Source: MNI - Market News/Bloomberg/Refinitiv.
UK
POLITICS (BBC): “Asked if he would be willing to water down attempts to forge closer ties with the EU in exchange for keeping the US on side, Sir Keir said both relationships were important to the UK.”
UKRAINE (POLITICO): “Keir Starmer tells EU countries to ‘step up’ for Ukraine. U.K. prime minister also wants the EU to target Russia’s energy revenues to keep the pressure on “rattled” leader Vladimir Putin.”
EU
GERMANY (DW): “The man likely to lead Germany's next government has said there would be no cooperation with the far-right AfD. Friedrich Merz's conservative CDU/CSU bloc has faced flak after accepting AfD support on legislation.”
GERMANY (DW): “Frank-Walter Steinmeier kicked off a three-day tour of the Middle East on Monday when he held talks with Saudi Arabia's Mohammed bin Salman. Berlin's reputation in the region has suffered due to its support for Israel.”
FRANCE (POLITICO): “French Prime Minister François Bayrou is planning to put his job on the line four times this week as he attempts to enact a long-overdue budget for 2025. The audacious gambit began Monday, when Bayrou pushed through part of the budget using a constitutional maneuver that allows the government to pass legislation without a vote, but that in turn allows opposition lawmakers to put forward no-confidence motions.”
BELGIUM (FRANCE24): “Conservative Bart De Wever was sworn in Monday as Belgium's new prime minister after seven months of tortuous negotiations to reach a coalition deal that shifts the country to the right. De Wever has pledged to crack down on irregular migration and has pushed for cuts in social benefits and pension reforms.”
US
US TARIFFS (MNI) : The U.S. and Canada will pause implementing tariffs for at least 30 days, Prime Minister Justin Trudeau said Monday after a call with President Donald Trump, averting for now a trade war between two of the world's largest trading partners unseen in generations and lifting the country's dollar from the lowest since 2003.
US RATES (MNI BRIEF) : Federal Reserve Bank of Atlanta President Raphael Bostic said Monday he's comfortable waiting "for a while" to see how the economy evolves after the Fed cut rates by 100 bps last year and the Trump administration makes changes to trade and regulatory policies. "I want to see what the 100 bps we did last year translates to in terms of the economy. Depending on what the data are, it might mean that we are waiting for a while," Bostic told the Rotary Club of Atlanta.
US (BBG) : President Donald Trump signed an executive action to create a sovereign wealth fund for the US, charging Treasury Secretary Scott Bessent and Commerce secretary nominee Howard Lutnick with spearheading the effort. The fund would be created within the next 12 months and could be used to facilitate the sale of TikTok, with officials submitting a plan to Trump within 90 days, including recommendations for funding and investment strategies.
OTHER
NEW ZEALAND DATA (MNI) Q4 labour market data are released on February 5 and Bloomberg consensus expectations are in line with the RBNZ’s November forecasts. The unemployment rate is projected to rise 0.3pp to 5.1%, employment fall 0.2% q/q and private wages rise 0.6% q/q. An outcome close to this is unlikely to derail another 50bp of easing on February 19. It would have to print significantly better than expected for a smaller move and given the weakness of activity that seems unlikely.
AUSTRALIA
AUSTRALIA HOUSEHOLDS (MNI) Australian household spending rose 0.4% m/m to be up 4.3% y/y in December, the highest since March. November was revised up significantly to +0.8% m/m & 3.2% y/y from 0.4% & 2.4%. This is consistent with the retail sales data released yesterday showing a recovery in household spending. Consistent with this is the third straight monthly rise in discretionary spending in December. Total household spending volumes rose 1.4% y/y in Q4 up from 0.2% in Q3 signalling a pickup including a solid quarterly rise in the national accounts version due on March 5. Furnishings, transport, clothing and recreation saw increases in annual growth.
CHINA
CHINA TRADE WAR (BBG) : China announced an investigation into Google and new tariffs on a range of US products in an apparent retaliatory move, moments after President Donald Trump slapped a 10% tariff on Beijing reigniting a trade war between the word’s largest economies. China will probe the US tech giant for alleged anti-trust violations, according to a Tuesday statement from the State Administration for Market Regulation. Beijing also announced 15% levies on coal and liquefied natural gas and 10% on oil and agricultural equipment from the US.
MARKET DATA
NEW ZEALAND BUILDING PERMITS MONTH ON MONTH DEC -5.6% : PRIOR 4.9% REVISED
AUSTRALIA HOUSEHOLD SPENDING YOY DEC 4.3%; EST. 3.4%; PRIOR 3.2% REVISED.
AUSTRALIA HOUSEHOLD SPENDING MOM DEC 0.4%; EST 0.3%: PRIOR 0.8% REVISED
JAPAN JAN. MONETARY BASE -2.5% Y/Y; PRIOR -1.0%
JAPAN MONETARY BASE END OF PERIOD Y653.4t : PRIOR Y660.3t
MARKETS
US TSYS: Tsys Futures Slightly Lower As China Tariff Deadline Nears
- Tsys futures edge lower as the deadline on the China tariffs near while Trump has agreed to delay 25% tariffs on Mexico & Canada. TU is unchanged at 102-24 1/4, while TY is -04+ at 108-26
- Earlier there was a block 2s10s flattener with a DV01 $245k, however little else in the way of notable flows
- Cash tsys yields are slightly higher today, curve has continued to flatten. The 2yr is +1.5bps at 4.264%, while the 10yr is +1.2bps 4.567%. The 2s10s is -0.5bps at 30bps.
- Projected rate cuts through mid-2025 have cooled slightly vs this Monday levels (*) as follows: Mar'25 at -3.5bp (-3.7bp), May'25 at -9.8bp (-10.3bp), Jun'25 at -19.2bp (-19.7), Jul'25 at -24.4bp (-24.9bp).
- Today we have Factory Orders & Durable Goods Orders while the Fed's Mary Daly will speak
JGBS: Cheaper, Fresh Cyclical High For 10YY, BoJ Aims For 2% Core CPI
JGB futures are sharply weaker, -27 compared to the settlement levels, but slightly above the session low set early in the afternoon session.
- BoJ's Ueda said on Tuesday the central bank will aim to achieve 2% inflation, as measured by the overall consumer price index, on a sustained basis. In gauging whether inflation will sustainably hit its target, the BoJ focuses on underlying inflation or the broad trend of price moves that strips away one-off factors such as fuel and volatile fresh food costs. (per RTRS)
- Cash US tsys are little changed in today’s Asia-Pac session after yesterday’s modest sell-off following news that President Trump agreed to delay a 25% tariff on Mexico and Canada.
- Cash JGBs are flat to 2bps cheaper across benchmarks. The benchmark 10-year yield is 1.5bps higher at 1.267% after setting a fresh cycle high of 1.275% after today’s supply.
- The 10-year JGB auction delivered mixed results, with the low price beating expectations but the cover ratio declining to 3.1809x from 3.3570x at the previous auction. The tail also lengthened slightly to 0.03 from 0.01.
- Swap rates are 1-3bps higher. Swap spreads are mostly wider.
- Tomorrow, the local calendar will see Labor & Real Cash Earnings and Jibun Bank Composite & Services PMIs.
AUSSIE BONDS: Cheaper With US Tsys, New Mar-36 Bond To Be Priced Tomorrow
ACGBs (YM -4.0 & XM -5.5) are cheaper after dealing in relatively narrow ranges on a second-tier data day.
- Outside of the previously outlined household spending and ANZ-Roy Morgan Consumer Confidence, there hasn't been much by way of domestic drivers to flag.
- Cash US tsys are 1-2bps cheaper in today’s Asia-Pac session after yesterday’s modest sell-off following news that President Trump agreed to delay a 25% tariff on Mexico and Canada.
- Cash ACGBs are 5bps cheaper with the AU-US 10-year yield differential at -14bps.
- Swap rates are 4-5bps higher.
- The bills strip has bear-steepened with pricing -1 to -6.
- RBA-dated OIS pricing is flat to 4bps firmer across meetings today. A 25bp rate cut is more than fully priced for April (136%), with the probability of a February cut at 91% (based on an effective cash rate of 4.34%).
- Tomorrow, the local calendar will see S&P Global Composite & Services PMIs.
- The AOFM announced the issue by syndication of a new 4.25% 21 March 2036 Treasury Bond. The issue will be of a benchmark size. Initial price guidance is a spread of 2 to 5bps to XMH5. The issue is expected to be priced tomorrow.
BONDS: NZGBS: Closed With A Twist-Steepener Ahead Of Tomorrow’s Q4 Jobs Data
NZGBs closed showing a twist-steepener, with benchmark yields 2bps lower to 2bps higher, ahead of tomorrow’s Q4 Labour Market data. The ranges were relatively narrow.
- Bloomberg consensus expectations for tomorrow’s labour market data are in line with the RBNZ’s November forecasts. The unemployment rate is projected to rise 0.3pp to 5.1%, employment to fall 0.2% q/q and private wages rise 0.6% q/q.
- An outcome close to this is unlikely to derail another 50bp of easing on February 19. It would have to print significantly better than expected for a smaller move. Weakness in activity makes that seem unlikely.
- Private wages growth sees forecasts between 0.4% and 0.8%. The RBNZ is slightly lower at 0.5% as are ASB and ANZ. Kiwibank and Westpac are in line with consensus while BNZ is higher projecting 0.7%.
- Swap rates closed 3bps lower to 1bp higher, with the 2s10s curve steeper.
- RBNZ dated OIS pricing closed 1-4bps softer across meetings. 50bps of easing is priced for February, with a cumulative 129bps by November 2025.
- On Thursday, the NZ Treasury plans to sell NZ$225mn of the 4.50% Apr-27 bond, NZ$225mn of the 2.00% May-32 bond and NZ$50mn of the 2.75% May-51 bond.
FOREX: USD Index To Session Highs As China Announces Tariffs, Yen Outperforming
The USD index sits close to session highs at the time of writing. The USD BBDXY index is above 1310, as seemingly no deal has been reached to delay the US tariffs on China imports. China has just announced counter tariffs of its own and also announced an anti-trust probe into Google. This includes 10% tariffs on oil and agricultural machines from the US and 15% on US LNG and coal exports. These will come into effect on Feb 10 per the China FinMin.
- AUD and NZD are both down over 0.70%, although up slightly from lows seen post tariff headlines. AUD/USD was last 0.6180, session lows rest at 0.6171. For NZD/USD we are just under 0.5590, while EUR is down by 0.60%, to 1.0275/80. We are still also above Monday intra-session lows.
- USD/CNH got to highs of 7.3365, but sits back under 7.3300 in latest dealings.
- USD/JPY has fallen back to 155.00, as risk aversion in the equity space (US futures back into the red, after spending much of the day in positive territory). Regional equities are still mostly in the green, but off best levels for the session.
- The latest risk off move have seen us tsys yields now trade little changed for the session after initially rising 1-2bps. The 10yr yield was last -.0.8bps at 4.547%. Looking ahead, the US response will be gauged to China's tariff hikes. Note we also have: Fed’s Bostic and Daly speak later and US December JOLTS job openings and orders print. France’s December budget statistics and January Spanish unemployment are also out.
ASIA STOCKS: Asian Equities Surge On Tariff Pause
Asian equities rebounded sharply as US President Donald Trump delayed tariffs on Mexico and Canada, fueling hopes of a potential reprieve for China. Hong Kong stocks surged, with the Hang Seng China Enterprises Index jumping nearly 4% before paring gains, its biggest move since October, as markets anticipated trade talks between Trump and Xi. Japan’s Nikkei 225 rose 1.6%, led by auto and electronics stocks, while South Korea’s Kospi climbed 1.6%. Australia’s ASX 200 edged up 0.13%, supported by gains in tech and mining stocks, with gold miners benefiting from record-high gold prices.
OIL: Crude Lower As Tariffs Delayed But Market Outlook Very Uncertain
Oil prices are lower again today with WTI down 1.1% to $72.37/bbl and Brent -0.5% to $75.55/bbl, holding above initial support levels. The 30-day postponement on US tariffs for Canada and Mexico has weighed on crude during APAC trading today. Talks are ongoing regarding the 10% on imports from China scheduled from midnight NY time today. The USD index is 0.1% lower.
- Crude has risen on news of trade taxes but the outlook continues to worry the market. The strength of demand from China, the world’s largest oil importer, remains a concern plus the impact of an increase in trade tensions on global demand generally. On the supply side, President Trump plans to increase US production, while OPEC kept its quotas unchanged at its review yesterday but is still scheduled to begin normalising output from April.
- Another uncertainty is the sanction environment with US talks with Venezuela opening the possibility of an increase in its supply, while Iran and Russia could be hit with tighter measures.
- Today industry-based data on US crude inventories are released for last week. They rose sharply the previous week as Canadian producers have lifted flows to the US sharply ahead of possible tariffs. That trend may continue for the next month or until it is clear whether taxes will actually be imposed.
- The Fed’s Bostic and Daly speak later and US December JOLTS job openings and orders print. France’s December budget statistics and January Spanish unemployment are also out.
GOLD: Gold Hits New Records in Tuesday’s Trading.
- Gold’s ‘safe-haven’ status was evident during the Asian trading day as investors focused on ongoing tariff uncertainty emanating from the US.
- Yesterday’s weaker than expected day due to USD strength was pushed aside as gold rallied throughout the day to reach new all time highs.
- Opening at US$2,815.41 gold’s fortunes continued to fall, reaching a low of $2,772.23; before a dramatic turnaround to touch $2,830.74.
- Gold gave back some of the gains to close it’s US trading day at $2,815.21 and continued to trade up during the Asian trading day reaching a high of $2,824.64, before declining back to $2,818.70
- There was some unexpected beneficiaries from the threatened tariffs on Canada with Canadian gold stocks rallying aggressively in Monday’s trading session.
- If the tariffs are fully implemented, there is a chance it is good for gold’s fortunes as a trade war could create inflation or could be dollar negative.
- Despite several materially down days, gold is already up over 6% in January and early signs are positive for ongoing gains in February.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 04/02/2025 | 0745/0845 |  FR | France Budget Balance | |
| 04/02/2025 | 1000/1000 | ** |  GB | Gilt Outright Auction Result |
| 04/02/2025 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 04/02/2025 | 1355/0855 | ** |  US | Redbook Retail Sales Index |
| 04/02/2025 | 1500/1000 | ** | US | Factory New Orders |
| 04/02/2025 | 1500/1000 | *** | US | JOLTS jobs opening level |
| 04/02/2025 | 1500/1000 | *** | US | JOLTS quits Rate |
| 04/02/2025 | 1600/1100 | US | Atlanta Fed's Raphael Bostic | |
| 04/02/2025 | 1630/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 04/02/2025 | 1900/1400 | US | San Francisco Fed's Mary Daly | |
| 05/02/2025 | 2200/0900 | * |  AU | S&P Global Final Australia Services PMI |
| 05/02/2025 | 2200/0900 | ** | AU | S&P Global Final Australia Composite PMI |
| 05/02/2025 | 2330/0830 | ** |  JP | average wages (p) |
| 05/02/2025 | 0030/0930 | ** | JP | S&P Global Final Japan Services PMI |
| 05/02/2025 | 0030/0930 | ** | JP | S&P Global Final Japan Composite PMI |
| 04/02/2025 | 0030/1930 | US | Fed Vice Chair Philip Jefferson | |
| 05/02/2025 | 0145/0945 | ** |  CN | S&P Global Final China Services PMI |
| 05/02/2025 | 0145/0945 | ** | CN | S&P Global Final China Composite PMI |
| 05/02/2025 | 0745/0845 | * | FR | Industrial Production |
| 05/02/2025 | 0815/0915 | ** |  ES | S&P Global Services PMI (f) |
| 05/02/2025 | 0815/0915 | ** | ES | S&P Global Composite PMI (final) |
| 05/02/2025 | 0845/0945 | ** |  IT | S&P Global Services PMI (f) |
| 05/02/2025 | 0845/0945 | ** | IT | S&P Global Composite PMI (final) |
| 05/02/2025 | 0850/0950 | ** | FR | S&P Global Services PMI (f) |
| 05/02/2025 | 0850/0950 | ** | FR | S&P Global Composite PMI (final) |
| 05/02/2025 | 0855/0955 | ** |  DE | S&P Global Services PMI (f) |
| 05/02/2025 | 0855/0955 | ** | DE | S&P Global Composite PMI (final) |
| 05/02/2025 | 0900/1000 | * | IT | Retail Sales |
| 05/02/2025 | 0900/1000 | ** |  EU | S&P Global Services PMI (f) |
| 05/02/2025 | 0900/1000 | ** | EU | S&P Global Composite PMI (final) |
| 05/02/2025 | 0930/0930 | ** | GB | S&P Global Services PMI (Final) |
| 05/02/2025 | 0930/0930 | *** | GB | S&P Global/ CIPS UK Final Composite PMI |
| 05/02/2025 | 1000/1100 | ** | EU | PPI |
| 05/02/2025 | 1200/0700 | ** | US | MBA Weekly Applications Index |
| 05/02/2025 | 1315/0815 | *** | US | ADP Employment Report |
| 05/02/2025 | 1330/0830 | ** |  CA | International Merchandise Trade (Trade Balance) |
| 05/02/2025 | 1330/0830 | ** | CA | International Merchandise Trade (Trade Balance) |
| 05/02/2025 | 1330/0830 | ** | US | Trade Balance |
| 05/02/2025 | 1330/0830 | *** | US | Treasury Quarterly Refunding |