EXECUTIVE SUMMARY
- TRUMP AIDES HUNT FOR 11TH-HOUR DEAL TO DIAL BACK CANADA-MEXICO TARIFFS: WSJ
- ECB MAY DROP ‘RESTRICTIVE’ LABEL ON STANCE AS SOON AS MARCH: BBG
- MNI PROJECTS 2.3% Y/Y GERMAN NATIONAL CPI, CORE 3.0%
- TOKYO CORE CPI RISES 2.5% VS. DEC +2.4%
Figure 1: ECB Survey 1-Year Inflation Expectations Continue to Firm
Source: MNI/ECB
NEWS
US (WSJ): Trump Aides Hunt for 11th-Hour Deal to Dial Back Canada-Mexico Tariffs
President Trump’s advisers are considering several offramps to avoid enacting the universal tariffs on Mexico and Canada that he had pledged, according to people familiar with the matter, even as he reiterated Thursday that the tariffs are coming. The situation is fluid and Trump still may go through with his vow to slap 25%, across-the-board levies on imports from America’s two largest trading partners. The president has consistently said he would do so by Saturday.
US/JAPAN (BBG): Ishiba Says Japan Will Seek Stable Energy Supply From Trump
Japan’s Prime Minister Shigeru Ishiba said he would ask US President Donald Trump for a stable supply of energy when they meet, hinting at the deals that the Japanese leader may try to strike with Trump in upcoming talks. Ishiba is expected to travel to the US early next month to meet with the US president amid prospects that Japan, a longtime ally of the US, may get caught up in a global trade war over tariffs.
ECB (BBG): ECB May Drop ‘Restrictive’ Label on Stance as Soon as March
The European Central Bank may stop describing its monetary policy stance as “restrictive” at its next decision in March, according to people familiar with the Governing Council’s debate. With another quarter-point cut in borrowing costs highly likely then, bringing the deposit rate down to 2.5%, such a level may not fully deserve that label anymore, said the people, who asked not to be identified citing confidential discussions. A change in that terminology in the ECB’s statement is therefore something officials will weigh when they next discuss monetary policy, they said.
ECB (MNI): Muller and Rehn Largely Consistent With ECB Press Conference
First rounds of post-meeting ECB speak starting to filter through from Muller and Rehn. Overall messages are largely consistent with President Lagarde's press conference, with a few nuances on how far policy rates are from neutral levels. Muller "We are getting closer and closer to a situation where central bank interest rates can no longer be considered high or an obstacle to reasonable investments". Rehn "Trade policy uncertainty is now weighing on the growth outlook and growth risks are on the downside."
GERMANY (MNI): Splits Emerge in CDU Over AfD Support for Immigration Bill
It is unclear whether the high-profile Influx Limitation Act will pass today in the Bundestag, or indeed even be debated. At late notice, liberal Free Democratic Party (FDP) leader in the Bundestag Christian Drr has proposed the legislation be sent back to the Interior Committee and the debate postponed until 11 Feb. Such a move would come as an embarrassing blow to opposition leader Friedrich Merz just weeks ahead of the 23 Feb federal election.
JAPAN (MNI): Core CPI to Slow in or After Mid-Year - BOJ’s Ueda
Bank of Japan Governor Kazuo Ueda said on Friday that the year-on-year increase in the core consumer price index caused mainly by cost-push will slow in or after mid-year. “We are managing monetary policy in order to achieve the 2% price target in a stable and sustainable manner,” Ueda told lawmakers at the Lower House budget committee. He also said that the BOJ aimed to achieve price rises accompanied with wage hikes.
NORTH KOREA (NYT): North Korean Troops No Longer Seen on Front Lines Fighting Ukraine
North Korea sent its best troops to aid Russia in its war against Ukraine. But after months of suffering severe losses, they have been taken off the front line. North Korean soldiers who joined their Russian allies in battle against Ukrainian forces have been pulled off the front lines after suffering heavy casualties, according to Ukrainian and U.S. officials.
ARGENTINA (BBG): Argentina Cuts Key Rate to 29% as Peso Depreciation Slows
Argentina’s central bank cut its benchmark interest rate by 300 basis points to 29% as inflation continues to slow in South America’s second-biggest economy. The bank’s board said the cut was due to reduced inflation expectations and that the new rate takes effect Friday, according to an emailed statement. The rate cut comes as the government is set to slow down the currency’s official monthly depreciation rate to 1% from 2% on Feb. 1. The controversial policy change to what’s known locally as the crawling peg, which some say is contributing to an overvalued peso, seeks to further cool inflation.
SOUTH AFRICA (BBG): South Africa’s Eskom Warns of Power-Cut Risk After Breakdowns
South Africa’s state power utility said there’s a “high risk” of outages after multiple plant breakdowns, a warning that may end a 10-month streak of stable electricity supply. The rand weakened. Eskom Holdings SOC Ltd. experienced several failures over the past seven days that require extended repair times, while emergency reserves have been depleted, Chief Executive Officer Dan Marokane said in a statement. The company may implement cuts as high as Stage 4 - which removes 4,000 megawatts from the national grid - over the weekend.
BRICS (MNI): No Talk of Setting Up BRICS Currency - Kremlin
Kremlin spokesperson Dmitry Peskov told reporters in Moscow "there is no talk" of setting up a BRICS currency, in response to a tariff threat issued by US President Donald Trump yesterday, per Reuters. Reuters: "Kremlin says BRICS is considering new joint investment platforms, says US experts need to brief Trump in more detail about subject... On Trump tariffs threat over potential BRICS currency, says there's no talk of setting up such a currency."
CORPORATE (BBG): Apple Forecast Cheers Investors After Mixed Holiday Results
Apple Inc. gave a reassuring revenue forecast for the current quarter, helping boost shares of the world’s most valuable company after its holiday results showed jarring declines for China and the iPhone. Sales will grow by a percentage in the low- to mid-single digits, the company said during a conference call Thursday. Though that’s in line with the roughly 5% that analysts have been predicting, it was enough to soothe the nerves of investors following a mixed quarterly report.
CORPORATE (BBG): Intel’s Push to Revive Sales Pays Off in Fourth Quarter
Intel Corp. reported better-than-projected fourth-quarter revenue, while the semiconductor maker cautioned that its push to become more competitive is still a work in progress. While the $14.3 billion in fourth-quarter sales beat estimates, part of that was from customers in Asia ordering ahead of possible US tariffs, executives said. First-quarter sales will fall short of analysts’ projections because of weaker demand and market share loss to rivals.
CORPORATE (BBG): Samsung’s Chip Division Underwhelms in Costly AI Memory Race
Samsung Electronics Co.’s pivotal chip division reported a smaller-than-expected profit as the company fights to close the gap on archrival SK Hynix Inc. in the artificial intelligence arena. Samsung is ratcheting up its research and operating costs, with executives saying the spending on memory would stay at a similarly elevated level as last year. Total capital expenditures came to 53.6 trillion won ($37 billion) in 2024.
DATA
EUROZONE DATA (MNI): ECB Survey 1-Year Inflation Expectations Continue to Firm
- ECB 1-YEAR CONSUMER INFLATION EXPECTATIONS 2.8%
- ECB 3-YEAR CONSUMER INFLATION EXPECTATIONS 2.4%
The ECB's Consumer Expectations Survey (CES) showed the 1-year ahead reading rose for the third consecutive month to 2.8% Y/Y in December (vs 2.6% in November) making it the highest since July 2024. The 3-years ahead expectation remained unchanged at 2.4% Y/Y (after jumping to 2.4% in November), therefore remaining the highest since July 2024. The survey doesn't have pre-pandemic readings but this three-year measure remains above the 1.9-2.1% readings mostly seen through mid-2020 to early 2022.
GERMANY DATA (MNI): MNI Projects 2.3% Y/Y German National CPI, Core 3.0%
From state-level data that equates around 89% weighting of the national December flash German CPI print (due at 13:00 GMT / 14:00 CET), MNI estimates that national CPI (non-HICP print) fell by around 0.1-0.2% M/M (Dec +0.5%) and rose 2.3% Y/Y (Dec 2.6%). See the tables below for full calculations. Analyst consensus stands at 2.6% Y/Y and 0.1% M/M, so there should be downside risks to headline inflation. Current tracking of Core CPI (ex-energy and food, based on 50% of the national index) implies around 3.0% (3.3% in Dec) and -0.3% M/M (+0.5% Nov).
GERMANY JAN UE RATE (SA) 6.2% (FCST 6.2%); DEC 6.1% (MNI)
GERMANY DEC RETAIL SALES -1.6% M/M, 1.8% Y/Y (MNI)
FRANCE DATA (MNI): France Flash Inflation Slightly Softer Than Expected
- FRANCE JAN HICP -0.2% M/M, +1.8% Y/Y
- FRANCE JAN CPI -0.1% M/M, +1.4% Y/Y
France Flash HICP for January came in below expectations at 1.82% Y/Y (vs 1.9% consensus, 1.75% prior), and -0.18% M/M (vs -0.1% consensus, 0.21% prior). Similarly the national CPI came below consensus at 1.35% Y/Y (vs 1.5% consensus, 1.32% prior) and -0.13% M/M (vs 0.0% consensus, 0.19% prior).
FRANCE DATA (MNI): France PPI M/M Rises for Third Consecutive Month
- FRANCE DEC PPI +1% M/M, -3.8% Y/Y
France December PPI rose 1.0% M/M (3.7% revised prior from 3.2%). This is the third consecutive monthly rise. We note that this is non-seasonally adjusted data. The M/M print is lower than in November which was the highest since March 2022 (note that November is typically the highest M/M print of the year though). The M/M increase was still above the 5/10-year averages for December prints, however.
SPAIN DATA (MNI): Strong December Retail Sales Underscores Q4 Consumption Growth
The Spanish December retail sales report underscores the strong growth in household consumption observed in Q4. Retail sales rose 4.0% Y/Y (vs a 4-analyst strong 2.0% consensus; 0.9% prior) and 1.5% M/M (vs -0.7% prior). On a 3m/3m SWDA basis, sales grew 0.9% (vs 1.3% prior), the ninth consecutive positive reading.
UK DAT (FT): UK House Prices Rise Less Than Expected in January
UK house prices continued rising in January although at a slower pace than expected, according to mortgage lender Nationwide. The average house price rose to £268,213, up 0.1 per cent from December and 4.1 per cent from January last year - less than the annual rise of 4.7 per cent recorded in December.
NORWAY DATA (MNI): Registered Unemployment at 2.1% for 5th Consecutive Month
The Norwegian registered unemployment rate was 2.1% for the fifth consecutive month, in line with the 6-strong analyst consensus and Norges Bank's December MPR projection. Little in the release to push back on expectations for a March rate cut. Including those on Government job schemes, the unemployment rate was steady at 2.6%. The highest unemployment rate in January was seen in the rate-sensitive construction industry (3.8% NSA).
SWISS DEC RETAIL SALES +0.6% M/M, +2.6% Y/Y (MNI)
JAPAN DATA (MNI): Jan Tokyo Core CPI Rises 2.5% Vs. Dec +2.4%
- JAPAN JAN TOKYO CORE CPI +2.5% Y/Y; DEC +2.4%
- JAPAN JAN TOKYO CORE-CORE CPI +1.9% Y/Y; DEC +1.8%
- JAPAN JAN SERVICES PRICES +0.6% Y/Y; DEC +1.0%
The year-on-year rise in Tokyo core inflation accelerated to 2.5% in January from December’s 2.4%, above the Bank of Japan's 2% price target for the third straight month, data from the Ministry of Internal Affairs and Communications showed on Friday. The January index was driven by higher food excluding perishables (+4.7% vs. +4.0%) and households’ durable goods (+8.0% vs. +7.3%). The result was within BOJ forecasts, which expected inflation to stay at around 2%. The core-core CPI (excluding fresh food and energy) – a key indicator in the underlying trend of inflation – rose 1.9% y/y in January, also accelerating from +1.8% in December and stayed below 2% for the 10th straight month.
JAPAN DATA (MNI): Japan Dec Factor Output Hits 1st Rise in 2 Months
- JAPAN DEC FACTORY OUTPUT +0.3% M/M; NOV -2.2%
Japan's industrial output rose 0.3% m/m in December for the first rise in two months following -2.2% in November, thanks to higher production machinery and electronic parts and devices, although production of automobiles fell, data released by the Ministry of Economy, Trade and Industry showed on Friday. Production of automobiles fell 1.7% m/m in December for the second straight drop following -4.3% in November, showing that demand for automobiles is slowing overseas. Production machinery rose 2.9% in December for the first rise in two months following -9.1% and production of electronic parts and devices rose 2.1% vs. -2.2% in November.
JAPAN DATA (MNI): Retail Sales Y/Y Momentum Slowly Improving
- JAPAN DEC RETAIL SALES +3.7% Y/Y; NOV +2.8%
- JAPAN DEC RETAIL SALES -0.7% M/M; NOV +1.9%
Japan preliminary Dec IP was slightly better than forecast, up 0.3% m/m (0.2% was forecast), while in y/y terms we were -1.1%, against a 2.2% forecast and -2.7% prior outcome. Retail sales fell -0.7% m/m in Dec, against a -0.1% forecast. In y/y terms we were +3.7% though, after a 2.8% rise in Nov (the market forecast was 3.2%).
JAPAN DEC JOBLESS RATE FALLS TO 2.4% FROM NOV 2.5% (MNI)
FOREX: Tariff Talk Raises Headline Risk Into Weekend
- Trump's re-raising of a flat 25% import tariff on Canada and Mexico unnerved markets late yesterday and that remains a key driving force across G10 FX early Friday. This leaves the USD as the main beneficiary while CAD and MXN understandably trade poorly - but it's the next 24 hours that should prove key. Reports suggest that Trump's advisors are preparing diplomatic 'offramps', through which the 25% tariffs can still be avoided.
- This leaves currencies highly sensitive to headline risk - particularly across US hours today - evident in the tick higher for overnight G10 FX vol we've seen this morning.
- Meanwhile, USD/CNH is holding the entirety of the late Thursday rally, pressing the rate through the 50-dma to the upside. A close above would be the first since October last year, again opening the cycle highs posted on Dec31 at 7.3695.
- German regional inflation stats pose downside risks to the national print later today, and have led the single currency lower. Euro rates markets have rushed to price in easier ECB policy in response, as the flattening of the ERH5/M5 spread points to more aggressive easing through the midpoint of 2025. EUR/USD looks to have consolidated back below the 50-dma - reorienting downside focus on mid-January lows.
- Outside of Trump tariff headlines, the MNI Chicago Business Barometer is the data highlight Friday - which should take focus ahead of the ISM manufacturing and services indices next week - and the nonfarm payrolls release in a week's time.
RATINGS: Germany, EFSF, ESM, Sweden & Turkey Set To Be Reviewed After Hours
Rating reviews of note scheduled for after hours on Friday include:
- Fitch on Turkey (current rating: BB-; Outlook Stable)
- S&P on the EFSF (current rating: AA-; Outlook Stable), the ESM (current rating: AAA; Outlook Stable), Germany (current rating: AAA; Outlook Stable) & Sweden (current rating: AAA; Outlook Stable)
Please use this link to access the indicative sovereign rating review schedule covering the five most notable rating agencies for 2025. Note that this schedule is indicative only and ratings can be reviewed on an ad-hoc basis. Rating agencies may also adjust their schedules during the year.
EGBS: Spreads to Bunds Little Changed to Marginally Wider
EGB spreads to Bunds off early session highs, although modest Bund outperformance remains intact, with the major spreads to 10-Year German paper flat to 1bp wider on the day.
- Softer-than-expected German regional inflation data continues to underpin EGBs, building on the reaction to the softer-than-expected French inflation readings.
- The bid in European equity indices is supportive of peripherals vs. Bunds, helping counter some of the early widening.
- ECBspeak continues to point to inflation nearing/meeting target in the spring/summer window.
- OAT/Bunds hovers around 75bp after finding a base as French political and fiscal risks reasserted themselves earlier this week.
- OAT bulls remain unable to force a test of 70bp in the spread given the re-emergence of those risks, with budget talks ongoing.
- The French Finance Minister has suggested that further budget compromises may be needed, despite the talks being on the “right path.”
- BTP/Bunds last 108.5bp, cycle closing lows at 106.4bp intact.
STIR: More ERH5/M5 Flattening Following German State-level CPIs
Dovish repricing in EUR rates following the softer-than-expected German state-level CPI readings. Euribor futures are now +4.0 to +9.0 ticks through the blues, with the back of the whites/front of the reds leading the rally.
- Yesterday, we highlighted notably flattening in the ERH5/M5 spread, as markets continued to position for a more aggressive ECB easing cycle in Q2. This flattening has extended following the German data, with the spread down another 3.5 ticks today to -26.0 ticks, the lowest since December 2024.
- In ECB-dated OIS, there are now 81bps of cuts priced through year-end (vs ~75bps pre-data).
- 26bps of cuts are priced through the March gathering, with another 36bps of easing priced into the April and June decisions (up from 30bps last week).
- As such, there remains scope for further dovish repricing in the April and June meetings, for those expecting the ECB to deliver sequential 25bp cuts throughout the first half of this year.
GILTS: Fade From Highs, Wider to Bunds
The bid in gilts fades, countering an early rally that followed the softer-than-expected inflation data out of France & Germany.
- No overt driver of the pullback, so perhaps cross-market flows (buying EGBs and selling gilts) are making themselves felt, particularly given the recent narrowing in gilt/Bunds (spread 3.5bp wider at 207.5bp today).
- Futures -4 at 92.58 (92.47-92.93 range).
- Initial resistance at yesterday’s high was pierced.
- Bulls now target the Dec 20 high (93.09). A break there would further deepen the threat to the medium-term bearish technical trend.
- Initial support at 91.52.
- Yields 1bp lower to 0.5bp higher, twist steepening.
- 2s10s tests YtD highs, 5s30s on track for highest close of the year.
- Dovish STIR repricing fades alongside the move away from highs in gilts.
- BoE-dated OIS shows 73.5bp of cuts vs. the 77bp that was briefly priced this morning.
- SONIA futures flat to 1.5.
- Some interest in potential for retail demand for gilts (particularly in low coupon short, maturity paper) given today’s maturity of the 0.25% 31 Jan-25 gilt and seemingly notable retail holdings of the line.
- Elsewhere, month-end index extension projections for gilt indices are sizeable, which could provide some support.
EQUITIES: Eurostoxx 50 Futures Trading Near Cycle Highs
A bull cycle in the Eurostoxx 50 futures contract remains intact. Yesterday’s gains delivered a print above 5726.00, the Jan 24 high. The clear break of this level has confirmed a resumption of the uptrend and paved the way for 5327.90, a Fibonacci projection. The first important support to watch is 5121.39, the 20-day EMA. Clearance of the average would signal the start of a correction. The S&P E-Minis contract is firmer today and continues to trade above Monday’s low. Key short-term support to watch lies at 5961.75, the Jan 16 low (pierced). For now, the recent sharp pullback appears corrective, however, a clear breach of 5961.75 would strengthen a bearish threat and signal scope for a deeper retracement, towards 5943.94, a Fibonacci retracement. Key resistance is 6178.75, the Dec 6 high.
- Japan's NIKKEI closed higher by 58.52 pts or +0.15% at 39572.49 and the TOPIX ended 6.73 pts higher or +0.24% at 2788.66.
- Across Europe, Germany's DAX trades higher by 66.81 pts or +0.31% at 21795.37, FTSE 100 higher by 44.35 pts or +0.51% at 8691.69, CAC 40 up 44.3 pts or +0.56% at 7985.38 and Euro Stoxx 50 up 31.98 pts or +0.61% at 5314.29.
- Dow Jones mini up 158 pts or +0.35% at 45212, S&P 500 mini up 28 pts or +0.46% at 6127, NASDAQ mini up 166.75 pts or +0.77% at 21791.5.
Time: 09:50 GMT
COMMODITIES: Gold Records Fresh All-Time High, Attention on $2800
This week’s move down in WTI futures marks an extension of the current corrective cycle. The 20-day EMA has been breached and attention is on support around the 50-day EMA, at $72.25. A clear break of the 50-day average would suggest scope for a deeper retracement. On the upside, a reversal higher would refocus attention on $79.48, the Apr 12 ‘24 high and a key resistance. A bull cycle in Gold remains in play. This week’s extension higher has resulted in a print above $2790.1, to record a fresh all-time high. The climb confirms a resumption of the primary uptrend and maintains the bullish price sequence of higher highs and higher lows. Attention is on $2800.0 and $2817.6, a Fibonacci projection. The first key support to watch is $2683.0, the 50-day EMA. The 20-day EMA is at $2720.7.
- WTI Crude down $0.08 or -0.11% at $72.63
- Natural Gas up $0.04 or +1.38% at $3.091
- Gold spot down $0.52 or -0.02% at $2794.21
- Copper down $0.4 or -0.09% at $430.4
- Silver up $0.01 or +0.03% at $31.6033
- Platinum up $6.53 or +0.67% at $977.83
Time: 09:50 GMT
| Date | GMT/Local | Impact | Country | Event |
| 31/01/2025 | 1300/1400 | *** |  DE | HICP (p) |
| 31/01/2025 | 1330/0830 | *** |  CA | Gross Domestic Product by Industry |
| 31/01/2025 | 1330/0830 | *** |  US | Personal Income and Consumption |
| 31/01/2025 | 1330/0830 | *** | US | Employment Cost Index |
| 31/01/2025 | 1330/0830 | *** | CA | Gross Domestic Product by Industry |
| 31/01/2025 | 1330/0830 | US | Fed Governor Michelle Bowman | |
| 31/01/2025 | 1445/0945 | *** | US | MNI Chicago PMI |
| 31/01/2025 | 1600/1100 | CA | Finance Dept monthly Fiscal Monitor (expected) | |
| 31/01/2025 | 1800/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |
| 03/02/2025 | 2200/0900 | ** |  AU | S&P Global Manufacturing PMI (f) |