Source: MNI - Market News/Bloomberg
EU
TRADE (BBG): "US President Donald Trump reiterated a call for the European Union to buy more American oil and gas if the bloc wants to avoid tariffs. “The one thing they can do quickly is buy our oil and gas,” Trump said to reporters in the White House after his inauguration on Monday. “We will straighten that out with tariffs, or they have to buy our oil and gas.”
ECB (BBG): " A reduction in interest rates next week by the European Central Bank is all but certain and two to three more will probably follow, according to Governing Council member Peter Kazimir."
EU (POLITICO): “Manfred Weber, the boss of Europe’s largest pan-European political party, will seek reelection as its president at an upcoming congress, a party official told Brussels Playbook.”
FRANCE (POLITICO): “French President Emmanuel Macron hinted on Monday that France would need to go beyond NATO’s current spending target, especially if United States President Donald Trump pulls the American military out of Europe.”
NORWAY (POLITICO): “Norway is one of the world’s richest countries, but isn’t signing up for U.S. President Donald Trump’s demand that NATO members increase their defense budgets to 5 percent of GDP. “'I’m prepared for new discussions about targets. But I think you also have to note that among the 32 allies there will be different views on this and also different starting points. Not everyone is at 2 percent yet,” Norway’s Defense Minister Bjørn Arild Gram told POLITICO.”
IRELAND (BBC): “Fine Gael have voted "overwhelmingly" to accept a programme for government ahead of the coalition taking office on Wednesday. The party said members, including the parliamentary party and councillors voted in favour of the programme by 93.9% to 6.1%.”
US
TARIFFS (BBG): " President Donald Trump said he planned to enact previously threatened tariffs of as much as 25% on Mexico and Canada by Feb. 1, reiterating his contention that America’s two immediate neighbors are allowing the flow of undocumented migrants and drugs into the country."
US/CHINA (BBG): "President Donald Trump temporarily halted a ban on TikTok in the US, granting the company and its Chinese parent ByteDance Ltd. more time to reach a deal for the popular app that would resolve long-standing US national security concerns."
IMMIGRATION (RTRS): "President Donald Trump on Monday kicked off his sweeping immigration crackdown, tasking the U.S. military with aiding border security, issuing a broad ban on asylum and taking steps to restrict citizenship for children born on U.S. soil."
ENERGY (RTRS): "President Donald Trump on Monday laid out a sweeping plan to maximize oil and gas production, including by declaring a national energy emergency to speed permitting, rolling back environmental protections, and withdrawing the U.S. from an international pact to fight climate change."
OTHER
CANADA (MNI BRIEF): Canadian Finance Minister Dominic LeBlanc said Monday Donald Trump's comment about imposing a 25% tariff on Feb. 1 would be "a mistake" drawing a response that hurts America's job creation and boosts inflation.
RBA (MNI INTERVIEW): Former RBA officials share their outlook for 2025 cuts. On MNI Policy MainWire now, for more details please contact sales@marketnews.com
CHINA
FISCAL POLICY (XINHUA): "Fiscal policy should be more proactive with expenditure outlays as soon as possible, while a moderately loose monetary stance should maintain ample liquidity and ensure funds enter the real economy, Xinhua News Agency reported, citing Premier Li Qiang."
ELECTRICITY (NEA): "China’s electricity demand reached 9,852 billion kilowatt hours in 2024, up 6.8% y/y, and faster than 2023’s 6.7% y/y growth, according to data from the National Energy Administration."
YUAN (YICAI): "The yuan is likely to stabilise or even appreciate amid weakening upward momentum in the U.S. dollar index, stronger-than-expected China GDP data and authorities’ signalling on currency stability, Yicai.com reported, citing market observers."
CHINA MARKETS
MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY256 billion via 14-day reverse repos, with the rate unchanged at 1.65%. The operation led to a net injection of CNY201 billion after offsetting the maturity of CNY55 billion today, according to Wind Information.
- The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.8357% at 09:42 am local time from the close of 2.0995% on Monday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 45 on Monday, compared with the close of 46 on Friday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.
MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.1703 on Tuesday, the lowest level since Nov 8, 2024, compared with 7.1886 set on Monday. The fixing was estimated at 7.2934 by Bloomberg survey today.
MARKET DATA
NEW ZEALAND BNZ DEC. SERVICES PSI 47.9; PRIOR 49.1
NEW ZEALAND DEC. RETAIL CARD SPENDING +2% M/M; PRIOR +0.1%
NEW ZEALAND DEC. TOTAL CARD SPENDING +1.5% M/M; PRIOR -0.1%
NEW ZEALAND DEC. GOVT. BONDS HELD BY FOREIGNERS 61.7%; PRIOR 61.2%
SOUTH KOREA DEC. PRODUCER PRICES +1.7% Y/Y; PRIOR +1.4%
SOUTH KOREA JAN. FIRST 20 DAYS EXPORTS -5.1% Y/Y; DEC. +6.8%
SOUTH KOREA JAN. FIRST 20 DAYS IMPORTS -1.7% Y/Y; DEC. +7.5%
SOUTH KOREA JAN. FIRST 20 DAYS TRADE DEFICIT $3.765B; DEC. SURPLUS $1.362B
MARKETS
US TSYS: Tsys Futures Trade At Session's Best, Curve Flattens Slightly
It has been a volatile session, following the Inauguration of Trump he has been busy signing executive orders, however the market has really only reacted to comments surrounding Canada & Mexico tariffs. Asian equities are trading higher with Hong Kong stocks the top performer following positive TikTok comments from Trump. Tsys futures volumes have surged, while the cash tsys curve has flattened slightly.
- Tsys futures are holding near session's best levels now, brushing off earlier weakness following headlines around 25% tariffs on Canada & Mexico. TU is +02¾ at 102-26¼ while TY is trading +16 at 109-01+, Resistance is seen at 109-06 (Dec 31 high) but gains are deemed corrective from a technical perspective, against a medium-term bear trend with support at 108-00 (Jan 16 low).
- Cash tsys curve has twist flattened, with the belly out-performing, the 7yr leads the way trading -9.5bps to 4.436% just off the ytd lows of 4.413%, while the 10yr is -9.1bps at 4.536%
- Long-end bonds have outperformed recently, flattening yield curves as markets downplayed Donald Trump's tariff threats against Canada and Mexico. The 2s10s spread fell to 31bps, its tightest level since January 3, with technical resistance and charting suggesting a double top may have formed at 42bps, which could limit further steepening for now.
- Fed Funds futures have seen cut expectations build during the Asian session to 43bp for 2025 vs 38bp at the US crossover on Monday and 32bp prior to last week’s CPI report. A next 25bp cut from the FOMC is seen around June/July.
- It is another quiet data session today with just Philadelphia Fed Non-Manufacturing Activity expected out.
JGBS: Richer With 40Y Leading After Strong Auction
JGB futures are stronger, +8 compared to settlement levels, but well off session bests.
- Today’s move was all about US tsys. Cash US tsys are 6-10bps richer in today’s Asia-Pacific session, with a flattening bias, following yesterday’s holiday. The session has been marked by volatility, driven by reports that Trump suggested tariffs on Canada and Mexico might take effect on February 1. While gains were briefly pared, US tsys have since rebounded, trading near session bests.
- Today’s local calendar was empty apart from 40-year supply.
- Cash JGBs are 1-3bps richer across benchmarks, with the 40-year leading. The benchmark 10-year yield is 0.9bps lower at 1.191% versus the cycle high of 1.262%.
- The issuance of 40-year bonds today was met with strong demand, with the actual high yield coming in notably below dealer expectations. According to a Bloomberg poll, the anticipated yield was 2.60%, compared to the realized yield of 2.57%. The auction’s cover ratio also improved, rising to 2.7518x from 2.2364x in the previous outing.
- Swap rates are slightly higher. Swap spreads are wider.
- Tomorrow, the local calendar will see BoJ Rinban Operations covering 1-25-year JGBs.
- BoJ Policy Decision on Friday.
AUSSIE BONDS: Richer With US Tsys, Trump Tariff Talk Impact Was Fleeting
ACGBs (YM +5.0 & XM +6.5) are stronger and near Sydney session highs.
- Today’s move was all about US tsys. Cash US tsys are 6-9bps richer in today’s Asia-Pacific session, with a flattening bias, following yesterday’s holiday. The session has been marked by volatility, driven by reports that Trump suggested tariffs on Canada and Mexico might take effect on February 1. While gains were briefly pared, US tsys have since rebounded, trading near session bests.
- Cash ACGBs are 6bps richer with the AU-US 10-year yield differential at -13bps.
- Swap rates are 5bps lower.
- The bills strip has bull-flattened, with pricing flat to 54.
- RBA-dated OIS pricing is flat to 5bps softer across meetings today. A 25bp rate cut is more than fully priced for April (110%), with the probability of a February cut at 68% (based on an effective cash rate of 4.34%).
- The local calendar is light this week after key December labour market data last Thursday. The highlights are the Westpac Leading Index tomorrow and S&P Global PMIs (P) on Friday. The focus is now on Q4 CPI data released on Wednesday, January 29.
- The AOFM plans to sell A$800mn of the 2.75% 21 June 2035 bond tomorrow and A$700mn of the 1.50% 21 June 2031 bond on Friday.
BONDS: NZGBS: Closed Sharply Richer With US Tsys, Q4 CPI Tomorrow
NZGBs closed sharply richer and at session bests, with yields 7bps lower.
- Today’s move was all about US tsys. Cash US tsys are 6-9bps richer in today’s Asia-Pacific session, with a flattening bias, following yesterday’s holiday. The session has been marked by volatility, driven by reports that Trump suggested tariffs on Canada and Mexico might take effect on February 1. While gains were briefly pared, US tsys have since rebounded, trading near session bests.
- Card spending in NZ rose 1.5% m/m in December, the highest since February. 125bp of monetary easing appears to be encouraging consumers to spend again.
- Swap rates closed 6-7bps lower.
- RBNZ dated OIS pricing closed slightly mixed. 44bps of easing is priced for February, with a cumulative 108bps by November 2025.
- Tomorrow, the local calendar will see Q4 CPI data including the RBNZ’s estimates of core.
- Bloomberg consensus forecasts for headline inflation are in line with the RBNZ’s November projections at 2.1% y/y, 0.1pp moderation from Q3. The expected quarterly increase of 0.5% is slightly higher than the RBNZ’s 0.4%.
- The Q3 sector factor model measure of core was at 3.4%. Following the sharp contraction in Q3 and Q4 growth, another 50bp rate cut on February 19 is likely, especially if inflation prints around the band’s mid-point.
FOREX: USD Rebounds On Trump Tariff Headlines, Yen Firmer On Lower US Yields
The USD surged on Trump tariff headlines. From just under 1300, the BBDXY index got above 1310, a +0.80% trough to peak move. We sit lower now, last around 1305.35, around +0.30% firmer versus end NY levels from Monday.
- The USD started on the backfoot, amid carry over from the US Monday session, with news sources indicating that there would be no Day 1 tariff announcements. However, an impromptu press conference in the oval office (as Trump signed executive orders) saw the USD Rally, as Trump stated Mexico and Canada would likely be hit with 25% tariffs from Feb 1 (which is only a few weeks away).
- Not surprisingly, CAD and MXN saw the brunt of USD demand. Both currencies slumped more than 1%. USD/CAD reached 1.4516, fresh highs back to 2020. USD/MXN rose to 20.7987, just short of recent highs. Both currencies are now away from lows against the USD. USD/CAD last near 1.4420.
- Further Trump headlines stated he hasn't made a decision on universal tariffs. This, coupled with lower US yields, which have fallen today by over 9bps for the belly of the curve, has curbed USD buying interest.
- The US yield move is interesting in the context that tariffs should be seen as inflationary. It may suggest Tsy yields were already primed for such tariff announcements/threats, like those Trump made today. The 25% hike for Mexico and Canada were mentioned in 2024 after Trump won the election.
- USD/JPY is lower, aided by the USJP yield differential dip. We got to lows of 154.78, but sit slightly higher in latest dealings (last 155.00/05). Yen is still 0.40% stronger versus the USD, the only G10 currency higher against the USD so far today. Focus will be on whether we can sustain a downside break under the 50-day EMA, which is just under 155.00.
- AUD and NZD both fell as the tariff headlines crossed. However, we sit away lows, AUD/USD last 0.6250, NZD/USD around 0.5655.
- Later US January Philly Fed non-manufacturing, UK labour market, euro area/German ZEW and Canada’s December CPI data are released.
ASIA STOCKS: Asian Equities Mostly Higher Following Early Volatility
Asian stocks experienced volatile trading on Tuesday as investors reacted to US President Donald Trump's initial policy actions and trade comments. The MSCI Asia Pacific Index rose 0.5% after fluctuating between gains and losses. While Trump confirmed tariffs of up to 25% on Mexico and Canada by February 1, he held off on outlining specific measures against China, leaving the door open for future negotiations.
- Trump signaled potential tariffs on Chinese goods if Beijing blocks TikTok's sale but avoided committing to immediate China-specific levies.
- Technology stocks led the region, buoyed by news of a Chinese government chip fund's investment in AI. Renewable energy and electric vehicle stocks fell after Trump withdrew the US from the Paris Agreement and rolled back environmentally-friendly policies. and shares in energy and chemical sectors declined as investors weighed Trump's trade policy.
- Goldman Sachs’ Kinger Lau forecasted a potential 20% rise in Chinese equities over the next 12 months, suggesting markets can absorb the impact of tariffs.
- APAC markets: Japanese equities mixed, with the TOPIX -0.10% while the Nikkei trades +0.10%, Hong Kong's HSI +1.20%, China's CSI 300 +0.25%, Taiwan's TAIEX +0.20%, South Korea's KOSPI +0.20%, Australia's ASX 200 +0.60%, New Zealand NZX 50 -0.30%
ASIA STOCKS: China & Hong Kong Equities Trades Higher Following Trump Comments
Chinese and Hong Kong equities saw heightened volatility earlier however all major benchmarks now trade higher, influenced by US President Donald Trump's tariff threats and a delay in the TikTok ban. The Hang Seng Index is 1%, while the HSTech Index gained 2.4%. Mainland indices like the CSI 300 and Shanghai Composite are 0.4% and 0.2% higher, respectively. Semiconductor and AI-related stocks rallied on news of a major government chip fund investment, while property developer Country Garden surged 19.6% after resuming trading post-suspension.
- Trump hinted at significant tariffs on China if Beijing fails to approve a TikTok deal, he wants a JV where the US owns 50%, adding to market uncertainty.
- Semiconductor stocks are trading higher following a government-backed AI and chip fund initiatives.SMIC (+5.1%), Hua Hong Semi (+2.8%), and HG Semiconductor (+6.3%).
- Country Garden Resumes trading, with shares climbing almost 20% after a nine-month suspension, following a debt restructuring proposal.
- There is still somewhat of a cautious sentiment, with gains in Hong Kong markets were capped by pre-Lunar New Year caution and potential policy reversals by the US administration.
Gold’s Rise Continues as Tariff Focus on Mexico and Canada.
- Gold prices continued to rise during the course of Tuesday following a Wall Street Journal Report that incoming President Trump may not implement tariffs immediately, being closely followed by potentially imminent tariffs for Mexico and Canada.
- Trump indicated that a possible tariff on all foreign imports is a possibility he is considering, something that is likely to impact gold.
- The report’s release drove the USD weaker thus supporting gold.
- Gold opened at US$2, 708.2 before moving lower briefly then rallying to $2,726.80 in the Asia trading session.
- Gold remains above all key technical levels with the upward trend entrenched
- Key technical levels are 20-day EMA $2,674.40, 50-day EMA $2,656.22, 100-day EMA $2,616.35 and 200-day EMA $2,510.28.
- Pakistan’s deal with Saudi Arabia to buy a stake in the gold mining project owned by Barrick Gold Corp remains unresolved as Pakistan officials hope to secure some refining activities within the country rather than the raw product leaving for elsewhere.
- The mining sector could be in for a massive year of M&A as BBG reports on rumours that two of the largest global mining companies, Rio Tinto and Glencore are in early stages of merger talks.
OIL: Trump Announces Measures To Boost Demand & Supply Of US Energy
Oil prices have continued to decline today after falling over 1% on Monday. Prices jumped following US President Trump’s statement that he thinks a 25% tariff on imports from Canada and Mexico will be enacted from February 1. The US receives 4mbd from Canada, so tariffs could result in higher US fuel prices. He also declared that the SPR would be refilled, the EV mandate ended and US output increased.
- WTI is down 0.8% to $76.75/bbl. It fell to $76.09, below initial support at $76.16, before Trump’s statements and then reached $77.18. Brent is only down 0.1% to $80.10/bbl after falling to $79.64 in early trading, holding just above support, and then rising to $80.46.
- Trump declared a “national energy emergency” to be able to increase domestic oil and gas production and reverse Biden’s climate change policies, according to Bloomberg. Uncertainty remains elevated though with no details yet or if he will even be able to use it. Energy permit regulations were also eased, while he said that crude imports from Venezuela would likely be stopped.
- With Trump planning to boost energy production, he said that if the EU wants to avoid tariffs it needs to buy more US oil & gas. EU President von der Leyen has already discussed increased LNG shipments with him.
- He also overturned Biden’s ban on offshore oil & gas drilling but it will require Congressional approval and may face legal challenges.
- The US has tightened sanctions against Russia and Iran by targeting tankers and this may be intensified. Data showed China’s crude imports from Russia in 2024 rose 1% to a record and from Malaysia, which Iranian and Venezuelan crude transits through, rose 28%, while Saudi shipments fell 9%. But that may change with some Chinese ports already preventing vessels carrying Iranian crude from docking.
- Later US January Philly Fed non-manufacturing, UK labour market, euro area/German ZEW and Canada’s December CPI data are released.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 21/01/2025 | 0700/0700 | *** |  GB | Labour Market Survey |
| 21/01/2025 | 1000/1100 | *** |  DE | ZEW Current Expectations Index |
| 21/01/2025 | - |  EU | ECB's De Guindos in ECOFIN Meeting | |
| 21/01/2025 | 1330/0830 | *** |  CA | CPI |
| 21/01/2025 | 1330/0830 | ** |  US | Philadelphia Fed Nonmanufacturing Index |
| 21/01/2025 | 1445/0945 | *** | US | MNI Chicago Business Barometer Seasonal Adjustment |
| 21/01/2025 | 1630/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 21/01/2025 | 1630/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 21/01/2025 | 1800/1300 | * | US | US Treasury Auction Result for Cash Management Bill |
| 21/01/2025 | 1800/1300 | ** | US | US Treasury Auction Result for 52 Week Bill |
| 22/01/2025 | 2145/1045 | *** |  NZ | CPI inflation quarterly |
| 22/01/2025 | 0001/0001 | * | GB | Brightmine pay deals for whole economy |
| 22/01/2025 | 0700/0700 | *** | GB | Public Sector Finances |
| 22/01/2025 | 0700/1500 | ** |  CN | MNI China Money Market Index (MMI) |
| 22/01/2025 | 1200/0700 | ** | US | MBA Weekly Applications Index |
| 22/01/2025 | 1330/0830 | * | CA | Industrial Product and Raw Material Price Index |
| 22/01/2025 | 1355/0855 | ** | US | Redbook Retail Sales Index |