Source: MNI - Market News/Bloomberg/Refinitiv.
UK
UK INFLATION (BBG) : The Bank of England is expected to deal Rachel Reeves a blow this week by downgrading its growth outlook and warning that her October budget will drive up inflation just days after the Chancellor of the Exchequer unveiled a huge package of measures to boost the economy.
EU (BBC): “Sir Keir Starmer is heading to Brussels to join a gathering of European Union leaders – the first time a British prime minister has done so since Brexit. Starmer is heading over the English Channel for talks focused on defence and security co-operation and will also meet Nato Secretary General Mark Rutte.”
TRADE (BBC): “The UK is "out of line" in its trade with the US but the situation can be "worked out", President Donald Trump says.”
EU
EUROPEAN UNION (BBG) : US President Donald Trump said he will “definitely” place new tariffs on the European Union, reiterating complaints about the US trade deficit with the bloc and what he sees as insufficient EU imports of American cars and agricultural products.
EUROPEAN UNION (BBG} : The European Union has said it will “respond firmly” if the US imposes tariffs on the bloc in the latest sign of discontent with President Donald Trump’s trade tactics that are reverberating globally.
TRADE (POLITICO): “The European Union is warning U.S. President Donald Trump the bloc will retaliate if he imposes tariffs on EU goods. The European Commission, the EU’s executive body, said it “regrets” Trump’s decision to impose blanket tariffs on Canada, Mexico and China on Saturday.”
DEFENCE (BBC): “The European Union's member states need to increase defence spending to keep pace with the threats facing the continent, its foreign policy chief has warned. Kaja Kallas, who served as prime minister of Estonia until July 2024, said "every euro spent on school, healthcare and welfare [was] vulnerable" if the bloc didn't maintain strong defences.”
EU (ECONOMIST): “On Monday leaders of the European Union’s 27 member states will meet in Brussels to discuss the new world order under Donald Trump. Sir Keir Starmer, Britain’s prime minister, will join the summit alongside Mark Rutte, NATO’s secretary-general.”
GERMANY (POLITICO): “Germany’s conservative Christian Democratic Union (CDU) and its leader, Friedrich Merz, support a second term for Manfred Weber as the head of the European People’s Party, giving the incumbent the best chance of being reelected during a party congress in Spain in April.”
GERMANY (POLITICO): “In an interview with Tagesspiegel, Pistorius dismissed the U.S. president’s call for allies to hike defense spending to 5 percent of gross domestic product, calling the figure both unrealistic and unnecessary.”
GERMANY (POLTICO): “Germany's Federal Network Agency is "well prepared" to respond to online interference in the country’s Feb. 23 parliamentary election, the agency's president Klaus Müller said following a stress test with social media platforms on Friday.”
ITALY (POLITICO): “Italy's UniCredit has bought a stake in insurance giant Generali Group, according to two people familiar with the matter, adding another twist to a byzantine banking battle brewing in Italy's north.”
BELGIUM (POLITICO): “Five parties agreed to form a new Belgian coalition government late Friday, concluding months of negotiations and paving the way for Flemish nationalist Bart De Wever to serve as the country’s next prime minister. “After seven long months, we finally have a government for the country,” said Conner Rousseau, the president of Vooruit, one of the parties in the new government.”
UKRAINE (POLITICO): “Excluding Kyiv from negotiations about ending Russian President Vladimir Putin’s invasion of Ukraine would send a "very dangerous" signal to the world's dictators, according to Ukrainian President Volodymyr Zelenskyy.”
US
USA/CANADA TARIFFS: (MNI BRIEF) : Canada remains willing to impose a tax on oil exports to the U.S. in retaliation for Donald Trump's tariffs, after avoiding that tool in the first round to ensure no region or industry faces a disproportionate hit from the trade war, a senior government official said Sunday.
TARIFFS (RTRS): "President Donald Trump said on Sunday the sweeping tariffs that he has imposed on Mexico, Canada and China may cause "short term" pain for Americans as global markets reflected concerns the levies could undermine growth and reignite inflation.
POLITICS (BBC): “The Trump administration has given Elon Musk's deputies access to the federal payments system that controls the flow of trillions of dollars in government funds every year, US media report.”
OTHER
JAPAN
JAPAN RATES: (MNI) Many Bank of Japan board members were concerned over the upside risks to prices and saw the need to raise the policy interest rate gradually at the Jan 23-24 meeting but they failed to offer insight into the pace or timeline, the summary of opinions showed on Monday. “Considering that both upside and downside risks are significantly large, the Bank should be extremely careful about suggesting the pace of policy interest rate hikes and the terminal policy rate,” one member noted.
CHINA
CHINA TARIFFS (BBG) : As the leaders of Canada and Mexico rushed to respond after Donald Trump started a new trade war, Chinese President Xi Jinping took a breath before his nation announced any concrete retaliation. China’s reaction — coming in the middle of a weeklong Lunar New Year holiday — was more muted, as was typical during Trump’s first term. The Commerce Ministry issued a statement expressing strong “dissatisfaction” and vowing “corresponding countermeasures,” without elaborating.
CHINA FACTORY OUTPUT (BBG) : China’s manufacturing activity unexpectedly declined for a second straight month in January, underlining the need for Beijing to step up economic stimulus with Donald Trump slapping tariffs on the country’s exports.
TAWAN TECH (BBG) : Taiwan’s government pledged to help companies with Mexico operations such as iPhone maker Foxconn Technology Group shift production lines and investment as needed to deal with higher US tariffs.
MARKET DATA
AUSTRALIA CORELOGIC HOME VALUE JAN. -0.2% M/M; PRIOR -0.2%
AUSTRALIA S&P GLOBAL PMI MFG JAN. F 50.2; PRE. 49.8; DEC. 47.8
AUSTRALIA MELBOURNE INSTITUTE INFLATION GAUGE JAN. +0.1% M/M & 2.3% Y/Y; DEC. +0.6% & 2.6%
AUSTRALIA Q4 RETAIL SALES +1.0% Q/Q; EST. +0.8%; PRIOR +0.5%
AUSTRALIA DEC. RETAIL SALES -0.1% M/M; EST. -0.7%; PRIOR +0.7%
AUSTRALIA DEC. BUILDING APPROVALS +0.7% M/M; EST. +1.0%; PRIOR -3.4%
AUSTRALIA DEC. PRIVATE HOUSES BUILDING APPROVALS -3.0% M/M; PRIOR -1.7%
AUSTRALIA JAN. ANZ JOB ADVERTISEMENTS +0.2% M/M; PRIOR +0.3%
JAPAN JIBUN BANK HJAN. MFG PMI 48.7; PRE. 48.8; DEC. 49.6
CHINA JAN. CAIXIN MANUFACTURING PMI 50.1; EST. 50.6; DEC. 50.5
SOUTH KOREA IP DEC. +4.6% M/M; EST. +0.3%; PRIOR -0.3%
SOUTH KOREA IP DEC. +5.3% Y/Y; EST. +1.2%; PRIOR +0.1%
SOUTH KOREA S&P GLOBAL JAN. MFG PMI 50.3; DEC 49
SOUTH KOREA DEC. CYCLICAL LEADING INDEX -0.2 PT M/M; PRIOR +0.2
MARKETS
US TSYS: Tsys Futures Off Session Lows, China To Speak With Trump
- Trading has been largely focused around the Trump Tariff headlines today. Earlier it was reported that China is planning to open discussions with Trump to avoid further tariff escalation. Tsys futures are off session lows now with just the TU contract trading lower on the day, last -00⅛ at 102-25⅞, while TY is +9 at 109-04.
- A bullish corrective cycle remains intact and the TY 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.
- In cash tsys, the curve has twist-flattened. We trade well off session's worst levels after the 2yr rose 7bps earlier, it now trades +4.1bps at 4.239%, while the 10yr is -3bps at 4.508%, just above the ytd lows of 4.486%.
- The 2s10s curve has dropped 7bps to 27bps having now erased all the steepening made this year, while the 2s30s is -8.5bps at 50bps.
- Projected rate cuts through mid-2025 receded vs.Friday (*) levels as follows: Mar'25 at -3.9bp (-4.2bp), May'25 at -11.8bp (-12.3bp), Jun'25 at -22.6bp (-24.0), Jul'25 at -28.5bp (-29.5bp).
- Later today, we have S&P Global US Manufacturing PMI, ISM Manufacturing while later in the week focus will turn to corporate earnings, key CPI, PPI inflation measures and headline employment data for January.
JGBS: Cash Bonds Slightly Mixed, US Tsys Twist-Flatten, 10Y Supply Tomorrow
JGB futures are stronger, +18 compared to settlement levels, but off session bests.
- (MNI) Many BoJ board members were concerned over the upside risks to prices and saw the need to raise the policy interest rate gradually at the Jan 23-24 meeting but they failed to offer insight into the pace or timeline, the summary of opinions showed.
- A different member said, with economic activity and prices remaining on track, "risks to prices have become more skewed to the upside."
- The board hiked the policy rate 25bps to 0.5% at the January meeting, the first increase since July 2024 and its highest level since 2008.
- In today’s Asia-Pacific session, cash US tsys have twist-flattened, with yields ranging from 4bps higher to 4bps lower. In addition to tariff developments, this week’s focus in the US will be on a heavy slate of corporate earnings, key CPI and PPI inflation data, and January’s headline employment report.
- Cash JGBs are mixed across benchmarks, with yields 1bp lower to 1bp higher. The benchmark 10-year yield is 0.6bp lower at 1.239% versus the cycle high of 1.262%.
- Swap rates are 1-2bps lower. Swap spreads are slightly mixed.
- Tomorrow, the local calendar will see Monetary Base data alongside 10-year supply.
AUSSIE BONDS: Tracking US Tsys As Market Adjusts To Weekend’s Tariff News
ACGBs (YM +6.0 & XM +5.5) are richer and near session highs.
- Outside of the previously outlined retail sales, building approvals and job ads there hasn't been much by way of domestic drivers to flag.
- The strengthening observed during the session appears more closely linked to movements in US tsys following the weekend’s US tariff announcements and the subsequent retaliatory measures by Canada and Mexico. China has also indicated it will implement countermeasures and file a complaint with the World Trade Organization.
- In today’s Asia-Pacific session, cash US tsys have twist-flattened, with yields ranging from 4bps higher to 5bps lower. In addition to tariff developments, this week’s focus in the US will be on a heavy slate of corporate earnings, key CPI and PPI inflation data, and January’s headline employment report.
- Cash ACGBs are 5-6bps richer with the AU-US 10-year yield differential at -13bps.
- Swap rates are 5bps lower.
- The bills strip is richer, with pricing +2 to +6.
- Tomorrow, the local calendar will see Household Spending and S&P Global Composite & Services PMIs.
- A new 21 March 2036 Treasury Bond is planned to be issued via syndication this week (subject to market conditions). The Joint Lead Managers are: Barrenjoey Markets; Commonwealth Bank of Australia; National Australia Bank Limited; and UBS.
BONDS: NZGBS: Closed On A Strong Note, Long-Dated US Tsys Rally On Tariff News
- After opening the session slightly weaker after the weekend’s US tariff developments, the local market changed course after US tsys reversed early Asia-Pac session weakness.
- Cash US tsys have twist-flattened, with yields ranging from 4bps higher to 5bps lower. In addition to tariff developments, this week’s focus will be on a heavy slate of corporate earnings, key CPI and PPI inflation data, and January’s headline employment report.
- Swap rates closed 6-8bps lower, with the 2s10s curve steeper.
- RBNZ-dated OIS pricing is flat to 5bps softer across meetings today, and down 4-17bps compared to pre-Q4 CPI levels on 22 January. 49bps of easing is priced for February, with a cumulative 127bps by November 2025.
- Tomorrow, the local calendar will see Building Permits data, ahead of the Q4 Employment Report on Wednesday.
- 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: Fresh Highs For USD Index On Tariffs, Yen Outperforms Amid Equity Slump
The USD BBDXY index sits just off fresh cycle highs, last near 1323.5, earlier we got just above 1325.1, levels last seen back in 2022. We are still up around 1.20% versus end Friday levels, as the markets digest weekend news around Trump signing orders for 25% tariffs against Mexico and Canada (energy at 10%) and 10% for China. These will come into affect this Tuesday.
- It has mostly been one-way USD traffic to the upside, although some pairs are away from early extremes and we some tariff headlines have created volatility.
- USD/CAD sits at 1.4760/65 in latest dealings, earlier highs were 1.4793. These are levels last seen in 2003. USD/MXN sit up nearly 2.8%, last near 21.2700. This is fresh highs in this pair back to 2022.
- USD/CAD had a brief pull back as Trump stated he would talk to both Canadian and Mexican leaders Monday morning US time, which raised hopes of potential to negotiate. The USD has been supported on dips though.
- Trump also stated at this time tariffs would be placed on the EU, although didn't give any hints around timing. EUR/USD was last 1.0220/25, off 1.3%. Earlier lows (amidst poor liquidity) were at 1.0141.
- AUD and NZD were both off 2% at one stage. AUD/USD getting to fresh lows since 2020 of 0.6088, but we sit slightly higher in latest dealings (0.6105/10). NZD/USD got to 0.5516, but is now in the 0.5530/35 region, still down 1.8%.
- Both currencies saw modest short covering on lower USD/CNH levels. The WSJ reported that China is likely to seek negotiations with the US to lower trade tensions and will pledge not to devalue the yuan.
- USD/JPY was sub 155.00 in early trade, but is now back at 155.70, around 0.30% weaker in yen terms. US equity futures are down sharply post the tariff news. Eminis and Nasdaq futures are off more than 2%. US yields are higher at the front of the curve though, providing some yield support to USD/JPY. AUD/JPY fell through 95.00, fresh lows back to Sep last year, but is now back abvoe this figure level.
- Later the Fed’s Bostic and Musalem speak and US January manufacturing PMI/ISM and December construction print. ECB’s Donnery appears and European January manufacturing PMIs and January CPI are released.
ASIA STOCKS: Asian Equities Hit Hard On Tariff Headlines
Asian equities lower across the board today following Tariff headlines. Although it has been reported that China is planning to open discussions with Trump to avoid further escalation.
- Japan's Nikkei 225 and Topix declined 2.8% and 2.5%, respectively, as US tariffs heightened global growth concerns. Tech stocks were particularly weak, with Tokyo Electron, Nintendo, and KDDI among those under pressure ahead of earnings. However, Hitachi (+1.1%) bucked the trend after reporting stronger-than-expected Q3 results and raising its full-year profit forecast. Komatsu dropped 7.2%, the most since August, after mixed Q3 earnings signaled uncertain global demand.
- South Korea's Kospi Index fell 3%, as semiconductor stocks were hit hard. Samsung Electronics and SK Hynix both declined as AI-related stocks faced profit-taking. Investors are also concerned that US tariffs will hurt Korea’s export-driven economy, particularly in technology and automotive sectors.
- Taiwan's Taiex Index is 3.8% lower, with TSMC leading declines as the AI sector saw a broad selloff. Delta Electronics’ parent company fell 9.8% in Taiwan, its largest drop since August 5, amid worries about its exposure to Mexico, where it has significant manufacturing operations. AI hardware names also suffered, with Wiwynn, Quanta, and Asia Vital hitting limit down on concerns that US tariffs could disrupt supply chains. PC makers like Asus (+5.4%) and Acer (+2.6%) outperformed, as they are expected to benefit from increased AI adoption.
- In Hong Kong the Hang Seng Index fell is 0.7%, paring deeper losses after reports that China is planning to open discussions with Trump to avoid further tariff escalation. Offshore yuan stabilized, signaling potential intervention. Alibaba surged 5%, its highest since Nov. 12, after revealing an AI model that outperformed Meta’s Llama and DeepSeek V3. Macau casino stocks declined after January gaming revenue missed estimates, but analysts remain focused on Lunar New Year performance, which could still show strength. CK Hutchison (-2.6%) hit its lowest since July 11, with further pressure on shipping and infrastructure stocks tied to the Panama Canal, after the US Secretary of State urged Panama to remove Chinese companies near key trade routes. Mainland markets remain closed for the Lunar New Year and will reopen on Wednesday.
- Australia's ASX 200 fell 1.9%, with mining stocks underperforming amid concerns that US tariffs on Canada, Mexico, and China could dampen global economic growth and weaken commodity demand. Westgold Resources plunged 14% after cutting its gold production forecast. In New Zealand, the NZX 50 dropped 1.4%, led by Fisher & Paykel Healthcare, which saw its biggest one-day decline since 2020 after warning of potential cost increases due to tariffs.
OIL: Crude Off Intraday Highs But Still Up On US Tariff News
Oil prices are higher during APAC trading today after news on the weekend that the US would go ahead with 25% tariffs on imports from Canada & Mexico and 10% from China. The inflationary impact had boosted oil prices with WTI up 1.8% to $73.81/bbl and Brent +0.8% to $76.28/bbl. They reached lows of $73.48 and $75.94 respectively. The USD index is 1.2% higher which has contributed to bringing oil off its intraday highs made early in the session.
- Canadian oil exports to the US will face a 10% tariff but that is still likely to mean higher fuel prices for American drivers as over half of US crude imports come from Canada. March gasoline futures are up 3.9% today but spiked 6.2% on the open. US President Trump is due to speak to Canada’s PM Trudeau later.
- While the prospect of increased protectionism is currently driving oil prices higher, they could easily turn down when concerns of the impact on global growth and thus demand for crude come to the fore.
- OPEC+ meets later today and is not expected to change its quotas. Rising non-OPEC supply and soft demand from China have driven it to delay its plan to normalise output.
- Trump plans to boost the US’ oil production and now there is the chance of increased supply from sanction-hit Venezuela on the global market after a US envoy met with President Maduro which resulted in an agreement to release American prisoners and for Venezuela to accept the return of illegal immigrants.
- Later the Fed’s Bostic and Musalem speak and US January manufacturing PMI/ISM and December construction print. ECB’s Donnery appears and European January manufacturing PMIs and January CPI are released.
GOLD: Gold Declines on Tariff Headlines.
- Gold started this week with a weakening bias, off from Friday’s close of US$2,798.41 to be at $2,772.75 in afternoon trading.
- Last week saw an amazing turnaround from gold to finish 1.00% better for the week after a very poor day, Monday and this week, Gold is showing it doesn’t like Mondays again down -0.90%.
- Whilst gold’s ‘safe haven’ status usually prevails, a strengthening USD on the back of tariff news won over sending gold lower this morning.
- The US announced 25% tariffs on goods from Mexico and Canada, and 10% from China coming into effect from Tuesday.
- The potential for a global trade war is now real and in any period of uncertainty the USD strengthens and already has moved by enough to offset gold’s safe haven status.
- That said, gold started 2025 where it left off last year, performing well and up over 5% year to date.
- JPMorgan announced that it plans to deliver US$4bn of gold bullion this month against contracts that expire in February, representing one of the largest physical settlements on record.
UP TODAY (TIMES GMT/LOCAL)
| 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 | |
| 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 |