- US stocks and bonds were choppy ahead of Friday's key NFP report and the major indices finished mixed gains in the Nasdaq and S&P 500, while the DJIA and Russell 2000 closed in the red. Nonetheless, sectors were predominantly higher as Financials, Staples and Tech outperformed, while Energy and Health Care were the laggards.
- USD was ultimately flat heading into the key US payrolls report on Friday, while data releases were soft as initial jobless claims rose slightly more than anticipated and Unit Labour Cost was softer than expected.
- Looking ahead, highlights include Japanese Household Spending & Leading Index, Philippines Industrial Production, Malaysian Industrial Production, RBI Rate Decision.
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LOOKING AHEAD
- Highlights include Japanese Household Spending & Leading Index, Philippines Industrial Production, Malaysian Industrial Production, RBI Rate Decision.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks and bonds were choppy ahead of Friday's key NFP report and the major indices finished mixed gains in the Nasdaq and S&P 500, while the DJIA and Russell 2000 closed in the red. Nonetheless, sectors were predominantly higher as Financials, Staples and Tech outperformed, while Energy and Health Care were the laggards.
- SPX +0.36% at 6,084, NDX +0.54% at 21,774, DJI -0.28% at 44,748, RUT -0.39% at 2,307.
- Click here for a detailed summary.
TARIFFS/TRADE
- USTR nominee Greer said trade reciprocity with China requires both tariffs and non-tariff barriers, while they will very quickly review China's compliance with the Phase 1 trade deal and are prepared to enforce it. Greer added the USMCA trade deal needs to be reviewed to make sure that foreign countries of concern are not 'free-riding' on it for duty-free access to the US market.
- US Treasury Secretary Bessent said could see a small one-time price adjustment with tariffs and sees China eating some tariffs.
- Hong Kong Post continues to suspend postal service for items containing goods to the US and has started communication with USPS to clarify matters including the US imposing tariffs.
- Oil and gas traders are likely to seek waivers from China over tariffs that the Chinese government plans to impose on US crude and LNG, according to Reuters sources.
- European Commission is requesting Shein to provide internal documents and more detailed information on risks linked to the presence of illegal content and goods in its marketplace on transparency of its recommender systems.
- Canada’s Energy and Natural Resources Minister said the US has not set out clear objectives to resolve tariff issues.
- Japan is reportedly seeking exemptions from steel import tariff being considered by India citing Chinese overcapacity, according to Reuters sources.
NOTABLE HEADLINES
- Fed's Goolsbee (2025 voter) said it seems the job market is settling at full employment and the effect of tariffs on inflation may be hard to discern, while the first-order effect of tariffs on prices may be less important than possible impact on expectations. Goolsbee also stated that he feels the neutral rate is well below current Fed policy, but it is appropriate to slow the pace of cuts to find a stopping point.
- Fed's Waller (voter) said a stablecoin is like a synthetic dollar and if it makes payments faster and cheaper, he is all for it but noted they need regulation for stablecoins and "the faster the better". Waller said will make the dollar even more of a reserve currency, while he responded the Fed would not run such a thing when asked about a possible Bitcoin strategic reserve and he does not see a case for retail CBDC in the US.
- US Treasury Secretary Bessent said he has met with Fed Chair Powell and had a very constructive discussion. Bessent also commented that there is a lot of misinformation about DOGE and the Treasury, while he added that DOGE has "absolutely not" had the power to change the system. Furthermore, he said they want the dollar to be strong and a strong dollar policy is completely intact under Trump, as well as noted that the US is never going to default on its debt and he wants to get data on bondholder thoughts on the debt limit.
- White House outlined its tax priorities in a meeting with House GOP leaders on Thursday, while the list includes campaign promises like ending taxes on tips and Social Security benefits, according to a White House official cited by Axios.
- White House is reportedly preparing an order to cut thousands of federal health workers and an executive order could come as soon as next week if the Trump administration goes ahead with plans, according to WSJ.
DATA RECAP
- US Unit Labor Costs Prelim (Q4) 3.0% vs. Exp. 3.4% (Prev. 0.8%, Rev. 0.5%)
- US Productivity Prelim (Q4) 1.2% vs. Exp. 1.4% (Prev. 2.2%, Rev. 2.3%)
- US Challenger Layoffs (Jan) 49.795k (Prev. 38.792k)
- US Initial Jobless Claims w/e 219.0k vs. Exp. 213.0k (Prev. 207.0k, Rev. 208k)
- US Continued Jobless Claims w/e 1.886M vs. Exp. 1.874M (Prev. 1.858M, Rev. 1.850M)
FX
- USD was ultimately flat heading into the key US payrolls report on Friday, while data releases were soft as initial jobless claims rose slightly more than anticipated and Unit Labour Cost was softer than expected.
- EUR softened after failing to sustain the 1.0400 level with the single currency not helped by dovish comments from ECB's Rehn who stated they should be ready to adjust below the neutral rate to bolster growth.
- GBP was the G10 laggard in the aftermath of a surprisingly dovish BoE rate decision in which the central bank cut by 25bps in which both dovish Dhingra and hawkish Mann voted for a 50bps cut.
- JPY outperformed with USD/JPY firmly beneath the 152.00 handle following recent hawkish BoJ rhetoric.
- Czech CNB Repo Rate 3.75% vs. Exp. 3.75% (Prev. 4.0%).
- Mexican Interest Rate 9.5% vs. Exp. 9.5% (Prev. 10.0%); split decision (4-1 vote) with Heath the dissenter and voting for a 25bps cut.
FIXED INCOME
- T-notes settled but with price action choppy amid soft US data and Trump policies ahead of NFP.
COMMODITIES
- Oil prices declined with pressure seen after President Trump stated they will drive the price of oil down and everything else would follow, while he also said they are making good progress to stop the Russia-Ukraine war.
- US President Trump said they will drive the price of oil down and everything else will follow.
GEOPOLITICAL
MIDDLE EAST
- Israeli PM Netanyahu told Channel 14 that President Trump told him that Trump is in contact with a number of countries to implement his plan to displace Palestinians, according to Al Jazeera.
- US President Trump posted on Truth that the Gaza Strip would be turned over to the United States by Israel at the conclusion of fighting and no soldiers by the US would be needed.
- White House Press Secretary said President Trump has made it clear he will not be sending boots on the ground in Gaza.
- US Treasury issued fresh Iranian-related sanctions which target shipping, oil and energy companies. In relevant news, Iran’s President said they are 'not seeking nuclear weapons', according to AFP.
RUSSIA-UKRAINE
- Preparations for a meeting between US President Trump and Russian President Putin are said to be at an advanced level, according to a Russian senior lawmaker.
- US President Trump will try to force Ukrainian President Zelensky to agree to a ceasefire with Russia by Easter under a peace plan, according to Daily Mail citing a report in Strana although Zelensky's office has denied the legitimacy of the peace plans. The plans will begin with a phone call between Zelensky and Putin in early February, a meeting between the two leaders in late February to early March and an official ceasefire declaration by April 20th.
OTHER
- Panama’s President said it is intolerable for the US State Department to say that US government vessels can cross the canal without paying fees, while he also commented that the ambassador in Beijing has presented a document to exit the Belt and Road initiative.
ASIA-PAC
NOTABLE HEADLINES
- US President Trump and Japanese PM Ishiba are to discuss joint AI and chip development at a summit with cooperation in AI and chip fields aimed at bolstering supply chains, according to Nikkei.
EU/UK
NOTABLE HEADLINES
- BoE cut rates cut by 25bps to 4.50%, as expected, in a 9-0 vote (exp. 8-1) in which Dhingra and Mann voted for a 50bps rate cut. BoE said it will take a "gradual and careful" approach to rate cuts (prev. "gradual" approach) and reiterated policy will be "restrictive for sufficiently long".
- BoE Governor Bailey said in the post-meeting statement that the MPC expects to be able to cut rates further and will have to judge on a meeting-by-meeting basis on how far and how fast. Bailey added the Bank Rate is not on a pre-set path and the MPC must proceed carefully.
- BoE Governor Bailey said in the Q&A it is important for the rate path to be based on economic fundamentals and reiterated that he thinks the path for disinflation remains in place. Bailey responded he expects the path for rates will be downwards but notes there is more uncertainty when asked if the BoE is happy to cut rates while inflation rises. Furthermore, it was later reported that Bailey said the MPC vote split is not a communication tool and does not put too much weight on MPC member votes, according to CNBC.
- BoE Deputy Governor Ramsden said UK factors only accounted for around one-third of the January bond sell-off and that Gilt markets have been operating in an orderly way.
- UK PM Starmer reportedly wants to "axe” Chancellor Reeves in a bombshell reshuffle and is considering moving Home Secretary Yvette Cooper to the Treasury to boost the country’s economic fortunes, according to the Express.
- ECB's Rehn said estimates point towards the "lower end" of the neutral rate of “approximately 2 per cent or slightly below” and should be ready to adjust below the neutral rate to bolster growth, according to the FT.
- ECB's Vujcic said they could have stagflation where they have higher inflation but lower growth and given the high level of uncertainty, the best thing is to wait and see what will actually happen before they decide what they would do.
DATA RECAP
- UK S&P Global Construction PMI (Jan) 48.1 vs. Exp. 53.4 (Prev. 53.3)
- German HCOB Construction PMI (Jan) 42.5 (Prev. 37.8)
- German Industrial Orders MM (Dec) 6.9% vs. Exp. 2.0% (Prev. -5.4%)
- EU HCOB Construction PMI (Jan) 45.4 (Prev. 42.9)
- EU Retail Sales MM (Dec) -0.2% vs. Exp. -0.1% (Prev. 0.1%, Rev. 0.0%)
- EU Retail Sales YY (Dec) 1.9% vs. Exp. 1.9% (Prev. 1.2%, Rev. 1.6%)
