EXECUTIVE SUMMARY
- CHINA IMPOSES TARIFFS ON U.S. IMPORTS
- TRUMP HINTS AT CURBS ON MUSK’S POWERS AFTER BILLIONAIRE SHAKES UP WASHINGTON
- NETANYAHU SET FOR TRUMP MEETING WITH FRAGILE GRIP ON POWER
- NIGEL FARAGE’S REFORM UK OVERTAKES LABOUR IN NEW OPINION POLL
Figure 1: US merchandise exports by destination (top) and merchandise imports by source (bottom), % total 2024
Source: MNI
NEWS
US/CHINA (MNI): China Imposes Tariffs on U.S. Imports
MNI (Beijing) China will impose an extra 15% tariff on U.S. coal and liquified natural gas imports from February 10, the Ministry of Finance said on Tuesday. An additional 10% charge will be applied to shipments of crude oil, agricultural machinery and some automobiles, the Ministry added. Washington’s decision to impose a 10% tariff on all Chinese goods violates World Trade Organization rules and undermines trade cooperation between the two countries, a statement from the Ministry said.
US (WSJ): Trump Hints at Curbs on Musk’s Powers After Billionaire Shakes Up Washington
President Trump on Monday said there were curbs in place to prevent Elon Musk from doing anything in the government without the White House’s blessing, responding to growing confusion about who was overseeing Musk’s push to dismantle multiple agencies. Trump described Musk’s role as advisory. “Elon can’t do—and won’t do—anything without our approval and we’ll give him the approval where appropriate. Where not appropriate, we won’t,” Trump said.
US/ISRAEL (BBG): Netanyahu Set for Trump Meeting With Fragile Grip on Power
Talks between Donald Trump and Benjamin Netanyahu on Tuesday are set to determine the course of Israel’s war against Hamas and, potentially, the prime minister’s ability to remain in power. In the first visit by a foreign leader to Trump’s White House, the two will discuss the ongoing truce in Gaza, which the US President’s Middle East envoy has indicated he wants to make permanent. That would help with larger regional moves high on Trump’s agenda, such as the normalization of ties between Israel and Saudi Arabia and ending Iran’s perceived nuclear threat.
US/ASIA (BBG): US, Philippines Hold Air Drills Over South China Sea
US and the Philippines are holding air drills over the disputed South China Sea on Tuesday, as the military allies bolster operational capabilities under President Donald Trump amid tensions with Beijing. Two US bombers and two Philippine fighter jets are joining the one-day drills over contested waters, including the disputed Scarborough Shoal, around which tensions between Manila and Beijing flared up last month.
SECURITY (MNI): Iran's Nuclear Programme in Focus Ahead of Trump-Netanyahu Meeting
Israeli Prime Minister Benjamin Netanyahu will meet President Donald Trump at the White House at 16:00 ET 21:00 GMT. Following a one-hour bilateral meeting, Trump and Netanyahu will deliver a joint press conference at 17:10 ET 22:10 GMT. Netanyahu is expected to stay in the US until at least Saturday for meetings with US officials and lawmakers. The meeting comes amid concerns about the implementation of phase two of the Gaza ceasefire agreement. Trump told reporters at the Oval Office yesterday that there are “no guarantees” the ceasefire will hold: “We'll see how it all turns out. It's complex".
UK (FT): Nigel Farage’s Reform UK Overtakes Labour in New Opinion Poll
Reform UK has taken the lead in a British opinion poll for the first time, in a move that will alarm Labour and the Conservatives ahead of local elections in May. Public support for Reform UK, the rightwing populist party led by Nigel Farage, was up two percentage points to 25 per cent, according to the YouGov survey. Sir Keir Starmer’s ruling Labour party was down three points to 24 per cent, while the Conservatives slipped one point to 21 per cent.
UK (FT): Rachel Reeves Faces Mounting Fiscal Pressure as Watchdog Prepares Forecast
The UK chancellor will on Tuesday receive the first official update on the forecasts set out in October’s Budget from the Office for Budget Responsibility. The first draft of the forecasts to be presented in next month’s Spring Statement, it will reflect developments in the economy since October but not the impact of any potential policy changes. Despite a string of recent announcements designed to showcase the government’s growth agenda, economists warn the OBR could conclude that even the slim margin of error Reeves left herself in October has already dwindled or disappeared.
RIKSBANK (MNI): Slightly More Cautious Tone Amongst the Doves
The Riksbank January meeting minutes highlight a slightly more cautious stance amongst the "doves" (Breman, Bunge and Jansson) than was seen in December. At first glance, Breman and Bunge still tilt in favour of further easing at first glance, but Jansson appears happy with rates at current levels in the absence of new information. Seim and Thedeen continue to provide a more cautious outlook.
JAPAN (BBG): Japan’s Ishiba Keeps Deflation Logic to Retain Ability to Spend
Japanese Prime Minister Shigeru Ishiba held onto the logic that the country still faces risks of falling prices, so that his government can justify more stimulus spending to appease voters. Shortly after central bank Governor Kazuo Ueda said the nation now “is in an inflationary situation,” Ishiba said he won’t assume Japan is cemented in a state of price growth, signaling that the government won’t be declaring the end of deflation any time soon.
DATA
AUSTRALIA DATA (MNI): Household Spending Signals Rise in Q4 Consumption
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.
FOREX: CAD, MXN Gain Tariff Reprieve, But CNH Still in Crosshairs
- JPY is slipping against most others in G10, pressed by a modest recovery in core European equities on the back of the Canadian/Mexican tariff reprieves. CHF, however, is firmer - showing that haven flows remain inconsistent. This keeps USD/JPY just above the 50-dma, however recoveries are capped by the 156.29 mark - the 50% retracement of the downleg off the YTD high.
- US JOLTS jobs data is set to cross later today, alongside the final durable goods report for December, but it's headline risk surrounding tariffs that will likely remain the key driver of sentiment. Both Mexico and Canada secured last minute reprieves on universal 25% import tariffs, allowing governments a month for negotiations to avoid full installation in March.
- China are yet to secure the same - and have announced plans for a 10% levy on US energy imports as a counteractive measure. It's these tariffs that will remain a focus for markets ahead. We wrote on Friday that CNH downside could be limited through this first phase of tariffs, as the reaction function of the Chinese authorities remains key. MNI wrote on January 17th that the PBOC will limit any sharp depreciation of the CNY in response to tariff uncertainties as sharp CNY depreciation will worsen capital outflows and impede monetary and fiscal policy coordination.
- As such, CNH downside could be limited over the short-term - price action that would work against options market pricing that increasingly favours USD/CNH calls. As such, collecting premiums via selling USD/CNH topside would stand to benefit.
EGBS: Bund Futures Below Yesterday's Settlement Levels Alongside USTs
Bund futures are 42 ticks below yesterday’s settlement levels at 132.87, with core FI markets unwinding a little of yesterday’s tariff risk-premium following agreements between the US and Mexico/Canada. The reaction to China’s retaliatory actions overnight has been relatively contained.
- Initial short-term support in Bunds is not seen until the 20-day EMA at 132.14.
- German yields are around 4bps higher across the curve, though 10-year yields at 2.423% remain comfortably below Friday’s closing levels of 2.459%.
- 10-year EGB spreads to Bunds are up to 1.5bps tighter, with European equity futures continuing to inch higher.
- The OAT/Bund spread remains above 70bps, with medium-term fiscal and political risks still present despite PM Bayrou looking likely to survive tomorrow’s censure motion.
- Austria sold E1.725bln of 5/15-year RAGBs this morning. We remain on the lookout for syndication announcements from Belgium, Germany and Italy.
GILTS: Holding Lower
Gilts remain lower on the day.
- Pressure was seen ahead of the GBP4.25bln auction of the 4.375% Mar-30 gilt, adding to weakness that stemmed from Canada & Mexico’s short-term U.S. tariff reprieve.
- Mixed auction results failed to provide any lasting support.
- Gilt futures as low as 92.45 post-auction before a recovery to 92.55.
- Initial support located at the 20-day EMA (92.11).
- Yields 3.5-6.0bp higher across the curve, 5s lead the sell off
- 10-Year spread to Bunds ~2.5bp wider at 212.3bp, next upside level at the Jan 20 close (213.3bp).
- Hawkish adjustments in GBP STIRs as gilts soften.
- 23.5bp of cuts priced for this week’s BoE decision (our preview will be published later today), 47bp of cuts showing through May.
- We look for 25bp cuts at both of those meetings.
- 78bp of cuts priced through December vs. ~80bp late yesterday.
- We believe that more data is needed before we can give a meaningful view on monetary policy beyond the Bank’s May meeting.
- SONIA futures little changed to -7.5.
- December highs in SFIZ5 remain untested.
- The recent run of dovish repricing may have reached its limit, unless we get a fresh catalyst.
- A limited UK calendar will leave focus on cross-asset cues and tariff-related headlines.
EQUITIES: Recent Weakness in E-Mini S&P Strengthens a Bearish Threat
A sharp reversal lower in the Eurostoxx 50 futures contract on Monday signals the end of the recent bull run - for now - and the start of a corrective cycle. Price gapped lower and traded through the 20-day EMA, at 5159.26. A continuation of the bear leg would pave the way for a move towards the 50-day EMA, at 5056.82. On the upside, key resistance and the bull trigger has been defined at 5327.00, the Jan 31 high. The S&P E-Minis contract started the week on a bearish note. The gap lower Monday and a breach of support at 5948.00, the Jan 27 low, strengthens a bearish threat and cancels - for now - a recent bullish theme. An extension down would open 5892.37, a Fibonacci retracement point. Initial resistance is at 6069.00, today’s intraday high. Gains are considered corrective, however, a stronger rally would expose key resistance at 6178.75, the Dec 6 high.
- Japan's NIKKEI closed higher by 278.28 pts or +0.72% at 38798.37 and the TOPIX ended 17.63 pts higher or +0.65% at 2738.02.
- Across Europe, Germany's DAX trades lower by 23.12 pts or -0.11% at 21405.41, FTSE 100 lower by 28.2 pts or -0.33% at 8555.43, CAC 40 down 2.96 pts or -0.04% at 7852.33 and Euro Stoxx 50 up 0.17 pts or +0% at 5218.09.
- Dow Jones mini down 120 pts or -0.27% at 44445, S&P 500 mini down 14.75 pts or -0.24% at 6008.25, NASDAQ mini down 30 pts or -0.14% at 21378.25.
Time: 09:50 GMT
COMMODITIES: Gold Maintains Bullish Price Sequence, Sights on $2845.20 Next
Last week’s move down in WTI futures marked an extension of the current corrective cycle. The 20-day EMA has been breached and attention is on support around the 50-day EMA, at $72.30. A clear break of the 50-day average would suggest scope for a deeper retracement. On the upside, a reversal higher would refocus attention on $79.48, the Apr 12 ‘24 high and a key resistance. A bull cycle in Gold remains in play. Last week’s extension higher and Monday’s gains confirm a resumption of the uptrend and maintain the bullish price sequence of higher highs and higher lows. Moving average studies are in a bull mode position too, highlighting a dominant uptrend. Sights are on $2845.2 next, a Fibonacci projection. The first key support to watch is $2692.6, the 50-day EMA. The 20-day EMA is at $2736.4.
- WTI Crude down $1.43 or -1.95% at $71.76
- Natural Gas down $0.12 or -3.61% at $3.231
- Gold spot up $5.58 or +0.2% at $2821.01
- Copper up $2.1 or +0.49% at $432.75
- Silver up $0.04 or +0.13% at $31.6379
- Platinum up $0.55 or +0.06% at $968.01
Time: 09:50 GMT
| Date | GMT/Local | Impact | Country | Event |
| 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 |
| 05/02/2025 | 1400/1500 | EU | ECB's Lane at Euro area in 2025 event and Q&A | |
| 05/02/2025 | 1400/0900 | US | Richmond Fed's Tom Barkin | |
| 05/02/2025 | 1445/0945 | *** | US | S&P Global Services Index (final) |
| 05/02/2025 | 1445/0945 | *** | US | S&P Global US Final Composite PMI |
| 05/02/2025 | 1500/1000 | *** | US | ISM Non-Manufacturing Index |
| 05/02/2025 | 1500/1000 | ** | US | housing vacancies |
| 05/02/2025 | 1530/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 05/02/2025 | 1800/1300 | US | Chicago Fed's Austan Goolsbee | |
| 05/02/2025 | 2000/1500 | US | Fed Governor Michelle Bowman |