- US stocks and bonds were firmer while the dollar was sold after US President Trump signed a memorandum on reciprocal tariffs which saw two-way price action but ultimately lifted equities and bonds given that the tariffs will be implemented within weeks and that studies will be done by April 1st so tariffs are “ready to go” which helped alleviate some tariff concerns as it allows time for negotiations. Furthermore, Trump stressed that other countries which feel they are being unfairly treated by the US can lower, or eliminate their tariffs on the US.
- USD softened heading into US President Trump's reciprocal tariff announcement despite the firmer-than-expected PPI data as all but one of the PPI components which feed into the PCE measure fell M/M, while there was some immediate support in the dollar after Trump confirmed reciprocal tariffs and took aim at countries using VAT against the US such as Europe. However, the uplift in the dollar was only brief and the greenback sold off as further details of the reciprocal tariffs came to light with a White House official noting they could come within weeks, while Commerce Secretary nominee Lutnick noted each country will be addressed one by one, with studies set to be done by April 1st.
- Looking ahead, highlights include South Korean Unemployment, Singapore GDP, Malaysian GDP, Supply from Australia & Japan.
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LOOKING AHEAD
- Highlights include South Korean Unemployment, Singapore GDP, Malaysian GDP, Supply from Australia & Japan.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks and bonds were firmer while the dollar was sold after US President Trump signed a memorandum on reciprocal tariffs which saw two-way price action but ultimately lifted equities and bonds given that the tariffs will be implemented within weeks and that studies will be done by April 1st so tariffs are "ready to go" which helped alleviate some tariff concerns as it allows time for negotiations. Furthermore, Trump stressed that other countries which feel they are being unfairly treated by the US can lower, or eliminate their tariffs on the US.
- SPX +1.04% at 6,115, NDX +1.43% at 22,031, DJIA +0.77% at 44,711, RUT +1.17% at 2,282.
- Click here for a detailed summary.
TARIFFS
- US President Trump signed a memorandum to introduce a reciprocal tariff plan and said the lack of reciprocity is one source of the large and persistent US trade deficit, while he added the annual trade deficit threatens US economic and national security. Trump said he decided to charge a reciprocal tariff and whatever countries charge the US, they will charge them, while they will consider countries that use the VAT tax system with VAT tax to be viewed as a tariff. Trump also stated that provisions will be made for non-monetary tariffs, such as tests on cars, and limitations on trade, while the reciprocal tariff system will bring fairness back and this will be over and above steel tariffs.
- US President Trump expects a lot of countries' tariffs to stay the same and stated don’t expect any exemptions or waivers, while he stated that auto, steel, aluminium and pharma tariffs are coming soon with no exemptions to the planned auto tariffs.
- US President Trump said the EU has 20% VAT and other measures that hurt US companies including Apple (AAPL), while he added that airlines are asking him to help with EU fees and the EU doesn't treat the US right on trade. Trump also said that Canada has been tough on military and is not paying enough, as well as noted that BRICS will be hit if they play with the dollar and the BRICS tariff could be 100% at least. Furthermore, Trump said he is concerned about countries shifting business to China, while he added Taiwan took their chip business away and they want that business back.
- US President Trump posted on Truth Social that he decided to charge a reciprocal tariff meaning that whatever countries charge the US, we will charge them “No more, no less!”.
- White House official said the USTR will quickly submit a report detailing proposed remedies on a country-by-country basis. Furthermore, the Trump administration could begin to impose some reciprocal tariffs within weeks and will examine the most egregious issues and countries with the biggest US trade surpluses first. It was also stated that they are not ruling out a flat global tariff and reciprocal tariffs will take into account value-added taxes charged by other countries.
- US Commerce Secretary nominee Lutnick said they are going to address each country one by one and studies should be done by April 1st.
- UK Business Minister said the UK can engage with the US on steel and aluminium tariffs.
NOTABLE HEADLINES
- US President Trump said interest rates will be going down and responded "not necessarily" when asked if consumers can expect higher prices, while expects jobs to go up and said prices could go up somewhat in the short term.
- White House is seeking to renegotiate act awards and said some upcoming Chips Act payments are to be delayed, according to Reuters citing sources.
- WSJ's Timiraos posted that "because the PPI components that feed into the PCE index (financial and healthcare services) were soft in January, the core PCE index is estimated to print well below the big 0.45% increase in the CPI", while he added "A 0.27% increase in core PCE for Jan would drop the Y/Y rate to 2.6% from 2.8%".
DATA RECAP
- US PPI Final Demand MM (Jan) 0.4% vs. Exp. 0.3% (Prev. 0.2%, Rev. 0.5%)
- US PPI Final Demand YY (Jan) 3.5% vs. Exp. 3.2% (Prev. 3.3%, Rev. 3.5%)
- US Initial Jobless Claims 213k vs. Exp. 215k (Prev. 219k, Rev. 220k)
- US Continued Jobless Claims 1.85M vs. Exp. 1.88M (Prev. 1.886M)
FX
- USD softened heading into US President Trump's reciprocal tariff announcement despite the firmer-than-expected PPI data as all but one of the PPI components which feed into the PCE measure fell M/M, while there was some immediate support in the dollar after Trump confirmed reciprocal tariffs and took aim at countries using VAT against the US such as Europe. However, the uplift in the dollar was only brief and the greenback sold off as further details of the reciprocal tariffs came to light with a White House official noting they could come within weeks, while Commerce Secretary nominee Lutnick noted each country will be addressed one by one, with studies set to be done by April 1st.
- EUR strengthened albeit with price action choppy in which the single currency traded on both sides of the 1.0400 level amid the swings in the dollar.
- GBP gradually edged higher throughout the day and reclaimed the 1.2500 status, while the latest quarterly UK GDP data topped forecasts.
- JPY strengthened with USD/JPY retreating to back beneath the 153.00 territory as US yields declined.
- Norges Bank Chief Bache said they are approaching time for a little monetary policy easing although a restrictive policy stance is still needed. Bache added it is unclear how changes in global trade will impact the Norwegian economy and an all-out trade war could hurt growth and raise inflation.
FIXED INCOME
- T-notes were ultimately bid despite the initial knee-jerk move lower following the firmer-than-expected PPI data which was hot on the headlines although the downside was quickly pared and treasuries moved higher due to cooling price pressures of the PCE components that feed into the US PCE report.
COMMODITIES
- Oil prices were choppy and settled only marginally lower in a day which was dominated by Trump tariff talk and hot US PPI data.
- IEA OMR raised the 2025 world oil demand growth forecast to 1.1mln BPD (prev. 1.05mln BPD), while it stated that fresh US sanctions on Russia and Iran roiled markets at the start of the year but they have yet to materially impact global oil supply.
GEOPOLITICAL
MIDDLE EAST
- Israel's Channel 12 cited official sources that stated after signals they received about Hamas's commitment to the deal, they are committed to the agreement, according to Al Jazeera. Sources also said a statement will be issued shortly confirming the consensus on the commitment of the parties to implement the ceasefire agreement and Hamas confirmed its position to implement the ceasefire deal, including the hostage exchange. However, Israeli PM Netanyahu's office later said the reaching of understanding with Hamas is fake news, according to Al Arabiya.
- Yemen's Houthi leader said they are pledging to attack with missiles and drones and will target vessels if the plan to displace Palestinians is forced, while they will undertake attacks if US President Trump moves ahead with his warning to Hamas.
- Iran's President Pezeshkian said the enemy can strike Iran's nuclear faculties but cannot destroy its ability to build new ones, according to Reuters citing state media.
RUSSIA-UKRAINE
- US President Trump said officials from the US and Russia are to meet in Munich on Friday and Ukraine is also invited.
- Ukrainian President Zelensky said he does not think US President Trump calling Russian President Putin before him is a sign of US priorities, though it is 'unpleasant' and noted that Europe should be at the negotiating table at the end of the war. Zelensky added that Ukraine will not accept any agreements that are reached between Moscow and Washington without Kyiv, while he warned world leaders not to trust Russian President Putin's claims of readiness to end the war.
- Ukraine President Zelensky told US President Trump that Russian President Putin pretends to want peace because he's "afraid of you", according to Axios citing sources. Furthermore, Trump told the Ukrainian President that he could be right, but his impression was that Putin is serious.
- Ukrainian President Zelensky praised a "good result" on the war front but provided no details or location although he congratulated a specific regiment, appearing to indicate military action was near the frontline city of Pokrovsk, according to Reuters.
- Russia's Kremlin does not rule out new telephone contacts between Russian President Putin and US President Trump before the leaders' face-to-face meeting, while Kremlin also said that Ukraine will participate in talks. It was separately reported that the preparation for discussions between Russian President Putin and US President Trump could take weeks or several months, while Riyadh is a suitable destination for talks for Russia and the US, according to Interfax and RIA.
- US Defence Secretary Hegseth said European allies should take primary responsibility for the defence of the continent and neither Putin nor Zelensky will get all they want. Hegseth said comments on Ukraine's borders did not amount to concessions to Russia, just a recognition of realities on the ground and it would be fair to say future funding for Ukraine could be on the table in negotiations.
- NATO Secretary General Rutte said it has never been a promise to Ukraine that, as a part of a peace deal, it would be in NATO.
- Ukrainian drone hit the Andreapol oil pumping station in Russia’s Tver region overnight, according to an SBU source cited by Reuters.
OTHER
- US President Trump said they had been talking about denuclearising and are going to do it, while he added there is no reason to build nuclear weapons and they could halve defence spending. Trump also stated that he wants a conference with Russia and China on defence spending and he will meet with China at some point.
ASIA-PAC
NOTABLE HEADLINES
- PBoC released its Q4 policy implementation report which stated it will implement appropriate loose monetary policy and keep ample liquidity. PBoC will adjust and optimise policy strength and pace at the appropriate time, as well as promote a reasonable rebound of prices, revitalise the stock of financial resources and improve the efficiency of capital use. Furthermore, it noted the adverse impact from changes in the external environment deepened and insufficient domestic demand and risks remain, while it will lower the cost of business financing and household credit, as well as use policy tools including interest rates and RRR.
- China's Foreign Minister Wang Yi said China is willing to expand infrastructure and trade cooperation.
- US President Trump said the TikTok deadline could be extended and he hopes to make a deal on TikTok, while they will make it worthwhile for China to approve the TikTok sale.
- TikTok CEO plans more streamlining as talks with the Trump team continue and it is working with a 'key person' in the Trump administration on the US ban issue.
- Senior Trump administration official said US President Trump’s meeting with Indian PM Modi aims to build on defence sales to ensure they are prioritising American technology, while they aim to prioritise India as a key importer of America's natural resources and want to bring down the bilateral trade deficit, as well as ensure fair trade relations with India.
EU/UK
NOTABLE HEADLINES
- UK PM Starmer briefly met Chinese Foreign Minister Wang Yi during Wang's meeting with the UK National Security Advisor, while Starmer told Wang that he wants consistent and respectful relations and to deepen trade relations with China.
DATA RECAP
- UK GDP Prelim QQ (Q4) 0.1% vs. Exp. -0.1% (Prev. 0.0%)
- UK GDP Prelim YY (Q4) 1.4% vs. Exp. 1.1% (Prev. 0.9%, Rev. 1.0%)
- UK GDP Estimate MM (Dec) 0.4% vs. Exp. 0.10% (Prev. 0.10%)
- UK GDP Est 3M/3M (Dec) 0.1% vs. Exp. -0.10% (Prev. 0.00%, Rev. -0.1%)
- UK GDP Estimate YY (Dec) 1.5% vs. Exp. 1.00% (Prev. 1.00%, Rev. 1.1%)
- EU Industrial Production MM (Dec) -1.1% vs. Exp. -0.6% (Prev. 0.2%, Rev. 0.4%)
- EU Industrial Production YY (Dec) -2.0% vs. Exp. -3.1% (Prev. -1.9%, Rev. -1.8%)
