- US stock indexes closed in the red, albeit well off worst levels, as Trump tariff talk dominated markets to start the week with an initial gap lower in futures after President Trump signed an order to impose tariffs on Canada, Mexico and China although stocks then rebounded after Mexican President Sheinbaum announced she had a good conversation with US President Trump and that he agreed to delay tariffs by a month and she will immediately supply 10,000 Mexican soldiers on the border. Furthermore, Canadian PM Trudeau and US President Trump also reached a similar agreement for a 30-day tariff delay.
- USD initially strengthened following Trump's tariff order on Saturday although had pared the majority of its early gains after Mexican President Sheinbaum announced that US tariffs on Mexico are to be delayed by one month and that she will immediately supply troops to the border to avoid trafficking of drugs to the US. Nonetheless, the DXY remained in the green as participants awaited the outcome of talks between US President Trump and Canadian PM Trudeau which resulted in a similar 30-day delay of tariffs, while there were several strong data releases but had little impact as the focus centred on the tariff headlines.
- Looking ahead, highlights include Japanese Monetary Base and 10yr JGB Auction.
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LOOKING AHEAD
- Highlights include Japanese Monetary Base and 10yr JGB Auction.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stock indexes closed in the red, albeit well off worst levels, as Trump tariff talk dominated markets to start the week with an initial gap lower in futures after President Trump signed an order to impose tariffs on Canada, Mexico and China although stocks then rebounded after Mexican President Sheinbaum announced she had a good conversation with US President Trump and that he agreed to delay tariffs by a month and she will immediately supply 10,000 Mexican soldiers on the border. Furthermore, Canadian PM Trudeau and US President Trump also reached a similar agreement for a 30-day tariff delay.
- SPX -0.76% at 5,995, NDX -0.84% at 21,298, DJIA -0.28% at 44,422, RUT -1.28% at 2,258.
- Click here for a detailed summary.
TARIFFS
- US President Trump posted on Truth that he spoke with Mexican President Sheinbaum which was a very friendly conversation wherein she agreed to immediately supply 10,000 Mexican soldiers on the border separating Mexico and the United States, while they agreed to immediately pause the anticipated tariffs for a one-month period during which there will be negotiations.
- US President Trump later said that nobody is out of tariffs, and they had a great talk with Mexico but have to stop fentanyl, while he said they have not agreed on tariffs yet with Mexico and he had a good talk with Canadian PM Trudeau but added the US not treated well by Canada. Furthermore, Trump said the US does not need Canadian cars, lumber or agriculture and they will have a big negotiation with Mexico.
- Mexican President Sheinbaum said she had a good conversation with US President Trump and that US tariffs will be delayed by one month, while Mexico will deploy 10k national guards immediately to the border to avoid trafficking of drugs to the US.
- Ecuador President Noboa said his government will apply a 27% tariff on Mexican goods.
- US President Trump posted on Truth that Canada doesn’t even allow US banks to open or do business there and there are many such things, but it’s also a drug war. It was later reported that President Trump said the call with Canadian PM Trudeau went 'very well' and when asked if the tariffs against Canada are still going into effect tonight, he said “Watch”, according to a CNN reporter on X.
- US President Trump’s trade adviser Navarro said Canadian PM Trudeau needs to recognise it is a drug war, not a trade war and it is going to take some time to get to where we need to go on Canada, while he added it is to be determined what they discuss with China.
- US President Trump said on Truth that Canada has agreed to ensure the US has a secure Northern Border and the tariffs announced on Saturday will be paused for a 30-day period to see whether or not a final Economic deal with Canada can be structured.
- Canadian PM Trudeau said he had a good call with President Trump who will pause the tariffs for at least 30 days and Canada will send almost 10,000 troops to protect the border, while Canada will also name a fentanyl czar.
- US President Trump said on Monday that the US will probably speak to China over the next 24 hours and China will not be involved with the Panama Canal for long. Furthermore, he said China tariffs were an opening salvo and will increase if they cannot make a deal, while he warned that tariffs will be substantial if can’t make a deal with China.
- China's UN envoy said China firmly opposes the unwarranted increase in tariffs by the Trump administration and in violation of the WTO, China will be filing a complaint. Furthermore, the envoy said Beijing may be forced to take countermeasures against the US, as well as commented that the US should look at its own problem with Fentanyl rather than shifting the blame onto others.
- US President Trump reportedly considering plans to impose a 10% tariff on the EU, according to The Telegraph.
- German Chancellor Scholz said the EU can react with its own tariffs against the US but cooperation is more important.
- UK government spokesperson said the UK and US have a fair and balanced trading relationship which benefits both sides of the Atlantic.
- UK is drawing up contingency plans for possible retaliation if US President Trump decides to target its exports with tariffs, even as the US president suggested he might spare the UK, according to FT.
NOTABLE HEADLINES
- US President Trump said the Federal Reserve was right to pause its rate-cutting path in its decision last week in which he noted that “Holding the rates at this point was the right thing to do”, while it was also reported that President Trump signed an executive order to create a sovereign wealth fund.
- Fed's Collins (2025 voter) said there is a lot of uncertainty about US policies and that broad-based tariffs should have an impact on prices, while she added the US has limited experience with large-scale tariffs. Collins also said it is appropriate for policy to be patient and careful, and there is no urgency to change rates.
- Fed's Bostic (2027 voter) said the current degree of uncertainty has broadened considerably, while tariffs are an aspect of uncertainty and it is challenging to figure out how to incorporate it. Bostic said because things are changing so rapidly the most important thing to do is ask questions of business contacts and look at possible other outcomes. Furthermore, he stated the emphasis is still on inflation and the Fed needs to get to 2% for the credibility of the institution. Bostic later commented that businesses are not confident in their outlook at this point and he is currently in wait-and-see mode, while he would want to see housing inflation begin to slow to cut again and does not expect clarity on inflation enough by March to move.
- Fed SLOOS (Q4) noted regarding loans to businesses that survey respondents reported, on balance, tighter lending standards for commercial and industrial (C&I) loans to firms of all sizes.
- NY Fed's measure of inflation persistence (the "multivariate core trend") fell to 2.3% in December which was the lowest level in four years.
- US Treasury expects to borrow USD 815bln in privately-held net marketable debt (prev. guided USD 823bln for Q1 25), assuming end of March cash balance of USD 850bln (prev. guided 850bln).
- US House Budget Committee is unlikely to mark up a budget resolution this week, according to GOP leadership sources and lawmakers cited by Punchbowl. Furthermore, a lawmaker noted that hardline US conservative House Republicans are “not even close” to a deal on the magnitude of spending cuts they expect in the reconciliation package.
- US President Trump advisers weigh a plan to dismantle the education department, according to WSJ citing sources.
DATA RECAP
- US S&P Global Manufacturing PMI Final (Jan) 51.2 (Prev. 50.1)
- US ISM Manufacturing PMI (Jan) 50.9 vs. Exp. 49.8 (Prev. 49.3, Rev. 49.2)
- US ISM Manufacturing Prices Paid (Jan) 54.9 vs. Exp. 53.5 (Prev. 52.5)
- US ISM Manufacturing New Orders Index (Jan) 55.1 (Prev. 52.5, Rev. 52.1)
- US ISM Manufacturing Employment Index (Jan) 50.3 (Prev. 45.3, Rev. 45.4)
- US Construction Spending MM (Dec) 0.5% vs. Exp. 0.2% (Rev. 0.2%)
FX
- USD initially strengthened following Trump's tariff order on Saturday although had pared the majority of its early gains after Mexican President Sheinbaum announced that US tariffs on Mexico are to be delayed by one month and that she will immediately supply troops to the border to avoid trafficking of drugs to the US. Nonetheless, the DXY remained in the green as participants awaited the outcome of talks between US President Trump and Canadian PM Trudeau which resulted in a similar 30-day delay of tariffs, while there were several strong data releases but had little impact as the focus centred on the tariff headlines.
- EUR was pressured as President Trump also looks to target the with tariffs and is considering plans to impose a 10% tariff on the bloc.
- GBP marginally strengthened with the UK seemingly not on President Trump's immediate tariff radar, although there was a report that the UK is said to be drawing up contingency plans for possible retaliation if President Trump decides to target its exports with tariffs.
- JPY outperformed with the USD/JPY pressured amid haven demand and softer US yields.
FIXED INCOME
- T-notes were choppy with the yield curve ultimately flatter in response to Trump tariff headlines.
COMMODITIES
- Oil prices settled marginally higher but well off today's best level with price action driven by tariff headlines and the broader macro moves.
- OPEC+ JMMC did not recommend changes to output policy but discussed changing the list of secondary sources it uses to monitor members' oil output was reported to consider a proposal to remove the US government's EIA as one of its secondary sources, while the next OPEC+ JMMC meeting will be on April 5th, according to Reuters sources.
- Russian Deputy PM Novak said following the OPEC+ JMMC meeting that the current situation on the global oil market is stable and sees oil demand rising with demand expected to rise by 1.4mln this year, while he said they will increase oil production from April which is in line with scheduled output increase.
- US President Trump's advisers reportedly concede that US frackers won’t pump much more oil and Trump's best way to bring down oil prices might be to persuade OPEC to add more barrels although Saudi has told former US officials that it is unwilling to augment global oil supplies. Furthermore, it was reported that Trump’s team has estimated Iran’s exports could be reduced by 500k-750k BPD from sanctions under consideration and that Iranian sanctions discussed include targeting Chinese ports that import Iran’s oil, Iraqi oil deals with Iran and other places used to facilitate the transfer of Iranian oil.
- Iraq’s southern oil exports averaged 3.3mln BPD in January (prev. 3.232mln BPD M/M), according to oil officials cited by Reuters.
- Daily output at Kazakhstan's Tengiz field hit a record 870k BPD - up 45% vs the 2024 daily average.
- Nigeria's upstream oil regulator said it would deny export permits for oil cargoes from producers who fail to meet their stipulated supply quota to local refineries, including the Dangote refinery.
GEOPOLITICAL
MIDDLE EAST
- US President Trump said he has no guarantees that the Gaza ceasefire will hold.
- US readies a new USD 1bln arms sale to Israel, according to WSJ.
RUSSIA-UKRAINE
- Ukraine's Military said it hit a Russian oil refinery in the Volgograd region and a gas processing plant in the Astrakhan region.
- US President Trump said they have made a lot of progress on Russia and Ukraine.
- US shipments of arms to Ukraine were briefly paused last week but resumed on the weekend, according to Reuters citing sources.
OTHER
- NATO's Rutte said new defence spending pledge from NATO countries is to be decided later in the year and will be "considerably" higher than 2% of GDP.
ASIA-PAC
NOTABLE HEADLINES
- China's UN envoy said a smear campaign by the US and others on the Belt and Road Initiative is 'totally groundless' and on the whole, believes that the US and China have so much in common and can work together at the UN on many things.
- Chinese Foreign Minister Wang Yi is to chair the UN Security Council meeting on multilateralism on February 18th, according to China's UN Envoy.
- US President Trump said they will be doing something with TikTok if they can make the right deal and that TikTok could go into a sovereign wealth fund.
- A team of researchers in the US claim to have reproduced DeepSeek’s viral AI chatbot for just USD 30, according to The Independent.
EU/UK
NOTABLE HEADLINES
- UK PM Starmer said they want to deliver an ambitious UK-EU security pact and the UK is working hard to set a path to 2.5% defence spending, while he added he is not choosing between the US or the EU.
- UK Chancellor Reeves told UK departments that budgets may be frozen in cash terms, which comes ahead of a major spending review planned in June, according to Bloomberg.
- ECB's Villeroy said President Trump's tariffs will increase economic uncertainty and it is a very worrying development, while he added that there will likely be further rate cuts. Villeroy said tariffs are brutal and will hit the autos sector, as well as commented that everyone loses in this kind of protectionist trade war.
- ECB's Simkus said there is space left before the neutral rate is reached, while he expects a 25bps decrease in March and a "couple more" decreases in later months. Furthermore Simkus said the US tariffs and possible action against the EU is not good news for the economy, nor inflation.
- French PM Bayrou said he will use special constitutional powers to pass this year's budget. In other news, the French Socialist Party's executive committee decided against backing a no-confidence motion against the government.
DATA RECAP
- EU HICP Flash YY (Jan) 2.5% vs. Exp. 2.4% (Prev. 2.4%)
- EU HICP-X F&E Flash YY (Jan) 2.7% vs. Exp. 2.7% (Prev. 2.7%)
- EU HICP Excluding Food, Energy, Alcohol & Tobacco Flash YY (Jan) 2.7% vs. Exp. 2.6% (Prev. 2.7%)
