- US stocks were little changed and finished mixed on Wednesday while T-Notes bull steepened with upside in both assets seen in late trade after the FOMC Minutes which signalled the Fed is in no rush to adjust policy and they should be cautious with future adjustments. However, commentary that various participants suggest it may be appropriate to pause or slow the balance sheet run-off until the debt ceiling issue is resolved, took the limelight and sent T-Notes to session highs with stocks following suit. Elsewhere, the attention also largely centered around geopolitics with more issues surrounding Ukraine and Russia peace talks as President Trump called Ukrainian President Zelensky a dictator and said that he needs to move fast or he is not going to have a country left.
- USD was slightly firmer on the day but off best levels with some pressure seen after the FOMC Minutes which noted that all participants said it was appropriate to hold rates and the staff's economic outlook was largely unchanged from the one provided in the December meeting although various participants noted it may be appropriate to consider pausing or slowing the balance sheet runoff until there is a resolution of debt ceiling dynamics.
- Looking ahead, highlights include Australian Jobs Data & Malaysian Trade Data, PBoC Loan Prime Rates, Supply from Japan.
More Newsquawk in 2 steps:
1. Subscribe to the free premarket movers reports
2. Trial Newsquawk’s premium real-time audio news squawk box for 7 days
LOOKING AHEAD
- Highlights include Australian Jobs Data & Malaysian Trade Data, PBoC Loan Prime Rates, Supply from Japan.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks were little changed and finished mixed on Wednesday while T-Notes bull steepened with upside in both assets seen in late trade after the FOMC Minutes which signalled the Fed is in no rush to adjust policy and they should be cautious with future adjustments. However, commentary that various participants suggest it may be appropriate to pause or slow the balance sheet run-off until the debt ceiling issue is resolved, took the limelight and sent T-Notes to session highs with stocks following suit. Elsewhere, the attention also largely centered around geopolitics with more issues surrounding Ukraine and Russia peace talks as President Trump called Ukrainian President Zelensky a dictator and said that he needs to move fast or he is not going to have a country left.
- SPX +0.18% at 6,140, NDX +0.05% at 22,175, DJI +0.16% at 44,627, RUT -0.46% at 2,281.
- Click here for a detailed summary.
FOMC MINUTES
- FOMC Minutes stated all participants said it was appropriate to hold rates and the staff's economic outlook was largely unchanged from the one provided at the December meeting. The Committee was well positioned to take time to assess the evolving outlook for economic activity, the labour market, and inflation, with the vast majority pointing to a still-restrictive policy stance. Participants indicated that provided the economy remained near maximum employment, they would want to see further progress on inflation before making additional adjustments to the target range for the federal funds rate. A majority of participants also observed that the current high degree of uncertainty made it appropriate for the Committee to take a careful approach in considering additional adjustments to the stance of monetary policy. Furthermore, a few noted that the current target range for the federal funds rate may not be far above its neutral level and various participants noted it may be appropriate to consider pausing or slowing the balance sheet runoff until there is a resolution of debt ceiling dynamics.
TARIFFS/TRADE
- Fed's Bostic (2027 voter) said he did not expect progress on inflation would go in a straight line and bumpiness in inflation is not super surprising, while the question is whether Jan. CPI was a bump in the road or a new trend. Bostic also stated that the Fed did not cut too much last year and policy remains restrictive, as well as noted he is comfortable with taking a pause to see how the economy evolves and does not know what the future holds but noted everything is on the table at every meeting, according to Yahoo Finance.
- US President Trump is eying a bigger, better trade deal with China, according to the NYT. Trump is said to want a wide-ranging trade deal that goes beyond reworking the trade relationship and is interested in a deal that would include substantial investment and commitments for China to buy more US products, while he would like an agreement to also include nuclear weapons security.
- China’s Commerce Minister said China is strongly dissatisfied with US tariffs on Chinese goods and hopes to resolve respective concerns through equal dialogue and consultation.
- WTO said talks on US-China trade tensions were constructive and a large number of countries called for restraint.
- Canadian PM Trudeau said they are entirely focused on making sure no tariffs ever get brought in on Canada and if ever there are tariffs brought in Canada, their response will be immediate and strong, but they do not want that.
- EU Trade Commissioner Sefcovic said there is nothing unfair about trade with the US and sees no justification for sudden unilateral tariff increases by the US, according to Bloomberg.
NOTABLE HEADLINES
- US President Trump posted that they need both Chambers to pass the House Budget to “kickstart” the reconciliation process and move all of their priorities to the concept of “ONE BIG BEAUTIFUL BILL” which will make America great again.
- US House Majority Leader Scalise said the House is to vote next week on the budget, according to Punchbowl.
- US President Trump’s administration reportedly ordered the Pentagon to plan for 8% budget cuts, according to the Washington Post.
- US President Trump's administration may use public health order to cut immigration, according to CNN.
DATA RECAP
- US Building Permits (Jan) 1.483M vs. Exp. 1.46M (Prev. 1.482M)
- US Housing Starts (Jan) 1.366M vs. Exp. 1.39M (Prev. 1.499M, Rev. 1.515M)
FX
- USD was slightly firmer on the day but off best levels with some pressure seen after the FOMC Minutes which noted that all participants said it was appropriate to hold rates and the staff's economic outlook was largely unchanged from the one provided in the December meeting although various participants noted it may be appropriate to consider pausing or slowing the balance sheet runoff until there is a resolution of debt ceiling dynamics.
- EUR softened amid concerns surrounding Ukraine with US President Trump referring to President Zelensky as a dictator although the downside was stemmed and there were some hawkish-leaning comments from ECB's Schnabel who said they are getting closer to the point where they may have to pause or halt rate cuts.
- GBP gradually retreated and gave up the 1.2600 handle as the dollar mildly strengthened and despite the firmer-than-expected UK CPI data.
- JPY outperformed amid geopolitical concerns and following the recent comments from BoJ board member Takata.
FIXED INCOME
- T-notes settled marginally higher and the curve steepened with a bid seen post-FOMC minutes on balance sheet comments.
COMMODITIES
- Oil prices saw mild gains on Wednesday as Russia/Ukraine continued to dominate headlines with US President Trump providing some punchy rhetoric on Truth regarding Ukrainian President Zelensky who he labelled as a dictator without elections, while Russian President Putin stated that Ukraine could not organise such an attack on its own and Western equipment damaged CPC, as well as noted it is impossible to restore quickly and that the attack was coordinated with Europe.
- US Private Inventory Data (bbls): Crude +3.3mln (exp. +2.2mln), Distillate -2.7mln (exp. -3.5mln), Gasoline +2.8mln (exp. +0.8mln) Cushing +1.7mln.
- Russian President Putin said he will call the Saudi Crown Prince in the coming days, while he added that energy talks are needed between leaders of Russia, the US and Saudi Arabia, according to TASS.
GEOPOLITICAL
MIDDLE EAST
- Hamas is ready to release all Israeli hostages at once in the second phase", according to Al Hadath.
- Egyptian sources claimed that Egypt had reached an understanding with Hamas that the organisation would distance itself from all aspects of the civil administration in the Gaza Strip, including the security aspect.
RUSSIA-UKRAINE
- Ukrainian President Zelensky said US President Trump is trapped in a disinformation bubble and the US demanding the return of USD 500bln in minerals is "not a serious conversation", while he added that he can't sell their country and nobody in Ukraine trusts Russian President Putin.
- Ukrainian President Zelensky said he wants to end war with Russia this year, according to Sky News Arabia. Ukrainian President Zelensky later commented it is important for them that work with the US is 'constructive'.
- Ukraine’s Foreign Minister said nobody can force Ukraine to give up and they will defend their right to exist.
- It was alleged that Kyiv intends to carry out a series of terrorist attacks against the diplomatic missions of the Russian Federation in European countries in order to disrupt the negotiations, according to TASS citing the Foreign Intelligence Service, Furthermore, it was said that "Kyiv may carry out terrorist attacks in Germany, the Baltic countries and Scandinavia, it is possible that it will prefer Slovakia and Hungary".
- US President Trump criticised Ukrainian President Zelensky on Truth in which he described him as a dictator without elections and said that Zelensky better move fast or he is not going to have a country left. Trump added that Zelensky talked the US into spending USD 350bln to go into a war that couldn’t be won and that never had to start, but a war that he, without the US and Trump will never be able to settle.
- White House National Security Advisor Waltz said chances of a peace deal for Ukraine and Russia are good, while the next step will be technical teams talking details and French President Macron and UK PM Starmer are to come to Washington next week.
- Russian President Putin said he was informed of Russia-US talks and new work of the diplomatic mission will be resumed, while he added they discussed energy and that a Ukraine resolution is a priority for Russia. Putin stated that the US delegation acted without bias or judgement and Russia is ready to get back to negotiations on Ukraine, as well as noted that President Trump informed him that Ukraine will partake in the talks, according to IFAX.
- Russian President Putin said the US and Russia have yet to resolve the issue of the New START Treaty and said he will be happy to meet US President Trump but the meeting has to be prepared and he is not ready to say when meeting with Trump will take place. Furthermore, he said US and Russian teams need to prepare mutually acceptable solutions.
- Russian President Putin said regarding the CPC attack that Ukraine could not organise such an attack on its own and that Western equipment damaged CPC, while he added it is impossible to restore quickly and the CPC attack was coordinated with Europe, according to TASS.
- Russian Foreign Minister Lavrov said he assumes that the US intends to remove obstacles that are in the path of promising projects, while he added they have begun to move away from the edge of the abyss where the Biden admin led the US-Russia relationship.
- Russia's Kremlin said a Putin-Trump meeting will take time to prepare and will first need reanimation of Russia-US relations, then restoration. It added that the talks in Riyadh were an important step towards Ukraine crisis settlement, while Russia and the US mainly discussed their own relations yesterday, according to TASS. Kremlin also said the Putin-Trump meeting may occur before the end of February and Russia will appoint a Ukraine negotiator depending on who the US representative is, according to Interfax.
- EU envoys have agreed on the 16th sanctions package against Russia, which includes a primary aluminium import ban and the listing of 73 new shadow fleet vessels.
- European Commission's 16th sanctions package against Russia is expected to be formally imposed on Monday, according to WSJ's Norman. It was also reported that European Commission President von der Leyen said they are committed to keeping up the pressure on the Kremlin.
- UK PM Starmer expressed his support for Ukrainian President Zelensky as Ukraine's democratically elected leader and noted that it was perfectly reasonable to suspend elections during wartime, while he reiterated his support for the US-led efforts to get a lasting peace in Ukraine that deterred Russian from any future aggression.
- German Chancellor Scholz said Trump calling Zelensky a 'dictator' is 'false and dangerous', according to Spiegel.
ASIA-PAC
NOTABLE HEADLINES
- China issued a plan to stabilise foreign investment and will better utilise foreign investment to strengthen the supply chain in the manufacturing sector and promote an orderly opening up in the BioPharma field. China is to encourage financial institutions to provide financing services to foreign-funded enterprises and foreign-invested firms will be allowed to use domestic loans to carry out equity investment. Furthermore, it encourages FDI in livestock breeding, feeding equipment production, feed and veterinary drug production, while it will facilitate foreign investors with M&A investment in China.
- China's financial regulator said they will maintain a stable and effective credit supply to private enterprises, as well as meet reasonable financing needs of various real estate enterprises including private housing enterprises.
- China's DeepSeek weighs raising outside money for the first time, while Alibaba (BABA) and Chinese state funds have expressed interest, according to The Information.
- RBNZ Governor Orr said he is feeling more positive about the inflation situation and expects the cash rate will be around 3% by year-end, while he added “in an environment of low and stable inflation”.
EU/UK
NOTABLE HEADLINES
- ECB's Schnabel said they are getting closer to the point where they may have to pause or halt rate cuts, while she added that restriction has come down significantly, up to a point where they can no longer say with confidence that their monetary policy is still restrictive. Schnabel stated that she is not saying monetary policy is no longer restrictive but is saying she is no longer sure whether it is still restrictive although they should not overstate a difference of 25 basis points. Furthermore, she replied "That is a discussion we should have in the next meeting" when asked "Should the ECB drop the reference to restrictiveness in March?", while she firmly believes in a meeting-by-meeting approach and stated that for her, the direction of travel is not so clear anymore, according to FT.
- ECB's Panetta said signs of weakness in the EZ economy "are more present than we were anticipating" and they expected a recovery driven by consumer spending which didn't materialise.
- EU is reportedly looking at tapping EUR 93bln in unspent COVID recovery funds for defence, according to FT.
DATA RECAP
- UK CPI YY (Jan) 3.0% vs. Exp. 2.8% (Prev. 2.5%)
- UK Core CPI YY (Jan) 3.7% vs. Exp. 3.7% (Prev. 3.2%)
