- US stocks ultimately finished in the green on what was a choppy day, while T-notes were sold across the curve and the Dollar plummeted as the Euro and Bund yields climbed. The focus of the session was on US trade updates in which the US decided to delay auto tariffs on Canada and Mexico by 30 days, although President Trump told Canadian PM Trudeau that they have not done enough on fentanyl imports into the US, albeit progress on borders has been reasonable, while participants also digested mixed data releases including a dismal ADP jobs report and better-than-expected ISM Non-Manufacturing PMI.
- USD slumped for a third consecutive day and fell to levels last seen in November 2024 as the recent soft dollar themes persisted with EUR surging on German CDU leader Merz's investment announcement on Tuesday, while US data releases were mixed in which the latest ADP report significantly fell short of expectations but ISM Services unexpectedly rose further into expansionary territory.
- Looking ahead, highlights include South Korean CPI, Australian Building Approvals & Trade Data, Supply from Japan.
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LOOKING AHEAD
- Highlights include South Korean CPI, Australian Building Approvals & Trade Data, Supply from Japan.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks ultimately finished in the green on what was a choppy day, while T-notes were sold across the curve and the Dollar plummeted as the Euro and Bund yields climbed. The focus of the session was on US trade updates in which the US decided to delay auto tariffs on Canada and Mexico by 30 days, although President Trump told Canadian PM Trudeau that they have not done enough on fentanyl imports into the US, albeit progress on borders has been reasonable, while participants also digested mixed data releases including a dismal ADP jobs report and better-than-expected ISM Non-Manufacturing PMI.
- SPX +1.11% at 5,843, NDX +1.36% at 20,628, DJI +1.14% at 43,007, RUT +1.02% at 2,101.
- Click here for a detailed summary.
TARIFFS/TRADE
- US President Trump posted on Truth that "Justin Trudeau, of Canada, called me to ask what could be done about Tariffs. I told him that many people have died from Fentanyl that came through the Borders of Canada and Mexico, and nothing has convinced me that it has stopped. He said that it’s gotten better, but I said, “That’s not good enough.” The call ended in a “somewhat” friendly manner! He was unable to tell me when the Canadian Election is taking place, which made me curious, like, what’s going on here? I then realized he is trying to use this issue to stay in power. Good luck Justin!"
- White House said they will give a one-month exemption on any autos coming through USMCA and reciprocal tariffs will still go into effect on April 2nd, while US President Trump sees an increase in fentanyl flow through the Canadian border and there needs to be repercussions for that. Furthermore, it was stated that President Trump is open to hearing about additional tariff exemptions. It was earlier reported that President Trump held a call on Tuesday with the CEOs of General Motors (GM), Ford (F), and Stellantis (STLAM IM) on a potential auto tariff delay, according to Reuters citing sources.
- US Commerce Secretary Lutnick reiterated this is not a trade war and that it is a drug war, while he said "There are going to be tariffs" in reference to April 2nd but added that President Trump will maybe consider giving relief in relation to fentanyl and the President is open-minded if they can stop the flow of fentanyl. Lutnick said Trump will maybe consider giving relief and is thinking about doing something in the middle. Furthermore, Lutnick said Trump spoke with Canadian PM Trudeau on Wednesday and that Trump is 'leaning towards helping out' automakers for a month.
- US wants zero tariffs on car imports in a trade deal with India and wants zero to negligible tariffs on most other sectors except agriculture, while New Delhi is reluctant to immediately reduce auto tariffs to zero but is considering further cuts, according to Reuters citing sources.
- Canadian official said will not end tariffs unless all US tariffs are lifted, while it was separately reported that Canada requested WTI consultation with the US on "unjustified tariffs".
- Mexican President Sheinbaum said the call with US President Trump could be on Thursday morning and Mexico will look for other trade partners if necessary but added let's see what happens on tariffs through Sunday and could seek other trade partners if tariffs are maintained.
- Mexico started an antidumping probe on China aluminium bar imports, according to Bloomberg.
- WTO said China filed a revised dispute consultations request with the US on tariff measures.
NOTABLE HEADLINES
- Fed Beige Book stated overall economic activity rose slightly since mid-January and that six Districts reported no change, four reported modest or moderate growth, and two noted slight contractions, while consumer spending was lower on balance, with reports of solid demand for essential goods mixed with increased price sensitivity for discretionary items, particularly among lower-income shoppers.
- US Secretary of State Rubio announced a visa restrictions policy applying to foreign government officials and others, believed to be responsible for facilitating illegal immigration.
DATA RECAP
- US ISM N-Mfg PMI (Feb) 53.5 vs. Exp. 52.6 (Prev. 52.8)
- US Factory Orders MM (Jan) 1.7% vs. Exp. 1.6% (Prev. -0.9%, Rev. -0.6%)
- US ADP National Employment (Feb) 77k vs. Exp. 140k (Prev. 183k, Rev. 186k)
- US S&P Global Services PMI Final (Feb) 51.0 (Prev. 49.7)
- US S&P Global Composite PMI Final (Feb) 51.6 (Prev. 50.4)
FX
- USD slumped for a third consecutive day and fell to levels last seen in November 2024 as the recent soft dollar themes persisted with EUR surging on German CDU leader Merz's investment announcement on Tuesday, while US data releases were mixed in which the latest ADP report significantly fell short of expectations but ISM Services unexpectedly rose further into expansionary territory.
- EUR rallied to just shy of the 1.0800 handle in a continuation of the upward momentum following the recent German spending and debt brake reform announcement, while Germany's 10-year yields saw their biggest intraday rise since the 1990s.
- GBP steadily climbed throughout the day alongside the dollar's demise and tested the 1.2900 level, while there were several comments from BoE officials but did little to shift the dial.
- JPY retreated to a sub-149.00 level against the greenback although the gains in the Japanese currency were to a lesser extent as the positive risk sentiment lessened haven demand.
FIXED INCOME
- T-notes were choppy amid trade updates and US data but ultimately settled lower after ISM Services PMI topped estimates and the US delayed auto tariffs on Canada and Mexico by 1 month, while
COMMODITIES
- Oil prices were lower amid choppy sentiment and tariff uncertainty, while inventory data showed a larger-than-expected build in headline crude stockpiles.
- US EIA Weekly Crude Stocks w/e 3.614M vs. Exp. 0.9M (Prev. -2.332M).
- Reuters OPEC February survey noted that output rose by 170k bpd from January to 26.74mln bpd, led by Iran.
GEOPOLITICAL
MIDDLE EAST
- US was reported to be holding secret talks with Hamas on Gaza hostages, according to Axios.
- US Treasury announced fresh Houthi-related sanctions.
- Russia's Kremlin said Iran will be a subject for future dialogue with the US, and Russia believes that the Iran nuclear programme needs to be solved through political means.
RUSSIA-UKRAINE
- Ukrainian President Zelensky anticipates positive outcomes from US cooperation next week. It was also reported that Zelensky’s top aide discussed with the US National Security Advisor steps to achieve just peace, while Ukraine and the US agreed on a meeting in the near future.
- White House said it is moving in a positive direction on peace talks regarding Ukraine and National Security Adviser Waltz President Trump will lift the Ukraine aid pause if talks are nailed down.
- White House Press Secretary said National Security Adviser Waltz has been talking to his Ukrainian counterparts and they are reconsidering funding for Ukraine, while talks on the mineral deal are happening and Trump is committed to a peace deal.
- US reportedly cut off intelligence-sharing with Kyiv in a move that could hamper the Ukrainian military's ability to target Russian forces, according to sources via FT. However, Bloomberg reported that a Ukrainian official said the country is still getting US intelligence, while CIA Director Ratcliffe said the US cut off intelligence to Ukraine, according to FBN.
- French President Macron said he wants to believe the US will remain at their side but have to be ready if they are no longer by their side and France will hold a meeting of all European army chiefs next week in Paris. Macron also stated they will have to make more investments in defence and will open the debate to extend the French nuclear umbrella to European partners.
ASIA-PAC
NOTABLE HEADLINES
- Chinese Premier Li said China must further strengthen confidence, open up to new ideas, take on greater responsibilities, and take proactive actions to promote sustained recovery.
EU/UK
NOTABLE HEADLINES
- BoE Governor Bailey said he expects a pick-up in inflation but it will be nothing like a few years ago and a weakening economy means second-round effects will be less likely. Bailey said the demand weakness argument may be getting stronger and that there are question marks around productivity data.
- BoE's Greene said she believes the disinflationary process is broadly on track and inflation persistence has been slowly fading which is partly due to their restrictive stance on monetary policy.
- BoE's Taylor said "We probably have a bit more of an output gap than in BoE's February MPR" and said the MPC would take a pause if second-round effects emerge.
- UK Chancellor Reeves is set to submit plans this week to the OBR detailing billions of pounds of spending reductions, according to the FT.
- Germany's Greens parliamentary leader said they are open on whether to support debt brake reforms and there are several questions that need to be clarified. Furthermore, they will negotiate hard but fairly when it comes to debt reforms but noted that special funds are not the honest way and debt brake reforms are the cleaner solution. In relevant news, Germany's AfD said they are considering judicial moves against the CDU/CSU and SPD debt plans.
DATA RECAP
- UK S&P Global Services PMI (Feb) 51.0 vs. Exp. 51.1 (Prev. 51.1)
- UK S&P Global Composite PMI (Feb) 50.5 vs. Exp. 50.5 (Prev. 50.5)
- EU HCOB Services Final PMI (Feb) 50.6 vs. Exp. 50.7 (Prev. 50.7)
- EU HCOB Composite Final PMI (Feb) 50.2 vs. Exp. 50.2 (Prev. 50.2)
- German HCOB Services PMI (Feb) 51.1 vs. Exp. 52.2 (Prev. 52.2)
- German HCOB Composite Final PMI (Feb) 50.4 vs. Exp. 51 (Prev. 51)
