EXECUTIVE SUMMARY
- KYIV READY FOR CEASEFIRE TALKS BUT REUTERS REPORTS RUSSIA SCEPTICAL
- EU TARGETS RETALIATION TARIFFS ON US RED STATES
- MNI US CPI PREVIEW: CALM BEFORE THE TARIFF STORM
- MNI BOC PREVIEW: EASING AMIDST EVEN GREATER UNCERTAINTY
Figure 1: Recent US inflation developments
NEWS
MNI US CPI PREVIEW: Calm Before the Tariff Storm
Analyst unrounded estimates see core CPI inflation easing to a still solid 0.28% M/M in February after a far stronger than expected 0.45% M/M in January. January’s beat came from a variety of factors and broad expectations are that much of these will reverse. Headline CPI is expected to show a very similar M/M pace as core, with food inflation a little stronger but energy prices flat on the month (lower gasoline vs higher natural gas). Core CPI should round down to 3.2% Y/Y from 3.26%, whilst headline should ease a full tenth to 2.9% Y/Y.
MNI BOC PREVIEW - MARCH 2025: Easing Amidst Even Greater Uncertainty
The Bank of Canada is expected to cut its overnight rate target another 25bp on Wednesday to 2.75%. It’s quite likely that a pause would have been seriously considered if going on recent economic trends alone and after 200bp of cuts. But easing 25bp to the mid-point of the BoC’s estimated neutral range of 2.25-3.25% appears the prudent choice (and 100% priced by OIS markets) given the context of an escalating US-Canada trade war that presents risks of both higher inflation and weaker growth.
US/EU (MNI): EU Targets Retaliation Tariffs on US Red States
The European Commission is targeting US Republican states and important US businesses to try and persuade public opinion that tariffs are not a good idea, EU sources said this morning. Among the US products being considered are soyabeans, with an eye on Louisiana, the home state of US Speaker Mike Johnson, beef and poultry, of which "Red States" Nebraska and Kansas are big exporters, and wood products from Georgia, Virginia and Alabama. The Commission is aiming to put together a target list of around €18bn worth of US exports and to implement them by mid-April following consultations with EU states and key EU industries. Officials suggested a 25% tariff rate on US exports was likely.
US (NYT): Trump’s Tariffs on Steel and Aluminum Go Into Effect
President Trump imposed a 25 percent tariff on metal imports. The move is expected to raise costs for U.S. manufacturers of cars, solar panels and other products, potentially slowing the economy. President Trump’s sweeping tariffs on foreign steel and aluminum went into effect on Wednesday, escalating America’s trade spats with global competitors, including close allies already reeling from his on-and-off approach to trade penalties.
US (WSJ): House Passes GOP Measure to Avert Government Shutdown
The House narrowly approved a Republican proposal to fund the government into the fall, as GOP lawmakers remained largely united following a last-minute push from the White House, overcoming Democratic opposition and setting up a fight in the Senate. Funding for the federal government expires this weekend. The GOP proposal would extend funding through Sept. 30 at fiscal 2024 spending levels, but it includes $13 billion in cuts in nondefense spending and $6 billion in increased military spending. It allocates additional money for border enforcement and forces Washington, D.C., to cut $1 billion from its budget.
US (WSJ): Trump’s Economic Messaging Is Spooking Some of His Own Advisers
President Trump’s stop-and-start trade policy and uneven economic messaging have rattled some of his own allies, triggering a flood of calls from business executives, concerns from Republican lawmakers and tension in the White House. Senior officials, including White House chief of staff Susie Wiles, have received panicked calls from chief executives and lobbyists, who have urged the administration to calm jittery markets by outlining a more predictable tariff agenda, according to people familiar with the discussions. Many in the business community have abandoned efforts to get the president to reverse course on trade, instead pleading with the White House for clarity on his approach, the people said.
UKRAINE (MNI): Kyiv Ready for Ceasefire Talks but Reuters Reports Russia Sceptical
Speaking in the Polish capital, Warsaw, Ukrainian Foreign Minister Andrii Sybiha says that the Ukrainian gov't is 'ready to form a team to work on a roadmap to reach a ceasefire with Russia,' adds that 'Ukraine is the country that wants the war to end the most', and 'wants a just peace'. This comes after the 11 March talks between Ukrainian officials (including Sybiha) and their US counterparts in Saudi Arabia. In the wake of the talks the US has restored aid to and intelligence sharing with the United States and is now seeking to push Russia towards accepting Ukraine's proposed 30-day ceasefire.
MIDEAST (BBG): Houthis Vow to Resume Attacks on Israeli Ships Over Gaza Aid
The Houthi militant group in Yemen said it would resume attacks on Israeli ships for the first time in about two months after demanding the country end a ban on aid entering Gaza. The decision, which the Houthis said would take effect immediately, will likely further deter container ships and tankers - including non-Israeli ones - from sailing through the Suez Canal and southern Red Sea.
ECB (MNI): Direction of Inflation Shocks Harder to Call - Lagarde
High levels of geopolitical and economic uncertainty make it much harder to predict the direction of inflationary shocks, European Central Bank, President Christine Lagarde said on Wednesday, reaffirming the need for a robust commitment to the ECB price target. While structural factors like ageing and digitalisation will probably be disinflationary, trade fragmentation and higher defence spending could push up inflation, even as U.S. tariffs potentially lower demand for EU exports and excess capacity from China is redirected into Europe, Lagarde told the ECB Watchers conference in Frankfurt.
ECB (BBG): Centeno Favors ECB Rate Cuts Sooner Rather Than Later: Dow Jones
The European Central Bank shouldn’t wait to lower interest rates, according to Governing Council member Mario Centeno. “I would prefer to move sooner rather than later,” he told Dow Jones. “I have been stressing the difficulties that the European economy has at this stage. Easing at this stage of the business cycle will help the economy to move forward, which is necessary.”
ECB (BBG): ECB’s Simkus Says Direction of Travel on Rates Hasn’t Changed
European Central Bank Governing Council member Gediminas Simkus said interest rates are still heading lower, though high uncertainty makes it too difficult to predict future decisions. “Has the direction of travel changed? It has not,” the Lithuanian official said Thursday. “We’ll be best positioned to see in April if we should cut rates or take a pause.”
PORTUGAL (BBG): Portugal Heads Toward Early Election After Government Ousted
Portugal is heading to its third early election in just over three years after parliament toppled Prime Minister Luis Montenegro’s center-right minority government in a confidence vote on Tuesday night. President Marcelo Rebelo de Sousa will hold meetings with parties on Wednesday, a necessary step before he can formally call an election. Sousa, who has the authority to dissolve parliament and decide whether to call a vote, said last week that the snap election could take place on May 11 or May 18 at the earliest.
BOJ (MNI): BOJ's Ueda Sees No Gap With Market L/T Rates View
Bank of Japan Governor Kazuo Ueda said on Wednesday that the rise in long-term interest rates reflects the change of market players’ view on the outlook for the economy and prices, and there is no contradiction between this and the BOJ. Ueda told lawmakers that it is natural for long-term interest rates to be formed freely in markets, and for rates to move based on the outlook for the short-term and the policy interest rate. Ueda in February said that the BOJ will conduct bond buying operations, if necessary, to fight rapid rate moves.
JAPAN (MNI): 2025 Pay Agreements Emerging, Some Below Union Demand Levels
A number of headlines have filtered out today on pledged wage rises from major Japanese firms for 2025. Some companies have met lofty demand, while others have come in a little below demands. See below for more details. This is a key watch point for the authorities and the BoJ, as it seeks to durably achieve the 2% inflation target. As noted yesterday, consumption spending has not been a strong point for the economy in recent months. Positive real wage growth is a key in terms of aiding the recovery in spending. Hence these developments will be an on-going watch point for markets.
CHINA (BBG): China Moves for Higher Copper Exports Amid Market Upheaval
China has issued more licenses allowing copper smelters to export metal tax-free, aiding local producers and paving the way for greater overseas sales at a time of upheaval in the global market. China Copper Southeast Copper Co., a unit of Aluminum Corp. of China, has been granted approval to do the so-called tolling trade, the company said in a statement. Separately, privately owned Guangxi Nanguo Copper Co. has also been given permission, Shanghai Metals Market reported, without citing anyone.
CHINA (MNI): China to Boost Environmental Equipment Industry
MNI (Beijing) China will support environmental protection equipment manufacturers to issue green bonds, expand financing channels and access government investment funds, the Ministry of Industry and Information Technology said on Wednesday, noting the sector's crucial foundation for the country’s green and low-carbon initiatives. The ministry will support firms to build multinational corporations, enhance international influence and increase trade.
AUSTRALIA (MNI): May Election Likely but Polls Still Point To Hung Parliament
Over the weekend, there were widespread press reports that a federal election would have been called for April 12 to avoid a mini budget having to be announced but had to be delayed because of Cyclone Alfred. Given the legal requirement that 33 days need to pass between the announcement and the vote, the time has now elapsed making a May poll the most likely. It has to be held by May 17. Recent polls have shown a narrowing between the two major parties but consistently point to a minority government outcome, which is likely to result in political instability.
DATA
SWEDEN DATA (MNI): Vacancy to Unemployment Claims Ratio Posts Fresh Cycle Low
The Swedish unemployment claims rate (from the Public Employment Service) was steady at 7.0% for the fourth consecutive month in February. However, a renewed fall in vacancies (90.3k vs 98.2k prior; -21% Y/Y) signals labour market conditions are still loosening somewhat. The vacancy-to-unemployment-claims ratio fell to 0.25 (vs 0.27 prior), the lowest since May 2021. While the Riksbank are firmly expected to remain on hold next Thursday on the back of increased inflationary pressures, Governor Thedeen noted at yesterday's Parliamentary Hearing that activity signals at the start of 2025 have been mixed.
JAPAN DATA (MNI): Japan Feb CGPI Rises 4.0% Y/Y; Import Price Drops
- JAPAN FEB CORP GOODS PRICE INDEX +4.0% Y/Y; JAN +4.2%
- JAPAN FEB CORP GOODS PRICE INDEX 0.0% M/M; JAN +0.3%
Japan's corporate goods price index rose 4.0% y/y in February, slowing from January’s 4.2%, while import prices posted their first drop in three months, data released by the Bank of Japan showed on Wednesday. Electric power, gas and water (+5.7% vs. +11.1) drove the index lower despite higher prices for agriculture, forestry and fishery products (+39.4% vs. 37.6%.). The CGPI was unchanged m/m in February after rising 0.3% in January. On a yen basis, import price fell 0.7% y/y in February for the first drop in three months following January’s 2.3%, indicating upward pressure from import goods on prices is slowing.
FOREX: JPY Slippage Stands Out as Equity Bounce Holds
- JPY slippage is the standout currency move early Wednesday, as equity futures globally smoothly absorb the formal installation of tariffs on aluminium and steel headed to the US. Risk sentiment is seemingly underpinned by hopes for a formal 30-day ceasefire between Ukraine and Russia. While Ukraine have agreed to the terms, Reuters sources this morning report that Russian sources are more wary on the approach - which leaves today's negotiations between Washington and Moscow in focus - particularly after Trump suggested he may talk to Putin as soon as today.
- EUR/USD gains slowed as the leader of Germany's Green party re-stated their opposition to debt brake reform in its current structure - while rejecting the defence spending plan, the door seemingly remains open to negotiations, which have extended across this week, leaving Merz and CDU / SPD officials still hopeful of a last minute deal here.
- The US inflation print and Bank of Canada decision take focus today, with CPI seen moderating to 2.9% from 3.0% for the headline, and down to 3.2% from 3.3% for the ex-food and energy figure. Covering February, the data will be the last look at price pressures in a pre-tariff era, although the sharp run higher for prices paid in sentiment surveys over the past few weeks may mean company stockpiling will still show through in headline stats.
- The Bank of Canada are seen trimming another 25bps off the benchmark policy rate today, and the accompanying policy statement will be carefully watched for any observations on tariff pressure or US-Canada tensions.
EGBS: Impending 10-Year Supply Caps Rallies in Bund Futures
Bund futures have recovered from yesterday evening’s Russia-Ukraine ceasefire and US-Canada tariff reprieve inspired lows. Rallies have been capped by today’s 10-year Bund supply, due at 1030GMT. Futures are -7 ticks at 127.00, with a bearish technical theme still intact.
- The German curve has bear flattened, with 2-year yields 2bps higher and 30-year yields 0.5bps higher. Green leader Habeck re-stated his party’s position that debt brake reform for defence spending is not acceptable, but remains open to negotiation.
- 10-year EGB spreads to Bunds are biased slightly tighter, with the exception of DSLs. The 10-year OAT/Bund spread has pushed below 70bp for the first time since September in recent days.
- PGBs lag peripheral peers at the margin after the expected ousting of the Portuguese government and with 10- & 13-Year paper set to be auctioned this morning.
- Comments from ECB President Lagarde were not market moving, while Simkus and Centeno stuck to previous rhetoric.
- The ECB’s forward-looking wage tracker is due at 1100GMT, though broader macro focus remains on the US CPI report at 1330GMT.
GILTS: Off Early Lows, Supply Due Shortly
Gilts initially showed lower as equities recovered on the back of a slight easing in U.S.-Canada tariff strains but have since recovered from lows.
- Futures based at 91.66 at the open, last ~91.80, with the bearish technical theme intact.
- Friday’s low (91.67) has been pierced, an extension lower would target the March 6 low (90.71).
- Yields essentially flat across the curve.
- 2s10s and 5s30s curves register fresh cycle highs, as the shifting global issuance outlook, increased risk of sticky inflation and reduction in central bank balance sheet size continues to reshape core global curves.
- 5s30s hit 100bp for the first time since June ’21.
- 10-Year gilt/Bund spread 1bp tighter on the day but still above the next support cluster at 175bp/174.5bp after failing to break below earlier this week.
- The DMO will come to market with GBP4bln of the 4.50% Mar-35 gilt shortly. This will be the first reopening of the gilt after the syndicated launch for GBP13bln on 11 February. We wouldn’t rule out a wide tail (particularly given the recent volatility in FI markets) but expect another solid bid-to-cover.
- Earlier this morning, the DMO’s provisional auction calendar for the first 3 weeks of FY25/26 generally met our expectations (see earlier bullets for details).
EQUITIES: Fresh Cycle Lows in E-Mini S&P Reinforces Bearish Theme
A bear threat in S&P E-Minis remains present and fresh cycle lows this week reinforce current conditions. MA studies are in a bear-mode set-up and this highlights a dominant downtrend and bearish market sentiment. Sights are set on the next important support at 5499.25, the Sep 9 2024 low. Note that the short-term trend condition is oversold, a corrective bounce would allow this set-up to unwind. Firm resistance to watch is 5963.30, the 50-day EMA. The medium-term trend in the Eurostoxx 50 futures contract remains bullish and the latest pullback appears corrective. However, support at the 50-day EMA, at 5309.17, has been pierced. A clear break of this average would highlight a strong short-term bear threat and suggest scope for a deeper retracement. This would open 5202.00, a Fibonacci retracement. For bulls, a resumption of gains would refocus attention on the 5600.00 handle.
- Japan's NIKKEI closed higher by 25.98 pts or +0.07% at 36819.09 and the TOPIX ended 24.19 pts higher or +0.91% at 2694.91.
- Elsewhere, in China the SHANGHAI closed lower by 7.904 pts or -0.23% at 3371.924 and the HANG SENG ended 181.83 pts lower or -0.76% at 23600.31.
- Across Europe, Germany's DAX trades higher by 158.53 pts or +0.71% at 22488.02, FTSE 100 higher by 14.7 pts or +0.17% at 8510.65, CAC 40 up 61.68 pts or +0.78% at 8003.59 and Euro Stoxx 50 up 35.79 pts or +0.67% at 5345.69.
- Dow Jones mini up 132 pts or +0.32% at 41605, S&P 500 mini up 23.75 pts or +0.43% at 5600, NASDAQ mini up 101 pts or +0.52% at 19497.5.
Time: 08:50 GMT
COMMODITIES: WTI Future Trend Bearish, Contract Remains Close to Recent Lows
A bearish trend condition in WTI futures remains intact and the contract is trading at its recent lows. The latest sell-off has resulted in a clear breach of support at $70.20, the Feb 6 low. This confirmed a resumption of the downtrend that started Jan 15 and has paved the way for an extension towards $63.61 next, the Oct 10 ‘24 low. Key short-term pivot resistance is seen at $70.20, the 50-day EMA. Gold is in consolidation mode. The trend condition is unchanged, it remains bullish and the recent pullback appears corrective. A resumption of gains would refocus attention on $2962.2, a Fibonacci projection. This would also open the $3000.0 handle. On the downside, a move lower would instead suggest scope for a deeper correction and expose support around the 50-day EMA, at $2829.8. The 50-day average marks a key support.
- WTI Crude up $0.45 or +0.68% at $66.67
- Natural Gas down $0.1 or -2.18% at $4.353
- Gold spot up $4.4 or +0.15% at $2920.17
- Copper up $5.5 or +1.15% at $482.1
- Silver up $0.08 or +0.23% at $33
- Platinum up $5.44 or +0.55% at $986.68
Time: 08:50 GMT
| Date | GMT/Local | Impact | Country | Event |
| 12/03/2025 | 1000/1000 | ** |  GB | Gilt Outright Auction Result |
| 12/03/2025 | 1100/0700 | ** |  US | MBA Weekly Applications Index |
| 12/03/2025 | 1100/1200 |  EU | ECB Wage Tracker | |
| 12/03/2025 | - | *** |  CN | New Loans |
| 12/03/2025 | - | *** | CN | Money Supply |
| 12/03/2025 | - | *** | CN | Social Financing |
| 12/03/2025 | 1230/0830 | *** | US | CPI |
| 12/03/2025 | 1345/0945 | *** |  CA | Bank of Canada Policy Decision |
| 12/03/2025 | 1430/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 12/03/2025 | 1515/1615 | EU | Lane at "ECB and Its Watchers" conference Frankfurt | |
| 12/03/2025 | 1700/1300 | ** | US | US Note 10 Year Treasury Auction Result |
| 12/03/2025 | 1800/1400 | ** | US | Treasury Budget |
| 13/03/2025 | 0700/0800 | *** |  SE | Inflation Report |
| 13/03/2025 | 0950/1050 | EU | de Guindos in fireside chat at EIOPA Sustainable Finance Conference | |
| 13/03/2025 | 1000/1100 | ** | EU | Industrial Production |
| 13/03/2025 | 1230/0830 | * | CA | Building Permits |
| 13/03/2025 | 1230/0830 | * | CA | Household debt-to-income |
| 13/03/2025 | 1230/0830 | *** | US | Jobless Claims |
| 13/03/2025 | 1230/0830 | ** | US | WASDE Weekly Import/Export |
| 13/03/2025 | 1230/0830 | *** | US | PPI |
| 13/03/2025 | 1400/1000 | * | US | Services Revenues |
| 13/03/2025 | 1430/1030 | ** | US | Natural Gas Stocks |
| 13/03/2025 | 1530/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 13/03/2025 | 1530/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 13/03/2025 | 1700/1300 | *** | US | US Treasury Auction Result for 30 Year Bond |