- US stocks finished mixed with two-way price action seen as firmer-than-expected CPI data initially sparked a broad-based hawkish reaction which underpinned the dollar and weighed on treasuries and stock index futures. However, the moves in the greenback and stocks were then pared throughout the session with the NDX closing in the green and DXY flat but Treasuries held on to their weakness, with the reversals facilitated by the more positive Russia-Ukraine rhetoric after US President Trump spoke to both Russian President Putin and Ukrainian President Zelensky, separately, about ending the war.
- USD traded mixed against its peers and the DXY ultimately returned to flat territory despite the initial boost following the firmer-than-expected US CPI report in which the core and headline metrics printed above estimates and triggered a broad hawkish reaction. The moves were then pared as markets reacted to the positive geopolitical updates regarding Russia and Ukraine following a phone call between US President Trump and Russian President Putin which was then followed by a call between Trump and Ukrainian President Zelensky. Separately, Fed's Chair Powell's testimony offered little new by way of monetary policy or the economy, although he did touch on January's CPI report and stated they are still not there on inflation.
- Looking ahead, highlights include Japanese PPI, Australia MI Inflation Gauge, New Zealand Inflation Expectations, Comments from Fed's Waller, Supply from Australia.
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LOOKING AHEAD
- Highlights include Japanese PPI, Australia MI Inflation Gauge, New Zealand Inflation Expectations, Comments from Fed's Waller, Supply from Australia.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks finished mixed with two-way price action seen as firmer-than-expected CPI data initially sparked a broad-based hawkish reaction which underpinned the dollar and weighed on treasuries and stock index futures. However, the moves in the greenback and stocks were then pared throughout the session with the NDX closing in the green and DXY flat but Treasuries held on to their weakness, with the reversals facilitated by the more positive Russia-Ukraine rhetoric after US President Trump spoke to both Russian President Putin and Ukrainian President Zelensky, separately, about ending the war.
- SPX -0.27% at 6,052, NDX +0.12% at 21,719, DJIA -0.50% at 44,369, RUT -0.87% at 2,256
- Click here for a detailed summary.
TARIFFS
- White House Press Secretary responded she believes it will come before the Indian PM's visit on Thursday and she will let the President discuss details on the reciprocal tariffs front when asked if reciprocal tariffs come before Indian PM Modi's visit tomorrow.
- White House National Economic Council Director Hassett said reciprocal tariffs are a work in progress and that conversations with other countries began earlier today.
- US President Trump’s aide Navarro is said to be the leading advocate for the reciprocal tariffs which could also go beyond simply matching other nations’ tariffs to take into account non-tariff trade barriers, WSJ sources. This potentially leaves Japan, Europe, and China on the hook for higher tariffs.
- US House speaker Johnson said he believes the White House is considering exemptions to reciprocal tariffs including autos and pharmaceuticals.
- Canadian Finance Minister said Canada will do tariffs before the US does but added the focus is still on avoiding tariffs and a Canadian delegation to meet with White House Senior Advisor Hassett. It was later reported that a group of Canadian premiers are expected to meet with President Trump at the White House on Wednesday.
- EU’s trade chief talked to US President Trump’s team on finding a tariff solution, according to Bloomberg.
NOTABLE HEADLINES
- Fed Chair Powell said they are close but not there on inflation and the January inflation print says that as well, while he wants to keep policy restrictive for now. Powell said they want to see more progress on inflation and did not see much progress on core inflation last year but have the luxury of being able to wait for that, given a strong economy. Furthermore, he offered a note of caution on the latest CPI reading and said the Fed targets PCE inflation which is a better measure, as well as stated they will know what PCE readings are late tomorrow, after PPI data.
- Fed's Goolsbee (2025 voter) said inflation data today is concerning, but it is just one month.
- Fed's Bostic (2027) voter said the labour market is performing incredibly well and the latest inflation numbers show careful monitoring is still needed.
- US President Trump posted on Truth that interest rates should be lowered which is something that would go hand in hand with upcoming tariffs.
- White House National Economic Council Director Hassett said they will fix inflation with or without the Fed, as well as suggested more energy supply and less rules to help curb inflation, according to Bloomberg TV.
- WSJ's Timiraos said “Inflation was firm in January, no question about it, derailing the case for further "recalibration" rate cuts before mid-year.
- US House Republicans proposed a USD 4tln debt limit increase and USD 2tln in cuts to mandatory spending over 10 years.
- US House Speaker Johnson believes Republicans will have the votes to pass newly unveiled budget resolution.
- US President Trump reportedly plans to nominate "China hawk" Landon Heid for a key US Commerce Department job of assistant secretary of Commerce for export administration, according to Reuters sources.
DATA RECAP
- US CPI MM, SA (Jan) 0.5% vs. Exp. 0.3% (Prev. 0.4%)
- US Core CPI MM, SA (Jan) 0.4% vs. Exp. 0.3% (Prev. 0.2%)
- US CPI YY, NSA (Jan) 3.0% vs. Exp. 2.9% (Prev. 2.9%)
- US Core CPI YY, NSA (Jan) 3.3% vs. Exp. 3.1% (Prev. 3.2%)
- US Cleveland Fed CPI (Jan) 0.3% (Prev. 0.3%)
FX
- USD traded mixed against its peers and the DXY ultimately returned to flat territory despite the initial boost following the firmer-than-expected US CPI report in which the core and headline metrics printed above estimates and triggered a broad hawkish reaction. The moves were then pared as markets reacted to the positive geopolitical updates regarding Russia and Ukraine following a phone call between US President Trump and Russian President Putin which was then followed by a call between Trump and Ukrainian President Zelensky. Separately, Fed's Chair Powell's testimony offered little new by way of monetary policy or the economy, although he did touch on January's CPI report and stated they are still not there on inflation.
- EUR outperformed and briefly reclaimed the 1.0400 handle against the dollar with the single currency underpinned by optimism regarding the Russia-Ukraine war.
- GBP was choppy and reverted to flat territory as participants now look ahead to incoming UK GDP data for Q4.
- JPY underperformed with USD/JPY climbing above the 154.00 level amid firmer US yields in the aftermath of the US CPI data.
- BoC Minutes stated the Governing Council agreed a protracted trade conflict with the US would permanently cut the level of Canadian GDP and agreed that in this case, Canadian GDP growth would be reduced until the economy adjusted to tariffs. BoC Minutes also stated that even if no tariffs were imposed, the GC felt a long period of uncertainty would almost certainly damage business investment.
FIXED INCOME
- T-notes were heavily pressured following the firmer-than-expected CPI data and a soft 10yr auction.
COMMODITIES
- Oil prices declined and settled at session lows after US President Trump had calls with Russian President Putin and Ukrainian President Zelensky about ending the war.
- US EIA Weekly Crude Stocks w/e 4.07M vs. Exp. 3.0M (Prev. 8.664M)
- OPEC MOMR (February) stated that global oil demand growth forecast for 2025 remains unchanged at 1.4mln BPD and it maintained its language that the robust oil demand growth is expected to continue in 2026.
- Russian Deputy PM Novak said Russia fully complied with the OPEC+ oil cuts deal in January and will do the same in February, while he expects Russia to keep or increase oil refining throughout 2025 and noted there is no discussion of gas swaps with Azerbaijan for the exports to Europe via Ukraine.
- Russia's seaborn oil product exports in January fell 3.3% Y/Y, according to data and Reuters calculations.
- EU nations are reportedly said to be pushing to relax the gas storage target amid the recent price rally, according to Bloomberg sources.
- Ukraine's Deputy Energy Minister said Russian strikes on gas infrastructure are creating "certain pressure" and Ukraine will need help from partners to import an additional volume of gas.
- Polish EU Presidency said EU member states are determined to protect the European steel and aluminium sector against possible market destabilisation.
GEOPOLITICAL
MIDDLE EAST
- Israel conveyed a message to Hamas that if they abide by the agreement and release the three hostages on Saturday, Israel will also continue to implement the agreement for its part, according to Axios citing an Israeli official.
- Israeli military spokesperson said the implementation period for the ceasefire deal in Lebanon was extended and the army remains on the ground.
- Qatar and Egypt are in contact with the US on the ceasefire issue and there is some optimism about reaching a solution, according to Journalist Kais citing mediating sources.
- Iran's Supreme Leader Khamenei said Tehran should continue improving its defence sector and the accuracy of Iranian missiles should be further improved. In relevant news, US President Trump's hostage envoy Boehler said Iran has Americans, while the White House said President Trump's red line is not letting Iran have nuclear capabilities.
RUSSIA-UKRAINE
- US President Trump posted on Truth that he had a lengthy and highly productive phone call with Russian President Putin and they agreed to have their respective teams start negotiations immediately, while he will begin by calling Ukrainian President Zelensky. Trump said they discussed Ukraine, the Middle East, energy, AI, the power of the dollar, and various other subjects, while they agreed to work together, very closely, including visiting each other’s countries. Furthermore, Trump asked Secretary of State Rubio, CIA Director Ratcliffe, National Security Advisor Waltz, and Ambassador and Special Envoy Steve Witkoff, to lead the negotiations which Trump strongly feels will be successful.
- US President Trump posted on Truth that he spoke to Ukrainian President Zelensky and the conversation went very well, while he added that Zelensky like Putin, wants to make peace.
- Russia’s Kremlin confirmed President Putin and US President Trump held a phone call in which they discussed the Middle East, Ukraine, and bilateral relations, while Putin invited Trump to meet him in Moscow. Russia's Kremlin earlier stated that Russia will never discuss swapping Ukrainian territory it controls, or the area Ukraine holds in the Kursk region, and that Ukrainian forces will be driven out of Kursk.
- Ukrainian President Zelensky’s office said Zelensky had a call with US President Trump and the call lasted about an hour, while Zelensky said he had a meaningful call with Trump and talked about opportunities to achieve peace. Furthermore, they discussed the preparation of a new document on security, economic cooperation and resource partnership.
- Ukrainian President Zelenskiy said he had a productive and constructive discussion with US Treasury Secretary Bessent and that the US presented Ukraine with a first draft of a natural resources agreement, while Ukraine is studying the draft agreement and hopes to reach a deal at Munich conference.
- US Treasury Secretary Bessent said the critical minerals deal is part of a larger peace deal and President Trump wants to end this war quickly. Bessent added they would like to send a signal that the US stands with Ukraine in the face of Russian aggression and a critical minerals deal will provide Ukraine with a security shield once the war is over.
- US Defence Secretary Hegseth said returning to Ukraine's 2014 borders is unrealistic and that President Trump intends to end the war through diplomacy, while he added that Ukraine's NATO membership is not a realistic goal. Hegseth said as part of any security guarantee, there will be no US troops deployed in Ukraine and the US doesn't see Ukraine's NATO membership as part of a peace plan.
ASIA-PAC
NOTABLE HEADLINES
- Computer researchers in China using domestically made graphics processors have achieved a near-tenfold boost in performance over powerful US supercomputers that rely on Nvidia’s (NVDA) hardware, according to a peer-reviewed study cited by SCMP.
DATA RECAP
- Indian CPI Inflation YY (Jan) 4.31% vs. Exp. 4.6% (Prev. 5.22%)
- Indian Industrial Output YY (Dec) 3.2% vs. Exp. 3.9% (Prev. 5.2%)
EU/UK
NOTABLE HEADLINES
- BoE's Greene said the disinflationary process is broadly on track and believes it is appropriate to maintain a cautious and gradual approach to removing monetary restrictiveness.
- ECB's Holzmann said lowering rates by 50bps increments this year would "not be a wise move".
- ECB's Nagel said the closer they get to a neutral rate, the more appropriate it is to take a gradual approach, while he added the limits of the neutral rate concept are clear and it is risky to base policy decisions mainly on R-star estimates. Furthermore, Nagel said spillovers from the economy could mean inflation falls below their target, but it is not a high probability scenario.
