- US stocks were ultimately mixed as overnight weakness following President Trump's steel and aluminium tariffs pared to see the SPX close flat, NDX & RUT down and DJIA up. Sectors were also varied with outperformance in Consumer Staples after strong Coca-Cola (KO) earnings and with strength seen in Energy and Materials. Conversely, Consumer Discretionary was hit as TSLA shares tumbled after Musk announced an apparent bid for OpenAI, while Healthcare and Communications also underperformed.
- USD was weaker despite US President Trump announcing the imposition of 25% tariffs on all steel and aluminium coming into the US which takes effect on March 12th. Nonetheless, as tariffs are not set to go into effect for a month, the softer buck was likely an expectation from markets that said tariffs are a starting point for negotiations, while further pressure was seen in the greenback after Ukrainian President Zelensky said they are prepared to offer a territory swap with Russia. The attention was also on Fed comments including from Powell who gave his semi-annual testimony to the Senate although his remarks largely echoed recent commentary and noted the Fed is not in a rush to move on policy.
- Looking ahead, highlights include Japanese Money Supply & Machine Tool Orders, Australian Home Loans, Supply from Australia & Japan.
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LOOKING AHEAD
- Highlights include Japanese Money Supply & Machine Tool Orders, Australian Home Loans, Supply from Australia & Japan.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks were ultimately mixed as overnight weakness following President Trump's steel and aluminium tariffs pared to see the SPX close flat, NDX & RUT down and DJIA up. Sectors were also varied with outperformance in Consumer Staples after strong Coca-Cola (KO) earnings and with strength seen in Energy and Materials. Conversely, Consumer Discretionary was hit as TSLA shares tumbled after Musk announced an apparent bid for OpenAI, while Healthcare and Communications also underperformed.
- SPX +0.03% at 6,069, NDX -0.29% at 21,694, DJIA +0.28% at 44,594, RUT -0.53% at 2,276.
- Click here for a detailed summary.
TARIFFS
- US duties on China could be paused if “serious headway” is made on fentanyl when Trump and Xi next speak, according to WSJ's Wei who stated "In other words, no headway yet, and that’s why no call, and no pause on the tariffs". Furthermore, Wei noted "The Chinese leader is in no rush. Rather than focusing solely on a deal about fentanyl, he aims to negotiate a broader agreement with Trump that could define the tone of bilateral relations".
- Canadian PM Trudeau said their response will be firm and clear and they will stand up for Canadian workers in relation to the new Trump tariffs.
- European Commission President von der Leyen said unjustified tariffs on the EU will not go unanswered and that they will trigger firm and proportionate countermeasures.
- Britain is not expected to join the EU in retaliating against the US after President Trump announced plans to hit steel imports with 25% tariffs, according to The Times's Swinford.
- South Korean acting President said they are to prepare support for firms hit by US tariffs and will discuss response measures with Japan and the EU. Furthermore, they will respond to US tariffs on steel and aluminium according to pre-arranged plans and will seek talks with the US on tariffs to reflect the interest of Korean firms.
NOTABLE HEADLINES
- Fed Chair Powell said they do not need to be in a hurry to adjust policy and policy is well-positioned to deal with risks and uncertainties. Powell added they can maintain policy restraint for longer if the economy remains strong and inflation does not move toward 2% or can ease policy if the labour market unexpectedly weakens or inflation falls more quickly than expected. Furthermore, Powell said shrinking of the balance sheet is ongoing and reserves are still abundant, as well as noted that overall aggregate numbers on the economy are very good and what people are feeling is the results of several years of inflation with low- and moderate-income people feeling very strapped which is another reminder of how bad high inflation is and furthers the Fed resolve to get it down to 2%.
- Fed's Williams (Vice Chair) said monetary policy is well positioned to achieve Fed goals and the US economy is in a good place, while inflation expectations are well anchored and the US unemployment rate should stay between 4% to 4.25%. Williams also stated that the US is to grow by around 2% this year and next, while inflation is to hang around 2.5% this year and 2% in the coming years.
- Fed's Hammack (2026 voter) said it is likely appropriate to hold rates steady for some time and a patient approach to rates will provide time to assess the economy. Hammack said it is still not clear that inflation will keep moving down to 2% and getting inflation to the target is paramount, while she added a rate hike is not her base case and the economy is in a good position.
- US Speaker Johnson intends to begin presenting outlines of his budget reconciliation package and believes he’s “very close” to a final budget resolution, according to Punchbowl.
FX
- USD was weaker despite US President Trump announcing the imposition of 25% tariffs on all steel and aluminium coming into the US which takes effect on March 12th. Nonetheless, as tariffs are not set to go into effect for a month, the softer buck was likely an expectation from markets that said tariffs are a starting point for negotiations, while further pressure was seen in the greenback after Ukrainian President Zelensky said they are prepared to offer a territory swap with Russia. The attention was also on Fed comments including from Powell who gave his semi-annual testimony to the Senate although his remarks largely echoed recent commentary and noted the Fed is not in a rush to move on policy.
- EUR benefitted amid the dollar weakness in which EUR/USD steadily climbed north of the 1.0300 level as markets shrugged off the latest tariff announcements.
- GBP outperformed its G10 counterparts following recent comments by BoE's Mann who gave her reasoning behind her dovish dissent at the last meeting but noted her “active rate policy does not mean cut, cut, cut" and suggested she may not opt for another 50bps cut at the next meeting.
- JPY weakened with USD/JPY back at the 152.00 handle as havens lagged and with the move also facilitated by firmer US yields.
FIXED INCOME
- T-notes were pressured as participants digested Trump's tariff announcement, Fed Chair Powell's comments and supply, while the attention now turns to incoming US CPI data.
COMMODITIES
- Oil prices edged higher in the aftermath of tariff escalations and continued heightened geopolitical updates.
- Private inventory data (bbls): Crude +9.0mln (exp. +3.0mln), Distillates -0.6mln (exp. -1.5mln), Gasoline -2.5mln (exp. +1.4mln), Cushing +0.4mln.
- OPEC Secretary General said the OPEC approach is for balance in the market and oil demand will not peak.
- US Energy Secretary Wright said oil output can grow 'meaningfully' and the US is focused on reducing the cost to produce oil, while he added the US needs a ‘robust’ strategic oil reserve and is seeking to stop the closure of coal-fired power plants.
- Russia’s Deputy Energy Minister said they will continue to supply oil to the market and current oil prices are not exorbitant, while he added that oil prices give decent levels of return for reinvestments. There were also comments from Deputy PM Novak that they will be looking at proposals regarding the possibility of a gasoline export ban.
- EIA STEO (Feb) noted that 2025 world oil demand is seen at 104.1mln BPD (prev. saw 104.1mln BPD), while 2026 demand is seen at 105.2mln BPD (prev. 105.1mln BPD).
GEOPOLITICAL
MIDDLE EAST
- Israeli PM Netanyahu said if Hamas does not return hostages by Saturday noon, the ceasefire will end and the military will return to intense fighting until Hamas is finally defeated. It was also reported that Israeli PM Netanyahu ordered the army to boost troops in and around Gaza.
- US President Trump said when asked about Israeli annexation of the West Bank that it is going to work out with the US to run Gaza very properly and is not going to buy it. Furthermore Trump thinks there will be parcels of land in Jordan and in Egypt where Palestinians will live and does not think Hamas will make the Saturday deadline for the hostage release.
- Yemen's Houthi group leader said the group is ready to launch attacks on Israel if they resume attacks on Gaza.
- Iran's UN envoy alerted the UN Security Council to "deeply alarming and irresponsible" remarks by US President Trump threatening the use of force and said the statements flagrantly violate international law. The envoy rejected and condemned Trump’s threat, as well as noted the UN Security Council must not remain silent. Furthermore, Iran warned that any act of aggression will have severe consequences for which the US will bear full responsibility.
RUSSIA-UKRAINE
- Ukrainian President Zelensky stated in a recent interview with AFP that he is willing to swap Russian territory captured by Ukraine in the Kursk region for Ukrainian territory captured by Russia in the east in a negotiated peace settlement to end the ongoing war.
- US President Trump said on Truth that he will send US Treasury Secretary Bessent to Ukraine to meet Zelensky, while he added the war must end and will end soon.
- White House National Security Adviser Waltz said they are moving in the right direction to end the brutal and terrible war in Ukraine.
- Russian Deputy Foreign Minister met the US envoy, according to RIA. Russia's Kremlin said there are contacts with the Trump team which are intensifying, although nothing yet in terms of a possible settlement to the conflict in Ukraine. It was later reported that Russia released a US prisoner after talks with Trump's envoy.
- Polish armed forces said a Russian military jet intruded into Polish airspace on Tuesday.
OTHER
- US Defence Secretary Hegseth said China’s intentions in Africa are pernicious, while he added that the US needs to spend more on defence than it did under the Biden administration.
EU/UK
NOTABLE HEADLINES
- BoE Governor Bailey said there is a reaction taking place against regulation and they must not forget the lasting damage done by the GFC. Bailey said interventions may not always need to be more regulation but can be liquidity facilities and can be to improve areas of the financial infrastructure.
- BoE's Mann said as an activist policy maker, she opted for a 50bps cut in February to ‘cut through the noise’, anchor expectations through the inflation hump, and acknowledge structural impediments and macroeconomic volatility in the longer term. Mann said her “active rate policy does not mean cut, cut, cut", while she added that “A 50bps cut now, 50 next time would not be a full reading of what I have said".
- ECB's Schnabel said uncertainty in trade has risen dramatically.
