneath the 107.00 level amid the notable strength in the yen and with pressure also seen as Treasuries were bid following US Treasury Secretary Bessent's remarks on debt issuance in which he stated that terming out debt is "a long way off", while data releases were disappointing as the US Philly Fed drop was steeper than expected and initial claims rose above expectations.
- Looking ahead, highlights include Australian Flash PMIs, Japanese CPI & Flash PMIs, Malaysian CPI, Comments from RBA Governor Bullock, Supply from Australia.
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LOOKING AHEAD
- Highlights include Australian Flash PMIs, Japanese CPI & Flash PMIs, Malaysian CPI, Comments from RBA Governor Bullock, Supply from Australia.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks were pressured and all major indices closed in the red with underperformance in the Dow following dismal guidance from Walmart, while risk sentiment was also not helped by weaker-than-expected data and the geopolitical uncertainty amid tensions between US and Ukraine with White House National Security Advisor Waltz telling Ukraine to tone it down although sources later noted that the US has given Ukraine a new "improved" draft of the minerals deal.
- SPX -0.43% at 6,118, NDX -0.48% at 22,068, DJIA -1.01% at 44,177, RUT -0.91% at 2,262.
- Click here for a detailed summary.
TARIFFS/TRADE
- White House National Economic Council Head Hassett sees revenue from China tariffs of USD 500bln to USD 1tln over 10 years and said replacing income tax revenue with tariffs is possible.
- US President Trump’s aluminium tariffs set to take effect on March 12th will cover 123 products including chipmaking equipment parts and aircraft components in a potential blow to Japanese companies that rely on exports to America, according to Nikkei.
- EU Trade Chief Sefcovic said the EU is seeking common ground in talks with the US and discussed the car industry to "quite an extent", as well as noted that tariff reciprocity must work for both sides and the EU is ready to look at lower industrial tariffs. Sefcovic said they told US counterparts to not focus on measures and countermeasures, while he added that overall US tariffs are slightly higher than EU tariffs and he saw some openness from the US to lower tariffs.
NOTABLE HEADLINES
- Fed's Barr (Vice Chair supervision) urged incoming regulators to implement international capital standards and said the Fed should not reform stress tests in a way that results in lower bank capital requirements. Furthermore, he said it is important to have strong bank regulation and supervision against potential shocks.
- Fed's Musalem (2025 voter) said assurance that inflation is returning to the 2% target is needed before further policy changes and a patient approach is appropriate, while he also stated there are lots of risks in the economy right now on many fronts and noted that so far there are no plans to change the Fed balance sheet drawdown. Furthermore, Musalem said a one-time increase in tariffs is a one-time increase in the price level and any new tariffs will need a lot of study to understand the impact.
- Fed's Bostic (2027 voter) does not expect a new burst of inflation, while he noted uncertainty is widespread and sees two interest-rate cuts this year but added that much could happen to yield more or fewer rate cuts. Furthermore, Bostic said inflation data has been bumpy and that is likely to continue, as well as stated that the possibility of slowing QT is not just about the debt ceiling but also because the Fed does not want to overshoot.
- US President Trump posted on Truth "BALANCE BUDGET NOW??? LETS GIVE IT A SHOT. LOTS OF MONEY COMING IN FROM TARIFFS. DO IT! DJT".
- US VP Vance said negotiations on the budget bill are going well but it is early.
- US House Speaker Johnson said he is waiting on a "few" developments that "might have a big effect" on the reconciliation bill, according to Punchbowl.
- US Treasury Secretary Bessent responded the prior admin shortened some of the duration when asked about Treasury issuance, while he added they have kept it in place and have not shortened it further. Bessent also stated that terming out the debt is a long way off and any change to issuances would be path dependent, as well as commented that if tariffs have any price adjustments, it would be transitory price increases.
- US Commerce Secretary Lutnick said tariffs won't cause inflation and he doesn’t see tariff policy causing a recession.
- US President Trump's administration opened a review into whether to rescind USD 4bln in grants awarded to the California high-speed rail project.
DATA RECAP
- US Philly Fed Business Index (Feb) 18.1 vs. Exp. 20.0 (Prev. 44.3)
- US Leading Index Change MM (Jan) -0.3% vs. Exp. -0.1% (Prev. -0.1%, Rev. 0.1%)
- US Initial Jobless Claims w/e 219.0k vs. Exp. 215.0k (Prev. 213.0k, Rev. 214k)
- US Continued Jobless Claims w/e 1.869M vs. Exp. 1.871M (Prev. 1.85M, Rev. 1.845M)
FX
- USD was softer against all G10 peers which dragged the DXY to a fresh YTD low firmly beneath the 107.00 level amid the notable strength in the yen and with pressure also seen as Treasuries were bid following US Treasury Secretary Bessent's remarks on debt issuance in which he stated that terming out debt is "a long way off", while data releases were disappointing as the US Philly Fed drop was steeper than expected and initial claims rose above expectations.
- EUR benefitted from the broad dollar weakness and reclaimed the 1.0500 handle, while there were some encouraging comments on the tariff from EU Trade Chief Sefcovic who said the EU is ready to look at lower industrial tariffs and that he is seeing an openness from the US to lower tariffs.
- GBP gradually climbed throughout the session with GBP/USD gaining a firm footing on return to above the 1.2600 level.
- JPY outperformed with USD/JPY slipping beneath the 150.00 level amid the negative risk tone and as US-Japan yield differentials narrowed.
FIXED INCOME
- T-notes settled higher but with price action choppy amid comments from the Trump administration, US data and risk sentiment.
COMMODITIES
- Oil prices edged higher throughout most of the US session amid dollar weakness and geopolitical tensions but slipped from highs into the settlement.
- US EIA Weekly Crude Stocks 4.633M vs. Exp. 3.0M (Prev. 4.07M).
- US EIA reported no crude oil addition to the SPR in the latest week for the first time since December 2024.
- Russian President Putin held a phone call with Saudi Arabia's Crown Prince Mohammed Bin Salman, while it was stated that Russia and Saudi Arabia will continue to cooperate closely within the framework of OPEC+, according to RIA.
- Russia’s Trade Minister said Russia has been reducing the supply of aluminium to the EU in recent years and if sanctions occur, there will be substitute markets, while the official added the planned EU ban on imports of aluminium from Russia is not particularly sensitive.
GEOPOLITICAL
RUSSIA-UKRAINE
- US gave Ukraine a new draft of minerals deal, according to Axios.
- Ukrainian President Zelensky said he had a productive meeting with US Envoy Kellogg and discussed security guarantees, while he said Ukraine is ready for a strong and useful agreement with the US on investments and security.
- White House National Security Advisor Waltz said Ukraine badmouthing the US is unacceptable and Ukraine should tone it down, take a hard look at the minerals deal, and sign it. Waltz said US differences with Ukraine can be reconciled and that the US is engaging in shuttle diplomacy on Ukraine peace talks. Waltz later commented that Europe needs to step up for their own defence as a NATO partner and called for allies to pay up by the June NATO summit. Waltz also said some of the insults coming out of Kyiv were unacceptable and Ukrainian President Zelensky needs to come back to the table on critical minerals, while he added that President Trump is obviously very frustrated with Zelensky right now.
- US is declining to co-sponsor a UN General Assembly Resolution backing Ukraine and condemning Russian aggression ahead of the war anniversary, according to Reuters citing diplomatic sources.
- NATO Secretary General Rutte said they all want to see an end to the aggression against Ukraine and it will require robust security guarantees to reach enduring peace in Ukraine, while they should continue to strengthen Ukraine's hand so they can come to the negotiating table from a position of strength.
- French President Macron said if there is no dissuasion, Russia will not keep its word, while they are not planning to send troops to Ukraine although troops could be sent as part of peacekeeping and security guarantees for Ukraine. Furthermore, Macron said priority is to work on creating European champions for the defence industry and he will tell US President Trump that weakness with Russian President Putin will not make him credible with China and Iran's nuclear threat.
- Polish PM Tusk called for financing aid for Ukraine from frozen Russian assets and urged stronger defences along EU borders with Russia.
OTHER
- Russian Foreign Minister Lavrov said Chinese Foreign Minister Wang Yi will visit Moscow and Russia-China relations are a significant factor for a stabilisation in the international situation. It was also reported that Chinese Foreign Minister Wang Yi said China is willing to further advance China-Russia relations in the new year.
ASIA-PAC
NOTABLE HEADLINES
- PBoC held a macro-prudential work conference and said it will step up the analysis of macroeconomic and financial work, while it will help the real estate market stop falling and stabilise, as well as support the construction of a new model of real estate development and promote cross-border use of the yuan.
- PBoC will further smooth the financing channels of bonds, loans and stocks, as well as focus on solving difficult issues and the high cost of financing for private enterprise, while it is to provide strong financial support for the healthy economic development of the private economy and private enterprise expansion. PBoC said it will make good use of the stock buyback relending tool and maintain stable operations of the capital market.
- Chinese Premier Li said they will be making more effort and adopting more targeted measures to stimulate consumption, while they are to place consumption in a more prominent position and will improve supplies in education, medical care, tourism and elderly sectors.
EU/UK
NOTABLE HEADLINES
- UK reportedly lines up a new ambassador to help rebuild China ties, according to Reuters.
- ECB's Simkus said he agrees with market pricing for three additional cuts this year and the direction of travel is clear in which the next move is a cut, while he does not see a good reason to not cut in March.
- ECB's Makhlouf cautioned that the disinflation process faces dangers.
DATA RECAP
- EU Consumer Confid. Flash (Feb) -13.6 vs. Exp. -14.0 (Prev. -14.2)
