EXECUTIVE SUMMARY
- TRUMP ESCALATES GLOBAL TRADE WAR, SPARKING TIT-FOR-TAT TARIFFS
- EUROPEAN COMMISSION PRESIDENT OUTLINES 'REARM EUROPE' PLAN
- TRUMP PAUSES MILITARY AID FOR UKRAINE TO SQUEEZE ZELENSKIY
- CHINA UNVEILS RETALIATION AGAINST EXTRA U.S TARIFFS
Figure 1: Eurozone unemployment rate (seasonally adjusted, %) matches record low
Source: Eurostat
NEWS
US (BBG): Trump Escalates Global Trade War, Sparking Tit-for-Tat Tariffs
President Donald Trump delivered on his threat to hit Canada and Mexico with sweeping import levies and doubled an existing charge on China, spurring swift reprisals that plunged the world economy into a deepening trade war. The US new tariffs - 25% duties on most Canadian and Mexican imports and raising the charge on China to 20% - impact roughly $1.5 trillion in annual imports, an expansive move signaling to markets that the Republican president is committed to wielding import duties to obtain fresh revenue and create domestic manufacturing jobs.
EU (MNI): Commission President Outlines 'ReArm Europe' Plan
European Commission President Ursula von der Leyen has outlined the Commission's 'ReArm Europe' plan intended to significantly boost defence and security spending at the EU and member state level. One proposal is to activate the 'national escape clause' of the Stability and Growth Pact that will allow member states to increase domestic defence spending without entering the excessive deficit procedure. Proposes a new instrument that can put forwards EUR150B in loans to member states for defence investment. VdL: 'It will help member states to pool demand and buy together'. Claims that it can be used to the benefit of Ukraine.
US/UKRAINE (BBG): Trump Pauses Military Aid for Ukraine to Squeeze Zelenskiy
President Donald Trump ordered a pause to all US military aid to Ukraine, turning up the heat on Volodymyr Zelenskiy days after an Oval Office blowup with the Ukrainian president left support from his country’s most important ally in doubt. The US is holding up all pending military assistance until Trump determines Ukraine’s leaders demonstrate a good-faith commitment to peace, according to a senior Defense Department official, who asked not to be identified discussing private deliberations. The administration will also review the aid to make sure it’s contributing to a solution to the conflict, a White House official said.
US/CHINA (MNI): China Unveils Retaliation Against Extra U.S Tariffs
MNI (Beijing) China will impose new tariffs on U.S goods and control trade with some American companies in retaliation to the extra 10% duties revealed on Tuesday, according to the Ministry of Finance and the Ministry of Commerce. Effective from March 10, China will impose a 15% tariff on chicken, wheat, corn, and cotton imported from the U.S, and a 10% duty on sorghum, soybeans, pork, beef, aquatic products, fruits, vegetables, and dairy products, the Ministry of Finance said in a statement.
US/CHINA (BBG): China Suspends Imports of US Logs and Soybeans From Three Firms
China has halted soybean imports from three US entities, further ratcheting up trade tensions between the world’s two largest economies. The nation halted qualifications for soybean exports from CHS Inc., Louis Dreyfus Company Grains Merchandising LLC and EGT LLC, its General Administration of Customs said in a notice late Tuesday.
US/CHINA (MNI): SCIO Publishes Fentanyl White Paper as US Tariffs Hit
MNI (London) China's state-run Xinhua reports that the State Council Information Office has released a white paper entitled "China's Control of Fentanyl-Like Substances". Allegations against China of fentanyl production/the production of chemicals used to make the drug have been cited as one of the factors behind the imposition of trade tariffs by the Trump administration. The white paper says that China "fully and deeply participates in important decision-making in the field of international drug control".
US/CANADA (MNI): Canada to Retaliate Immediately Against US Tariffs
Canadian Prime Minister Justin Trudeau said Monday night the government will almost immediately retaliate against U.S. tariffs if they come into force as President Donald Trump has indicated, opening up a trade war between two of the world's largest trading partners unseen since the 1930s. "Should American tariffs come into effect tonight, Canada will, effective 12:01 a.m. EST tomorrow, respond with 25% tariffs against CAD155 billion of American goods -- starting with tariffs on CAD30 billion worth of goods immediately, and tariffs on the remaining CAD125 billion on American products in 21 days’ time," Trudeau said in a statement.
US/RUSSIA (MNI): Sanctions Must Be Lifted to Normalise US-Russia Relations - Kremlin
Reuters carrying comments from Kremlin spokesperson Dmitri Peskov, speaking on major developments in the war in Ukraine, including possible sanctions relief and US President Donald Trump's decision to pause military aid to Ukraine. Peskov said it's "too early to comment" on reports that the Trump administration is looking at possible sanctions relief for Russia but notes that sanctions are "illegal" and need to be lifted in order to normalise relations.
MIDEAST (MNI): Israeli FM Says Open to Phase 2 Talks; Arab League Leaders Meet on Gaza
Israel's Foreign Minister Gideon Sa'ar says that the Israeli gov't is "ready to continue with phase two of the agreement, but for that we need an agreement. We will not agree to another October 7, from any front." Sa'ar refused to answer questions on if there was a deadline after which the war on Hamas in Gaza will resume, saying only, "If we want to - we will do it."
JAPAN (BBG): Japan’s Lower House Passes Budget, Providing Relief for Ishiba
Japan’s lower house passed the budget for the year starting in April, checking off a key item on Prime Minister Shigeru Ishiba’s to-do-list for shoring up his leadership ahead of a national election in the summer. The lower chamber of parliament approved the ¥115.2 trillion ($771 billion) budget in a plenary session Tuesday, clearing the way for its likely enactment before the new fiscal year begins.
RBA (MNI): Inflation, Jobs, U.S. Policies Drove RBA Cut
Weaker inflation and wages, and less concern over the non-market job sector alongside uncertainty over U.S. government policies drove the Reserve Bank of Australia Board to cut the cash rate 25 basis points to 4.10% at the February meeting, the published minutes showed Tuesday. “Members noted that inflation in the December quarter had been weaker than expected: indeed, underlying inflation was already close to the midpoint of the target range on a six-month annualised basis,” the Board said, noting wages growth had also been weaker than expected.
DATA
EUROZONE DATA (MNI): Unemployment Rate Matches Record Low and a Tenth Below Consensus
- EUROZONE JAN UNEMPLOYMENT RATE 6.2%
The Eurozone unemployment rate (SA) for January printed a tenth below consensus at 6.2% (vs 6.3% consensus) matching the record low. The latest data shows the unemployment rate has remained unchanged for four consecutive months since October at 6.2%. Previously November was reported at 6.2% with October and December previously reported at 6.3%. Within the details, the youth unemployment rate (for those under 25 years old) continued to ease to 14.1% in January (vs 14.2% in December revised from 14.8% and 14.4% in November revised from 14.9%)
UK DATA (MNI): BRC-NielsenIQ Shop Prices: Deflation Stable; Elevated Food Prices in H2
- UK FEB BRC SHOP PRICES +0.4% M/M, -0.7% Y/Y
BRC-NielsenIQ Shop Prices fell by 0.7% Y/Y for the second consecutive month, remaining in the range of -0.8% to -0.6% since September 2024 (excluding December which was distorted by Black Friday). The Shop Price Index remains in deflation for the seventh consecutive month. On a sequential basis, Shop Prices rose 0.4% M/M (vs a fall of 0.4% in January), marginally below their February average (2010-2019 average of 0.52% M/M - note none of these data are seasonally adjusted).
UK DATA (FT): UK Rental Prices Rise at Slowest Pace in Over 3 Years, Data Shows
UK rental prices rose at the slowest annual rate in more than three years in January as tenant demand eased, according to data that signals a softening in the prolonged squeeze on renters’ finances. Monthly rent for new tenancies increased by an annual rate of 3 per cent in January, taking the average cost to £1,284, according to data published by Zoopla on Tuesday.
JAPAN DATA (MNI): Japan Q4 Capex Rise Slows, GDP Seen Revised Lower
Combined capital investment by non-financial Japanese companies excluding software rose 0.5% q/q in Q4, slowing from 1.1% in Q3, a quarterly revised survey released by the Ministry of Finance Tuesday showed. The MOF survey, based on the demand side, is the key to calculating Q4 GDP revisions due March 11 and indicated that capex will be revised lower from the preliminary 0.5% estimate, based solely on supply side data. Based on the MOF data on capex and inventories, the government is likely to revise its estimate of Q4 real GDP lower from the preliminary 0.7% q/q, or an annualised 2.8% unless other components are revised sharply.
JAPAN JAN JOBLESS RATE AT 2.5%, UNCHANGED FROM DEC (MNI)
AUSTRALIA DATA (MNI): Q4 Net Export Contribution Higher Than Expected
- AUSTRALIA Q4 CURR ACCT BALANCE -12547M
The Q4 current account deficit narrowed to $12.5bn from $13.9bn, the seventh straight negative. The ABS notes 2024 saw the largest current account deficit ince 2016. The net export contribution to GDP, released Wednesday, was higher than expected at 0.2pp, which may see some forecasts revised higher, but public demand contributed only 0.2pp, significantly below Q3's 0.7pp. The improvement in the current account was driven by an increase in the goods & services surplus, while the primary income deficit widened $2.3bn. Both goods and services contributed to the $3.7bn rise in the trade surplus.
AUSTRALIA DATA (MNI): Solid Start to 2025 as RBA Expects Mild Consumption Recovery
- AUSTRALIA JAN RETAIL SALES +0.3% M/M
January retail sales values rose 0.3% m/m to be up 3.8% y/y, in line with consensus, with 3-month momentum remaining solid. Through the volatility retail spending has improved since March and the RBA is expecting private consumption to recover to a still soft 1.8% y/y in Q4 2025 up from 0.7% in Q4 2024 helped by higher real income growth. The rise was broad-based in January with all major components increasing except household goods, which had benefited from discounting during the festive period. Clothing rose 2.0% m/m, other retailing +2.4% m/m and restaurants 1.1% m/m.
FOREX: Tariff Tuesday Works Against USD, Rearmament Plans Boost EUR
- The EU's rush to rearm accelerated this morning, as European Commission President Von der Leyen outlined funding plans and instruments worth upwards of €800bln to help the EU rearm in the face of US withdrawal from Ukraine aid. The size of the plans came in above expectations, helping drive an early EUR rally and push EUR/USD back above $1.0500 and cleanly through the 100-dma at $1.0508.
- The stagflationary bias to sell USD has only picked up on the confirmation of tariffs against Canadian, Mexican and Chinese imports this morning. The news looked well-priced in as equities are somewhat stable this morning, however hold almost the entirety of yesterday's downdraft - particularly for the e-mini S&P. Haven currencies are outperforming, with both JPY and CHF firmer against all others.
- Weaker brent crude and natural gas prices have weighed on the NOK this morning, with EURNOK 0.5% higher on the session. The rally in EURNOK sees trendline resistance drawn from the August 5th 2024 high (11.7754 today) pierced, with the Jan 21 high at 11.8260 the next topside target. NOKSEK has seen a more modest 0.15% sell-off, with the SEK also under pressure amid today's pullback in European equities. However, yesterday's close below key multi-year support at 0.9500 was an important bearish development, with rallies short of the 20-day EMA at 0.9606 considered corrective.
- The data schedule for Tuesday trade is quiet, with no tier one releases set - this keeps focus on developments from the White House and in particular Trump's State of the Union address in front of a joint session of Congress for direction. Trump is expected to touch on all the major themes of his second term, from geopolitics to tariffs to tax policy and the debt limit.
EGBS: Futures Recover From Yesterday's Lows on Fresh Tariff Worries
Major EGB futures have recovered a good portion of yesterday’s selloff, as markets assess the implementation of US tariffs on Mexico, Canada and China overnight (including retaliation from the latter two). However, upside has been limited by supply from Belgium, the Netherlands, Austria and Germany and fresh signals around increased EU defence spending from EC President von der Leyen.
- Bund futures are +45 ticks at 132.46. However, yesterday’s sell-off undermined a recent bullish theme, with key resistance points now defined at 133.46 (Feb 28 high) and 133.71 (Feb 5 high).
- A pullback in crude oil futures following reports that OPEC will go ahead with its output normalisation from April will have also provided support to bonds.
- The tariff announcements heighten expectations for trade barriers to be implemented on the EU, which is expected to have a negative impact on growth and necessitate further ECB rate cuts. ECB-dated OIS price 85bps of easing through year-end (vs 80bps at yesterday’s close), driving a bull steepening in EGB curves.
- 10-year EGB spreads to Bunds are biased slightly wider, with European equity futures over 2% lower intraday.
- The Eurozone unemployment rate (SA) for January printed a tenth below consensus at 6.2% (vs 6.3% consensus) matching the record low.
- The remainder of today’s data calendar is light, keeping focus on any tariff-related headline flow.
GILTS: Back to Highs, Global Growth Fears Underpin
Gilts trade back to session highs, with tariff and global growth worries limiting any intraday pullbacks at this stage.
- Spillover from large U.S. TY futures selling flow and European defence spending headlines was limited and brief.
- The short-term bullish technical picture in futures is intact.
- Initial resistance at the Feb 26 high (93.51) caps rallies.
- More meaningful resistance seen at the Feb 6 high and bull trigger (93.83)
- Yields 3.5-5.5bp lower, curve bull steepens.
- 30-Year gilt supply saw strong demand.
- BoE-dated OIS now shows 58bp of cuts through year-end, with just under 20bp of cuts showing through May and ~27bp priced through June (these markets remain relatively rangebound over a multi-week horizon).
- ~53.5bp of cuts were priced through year-end at yesterday’s close.
- SONIA futures at/just off session highs, little changed to +8.5.
- Little of note left on the UK calendar today, which will leave macro and global issuance cues at the fore for much of the session.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Mar-25 | 4.448 | -0.7 |
May-25 | 4.256 | -19.9 |
Jun-25 | 4.187 | -26.8 |
Aug-25 | 4.046 | -40.9 |
Sep-25 | 3.998 | -45.8 |
Nov-25 | 3.902 | -55.3 |
Dec-25 | 3.874 | -58.1 |
EQUITIES: Monday's Rally Reinforces Bullish Theme for Eurostoxx 50 Futures
The trend in the Eurostoxx 50 futures contract remains bullish and Monday’s strong start to the week reinforces current conditions. The rally Monday resulted in a fresh all-time cycle high, with price piercing resistance at 5555.00, the Feb 18 high. This maintains the price sequence of higher highs and higher lows and opens the 5600.00 handle next. Key short-term support has been defined at 5394.00, the Feb 28 low. A sharp sell-off in the S&P E-Minis contract on Monday, reinforces a short-term bearish threat. The contract traded to a fresh low and the move down exposes the next key support at 5809.00, the Jan 13 low. Clearance of this level would highlight a stronger reversal and confirm a double top pattern on the daily scale. Initial firm resistance to watch is 6029.12, the 50-day EMA. A break of this average is required to signal a bull reversal.
- Japan's NIKKEI closed lower by 454.29 pts or -1.2% at 37331.18 and the TOPIX ended 19.38 pts lower or -0.71% at 2710.18.
- Elsewhere, in China the SHANGHAI closed higher by 7.285 pts or +0.22% at 3324.21 and the HANG SENG ended 64.5 pts lower or -0.28% at 22941.77.
- Across Europe, Germany's DAX trades lower by 427.85 pts or -1.85% at 22718.14, FTSE 100 lower by 35.01 pts or -0.39% at 8836.75, CAC 40 down 94.76 pts or -1.16% at 8105.62 and Euro Stoxx 50 down 92.9 pts or -1.68% at 5448.31.
- Dow Jones mini up 46 pts or +0.11% at 43284, S&P 500 mini up 10.5 pts or +0.18% at 5869.75, NASDAQ mini up 65.75 pts or +0.32% at 20529.25.
Time: 09:55 GMT
COMMODITIES: Fresh Cycle Lows in WTI Futures Strengthens Bearish Conditions
The current bearish trend condition in WTI futures remains intact and this week’s fresh short-term cycle low reinforces current conditions. Recent weakness has resulted in a clear breach of support at $70.20, the Feb 6 low. This confirms a resumption of the downtrend that started Jan 15 and paves the way for an extension towards $67.75, the Dec 20 ‘24 low, and $66.41, the Dec 6 ‘24 low. Key short-term resistance is at $73.33, the Feb 11 high. The latest pullback in Gold appears to be a correction. The move through the 20-day EMA does signal scope for an extension towards the next important support around the 50-day EMA, at $2808.08. However, Monday’s gains are a positive development and potentially an early reversal signal. A stronger rally would refocus attention on the next objective at $2962.2, a Fibonacci projection. This would also open the $3000.0 handle.
- WTI Crude down $0.7 or -1.02% at $67.67
- Natural Gas down $0.04 or -1.02% at $4.077
- Gold spot up $26.5 or +0.92% at $2920.02
- Copper down $2.95 or -0.64% at $457.3
- Silver up $0.21 or +0.67% at $31.876
- Platinum up $4.22 or +0.44% at $960.47
Time: 09:55 GMT
| Date | GMT/Local | Impact | Country | Event |
| 04/03/2025 | 1355/0855 | ** |  US | Redbook Retail Sales Index |
| 04/03/2025 | 1630/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 04/03/2025 | 1920/1420 | US | New York Fed's John Williams | |
| 05/03/2025 | 2200/0900 | * |  AU | S&P Global Final Australia Services PMI |
| 05/03/2025 | 2200/0900 | ** | AU | S&P Global Final Australia Composite PMI |
| 05/03/2025 | 0030/0930 | ** |  JP | S&P Global Final Japan Services PMI |
| 05/03/2025 | 0030/0930 | ** | JP | S&P Global Final Japan Composite PMI |
| 05/03/2025 | 0030/1130 | *** | AU | Quarterly GDP |
| 05/03/2025 | 0100/0900 |  CN | National People's Congress opens | |
| 05/03/2025 | 0145/0945 | ** | CN | S&P Global Final China Services PMI |
| 05/03/2025 | 0145/0945 | ** | CN | S&P Global Final China Composite PMI |
| 05/03/2025 | 0730/0830 | *** |  CH | CPI |
| 05/03/2025 | 0745/0845 | * |  FR | Industrial Production |
| 05/03/2025 | 0815/0915 | ** |  ES | S&P Global Services PMI (f) |
| 05/03/2025 | 0815/0915 | ** | ES | S&P Global Composite PMI (final) |
| 05/03/2025 | 0845/0945 | ** |  IT | S&P Global Services PMI (f) |
| 05/03/2025 | 0845/0945 | ** | IT | S&P Global Composite PMI (final) |
| 05/03/2025 | 0850/0950 | ** | FR | S&P Global Services PMI (f) |
| 05/03/2025 | 0850/0950 | ** | FR | S&P Global Composite PMI (final) |
| 05/03/2025 | 0855/0955 | ** |  DE | S&P Global Services PMI (f) |
| 05/03/2025 | 0855/0955 | ** | DE | S&P Global Composite PMI (final) |
| 05/03/2025 | 0900/1000 | *** | IT | GDP (f) |
| 05/03/2025 | 0900/1000 | ** |  EU | S&P Global Services PMI (f) |
| 05/03/2025 | 0900/1000 | ** | EU | S&P Global Composite PMI (final) |
| 05/03/2025 | 0930/0930 | ** |  GB | S&P Global Services PMI (Final) |
| 05/03/2025 | 0930/0930 | *** | GB | S&P Global/ CIPS UK Final Composite PMI |
| 05/03/2025 | 1000/1100 | ** | EU | PPI |
| 05/03/2025 | 1000/1100 | * | IT | Retail Sales |
| 05/03/2025 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 05/03/2025 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 05/03/2025 | 1200/0700 | ** | US | MBA Weekly Applications Index |
| 05/03/2025 | 1315/0815 | *** | US | ADP Employment Report |
| 05/03/2025 | 1430/1430 | GB | TSC: Bailey/Pill/Taylor/Greene | |
| 05/03/2025 | 1430/1430 | GB | Greene annual report | |
| 05/03/2025 | 1445/0945 | *** | US | S&P Global Services Index (final) |
| 05/03/2025 | 1445/0945 | *** | US | S&P Global US Final Composite PMI |
| 05/03/2025 | 1500/1000 | *** | US | ISM Non-Manufacturing Index |
| 05/03/2025 | 1500/1000 | ** | US | Factory New Orders |
| 05/03/2025 | 1530/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 05/03/2025 | 1900/1400 | US | Fed Beige Book | |
| 05/03/2025 | 2315/1815 | US | New York Fed's Roberto Perli |