- US stocks and bonds ended Friday's session lower with a focus on tariffs as sentiment was initially boosted by reports that Trump was set to postpone the tariffs by 1 month to March 1st. However, the White House then announced this was false and that Canada and Mexico would be hit with 25% tariffs from Saturday, February 1st, while China would face 10% tariffs. This set the tone for the remainder of the session with CAD and MXN selling off while T-Notes were pressured into settlement, and bear steepening.
- US President Trump signed the tariff order effective February 4th which confirms 25% tariffs on all Mexican and Canadian imports to the US with the exception of a 10% tariff on Canadian energy products, while imports from China are subject to an additional 10% tariff on top of existing levies with no exclusions offered. The order stated the new tariffs don’t apply to goods loaded onto vessels or in transit before February 1st and stated the President can remove new Canadian tariffs if enough steps are taken to reduce the health crisis but also included a retaliation clause that calls for further action which would likely be increased tariffs.
- Looking ahead, highlights include South Korean Industrial Production & Retail Sales, Australian MI Inflation Gauge, Building Approvals & Retail Sales, Regional PMIs, Chinese Caixin Manufacturing PMI, BoJ Summary of Opinions, Mainland China Holiday Closure.
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LOOKING AHEAD
- Highlights include South Korean Industrial Production & Retail Sales, Australian MI Inflation Gauge, Building Approvals & Retail Sales, Regional PMIs, Chinese Caixin Manufacturing PMI, BoJ Summary of Opinions, Mainland China Holiday Closure.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks and bonds ended Friday's session lower with a focus on tariffs as sentiment was initially boosted by reports that Trump was set to postpone the tariffs by 1 month to March 1st. However, the White House then announced this was false and that Canada and Mexico would be hit with 25% tariffs from Saturday, February 1st, while China would face 10% tariffs. This set the tone for the remainder of the session with CAD and MXN selling off while T-Notes were pressured into settlement, and bear steepening.
- SPX -0.51% at 6,040, NDX -0.14% at 21,478, DJIA -0.75% at 44,544, RUT -0.97% at 2,285.
- Click here for a detailed summary.
NOTABLE HEADLINES
- White House said US President Trump signed the tariff order effective February 4th which confirms 25% tariffs on all Mexican and Canadian imports to the US with the exception of a 10% tariff on Canadian energy products, while imports from China are subject to an additional 10% tariff on top of existing levies with no exclusions offered. The order stated the new tariffs don’t apply to goods loaded onto vessels or in transit before February 1st and stated the President can remove new Canadian tariffs if enough steps are taken to reduce the health crisis but also included a retaliation clause that calls for further action which would likely be increased tariffs.
- Canadian PM Trudeau said the new US tariffs violate the USMCA trade agreement and Canada will impose 25% tariffs on CAD 155bln of US goods with CAD 30bln in tariffs to take effect on February 4th and the rest starting in 21 days. Furthermore, Trudeau said they are considering several non-tariff measures including those relating to minerals and energy procurement, while he added that Canada and Mexico are working together to face the US tariffs.
- Canadian senior government official said the Canadian tariffs will not apply to goods in transit and that the actions of the US are a violation of the obligations of the free trade agreement, while the official added that Canada’s countermeasures will have an impact on the Canadian economy and the government has a plan to try to offset them.
- Canadian Ambassador said she is hopeful that the Trump tariffs don’t come into effect on Tuesday and that US consumers should know retaliatory tariffs are not actions Canada wants to do.
- Mexican President Sheinbaum ordered the start of a retaliatory tariff plan against the US and stated that tariffs will not fix problems but dialogue will, while it was separately reported that Mexico’s Economy Minister said ‘Plan B’ is underway in response to US tariffs. President Sheinbaum later commented that 25% tariffs will have a great impact on both the US and Mexico’s economies, while she added that they categorically reject the US statement that Mexico has ties to drug cartels and stated the US has done nothing to stop the illegal sale of drugs in its own country.
- China’s Commerce Ministry said China will take necessary countermeasures to new US tariffs and that Fentanyl is America’s problem. Furthermore, it said China will challenge the new US tariffs under WTO and that there are no winners in a trade war, while it urged the US to engage in frank dialogue and strengthen cooperation.
- Goldman Sachs believes US tariffs on Mexico and Canada are to be short-lived.
- Yale’s non-partisan policy research centre Budget Lab preliminary estimates project US PCE prices to increase by 0.76% and household purchasing power to be reduced by an average of USD 1250, while US real GDP is projected to contract by 0.2% in the medium run, as an impact from US President Trump’s tariffs.
- Elon Musk’s team got access to the US Treasury Department’s payments system, according to NYT.
- US Transport Secretary Duffy said the US pilot messaging system experienced a temporary outage on Sunday.
COMMODITIES
- Iraq’s parliament approved the compensation plan to resolve the Kurdistan oil dispute and seeks to expedite northern exports.
- Iraq’s northern Khor Gas field was targeted by a drone attack although no damage was reported and production remained unaffected.
- Alberta’s Premier called for an immediate effort to build oil and gas pipelines to Canada’s coast and stated that Trump’s tariffs will harm people and strain US-Canada ties.
- Vitol said it expects global oil demand to peak at almost 110mln BPD at the end of the decade and then retreat to around the current levels of about 105mln BPD in 2040, according to FT.
GEOPOLITICAL
MIDDLE EAST
- Israeli PM Netanyahu spoke on Saturday with US special envoy Steve Witkoff and then travelled to the US on Sunday for a meeting with US President Trump, while Witkoff will speak with Qatar’s PM and Egyptian representatives.
- Israel’s military said its aircraft fired to repel a suspicious vehicle moving towards northern Gaza without passing through the inspection route, in violation of ceasefire terms, while it was separately reported that four Palestinians were wounded in an Israeli strike on a car on Gaza’s coastline.
- ICRC announced 3 hostages were transferred out of Gaza to Israel and 175 Palestinian detainees were transferred from Israeli detention centres to Gaza and the West Bank.
- Qatar’s PM called on Israel and Hamas to immediately begin negotiations on the second phase of the Gaza ceasefire and said that Qatar is prepared to host released Palestinian prisoners if they choose to come but added there is no clear plan for when negotiations towards the second phase will begin.
- US President Trump and Egyptian President Sisi discussed complicated issues and crises in the Middle East during a phone call, as well as discussed the need to strengthen economic and investment relations.
- Hamas political bureau’s deputy head is to visit Moscow on Monday for talks scheduled at the Russian Foreign Ministry, according to RIA.
RUSSIA-UKRAINE
- Ukrainian President Zelensky said a Russian aerial bomb destroyed a boarding school in Russia’s Kursk region even though dozens of civilians were there, while Ukraine’s military later stated that four died and dozens were injured in the Russian strike on the boarding school.
- Ukrainian President Zelensky’s aide said calls by US President Trump’s aide for a truce followed by an election is a failed plan if that is all it consists of.
- Ukrainian Air Force said on Sunday morning that 40 drones were launched by Russia during an overnight strike, while Russia’s Defence Ministry said Russia shot down a HIMARS projectile and 44 Ukrainian drones over the prior 24 hours and that Russia hit military airfields and fuel storage facilities in Ukraine, according to TASS. It was also reported that Russia launched 165 missiles and drones at Ukraine during an attack on Saturday.
OTHER
- Russian parliament chairman Volodkin travelled to India on Sunday for important meetings and negotiations.
- North Korea said US Secretary of State Rubio’s comments do not help US interests and it warned that North Korea will respond strongly to hostile US provocations, while it noted that the US new missile defence system plan makes it necessary for North Korea to progress its nuclear deterrence, according to KCNA.
- US President Trump ordered precision military air strikes on the senior ISIS planner and other terrorists he recruited and led in Somalia.
- US President Trump said Venezuela has agreed to receive all illegal migrants captured in the US, while it was later reported that the Trump administration moved to terminate protected status for hundreds of thousands of Venezuelans in the US, according to NYT.
- US Secretary of State Rubio called Chinese presence at the Panama Canal unacceptable and told Panamanian leaders that the US would protect its rights under the Panama Canal Treaty if Panama didn’t move to oust Chinese-connected companies near the canal, according to Bloomberg. Furthermore, Panama’s President Mulino said the meeting with Rubio was highly respectful and cordial, while Mulino added sovereignty over the Panama Canal is not up for discussion and that he will not renew the Panama-China agreement over the silk route.
ASIA-PAC
NOTABLE HEADLINES
- South Korea’s acting President ordered to closely monitor the impact of US tariffs on domestic firms.
- Indian Finance Minister Sitharaman announced that India set an FY26 net market borrowing at INR 11.54tln and gross market borrowing at INR 14.82tln, while the budget deficit target was set at 4.4% of GDP.
DATA RECAP
- South Korean Trade Balance (USD)(Jan P) -1.89B vs. Exp. -1.28B (Prev. 6.49B)
- South Korean Export Growth YY (Jan P) -10.3% vs. Exp. -13.5% (Prev. 6.6%)
- South Korean Import Growth YY (Jan P) -6.4% vs. Exp. -9.9% (Prev. 3.3%)
EU/UK
NOTABLE HEADLINES
- ECB’s Knot expects US tariffs to lead to higher interest rates and a weaker euro, while he said the best response to US tariffs would be to do nothing although he expects retaliation.
- EU plans to make Amazon (AMZN), Temu and Shein liable for unsafe or illegal goods sold on their platforms, according to FT.
- S&P affirmed Germany on Friday at AAA; Outlook Stable.
