EXECUTIVE SUMMARY
- MNI BRIEF: Canada Retaliates Against US Tariff, But No Oil Tax
- MNI US: WH's Leavitt Confirms Canada/Mexico/China Tariffs Feb 1, No News On EU
- MNI US DATA: Upward Revisions Bolster Case For Solid Consumer Demand Entering 2025
- MNI US DATA: No Surprises In Core PCE, Recent Progress But Supercore Still Stubborn
US
MNI US: WH's Leavitt Confirms Canada/Mexico/China Tariffs Feb 1, No News On EU
White House Press Secretary Leavitt's comments sound firm with regard to the President's decision to impose tariffs on Canada, Mexico, and China starting tomorrow Feb 1:
- Leavitt's quote on the earlier Reuters report (that suggested a Mar 1 deadline for tariffs), per BBG closed captioning: "I saw that report and it is false. I was just with the president in the Oval Office, and I can confirm that tomorrow, the February 1st deadline that President Trump put into place, that a statement several weeks ago continues. The president will be implementing tomorrow a 25% tariffs on Mexico, 25% tariffs on Canada and a 10% tariff on China for the illegal fentanyl that they have sourced and allowed to distribute into our country, which has killed tens of millions of Americans. These are promises made and promises kept by the president."
- Asked about whether Trump has made up his mind on EU tariffs: "No, he has not....I won't get ahead of the president on tariffs when it comes to the European Union. What I can tell you again is that the president will be implementing 25% on Canada, 25% of Mexico, 10% on China tomorrow for the reasons that I have repeatedly laid out in this briefing."
MNI BRIEF: Canada Retaliates Against US Tariff, But No Oil Tax
Prime Minister Justin Trudeau said Saturday Canada will retaliate against U.S. President Donald Trump's tariffs with a 25% levy on CAD155 billion of goods, a trade war between two of the world's largest economic partners unseen in generations. Trump's decision earlier today to set a 25% tariff on Canadian products except for a 10% levy on energy “puts in peril a historic economic relationship” Trudeau said. The two nations trade more than USD1 trillion each year.
- Canadians should curb purchases of U.S. products and reconsider vacations there, Trudeau said, also warning Americans the dispute will raise gasoline prices and imperil jobs in the auto industry. Non-tariff penalties in areas such as energy and critical minerals are also being considered, though Trudeau stopped short of announcing an energy export tax.
MNI FED: Chicago's Goolsbee Comfortable With Inflation; Neutral Is "Fair Bit" Lower
Chicago Fed President Goolsbee, the biggest dove on the FOMC, tells CNBC that he remains comfortable that inflation is on a path to 2%. But despite reiterating his view that the neutral level of rates is "still a fair bit below where we are today", he stops short of pushing for rate cuts in H1 this year, saying that he doesn't like "tying our hands down" ahead of crucial data in the next few months.
NEWS
MNI CANADA: PM-Response To US Tariffs 'Would Be Purposeful, Forceful & Immediate'
Speaking at a meeting of the Canada-US Relations Council, PM Justin Trudeau says that if US President Donald Trump does choose to implement any tariffs against Canada "We're ready with a response." Says that this response "would be purposeful, forceful and immediate...It's not what we want, but if he moves forward, we will also act. If we have to act we wouldn't relent until tariffs are removed...everything is on the table."
MNI GLOBAL POLITICAL RISK: No Talk Of Setting Up BRICS Currency, Kremlin
Kremlin spokesperson Dmitry Peskov told reporters in Moscow "there is no talk" of setting up a BRICS currency, in response to a tariff threat issued by US President Donald Trump yesterday, per Reuters. Reuters: "Kremlin says BRICS is considering new joint investment platforms, says US experts need to brief Trump in more detail about subject... On Trump tariffs threat over potential BRICS currency, says there's no talk of setting up such a currency."
- Trump wrote in a message on Truth Social: "The idea that the BRICS Countries are trying to move away from the Dollar, while we stand by and watch, is OVER. We are going to require a commitment from these seemingly hostile Countries that they will neither create a new BRICS Currency, nor back any other Currency to replace the mighty U.S. Dollar or, they will face 100% Tariffs, and should expect to say goodbye to selling into the wonderful U.S. Economy."
MNI GERMANY: Migration Bill Defeated In Parl't In Blow To Oppo Ldr. Merz
Legislation intended to restrict migration into Germany has been defeated in the Bundestag after a day of high political drama and bitter accusations in parliament. The 'Influx Limitation Act' was defeated by 338 votes to 350 with five abstentions after several parties split on the issue. The main disagreements came down to the support of the far-right Alternative for Germany (AfD) for the bill. Friedrich Merz, leader of the conservative Christian Democratic Union (CDU) argued that the bill had widespread backing among voters and should not be halted due to the AfD's votes.
MNI FRANCE: Joint Cmte Set To Agree Budget Text, PS Stance Key To Avoiding Defeat
The Joint Committee (CMP) that seeks to reach agreement between the Senate and National Assembly on the text for a state budget has agreed to scale back plans for cuts to State Medical Aid (AME). The version of the budget passed by the Senate, where the parties of the centre-right hold a majority, provided for cuts of EUR200mn to the initial EUR1.3B allotted for AME. In the event, the CMP agreed to a proposal from centrist Renaissance deputy David Amiel that envisages a EUR111mn cut.
MNI US TSYS: Extending Lows After Saturday Tariff Calls Confirmed
- Trading weaker most of the session, Treasuries extended lows late Friday after White House officials confirmed 25% tariffs on Canada & Mexico, 10% on China will be announced Saturday, February 1.
- The Mar'25 10Y Treasury futures contract trades -12.5 at 108-27 after the bell, still above initial technical support at 108-23 (20-day EMA)., 10Y yield +.0508 at 4.5671% after declining to as low as 4.5003% midmorning.
- Tariff confirmation stoked a swift move lower for the greenback, with the USD index extending to session lows following the WMR fixing window which also appeared to be dominated by USD supply. The likes of USDCAD and USDMXN pushed firmly lower, with the former erasing the entirety of the late Thursday surge to trade back below 1.44.
- Stocks did not like the confirmation either, SPX Eminis and Nasdaq retreating from near all-time highs to moderate session lows in late trade, Energy and Materials sectors underperforming.
- Focus turned to next week's heavy corporate earnings docket, key CPI and PPI inflation measures and headline employment data for January.
OVERNIGHT DATA
MNI US DATA: Core PCE Unrounded
Core PCE fractionally softer than average unrounded estimates we'd seen, with offsetting revisions to Nov and Oct.
- M/M (SA): 0.156% in Dec (vs BBG cons 0.2 median, MNI unrounded 0.18 av)
- Follows 0.108% in Nov (initial 0.115%), 0.273% in Oct (initial 0.262%)
- Y/Y (SA): 2.794% in Dec (cons 2.8) from 2.821% in Nov
MNI US DATA: No Surprises In Core PCE, Recent Progress But Supercore Still Stubborn
- There weren’t any major surprises in the December core PCE inflation data, printing 0.156% M/M for only fractionally under the 0.18% average of unrounded estimates we’d seen prior.
- It followed offsetting minor revisions to November (0.108% M/M) and October (0.273% M/M).
- It saw Y/Y inflation at 2.79% Y/Y in December to average the 2.8% in Q4 seen in yesterday’s quarterly advance for exactly in line with the median FOMC revision from the December SEP (which had been revised up from 2.6% back in Sept).
- There are well known base effects pushing these Y/Y rates higher, whilst short-term trend rates continue to look more favorable: the three-month eased from 2.6% to 2.2% annualized (lowest since July) whilst the six-month eased a tenth to 2.3% (lowest since Sept and before that Dec 2023).
- Within the details, core services ex-housing shows less sign of recent moderation.
- This "supercore" increased a solid 0.28% M/M, which helped see an unchanged Y/Y pace at 3.5% Y/Y, for a third month running at highs since April, whilst three- and six-month rates were broadly unchanged at 3.2% and 3.1% annualized respectively.
- When thinking about the return to pre-pandemic averages consistent with the inflation target, these supercore rates continue to run hot compared to the 2.0% averaged in 2019 or 2.2% in 2017-19.
MNI US DATA: Upward Revisions Bolster Case For Solid Consumer Demand Entering 2025
Real PCE spending came in at 0.40% M/M in December - above the 0.3% expected coming into this week, but not enough to explain the strong acceleration in quarterly consumer spending we saw yesterday in Q4 GDP data. For that, we have the revisions to thank: October was revised up to 0.21% M/M (from 0.12%), with November to 0.47% (from 0.28%).
- That meant the quarterly reading reached 4.2% (3mma ar) - recall that consensus going into yesterday was for 3.2% (and was 3.7% in Q3).
- We also note that the goods and services consumption breakdown is looking healthier: real goods consumption rose 0.7% M/M (after an upwardly revised 1.1% in November, was 0.7%), bringing the quarterly rate to 6.6% as shown in GDP.
- We had been more concerned about services consumption though given that it looked to have been tapering off into year-end, but the revisions now suggest very much otherwise: October and November real services consumption were each revised up by 0.1pp (to 0.3% M/M and 0.2% respectively), with December coming in at a robust 0.3%.
- That meant that instead of an apparent deceleration in services spending in the quarter through November, it's as robust as it has been since Q1 2024 (3.1% Q/Q).
- All in all, Q4 was a strong quarter for the consumer, and suggests little let-up in demand heading into 2025.
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA down 347.26 points (-0.77%) at 44534.69
S&P E-Mini Future down 35.5 points (-0.58%) at 6064.25
Nasdaq down 94.6 points (-0.5%) at 19588.69
US 10-Yr yield is up 5.3 bps at 4.5691%
US Mar 10-Yr futures are down 12/32 at 108-27.5
EURUSD down 0.0019 (-0.18%) at 1.0372
USDJPY up 0.84 (0.54%) at 155.13
WTI Crude Oil (front-month) down $0.33 (-0.45%) at $72.41
Gold is up $2.5 (0.09%) at $2796.97
European bourses closing levels:
EuroStoxx 50 up 4.66 points (0.09%) at 5286.87
FTSE 100 up 27.08 points (0.31%) at 8673.96
German DAX up 4.85 points (0.02%) at 21732.05
French CAC 40 up 8.53 points (0.11%) at 7950.17
US TREASURY FUTURES CLOSE
3M10Y +5.173, 27.228 (L: 20.331 / H: 27.634)
2Y10Y +3.404, 34.101 (L: 30.109 / H: 34.101)
2Y30Y +4.171, 59.248 (L: 54.234 / H: 59.248)
5Y30Y +1.993, 45.987 (L: 43.009 / H: 45.987)
Current futures levels:
Mar 2-Yr futures down 2.125/32 at 102-26.5 (L: 102-25.875 / H: 102-29)
Mar 5-Yr futures down 6.75/32 at 106-13 (L: 106-12 / H: 106-20.75)
Mar 10-Yr futures down 12.5/32 at 108-27 (L: 108-25.5 / H: 109-09.5)
Mar 30-Yr futures down 26/32 at 113-27 (L: 113-25 / H: 114-27)
Mar Ultra futures down 1-08/32 at 118-10 (L: 118-08 / H: 119-24)
MNI US 10YR FUTURE TECHS: (H5) Resistance At The 50-Day EMA Remains Exposed
- RES 4: 110-25 High Dec 12
- RES 3: 110-19 76.4% retracement of the Dec 6 - Jan 13 bear leg.
- RES 2: 109-31 High Dec 18
- RES 1: 109-11/13 50-day EMA / High Jan 30
- PRICE: 109-03 @ 16:38 GMT Jan 30
- SUP 1: 108-23 20-day EMA
- SUP 2: 108-06/107-06 Low Jan 23 / 13 and the bear trigger
- SUP 3: 107-04 Low Apr 25 ‘24 and a key support
- SUP 4: 106-11 2.00 proj of the Oct 1 - 14 - 16 price swing
Treasury futures are unchanged. A bullish corrective cycle remains intact and the contract is holding on to its recent gains. 109-11, the 50-day EMA, remains exposed. It has been pierced, a clear break of it would strengthen a bullish theme and open 109-31, the Dec 18 high. The medium-term trend condition is bearish. The bear trigger is 107-06, the Jan 13 low. Initial firm support has been defined at 108-06, the Jan 23 low.
SOFR FUTURES CLOSE
Mar 25 -0.005 at 95.750
Jun 25 -0.015 at 95.905
Sep 25 -0.030 at 96.015
Dec 25 -0.035 at 96.075
Red Pack (Mar 26-Dec 26) -0.05 to -0.04
Green Pack (Mar 27-Dec 27) -0.055 to -0.05
Blue Pack (Mar 28-Dec 28) -0.065 to -0.06
Gold Pack (Mar 29-Dec 29) -0.07 to -0.065
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M +0.00447 to 4.31308 (-0.00233/wk)
- 3M +0.01154 to 4.30225 (+0.00241/wk)
- 6M +0.00970 to 4.24831 (-0.01075/wk)
- 12M +0.00190 to 4.16030 (-0.03860/wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.36% (+0.01), volume: $2.369T
- Broad General Collateral Rate (BGCR): 4.34% (+0.01), volume: $902B
- Tri-Party General Collateral Rate (TCR): 4.34% (+0.01), volume: $870B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $103B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $280B
FED Reverse Repo Operation
RRP usage climbs to $187.913B this afternoon from $125.965B yesterday. Compares to Monday, January 27 usage of $92.863B - the lowest level since mid-April 2021. The number of counterparties rises to 57 from 45 prior.
MNI PIPELINE: January Corporate Bond Issuance Summary: Record $288.45B
$21.2B Priced Thursday, $37.2B total / wk, ending January with record $288.45B issuance from domestic & foreign corporate and supra-sovereign bond issuance.
- Date $MM Issuer (Priced *, Launch #)
- 01/30 $7.75B *Oracle $1.5B +3Y +57, $500M +3Y SOFR+76, $1.25B 7Y +87, $1.75B +10Y +97, $1.75B +30Y +122, $1B +40Y +135
- 01/30 $5B *NextEra Energy $1B 3Y +60, $500M 3Y SOFR+80, $1B 5Y +73, $750M 7Y +88, $1B 10Y +98, $750M 30Y +113
- 01/30 $3B *Stryker $500M 2Y +38, $700M 3Y +48, $800M 5Y +58, $1B 10Y +73
- 01/30 $2.65B #Scotiabank $1.25B 4NC3 +70, $400M 4NC3 SOFR+89, $1B 6NC5 +82
- 01/30 $1.5B *Medical Properties 7NC3 8.75%
- 01/30 $750M *State Street PerpNC5 6.45%
- 01/30 $550M *Alexandria Real Estate 10Y +102
MNI BONDS: EGBs-GILTS CASH CLOSE: Bull Steepening Continues On Soft Euro Inflation
The German and UK curves bull steepened for a 2nd consecutive session Friday as Eurozone inflation pressures appeared softer than expected to start the year.
- Following on from Thursday's post-ECB rally, Bunds led gains across the space as German regional and French inflation data came in softer than expected.
- ECB implied rate cuts deepened, with around 81bp total expected by year-end (up 10bp from pre-data).
- In other data, UK mortgage approvals were firmer than expected, with consumer credit in-line; the ECB's Survey of Professional Forecasters saw respondents revised 2025
growth expectations down. - OATs notably outperformed the rest of the semi-core (and periphery) EGB space, with spreads narrowing after an apparent deal on the 2025 budget seemingly reducing near term fiscal/political risks. Periphery EGB spreads widened slightly as an intraday equity rally faded.
- Next week's European calendar includes the BoE decision (25bp rate cut expected, along with new forecasts and a press conference) and the Eurozone-wide flash inflation print.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is down 8.9bps at 2.119%, 5-Yr is down 8bps at 2.235%, 10-Yr is down 5.9bps at 2.46%, and 30-Yr is down 4.6bps at 2.713%.
- UK: The 2-Yr yield is down 3.7bps at 4.219%, 5-Yr is down 2.9bps at 4.224%, 10-Yr is down 2.2bps at 4.538%, and 30-Yr is up 0.1bps at 5.126%.
- Italian BTP spread up 1.2bps at 109.3bps / French OAT down 1.8bps at 73.4bps
MNI FOREX: Conflicting Tariff Headlines Continue to Dominate USD Sentiment
- Currency markets have been extremely volatile late Friday, amid conflicting reports on the implementation of tariffs by the Trump administration. Initially, a Reuters exclusive suggested that tariffs on Mexico and Canada could be delayed until March 1, but will include a process for the countries to seek specific exemptions for certain imports.
- This stoked a swift move lower for the greenback, with the USD index extending to session lows following the WMR fixing window which also appeared to be dominated by USD supply. The likes of USDCAD and USDMXN pushed firmly lower, with the former erasing the entirety of the late Thursday surge to trade back below 1.44.
- However, this news was then refuted by White House Press Secretary Karoline Leavitt, who said President Trump intends to move ahead with plans on Saturday to impose 25% tariffs on Mexico and Canada and a 10% levy on China, denying the prior report that he planned to delay the implementation by a month.
- Sharp reversals of the prior moves were then seen, as the greenback spiked aggressively higher and the USD index then made a fresh session high. USDCAD reversed around 100 pips and USDMXN printed back above 20.70 from 20.49 prior to the comments amid major equity indices coming under pressure.
- For the majors, EURUSD echoed the sentiment, rising to 1.0434 before reversing back to 1.0375 as we approach the close. USDJPY has been more insulated to the tariff volatility, however, spot stands a solid 110pips off session lows at 155.10.
- Tariff developments are sure to dominate across the weekend and into next week, however, we will also have the Bank of England and US employment data to highlight the economic calendar.
MONDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 03/02/2025 | 0700/0200 | * |  TR | Turkey CPI |
| 03/02/2025 | 0815/0915 | ** |  ES | S&P Global Manufacturing PMI (f) |
| 03/02/2025 | 0845/0945 | ** |  IT | S&P Global Manufacturing PMI (f) |
| 03/02/2025 | 0850/0950 | ** |  FR | S&P Global Manufacturing PMI (f) |
| 03/02/2025 | 0855/0955 | ** |  DE | S&P Global Manufacturing PMI (f) |
| 03/02/2025 | 0900/1000 | ** |  EU | S&P Global Manufacturing PMI (f) |
| 03/02/2025 | 0930/0930 | ** |  GB | S&P Global Manufacturing PMI (Final) |
| 03/02/2025 | 1000/1100 | *** | EU | HICP (p) |
| 03/02/2025 | 1000/1100 | *** | IT | HICP (p) |
| 03/02/2025 | - | *** |  US | Domestic-Made Vehicle Sales |
| 03/02/2025 | 1445/0945 | *** | US | S&P Global Manufacturing Index (final) |
| 03/02/2025 | 1500/1000 | *** | US | ISM Manufacturing Index |
| 03/02/2025 | 1500/1000 | * | US | Construction Spending |
| 03/02/2025 | 1630/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 03/02/2025 | 1630/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 03/02/2025 | 1730/1230 | US | Atlanta Fed's Raphael Bostic | |
| 03/02/2025 | 2330/1830 | US | St, Louis Fed's Alberto Musalem |