EXECUTIVE SUMMARY
- CDU & SPD CAN FORM 'GRAND COALITION'; PATH OPEN FOR DEBT BRAKE REFORM
- ZELENSKY SEEKS TRUMP MEETING, QUESTIONS TERMS OF U.S. MINERAL DEAL
- TRUMP TARGETS CHINA WITH BIGGEST SALVO SO FAR IN SECOND TERM
- ECB FACES RISK OF ‘SLEEPWALKING’ INTO TOO MANY RATE CUTS - WUNSCH
Figure 1: Germany 2025 Federal Election Results, Seats
Source: Federal Returning Officer, MNI
NEWS
GERMANY (MNI): CDU & SPD Can Form 'Grand Coalition'; Path Open for Debt Brake Reform
In line with expectations, the conservative Christian Democratic Union (CDU) and its allies in the Christian Social Union have secured a plurality in the Bundestag with 208 of 630 seats in the 23 February federal election. The CDU is now in a strong position to form a 'grand coalition' with the centre-left Social Democrats (SPD). The SPD fell from first to third place, enduring its worst-ever post-war election result winning just 120 seats (down 86). A prospective 'GroKo' would carry 328 seats, above the 315 majority threshold. It would be the smallest grand coalition to govern Germany, but for CDU leader Friedrich Merz a narrow majority is likely preferable to a tripartite 'Kenya' coalition that includes the environmentalist Greens (85 seats, down 33).
US/UKRAINE (WaPo): Zelensky Seeks Trump Meeting, Questions Terms of U.S. Mineral Deal
Ukrainian President Volodymyr Zelensky called Sunday for a meeting with President Donald Trump as the United States continues to push a deal for access to his country's minerals, and said he would step down if it would bring peace to Ukraine or in exchange for NATO membership - sequences of events that remain unlikely. The Trump administration has cast doubt on Ukraine reaching its goal of becoming a NATO member, frustrating Kyiv that an important bargaining chip might be taken off the table before any serious negotiations with Russia even begin.
US/RUSSIA (MNI): Russia and US to Hold Additional Talks This Week - Kremlin
Reuters reporting comments from the Kremlin spokesperson Dmitri Peskov confirming that US and Russian officials will hold further talks this week on “eliminating irritants in ties and on work of foreign missions”. Peskov told reporters Russian President Vladimir Putin will make calls this morning to "infor[m] partners about talks with US.” Reuters notes Peskov said ‘on Trump comments blaming Zelenskiy and Biden for war’: “We welcome and support new US approach to dialogue with Russia... We hope US will fully analyse root causes of Ukraine conflict… We hope this will help towards a settlement”.
US/CHINA (BBG): Trump Targets China With Biggest Salvo So Far in Second Term
The Trump administration took aim at China with a series of moves involving investment, trade and other issues that raises the risk ties may soon worsen between the US and its top economic rival. In recent days, President Donald Trump has rolled out a memorandum telling a key government committee to curb Chinese spending on tech, energy and other strategic American sectors. The administration also called on Mexican officials to place their own levies on Chinese imports – a move that comes after some firms from the Asian nation shifted production to the US neighbor to avoid duties the Republican enacted in his first term.
US (WSJ): The U.S. Economy Depends More Than Ever on Rich People
Many Americans are pinching pennies, exhausted by high prices and stubborn inflation. The well-off are spending with abandon. The top 10% of earners - households making about $250,000 a year or more - are splurging on everything from vacations to designer handbags, buoyed by big gains in stocks, real estate and other assets.
MIDDLE EAST (WSJ): Israel Says It Won’t Release Prisoners Until Hamas Stops ‘Humiliating’ Hostage Handovers
Israel said it is temporarily withholding the release of any Palestinian prisoners until Hamas stops staging “ceremonies that humiliate our hostages,” throwing into question the future of the Gaza cease-fire. Hundreds of Palestinian prisoners were supposed to be released Saturday from Israeli custody after Hamas handed over six hostages in ceremonies in which the men, some looking thin and weak, were forced to wave on stage before crowds. One of the hostages kissed militants during the event.
EU/RUSSIA (BBG): EU’s Top Diplomat Says the US Is Spreading Russia Narrative
The European Union’s foreign policy chief said US President Donald Trump’s administration is falling for Russia’s narrative in its escalating criticism of Ukraine. Speaking ahead of a meeting of EU foreign ministers in Brussels on Monday, Kaja Kallas stressed any potential peace deal to halt Russia’s war will need to involve Ukraine and Europe as fears grow both will be sidelined in talks.
EUROPE/RUSSIA (BBG): Macron and Starmer Head to Washington to Lobby for Ukraine Help
French President Emmanuel Macron and UK Prime Minister Keir Starmer will meet with President Donald Trump this week as they try to clinch a European role in the ongoing talks between Washington and Moscow on ending Russia’s war in Ukraine. The French and British leaders spoke Sunday to coordinate their objectives, which include getting US security guarantees for Ukraine, slowing the pace of Washington’s talks with Russia and demonstrating Europe’s commitment to increase defense spending, according to people familiar with their plans, who spoke on the condition of anonymity.
ECB (FT): ECB Faces Risk of ‘Sleepwalking’ Into Too Many Rate Cuts, Says Top Official
The Eurozone risks “sleepwalking” into making too many interest rate cuts and needs to stand ready to stop lowering borrowing costs soon, the head of Belgium’s central bank has said. Markets widely expect the European Central Bank to cut its benchmark deposit rate from 2.75 per cent to 2 per cent by the end of the year, amid signs of weak growth in the region. “I’m not pleading for a pause in April but we must not sleepwalk to 2 per cent [interest rates] without thinking about it,” said Pierre Wunsch, governor of the Central Bank of Belgium, in an interview with the Financial Times on Friday.
BOE (MNI): A Number of Speakers at BOE's BEAR Conference
BOE's Lombardelli has just finished speaking, giving the intro to the BOE's research conference (BEAR) with the focus this year on the balance sheet. This morning sees a session on QT (chaired by Andrea Rosen) with a keynote on "Balance Sheet Policy" from Annette Vissing-Jorgensen (Federal Reserve Board) with Pill chairing this (11:15GMT). This afternoon Ramsden will chair a panel (13:15GMT) with BOE's ED of Markets Vikcy Saporta participating. Tomorrow's highlights will be remarks and a Q&A from Dallas Fed Chair Logan (9:15GMT) ahead of a keynote speech from ECB's Schnabel (13:00GMT) and then closing remarks by Pill (14:00GMT).
CHINA (MNI): NPC Standing Committee Meeting on Private Law Bill
MNI (Beijing) China’s NPC Standing Committee has met to prepare for the third annual session of the 14th National People's Congress to be held in Beijing on March 5, 2025, state media outlet Xinhua news has said. The meeting reviewed the draft report of the 14th National People's Congress Standing Committee and the draft bill on promoting the private economy, Xinhua said, adding that Zhao Leji, chairman of the Committee presided over meeting.
DATA
EUROZONE DATA (MNI): EZ Final HICP Unrevised to 2dp From Flash
- EUROZONE JAN FINAL HICP -0.3% M/M, +2.5% Y/Y
- EUROZONE JAN FINAL CORE HICP -0.9% M/M, +2.7% Y/Y
Eurozone January Final HICP was unrevised to 2dp from the flash reading for both the Y/Y and M/M prints at 2.52% Y/Y (2.43% in December) and -0.28% M/M (0.36% in December). Core inflation (ex energy, food, alcohol & tobacco) was revised 0.01ppt higher from flash at 2.70% Y/Y (vs 2.69% flash, 2.71% in December), remaining around the 2.7% Y/Y level for the fifth consecutive month. On a monthly basis it was -0.95% M/M (vs -0.96% flash, 0.45% in Dec). The final reading shows services soften marginally as seen in the flash print, with services' contribution to headline HICP at 1.77ppts (vs 1.78ppts in Dec). Sequential services was revised up from flash however to -0.14% M/M (from -0.2%). This is stronger than what we'd typically see for a January in a pre-pandemic setting
GERMANY DATA (MNI): IFO Expectations Improve, Particularly in Industry; Overall Weak
- GERMANY FEB IFO BUSINESS CLIMATE INDEX 85.2
Germany's IFO Business Climate Index remained unchanged at 85.2 in February (January's print got slightly upwardly revised), remaining below expectations of 85.8. The print directionally mirrors Friday's flash PMI release across sectors, with services slightly deteriorating and some improvement in manufacturing, but overall a bit weaker. A more pronounced uptick in expectations would be needed for a firm signal of Germany's economy leaving the doldrums.
SWITZERLAND DATA (MNI): Labour Maket Softens on Demand Side But Remains Solid
Swiss employment (excl. agriculture) rose +0.9% Y/Y and +0.1% Q/Q in Q4 2024. The slight sequential increase was based on employment rising both in the tertiary sector, as well as in industry and construction, by 0.1%. While the data suggests some labour market softening on the demand side, the figures overall underpin the narrative that the Swiss economy remains on a solid enough footing, meaning little requirement for the SNB to move policy into accommodative territory from a business cycle perspective.
FOREX: EUR Breathes Sigh of Relief on German Elections
- The smooth passage of the German election results has allowed markets to trade with a sense of normalcy after EUR came under pressure into the Friday close - but the victory for Merz' CDU/CSU and the likely formation of a coalition with the SPD has steered markets clear of any abrupt U-turns on policy - leaving the EUR to very modestly outperform this morning.
- January highs have capped the topside for EURUSD and broader bearish conditions continue to signal scope for a test of a significant cluster of support in EURJPY. For EURUSD, spot is edging lower and narrowing the gap to Friday’s close at 1.0459. A deeper reversal would place the focus on initial firm at 1.0401, the Feb 19 low.
- A sharp dose of equity selling at the European open has subsided, with the bounce off lows helping markets maintain their preference for JPY and CHF selling - with both currencies at the bottom of the G10 table today. The key for sentiment ahead remains the state of the Russia-Ukraine peace talks and the timing of a Putin-Trump meeting in Saudi Arabia.
- Schedules show both the French and UK leaders set to head to Washington this week, at which they'll look to assert Europe's interests and moderate Trump's divisive tone toward Moscow and Kyiv. Macron and Starmer's ability to do so could prove market-moving this week.
- Typically for a Monday, datapoints are few and far between, with just the Chicago and Dallas Fed national activity indices. As such, more focus may be paid to the ongoing BoE research conference, at which BoE's Ramsden and Dhingra are set to speak - with balance sheet policy a particular focus.
EGBS: Details of German Vote Split Limits Downside in Bund Futures
Details of the German election vote split has limited downside in Bund futures this morning. Although the CDU is in a strong position to form a 'grand coalition' with the centre-left Social Democrats (SPD), debt brake reform will only be possible with support from the far-left progressive Die Linke party.
- Bund futures are -10 ticks versus Friday’s settlement levels at 132.28, up from a session low of 132.02. Friday’s rebound in futures appears corrective for now, with key short-term resistance defined at 132.97, the Feb 13 high. Initial firm support is 131.26, the Feb 19 low and the bear trigger.
- German cash yields are now little changed on Friday’s close, with the curve lightly steepening.
- The German February IFO survey was mixed versus expectations, but directionally mirrored Friday's flash PMI release across manufacturing/services sectors. Eurozone final Jan HICP confirmed flash estimates at 2.5% Y/Y for headline and 2.7% Y/Y for core.
- 10-year EGB spreads to Bunds are up to 0.5bps tighter on the day.
- EU-bond and Belgian OLO supply is due this morning.
- The remainder of today’s regional calendar is light.
GILTS: Little Changed as Offshore Cues Largely Offset, Roll Activity Dominates
Gilts remain locked in a narrow range, with offshore cues (Friday’s late rally in wider core global FI markets & feedthrough from the German election) mostly offsetting thus far.
- Futures continue to hover around 92.50, after stabilising around that level shortly after the open.
- The bullish technical cycle in the contract remains intact, although it has moderated.
- Initial resistance located at the 50-day EMA (92.83), while initial support comes in at the Feb 20 low (91.78).
- Yields ~1bp lower across the curve.
- Expect futures roll activity to continue to dominate ahead of Thursday’s first notice for H5, with estimates pointing to just over 26% roll completion at present.
- Comments from BoE’s Ramsden (13:15 GMT) and Dhingra (18:00 GMT) are due later today, with plenty of BoE-speak due throughout the week.
- BoE-dated OIS is little changed on the day, showing 52.5bp of cuts through year-end.
EQUITIES: Trend Direction in Eurostoxx 50 Futures Remains Upward
The trend direction in Eurostoxx 50 futures remains up and last week’s climb to a new alltime high on the continuation contract, reinforces a bull theme. Note too that moving average studies are in a bull-mode set-up, highlighting a dominant uptrend and positive market sentiment. Sights are on 5574.57 next, a Fibonacci projection. Initial firm support to watch is 5379.97, the 20-day EMA. S&P E-Minis faded sharply off their recent highs last week. The move down appears corrective - for now - and a bullish theme is intact. Attention is on the key resistance at 6178.75, the Dec 6 ‘24 high. A break of this hurdle would resume the primary longer-term uptrend. On the downside, initial key near-term support has been defined at 6014.00, the Feb 10 low. A breach would highlight a bearish development and expose 5935.50, the Feb 3 low.
- In China the SHANGHAI closed lower by 6.085 pts or -0.18% at 3373.028 and the HANG SENG ended 136.31 pts lower or -0.58% at 23341.61.
- Across Europe, Germany's DAX trades higher by 178.29 pts or +0.8% at 22464.5, FTSE 100 higher by 24.7 pts or +0.29% at 8684.15, CAC 40 down 12.52 pts or -0.15% at 8141.24 and Euro Stoxx 50 up 0.31 pts or +0.01% at 5474.85.
- Dow Jones mini up 289 pts or +0.66% at 43775, S&P 500 mini up 33.5 pts or +0.56% at 6062.5, NASDAQ mini up 106 pts or +0.49% at 21786.25.
Time: 09:50 GMT
COMMODITIES: Bear Theme in WTI Futures Intact Following Recent Move Lower
A bearish theme in WTI futures remains intact and the move lower last week, and today’s fresh short-term cycle low, reinforces a bear condition. Support at $70.20, the Feb 6 low, has been pierced. A clear break of it would strengthen the downtrend and confirm a breach of the 50-day EMA. This would open $67.75, the Dec 20 ‘24 low. Key short-term resistance has been defined at $74.06, the Feb 3 high. A move above this level would reinstate a bull theme. A bull cycle in Gold remains in play and the yellow metal continues to trade at its recent highs. Fresh recent highs once again 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 the $2962.2, a Fibonacci projection. The first key support to watch is $2867.1, the 20-day EMA.
- WTI Crude down $0.05 or -0.07% at $70.36
- Natural Gas down $0.22 or -5.17% at $4.015
- Gold spot up $7.35 or +0.25% at $2943.18
- Copper down $2.25 or -0.49% at $459.25
- Silver up $0.07 or +0.21% at $32.533
- Platinum down $2.7 or -0.28% at $970.16
Time: 09:50 GMT
| Date | GMT/Local | Impact | Country | Event |
| 24/02/2025 | 1315/0815 |  CA | BOC Deputy Gravelle speaks on BOE panel at "The Future of the Central Bank Balance Sheet" conference | |
| 24/02/2025 | 1315/1315 |  GB | BOE's Ramsden and Saporta panellist on CB Balance sheet during QT | |
| 24/02/2025 | 1330/0830 | * | CA | Quarterly financial statistics for enterprises |
| 24/02/2025 | 1400/1500 | ** |  BE | BNB Business Confidence |
| 24/02/2025 | 1530/1030 | ** |  US | Dallas Fed manufacturing survey |
| 24/02/2025 | 1630/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 24/02/2025 | 1630/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 24/02/2025 | 1800/1800 | GB | BOE's Dhingra speech on state of the UK monetary policies | |
| 24/02/2025 | 1800/1300 | * | US | US Treasury Auction Result for 2 Year Note |
| 25/02/2025 | 0700/0800 | *** |  DE | GDP (f) |
| 25/02/2025 | 0920/0420 | US | Dallas Fed's Lorie Logan | |
| 25/02/2025 | 1000/1000 | * | GB | Index Linked Gilt Outright Auction Result |
| 25/02/2025 | 1100/1100 | ** | GB | CBI Distributive Trades |
| 25/02/2025 | 1300/1400 |  EU | ECB's Schnabel at BOE's Annual Conference on Balance Sheet | |
| 25/02/2025 | 1330/0830 | ** | US | Philadelphia Fed Nonmanufacturing Index |
| 25/02/2025 | 1355/0855 | ** | US | Redbook Retail Sales Index |
| 25/02/2025 | 1400/0900 | ** | US | S&P Case-Shiller Home Price Index |
| 25/02/2025 | 1400/0900 | ** | US | FHFA Home Price Index |
| 25/02/2025 | 1400/0900 | ** | US | FHFA Home Price Index |
| 25/02/2025 | 1400/0900 | ** | US | FHFA Quarterly Price Index |
| 25/02/2025 | 1400/0900 | ** | US | FHFA Quarterly Price Index |
| 25/02/2025 | 1400/1400 | GB | BOE's Pill remarks at BEAR Conference | |
| 25/02/2025 | 1500/1000 | *** | US | Conference Board Consumer Confidence |
| 25/02/2025 | 1500/1000 | ** | US | Richmond Fed Survey |
| 25/02/2025 | 1530/1030 | ** | US | Dallas Fed Services Survey |
| 25/02/2025 | 1645/1145 | US | Fed Governor Michael Barr | |
| 25/02/2025 | 1800/1300 | US | Richmond Fed's Tom Barkin | |
| 25/02/2025 | 1800/1300 | * | US | US Treasury Auction Result for 5 Year Note |