EXECUTIVE SUMMARY
- CHINA’S DEEPSEEK TOPS IPHONE DOWNLOADS AND SPURS AI SELLOFF
- TRUMP AIDES WANT TO HIT MEXICO, CANADA WITH TARIFFS BEFORE TALKS
- GERMAN IFO UPTICK DRIVEN BY CURRENT ASSESSMENT & SERVICES
- CHINA MANUFACTURING PMI'S DIP INTO CONTRACTION
Figure 1: Nasdaq futures slide over 3% on DeepSeek concerns
Source: MNI/Bloomberg
NEWS
GLOBAL (BBG): China’s DeepSeek Tops iPhone Downloads and Spurs AI Selloff
Chinese startup DeepSeek’s eponymous AI assistant rocketed to the top of Apple Inc.’s iPhone download charts, stirring doubts in Silicon Valley about the strength of America’s lead in AI. The app’s underlying artificial intelligence model is widely seen as competitive with OpenAI and Meta Platforms Inc.’s latest. Its claim that it cost much less to train and develop triggered share moves across Asia’s supply chain. Chinese tech firms linked to DeepSeek, such as Iflytek Co., surged on Monday, while chipmaking tool makers from Netherlands’ ASML Holding NV to Japan’s Advantest Corp. slumped on the potential threat to demand for Nvidia Corp.’s AI accelerators.
MNI FED PREVIEW - JANUARY 2025: Keeping Rate Cut Hope Alive
The FOMC will keep the benchmark Fed funds rate on hold on January 29 for the first time in four meetings, as it shifts to a more patient phase of its easing cycle after delivering 100bp of cuts. The forward guidance adopted in December points to a data-dependent approach to assessing the “extent and timing” of additional rate adjustments. To this end, there has been only limited inflation and labor market data since then, while the Trump administration’s policies and their potential impact on the economic outlook are still in a formative stage.
US (WaPo): Trump Backs Off Trade Threats After Colombia Agrees to Deportation Flights
The United States and Colombia averted a trade war, for now, after the White House said late Sunday that Bogotá agreed to accept deportation flights from the United States. The two nations had spent much of the day in a tense standoff, with President Donald Trump threatening to impose steep tariffs and visa restrictions on Colombia after the South American nation turned away two deportation flights.
US (WSJ): Trump Aides Want to Hit Mexico, Canada With Tariffs Before Talks
Momentum is growing among President Trump’s advisers to place 25% tariffs on Mexico and Canada as soon as Saturday, bucking conventional wisdom in Washington and on Wall Street that he would back off the threatened levies as he has in the past in exchange for concessions. Trump has shown a willingness to move swiftly on tariffs in recent days without allowing for drawn-out talks. On Sunday, Trump announced—and then backed off—a threat to impose 25% tariffs on Colombia, citing its initial refusal to accept repatriation flights from the U.S. A senior administration official said the decision, despite the pullback, proves that Trump views tariffs as an “effective negotiating tool” and “effective punishment” for nations that don’t hew to his agenda.
US/MIDEAST (WSJ): Trump’s ‘Clean Out’ Gaza Proposal Stuns All Sides, Scrambles Middle East Diplomacy
President Trump’s Saturday night proposal that Palestinians vacate a devastated Gaza marked a sharp break with his predecessor and introduced a contentious new initiative into his unfolding Middle East diplomatic plans. Trump said the resettling of the Palestinians from Gaza “could be temporary or long term.”
US/RUSSIA (MNI): Kremlin Waiting for White House to OK Putin-Trump Call
Kremlin spokesperson Dmitry Peskov told reporters that Moscow is yet to receive signals from the White House about a meeting or call between Russian President Vladimir Putin and US President Donald Trump, noting a "certain amount of time" was needed before a meeting could take place, per Reuters. Comes after Peskov said on Friday: "Putin's ready, we're waiting for signals. Everyone is ready." Putin said in an interview on Friday: "We have always said, and I want to emphasise this again, we are ready for these talks on the Ukrainian issue."
ISRAEL/MIDEAST (BBG): Israel, Lebanon Extend Ceasefire as Gaza Hostage Obstacle Clears
Israel and Lebanon agreed to extend their ceasefire until Feb. 18 to give Israeli troops more time to withdraw, the Trump administration said Sunday, while a Gaza dispute with Hamas over a hostage was resolved. The developments came as Israeli television reported that President Donald Trump’s Middle East envoy, Steve Witkoff, would visit this week to advance the next phase of the deal with Hamas, which took effect on Jan. 19. Trump himself floated the possibility of having Jordan and Egypt take in Palestinian refugees, an idea quickly rejected in the region.
UK (FT): UK Banks Clash With Bank of England Over Rules on Loss-Absorbing Debt
UK banks have urged the Bank of England to dilute its plans for handling failing lenders, arguing that they go beyond equivalent rules in the US or the EU, and will impose “significant costs” on the sector. The City of London’s clash with the central bank comes as the government is pressing regulators to do more to revive economic growth by slashing the bureaucratic burden faced by businesses.
UKRAINE (MNI): Zelenskyy to Meet w/Macron & EUCO Pres on Poland Visit
A spox for President Volodymyr Zelenskyy has said that the president is set to meet with his French counterpart Emmanuel Macron as well as European Council President Antonio Costa during the course of the day. The three are in Poland to attend the commemoration events for the 80th anniversary of the liberation of the Auschwitz-Birkenau Nazi death camps.
DATA
GERMANY DATA (MNI): IFO Uptick Driven by Current Assessment & Services
- GERMANY JAN IFO BUSINESS CLIMATE INDEX 85.1
Germany's IFO Business Climate Index rose slightly to 85.1 in January, stabilizing on a low level (84.7 prior) and barely surpassing expectations of 84.8. The print mirrors Friday's flash PMI release overall with a stronger composite reading - however, the IFO index sees a continued deterioration in the business climate of manufacturing firms. Overall, the print suggests the ongoing slump in German economic conditions is not to subside anytime soon. The current assessment at 86.1 (vs 85.4 cons; 85.1 prior) was responsible for the higher overall reading, while expectations at 84.2 (vs 85.0 cons; 84.4 prior) remained weak.
NORWAY DATA (MNI): Q4 LFS Unemployment Rate Steady at 4.0%, March Cut Still Base Case
The Norwegian Q4 Labour Force Survey data is consistent with Norges Bank starting its easing cycle in March. While the Q4 unemployment rate was steady at 4.0%, employment growth was flat, meaning the labour force participation rate eased slightly to 72.6% (vs 72.8% prior). In December, the SA unemployment rate was 4.2%, up from 3.7% in November and 4.1% in October. The press release indicates that NSA unemployment rates were revised higher in August, September and November.
SWEDEN DATA (MNI): 12m Trade Surplus Ticks Higher, But Volume Trends Remain Sluggish
The Swedish goods trade balance was SEK6.2bln in December, down from SEK7.5bln in November. On a 12-month rolling basis, the trade balance was SEK67.5bln , up
from SEK62.6bln in November and the YTD average of SEK63.6bln. However, the trend in the value of imports and exports since 2023 remains on a sluggish path, reflecting subdued demand conditions in both Sweden and its major trading partners (e.g. Germany and China).
CHINA DATA (MNI): Manufacturing PMI's Dip into Contraction
January PMI Manufacturing disappointed slipping to 49.1 from 50.1 in December. January PMI non- Manufacturing disappointed slipping to 50.2 from 52.2 in December. Both readings were below market expectations. Industrial profits' drop in December of -3.3% signifies are third year for deflation for Chinese corporates and likely will feed into the bond rally in the near term.
CHINA DATA (MNI): China Industrial Profits Up 11.0% in December
MNI (Beijing) China’s industrial profits at large firms increased 11.0% y/y in December, rebounding from November’s 7.3% y/y fall, data from the National Bureau of Statistics showed on Monday. Profits in 2024 reached a total of CNY7431.05 billion, down 3.3% y/y, the third year of consecutive contraction, while operating income rose 2.1% y/y, the data showed.
RATINGS: Affirmations & Upgrades on Friday
Sovereign rating reviews of note from after hours on Friday include:
- Fitch affirmed the Netherlands at AAA; Outlook Stable
- Moody's upgraded Argentina to Caa3; outlook positive
- Morningstar DBRS confirmed Belgium at AA, Stable Trend
- Scope Ratings affirmed Belgium at AA-; Outlook Negative
FOREX: DeepSeek Equity Slippage Boosts JPY, Hinders AUD, NZD
- The assumption that US firms will remain market-leaders in artificial intelligence was challenged this weekend with the rise and rise of China's DeepSeek - a product demonstrating that not only can AI be rolled out extremely cheaply and effectively, but also that the US' targeted chips sanctions are failing to contain China's tech industry.
- The sharp Deepseek-triggered slide in equity futures (Nvidia's pre-market trade has wiped out near $300bln in market cap) is helping underpin haven currencies this morning, tipping USD/JPY to new YTD lows. 2025 range in GBP/JPY has been defined by the upleg posted off late November lows - with markets finding both the 76.4% retracement of the fade off highs as a decent support mid-January and 194.81, the 38.2% Fib, as a solid inflection point to cap last week's rally.
- As a result, AUD and NZD are among the poorest performers, with the effect compounded by Trump's tariff sabre-rattling toward Colombia over the weekend. The USD Index is near last week's lows, holding close to the lowest levels of 2025. The Fed decision mid-week looks key here - as Powell's messaging on rates across this year is set to steer price action.
- Focus for the Monday session remains on the ebb and flow of risk sentiment, with fragility in market-leading US tech stocks driving both headlines indices as well as broader price action. US new home sales, Chicago Fed national activity and Dallas Fed manufacturing activity data are the schedule highlights. Central bank comms are set to be quiet, with both the Fed and ECB inside their pre-decision media blackout periods.
EGBS: Major EGB Futures Off Highs, But DeepSeek Risk-Off Still Evident
This morning’s DeepSeek triggered risk-off has partially faded in major EGB futures, which are off session highs, with markets assessing the European impact as more equity-focused (ASML shares are over 11% lower today).
- Bund futures nonetheless remain +56 ticks today at 131.81. Resistance at the 20-day EMA (132.15) remains intact for now.
- German yields are 4-5bps lower, with the belly outperforming. German ASWs (vs 3m Euribor) have widened ~1bp as a result of the risk-off trade.
- The German January IFO survey was a little stronger-than-expected on the business climate and current assessment components, but the expectations component was below consensus. The print suggests the ongoing slump in German economic conditions is not to subside anytime soon.
- The EU will hold an auction to sell up to E3bln of the 5-year 2.875% Oct-29 EU-bond and up to E2bln of the 10-year 3.00% Dec-34 EU-bond at 1030GMT/1130CET.
- Weaker European equities sees 10-year EGB spreads to Bunds widen.
- Broader regional focus remains on Thursday’s ECB decision, alongside the heavy regional data calendar later this week.
GILTS: Supported by Broader Risk Off, Supply Eyed Later in the Week
Gilts are off session highs, with global inputs dominating thus far.
- Core global FI markets rallied as Chinese tech firm DeepSeek’s AI advances generated questions surrounding U.S. tech dominance, as well as promoting worry surrounding the high levels of planned and already deployed capex in microchips.
- Futures +48 at 92.39 last, compared to session highs of 99.60.
- Yields 2-5bp lower, 10s outperform.
- Bulls have been unable to force meaningful breaks of last week’s yield lows.
- Spread to Bunds 0.5bp wider at 206.5bp.
- BoE-dated OIS price 70bp of cuts through year-end after showing ~71.5bp at one point this morning. Last week’s dovish extreme of ~72.5bp over that horizon intact.
- We still look for cuts in February (market prices 22.5bp of cuts over that horizon) and May (~42bp of cumulative cuts showing through that meeting).
- SONIA futures flat to +6.5. SFIM6-U7 have breached last week’s highs.
- Supply provides the highlights of this week’s limited UK calendar.
- The DMO is looking to hold a tender of a sub-5-Year gilt on Thursday. We believe that the 0.125% Jan-26 gilt is the most likely candidate for issuance via that tender and pencil in a GBP1.0-2.0bln size for the transaction (greater colour surrounding our thoughts can be found in an earlier bullet).
EQUITIES: E-Mini S&P Starts the Week on a Bearish Note
A bull cycle in the Eurostoxx 50 futures contract remains intact and the move lower from Friday’s high is considered corrective. The move down is allowing an overbought trend condition to unwind. Moving average studies are in a bull-mode set-up that highlights a dominant uptrend. The first important support to watch is 5086.38, the 20-day EMA. A resumption of the uptrend would open 5298.50, a Fibonacci projection. The S&P E-Minis contract is starting the week on a bearish note, extending the pullback from Friday’s high. Key short-term support to watch lies at 5961.75, the Jan 16 low. For now, the move down appears corrective, however, a breach of 5961.75 would strengthen a bearish threat and signal scope for a deeper retracement. This would open 5943.94, a Fibonacci retracement. Key resistance is unchanged at 6178.75, the Dec 6 high.
- Japan's NIKKEI closed lower by 366.18 pts or -0.92% at 39565.8 and the TOPIX ended 7.03 pts higher or +0.26% at 2758.07.
- Elsewhere, in China the SHANGHAI closed lower by 2.025 pts or -0.06% at 3250.601 and the HANG SENG ended 131.58 pts higher or +0.66% at 20197.77.
- Across Europe, Germany's DAX trades lower by 224.91 pts or -1.05% at 21169.14, FTSE 100 lower by 14.67 pts or -0.17% at 8487.68, CAC 40 down 61.52 pts or -0.78% at 7865.18 and Euro Stoxx 50 down 70.38 pts or -1.35% at 5148.9.
- Dow Jones mini down 364 pts or -0.82% at 44238, S&P 500 mini down 113 pts or -1.84% at 6020.75, NASDAQ mini down 670 pts or -3.06% at 21240.5.
Time: 09:50 GMT
COMMODITIES: Trend Conditions in Gold Bullish Following Last Week's Climb
The trend structure in WTI futures is bullish despite the recent pullback. The move down appears corrective and is allowing an overbought trend reading to unwind. The 20-day EMA, at $74.28, has been pierced. A clear break of it would signal scope for a deeper retracement and expose the 50-day EMA, at $72.11. A reversal higher would highlight the end of the correction and refocus attention on $79.48, the Apr 12 ‘24 high and a key resistance. Gold traded higher last week. A bull cycle remains in play and the recent breach of resistance at 2726.2, the Dec 12 high, reinforces current conditions. Sights are on $2790.1, the Oct 31 all-time high. A break of this hurdle would confirm a resumption of the primary uptrend. On the downside, the first key support to watch is $2668.8, the 50-day EMA. A reversal lower and a breach of this average would reinstate a bearish threat.
- WTI Crude up $0.18 or +0.24% at $74.75
- Natural Gas down $0.26 or -6.56% at $3.763
- Gold spot down $7.52 or -0.27% at $2763.68
- Copper down $5 or -1.16% at $427
- Silver down $0.11 or -0.37% at $30.473
- Platinum down $6.09 or -0.64% at $945.48
Time: 09:50 GMT
| Date | GMT/Local | Impact | Country | Event |
| 27/01/2025 | 1400/1500 | ** |  BE | BNB Business Confidence |
| 27/01/2025 | 1500/1000 | *** |  US | New Home Sales |
| 27/01/2025 | 1530/1030 | ** | US | Dallas Fed manufacturing survey |
| 27/01/2025 | 1535/1635 |  EU | ECB's Lagarde remarks at IHRD occasion | |
| 27/01/2025 | 1630/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 27/01/2025 | 1630/1130 | * | US | US Treasury Auction Result for 2 Year Note |
| 27/01/2025 | 1800/1300 | * | US | US Treasury Auction Result for 5 Year Note |
| 27/01/2025 | 1800/1300 | * | US | US Treasury Auction Result for 13 Week Bill |
| 27/01/2025 | - | US | FOMC Meeting | |
| 28/01/2025 | 0001/0001 | * |  GB | BRC Monthly Shop Price Index |
| 28/01/2025 | 0745/0845 | ** |  FR | Consumer Sentiment |
| 28/01/2025 | 0900/1000 | ** | EU | ECB Bank Lending Survey |
| 28/01/2025 | 1000/1000 | * | GB | Index Linked Gilt Outright Auction Result |
| 28/01/2025 | 1330/0830 | ** | US | Durable Goods New Orders |
| 28/01/2025 | 1355/0855 | ** | US | Redbook Retail Sales Index |
| 28/01/2025 | 1400/0900 | ** | US | S&P Case-Shiller Home Price Index |
| 28/01/2025 | 1400/0900 | ** | US | FHFA Home Price Index |
| 28/01/2025 | 1400/0900 | ** | US | FHFA Home Price Index |
| 28/01/2025 | 1430/1530 | EU | ECB's Cipollone in panel on future of markets | |
| 28/01/2025 | 1500/1000 | *** | US | Conference Board Consumer Confidence |
| 28/01/2025 | 1500/1000 | ** | US | Richmond Fed Survey |
| 28/01/2025 | 1530/1030 | ** | US | Dallas Fed Services Survey |
| 28/01/2025 | 1630/1130 | ** | US | US Treasury Auction Result for 2 Year Floating Rate Note |
| 28/01/2025 | 1630/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 28/01/2025 | 1700/1800 | EU | ECB's Lagarde to mee t with Ursula von der Leyen | |
| 28/01/2025 | 1800/1300 | ** | US | US Treasury Auction Result for 7 Year Note |