EXECUTIVE SUMMARY
- FED SHIFT TO LESS LONG-DATED BONDS TO TAKE YEARS - LOGAN
- US WINS BACKING FOR UN RESOLUTION ON UKRAINE WAR THAT DOESN’T BLAME RUSSIA
- TRUMP TEAM SEEKS TO TOUGHEN BIDEN’S CHIP CONTROLS OVER CHINA
- CDU/CSU FIGURES VOICE UNEASE AT DECISIONS BEING MADE BY OUTGOING PARL'T
Figure 1: ECB Negotiated Wages vs. Wage Tracker
Source: MNI/ECB
NEWS
FED (MNI): Fed Shift to Less Long-Dated Bonds to Take Years - Logan
Federal Reserve Bank of Dallas President Lorie Logan said Tuesday the Fed should eventually purchase more Treasury bills to return the central bank's assets to a more neutral posture but that would likely take many years to achieve. "Although I view a neutral mix of purchases relative to issuance as appropriate in the long run, it would make sense in the medium term to overweight purchases of shorter-dated securities so as to more promptly return the Fed’s holdings to a neutral allocation," said Logan. Her prepared remarks did not touch on a potential near-term slowdown or pause of the Fed's balance sheet drawdown, which according to minutes last week was debated at the central bank's January meeting.
US/UKRAINE (WSJ): U.S. Wins Backing for U.N. Resolution on Ukraine War That Doesn’t Blame Russia
The U.S. sided with Russia and China to win the United Nations Security Council’s backing for a resolution crafted in Washington that didn’t blame Moscow for the Ukraine war and called for a swift end to the conflict, as President Trump said he was in talks with Russia about an economic-development deal. Trump’s comments and the U.S.’s vote at the U.N. on Monday illustrated the extent to which the president has changed the U.S.’s posture toward the region, coming on the same day as European leaders gathered in Kyiv to mark the third anniversary of the invasion.
US/RUSSIA (MNI): Kremlin Talks Up Cooperation w/US, EU Enters UKR Minerals Discussion
Reuters reporting comments from Kremlin spokesperson Dmitri Peskov - speaking at his daily presser. Peskov said, addressing remarks from Russian President Vladimir Putin yesterday, hinting that Russia could work with US companies to mine rare-earth minerals in Ukraine: “Russia says it has its own plans to develop them but is open to cooperation.” Putin said, in an apparent reference to Ukraine yesterday: “Russia is one of the leading countries when it comes to rare metal reserves... as for new territories, we are also ready to attract foreign partners – there are certain reserves there too.”
US/CHINA (BBG): Trump Team Seeks to Toughen Biden’s Chip Controls Over China
Donald Trump’s administration is sketching out tougher versions of US semiconductor curbs and pressuring key allies to escalate their restrictions on China’s chip industry, an early indication the new US president plans to expand efforts that began under Joe Biden to limit Beijing’s technological prowess. Trump officials recently met with their Japanese and Dutch counterparts about restricting Tokyo Electron Ltd. and ASML Holding NV engineers from maintaining semiconductor gear in China, according to people familiar with the matter.
ECB (BBG): ECB’s Nagel Calls On Colleagues to Halt Rate-Cut Speculation
European Central Bank officials would be “well advised” to stop openly discussing their preferences for interest rates amid sticky inflation and elevated uncertainty, according to Governing Council member Joachim Nagel. Policymakers also shouldn’t hurry to ease monetary policy further, the Bundesbank chief said Tuesday. While there’s confidence that inflation will retreat to 2% sometime this year, recent information signals caution is still needed.
ECB (BBG): ECB’s Kazaks Sees More Cuts But With Trump Shaping Path Down
The European Central Bank should lower borrowing costs further but how it does so will be dictated to a large extent by economic policy in the US, according to Governing Council member Martins Kazaks. While more caution is needed as the ECB gets closer to the end point on interest rates, the direction for now is “still clear,” the Latvian official said Tuesday.
GERMANY (MNI): CDU/CSU Figures Voice Unease at Decisions Being Made by Outgoing Parl't
Late on 24 Feb reports suggested that leader of the centre-right Christian Democratic Union (CDU) and presumptive next chancellor Friedrich Merz could look to use the current Bundestag, rather than the new chamber elected on 23 Feb, to pass reform to the constitutional debt brake. Thorsten Frei, CDU leader in the Bundestag said to Deutschlandfunk "Very quick decisions are needed, quite specifically in security and foreign policy". Frei called the prospect of the swift establishment of a fund for Ukraine aid "feasible", but sought to argue that any wider constitutional changes would not be rushed.
GERMANY (BBG): Germany Discussing €200 Billion for Emergency Defense Fund
Germany’s chancellor-in-waiting Friedrich Merz has opened talks with the Social Democrats to quickly approve as much as €200 billion ($210 billion) in special defense spending, according to a person familiar with those discussions. Officials from Merz’s Christian Democrats and the SPD are discussing ways to get around Germany’s tight restrictions on government borrowing to free up resources for the country’s dilapidated military, said people familiar with the matter, who asked not to be named discussing private conversations.
UK (MNI): Energy Price Cap Adds Around 0.06ppt More to Headline CPI Than BOE Projected
Energy price cap is a little higher than expected at 1849. This is a 6% increase. The BOE's forecasts had assumed that energy prices would be 7.51% higher than last year in its February MPR projections. The Y/Y increase in the price cap is actually 9.41% (so 1.90ppt higher than the BOE forecast). Based on the CPI 2025A weights (note these will be revised in February to 2024B weights) where electricity and has have a 3.32% weight, we estimate that this increase adds around 0.063ppt to the BOE's forecasts for headline CPI between April and June.
CHINA (BBG): China Raises Scrutiny of Outflows Via HK Listings, Foreign Deals
China is increasing scrutiny of outbound investments by domestic companies as well as their use of proceeds from Hong Kong share sales, people familiar with the matter said, after record capital outflows put pressure on the yuan. Authorities have recently informed China-incorporated firms seeking initial public offerings or second share sales in Hong Kong to get a “no objection” indication from the State Administration of Foreign Exchange if they want to deploy the proceeds overseas, the people said, asking not to be identified discussing private information.
CHINA/RUSSIA (BBG): Xi Tells Putin China Supports Russia-US Collaboration on Ukraine
Chinese President Xi Jinping reaffirmed his relationship with Vladimir Putin on the third anniversary of Russia’s invasion of Ukraine, signaling that Moscow’s detente with Washington wouldn’t deter ties. “China welcomes positive efforts made by Russia and relevant parties to resolve the crisis,” Xi said Monday during a phone call with Putin, state broadcaster China Central Television reported. Relations between the neighboring nations have “a strong internal driving force and unique strategic value,” the Chinese leader added.
JAPAN (MNI): Ishin Party Lawmakers Back Budget Deal w/LDP Setting Up Bill for Passage
Lawmakers from the conservative-libertarian Japan Innovation Party (Nippon Ishin no Kai) have formally given their backing to a draft agreement on budget amendments and to support the budget bill worked out between Ishin party leaders and figures from the gov't of PM Shigeru Ishiba late last week. Late last week reports suggested that an agreement to get the FY2025/26 JPY115T state budget over the line was close.
JAPAN (FT): Japanese Trading House Shares Surge After Latest Warren Buffett Endorsement
Shares in Japan’s five largest trading houses surged as much as 8 per cent after Warren Buffett signalled Berkshire Hathaway was likely to increase its already substantial stakes in those companies. The five stocks rose between 4 and 8 per cent in the first half hour of trading in Tokyo on Tuesday. Markets in Japan were closed on Monday for a public holiday. Berkshire disclosed in 2020 it had made a 5 per cent investment in each of the trading houses worth more than $6bn combined. Since then, the market value of all five companies has soared.
BOK (MNI): Rhee Flags More Cuts, No Hint Of Timing
Bank of Korea Governor Rhee Chang-yong on Tuesday flagged further rate cuts amid greater downside risk to growth, but failed to signal a clear easing timeline, following the monetary policy board's decision Tuesday to lower the Base Rate 25 basis points to 2.75%. “It is judged that further adjustments to the Base Rate will be needed when considering economic conditions, while the timing and pace of additional rate changes will be determined by thoroughly assessing inflation, growth and financial stability based on newly obtained data, given the high uncertainties surrounding domestic and global policy conditions,” Rhee told reporters.
BITCOIN (BBG): Bitcoin Slides Below $90,000 as Crypto Selloff Gathers Steam
Bitcoin tumbled below $90,000 to hit the lowest since mid-November, as the rally that followed Donald Trump’s election to the White House fizzles. Bitcoin dropped as much as 6.1% to its lowest point since Nov. 15 and traded at around 89,400 at 8a.m. London on Tuesday after hitting its lowest point since Nov. 18. Other cryptocurrencies also fell, with Ether and Solana down roughly 10% for the session.
CORPORATE (FT): Tesla Starts 2025 With Sharp Drop In Sales in Europe
Tesla sales plummeted in Europe in January, suggesting waning demand for the US carmaker’s vehicles after its billionaire chief Elon Musk stepped up his high-profile interventions in the region’s politics. The EV maker sold just 9,900 units in Europe last month, a decline of more than 45 per cent from the same period in 2024, according to data from the European Automobile Manufacturers’ Association. Its overall share of new car registrations fell to 1 per cent from 1.8 per cent over the same period.
DATA
GERMANY DATA (MNI): GDP Inline w/ Flash, Inventories Contribute +0.8ppt
- GERMAN Q4 FINAL GDP -0.2% Q/Q, -0.2% Y/Y
Germany's final Q4'24 GDP growth figures came in in line with the flash release at -0.2% Q/Q (+0.1% Q3). Inventories stand out, contributing +0.8% percentage points to the Q/Q print (the same contribution as in Q3). That means excl. inventories, Q/Q GDP growth would have been -1.0% (and -0.7%Q/Q in Q3). Other underlying drivers were also released, showing a rise in government expenditure, little moves in private consumption and declining exports. The bigger picture remains that the German economy continues to stall.
NORWAY DATA (MNI): Ninth Successive Increase in Consumer Confidence
Norway Q4 consumer confidence ticked up to -7.5 from -12.4, the ninth successive increase from a cycle low of -36.8 in Q4 2022. The series remains well below the 2010-2019 average of 13.9 though. From the release: "Expectations for both the country's and the country's economy next year show a significant improvement. The optimism is probably influenced by the expectation of a cut in the key interest rate from Norges Bank and a good wage settlement, expected to be over 4 percent".
JAPAN DATA (MNI): Japan Jan Services PPI Rises 3.1% vs. Dec's 3.0%
- JAPAN JAN SERVICES PPI +3.1% Y/Y; DEC REV +3.0%
- JAPAN JAN SERVICES PPI -0.5% M/M: DEC UNREV +0.0%
Japan’s services producer price index rose 3.1% y/y in January, accelerating from December’s revised 3.0%, showing that corporate pass-through of cost increases remained solid, preliminary data released by the Bank of Japan on Tuesday showed. Transportation and postal services (+3.4% vs. 3.1%), other services, including hotels (+4.4% vs. +4.3%), and real-estate services (+2.7% vs. 2.3%) boosted January's result. The SPPI fell 0.5% m/m after being unchanged in December.
FOREX: Vague Risk-Off Theme Helps Support USD
- Markets trade with a general risk-off feel, after the European open ushered in a phase of stock weakness, USD buying and a pullback in US yields as traders responded to reports that Trump is set to expand and extend restrictions on chip trade with China. Importantly, the Trump administration have reached out to their Dutch and Japanese counterparts to cooperate in the sector - reinforcing the potential impact of any levies.
- The single currency looked through the release of the ECB's negotiated wages tracker, which came and went with little market ripple - the numbers are unlikely to be a needle mover for the ECB, but the data does underscore the ECB's confidence in the inflation outlook, with services expected to start seeing more meaningful disinflation below 4% in the next few months.
- The USD remains among the strongest performers in G10 headed into the crossover, but is off the session's best levels. AUD and NZD remain the hardest hit - as growth sensitive currencies fade a recent rally as the proximity to potential Canadian/Mexican tariffs next week come nearer.
- Consumer confidence data for February is the highlight of the US schedule, with Richmond Fed Manufacturing and Philadelphia Fed non-manufacturing also set to follow. The central bank speaker schedule sees ECB's Centeno & Schnabel, BoE's Pill and Fed's Barr & Barkin.
EGBS: Bund Futures Off Highs as Euro Equities Post Intraday Recovery
This morning’s risk-off/tariff-driven rally in Bund futures extended a little before stalling, with European equity futures having fully recovered from session lows. Futures are -16 ticks at 132.24, up from a session low of 131.87. Initial resistance at 132.60 (Feb 21 high) remains untested for now.
- Short-end rates have rallied alongside core FI, prompting a light twist steepening of the German curve (Schatz yields 1.5bps lower today).
- German Q4 final GDP confirmed flash estimates at -0.2% Q/Q, but details of the reported noted inventories contributed 0.8pp (i.e. domestic demand remains very weak).
- The ECB’s indicator of negotiated wages eased to 4.12% Y/Y in Q4 (vs 5.43% prior, revised from 5.42% initial), but the data is unlikely to be a needle mover for the ECB. Policymakers are more focused on the signals from the bank’s forward-looking wage tracker.
- The 10-year OAT/Bund spread is 1.5bps tighter today at 73bps – we haven’t seen an obvious driver of the outperformance. Other EGB spreads are also biased tighter.
- Today’s conventional supply (BTP Short Term/BTPei and Green Bund) was digested smoothly, while the spread has been set for today’s 15-year Obli syndication.
GILTS: Intraday Rally Intact
Tariff worry underpins gilts on the day, as markets look to the potential growth hit as opposed to the inflation shock.
- Futures have broken above the 50-day EMA to trade as high as 92.97.
- A fresh extension higher would expose the Feb 13 high (93.50) and reintroduce some momentum to the bullish technical cycle.
- Yields 3-4bp lower, light bull steepening on the curve.
- 2s10s ~0.5bp below the mid-Feb cycle closing high.
- 5s30s ~1bp blow ‘25/cycle closing highs, last ~92.5bp.
- GBP1.6bln of Sep-35 I/L supply passed smoothly, with the average price comfortably above pre-auction mids and cover ratio topping 3.50x.
- GBP STIRs move in a dovish manner in sympathy with wider core global FI.
- BoE-dated OIS shows ~56bp of cuts through year-end vs. ~52bp late yesterday, moving back to levels seen as recently as last Tuesday.
- SONIA futures flat to +4.5, with bulls threatening to push several contracts cleanly through last week’s highs.
- This afternoon will bring comments from BoE chief economist Pill, as he delivers closing remarks at the Bank’s BEAR conference.
- MPC dove Dhingra reasserted her dovish views late on Monday, with a focus on consumption worries.
- A reminder that we have suggested that Friday’s address from Deputy Governor Ramsden could provide the most interesting round of BoE communique this week.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Mar-25 | 4.449 | -0.6 |
May-25 | 4.257 | -19.7 |
Jun-25 | 4.186 | -26.9 |
Aug-25 | 4.047 | -40.8 |
Sep-25 | 3.999 | -45.6 |
Nov-25 | 3.921 | -53.4 |
Dec-25 | 3.894 | -56.0 |
EQUITIES: Recent Move Lower in E-Mini S&P Considered Corrective For Now
The trend condition in the Eurostoxx 50 futures contract 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 5387.59, the 20-day EMA. A pullback would be considered corrective. S&P E-Minis traded lower again, on Monday. The move down appears corrective, however, price has breached support at 6014.00, the Feb 10 low. This signals scope for a deeper retracement and has exposed a key support at 5935.50, the Feb 3 low. Moving average studies remain in a bull-mode condition that suggests the trend direction remains up. A resumption of gains would refocus attention on key resistance at 6178.75, the Dec 6 ‘24 high.
- Japan's NIKKEI closed lower by 539.15 pts or -1.39% at 38237.79 and the TOPIX ended 11.83 pts lower or -0.43% at 2724.7.
- Elsewhere, in China the SHANGHAI closed lower by 26.988 pts or -0.8% at 3346.04 and the HANG SENG ended 307.59 pts lower or -1.32% at 23034.02.
- Across Europe, Germany's DAX trades higher by 38.35 pts or +0.17% at 22463.07, FTSE 100 higher by 31.4 pts or +0.36% at 8689.76, CAC 40 up 8.76 pts or +0.11% at 8097.74 and Euro Stoxx 50 down 0.24 pts or 0% at 5453.06.
- Dow Jones mini down 9 pts or -0.02% at 43523, S&P 500 mini down 7.25 pts or -0.12% at 5993, NASDAQ mini down 62.75 pts or -0.29% at 21354.25.
Time: 09:50 GMT
COMMODITIES: Fresh Short-Term Cycle Lows in WTI Futures Reinforces Bearish Theme
A bearish theme in WTI futures remains intact and the move lower last week, and Monday’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 S/T resistance has been defined at $74.06, 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 latest highs. Fresh cycle 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 $2875.2, the 20-day EMA.
- WTI Crude up $0.12 or +0.17% at $70.84
- Natural Gas up $0.01 or +0.18% at $4.001
- Gold spot down $11.78 or -0.4% at $2940.65
- Copper down $1.2 or -0.26% at $455.1
- Silver down $0.15 or -0.46% at $32.207
- Platinum down $0.48 or -0.05% at $969.5
Time: 09:50 GMT
| Date | GMT/Local | Impact | Country | Event |
| 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 |
| 26/02/2025 | 0030/1130 | *** |  AU | CPI Inflation Monthly |
| 26/02/2025 | 0030/1130 | *** | AU | Quarterly construction work done |
| 26/02/2025 | 0700/0800 | ** |  SE | PPI |
| 26/02/2025 | 0700/0800 | * |  DE | GFK Consumer Climate |
| 26/02/2025 | 0700/1500 | ** |  CN | MNI China Money Market Index (MMI) |
| 26/02/2025 | 0745/0845 | ** |  FR | Consumer Sentiment |
| 26/02/2025 | 0800/0900 | ** |  ES | PPI |
| 26/02/2025 | 1200/0700 | ** | US | MBA Weekly Applications Index |
| 26/02/2025 | - | EU | ECB's Lagarde and Cipollone in G20 FMs and CB Governors meeting | |
| 26/02/2025 | 1330/0830 | * |  CA | Capital and repair expenditure survey |
| 26/02/2025 | 1330/0830 | US | Richmond Fed's Tom Barkin | |
| 26/02/2025 | 1500/1000 | *** | US | New Home Sales |
| 26/02/2025 | 1530/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 26/02/2025 | 1630/1630 | GB | BOE's Dhingra lecture on Trade fragmentation and monetary policy | |
| 26/02/2025 | 1630/1130 | ** | US | US Treasury Auction Result for 2 Year Floating Rate Note |
| 26/02/2025 | 1700/1200 | US | Atlanta Fed's Raphael Bostic | |
| 26/02/2025 | 1800/1300 | ** | US | US Treasury Auction Result for 7 Year Note |