EXECUTIVE SUMMARY
- TRUMP SAYS HE SPOKE WITH XI SINCE INAUGURATION, UNCLEAR WHEN
- TRUMP TELLS ISRAEL TO END TRUCE IF HOSTAGES NOT FREED BY WEEKEND
- EU TO TAKE "FIRM COUNTERMEASURES" TO US TARIFFS
- BOE’S MANN SEES LITTLE ROOM FOR FURTHER RATE CUTS
Figure 1: BOE estimates show pass-through of increases in employer NICs to headline inflation
Source: Bank of England
NEWS
US/CHINA (BBG): Trump Says He Spoke With Xi Since Inauguration, Unclear When
President Donald Trump said he has spoken with Chinese President Xi Jinping since his Jan. 20 inauguration, amid a brewing trade war between the two nations. “Yeah, I’ve talked to him, and I talked to his people, too,” Trump told Fox News’ Bret Baier in an interview taped last week that aired on Monday. “His people come in all the time. We have a very good personal relationship.” Trump didn’t specify when the conversation took place.
US/ISRAEL (BBG): Trump Tells Israel to End Truce If Hostages Not Freed by Weekend
US President Donald Trump said Israel should call off its ceasefire with Hamas if hostages aren’t returned this weekend, raising concerns over the durability of the six-week truce in Gaza. “If all the hostages aren’t returned by Saturday 12 o’clock - I think it’s an appropriate time - I would say cancel it and all bets are off and let hell break out,” Trump said. The president spoke hours after Hamas announced it was indefinitely postponing the next release of Israeli hostages that was set to happen this weekend.
US/EU (MNI): EU to Take "Firm Countermeasures" to US Tariffs
The European Union will take “firm and proportionate countermeasures” to U.S. tariffs on steel and aluminium, European Commission President Ursula von der Leyen said on Tuesday. "Unjustified tariffs on the EU will not go unanswered,” she said in a news release.
EU (FT): EU Plans Radical Budget Overhaul Handing More Power to Capitals
Brussels is preparing a radical overhaul of the EU’s next trillion euro common budget, replacing dozens of programmes with merged funds that would hand more spending power to capitals. The plan, outlined in a paper seen by the Financial Times, calls for a more “ambitious” budget in “size and design” to meet increased spending demands on defence and hefty debt repayments.
UK (MNI): BOE Mann Sees Little Room for Further Rate Cuts
Bank of England Monetary Policy Committee member Catherine Mann said Tuesday that while she supported a 50bp cut at the February MPC meeting, when the majority backed a 25bps move taking the rate to 4.5%, she wanted to maintain policy restrictiveness in future and made clear Bank Rate did not have far to fall in her view. She said her support for a larger cut reflected in part a desire to 'cut through the noise' and to look through the looming move higher in inflation and to offset tightness in UK financial conditions which had been driven largely by events in the US. She said she did not favour a prolonged series of cuts.
UK (FT): UK Inflation Threat Receding, Says BOE Rate-Setter Who Voted for Big Cut
Companies will struggle to raise prices this year as consumers are hit by job losses and spending softens, according to a Bank of England rate-setter who argues the central bank should have cut interest rates more aggressively last week. Catherine Mann said she voted for a jumbo half-point cut last week because of a weakening jobs market and slowing consumer demand that is dampening businesses’ pricing power and therefore inflationary pressures.
GERMANY (BBG): Scholz Steps Up Attacks on Frontrunner Merz as German Vote Nears
German Chancellor Olaf Scholz used his likely final statement in parliament before the election to intensify his attacks on Friedrich Merz, accusing the conservative frontrunner of dividing Europe for political gain and saying his “fickleness and bluster” make him unsuitable to run the country. Scholz, whose Social Democrats are fast running out of time to close the gap to Merz’s poll-leading CDU/CSU alliance before the Feb. 23 vote, reiterated an accusation that the opposition leader’s recent hard-line immigration push breaks European Union law.
JAPAN (BBG): Japan Ishiba’s Approval Rating Rises to 44%, NHK Poll Shows
Public support for Japanese Prime Minister Shigeru Ishiba’s government rose 5 percentage points to 44% this month from January, according to a survey conducted by NHK. Of the respondents who said they supported Ishiba’s cabinet, 35% said it was because they preferred it over other cabinet options, 32% cited credibility in the administration as a reason, and 16% said they support Ishiba’s party
RUSSIA/UKRAINE (BBG): Ukraine Says Russia Targeted Energy Facilities in Attacks
Russia targeted Ukrainian gas and power facilities in strikes overnight and early Tuesday as night temperatures in Ukraine fell below minus 10C (14F). “Another attack on Ukraine’s energy system is underway. At night, the enemy attacked the gas infrastructure,” Ukrainian Energy Minister German Galushchenko said on Facebook without elaborating on what objects were targeted. “As of this morning, the energy sector is still under attack.”
CORPORATE (FT): Elon Musk-Led Consortium Offers $100bn to Take Control of OpenAI
Elon Musk and a group of co-investors have submitted a near-$100bn bid for the non-profit that controls OpenAI, complicating chief executive Sam Altman’s attempt to convert the start-up to a for-profit entity. Musk, whose start-up xAI is a direct competitor to OpenAI, submitted the bid to the group on Monday, according to Musk’s attorney Marc Toberoff.
CORPORATE (FT): BP Pledges ‘Fundamental Reset’ of Strategy as Profits Sink
BP has pledged to “fundamentally reset” its strategy and improve its performance as the struggling oil major reported a steep drop in profits for the final quarter of last year. The group on Tuesday reported underlying profits of $1.17bn for the period, falling by roughly half compared with the previous quarter and significantly below the $2.99bn it made in the fourth quarter of 2023.
DATA
UK DATA (MNI): BRC-KPMG Retail Sales - Jan Decent; 3-mma Similar to Sep/Oct
- UK BRC JAN BY VALUE SHOP SALES LFL +2.5% YY, TOTAL +2.6% YY
BRC-KPMG retail sales increased 2.6% Y/Y in January, after two monthly prints that have been distorted by Black Friday timing (+3.2% in December and -3.3% in November). Smoothing out the distortion, the three months to January figures saw sales growth of 1.1%, similar to levels seen in the 3-months to October / September (1.3% and 1.2%). Also remember that this is a value rather than a volume index - so these growth numbers include inflation.
NORWAY DATA (MNI): Inventories Drag on Q4 GDP, HH Consumption a Little Stronger Than NB Est
- NORWAY Q4 MAINLAND GDP -0.4% Q/Q
Norwegian mainland GDP was -0.4% Q/Q in Q4, after a stronger-than-expected 0.5% in Q3. On an annual basis, growth was 0.5% Y/Y (vs 1.4% prior). The quarterly reading was below Norges Bank and consensus expectations of 0.3% and the Q4 Regional Network Survey's output expectations of 0.2%. All else equal, this will have a dovish impact on the March MPR rate path, potentially offsetting the effects of yesterday's higher-than-expected CPI-ATE reading.
CHINA DATA (MNI): China SME Index Up in January
MNI (Beijing) China’s Small and Medium-Sized Enterprise Development Index reached 89.0 in January, up 0.1 points from December, according to the China Association of Small and Medium Size Enterprises on Tuesday. The macroeconomic sentiment sub-index reached 98.7, up 0.4 points from the previous month, the Association said. Sub-indices for manufacturing, transportation, real estate, wholesale and retail, social services, and information software turned from a decline to an increase, while the construction and accommodation industries continued to fall.
AUSTRALIA DATA (MNI): Consumers Remain Pessimistic as Cost-of-Living Still a Problem
Westpac's measure of consumer confidence was little changed in February rising 0.1% m/m to 92.2 as the positive effect of increased talk of a February rate cut following the Q4 CPI data was offset by global uncertainty and continued cost-of-living pressures. Consumers are not as pessimistic as they were in 2023 but confidence remains negative about current conditions but is improving regarding the outlook.
AUSTRALIA DATA (MNI): NAB Survey Shows Soft Activity But Stabilising Prices
NAB January business confidence picked up to +4 from -2, its highest in three months. The series has been oscillating around the zero mark for around two years. Conditions moderated further to +3 from +6, in line with the November outcome. The price/cost components remained elevated but below cycle highs and labour demand is above the 2024 trough. More data painting a mixed picture ahead of the RBA's February 18 meeting.
FOREX: Powell in Focus, Republican Scrutiny Likely
- A brief phase of JPY buying has dissipated into the US open, with USD/JPY back above, and anchored to, the Y152.00 level. The general stability of the pair so far today is a decent signal that markets are well-priced for fractious trade tensions ahead, particularly as the EU outlined in detail that they'd respond in unison against the trade levies waged on steel and aluminium exported to the US.
- EUR is faring well alongside local equity markets, helping EUR/GBP progress back to 0.8350, but the consolidative move is yet to make any headway on last week's highs. This leaves EUR/AUD just above the pullback low, after the cross tested but failed break the 200-dma overnight at 1.6388. Regardless, the cross has printed six consecutive sessions of lower lows and a positive close today would be the first in seven sessions.
- Powell's appearance in front of the Senate Banking Committee later today, while bipartisan in nature, will be a focus for any Republican scrutiny on the Fed chair, with markets and lawmakers looking to gauge the Fed's potential responses to tariffs, tax actions and the impacts of immigration on US labour market gains.
- Powell's appearance is set for 1500GMT/1000ET, at which a release of text is expected. For monetary policy specifically, markets will be sensitive around wording for future rate adjustments, particularly if Powell drops a reference to "cautious" on policy ahead.
- Powell isn't the only central banker set to speak today, with BoE's Bailey, Fed's Hammack, Williams & Bowman and ECB's Schnabel all set to speak.
EGBS: Supply Weighing on Major Futures
Heavy sovereign supply has weighed on major EGB futures this morning, with syndications from Italy and the EU being held alongside conventional auctions from the Netherlands (earlier this morning) and Germany (1030GMT).
- A rally in oil prices and digestion of US President Trump’s steel/aluminium tariff announcements (and the latest EU retaliatory threats) will have also factored in.
- Bund futures are -44 ticks at 133.06, flirting with the 50-day EMA at 133.05. However, better support is seen at the Feb 4 low at 132.72, before the 20-dam EMA at 132.53.
- The German cash curve has bear steepened, with yields 3-4bps higher today.
- Little net change in 10-year EGB spreads to Bunds on the day.
- ECB Executive Board member Schnabel participates in a panel appearance this evening (1700GMT). With a light regional data calendar, tariff-related headline flow and Fed Chair Powell’s Senate testimony will be in focus.
GILTS: Lower on the Day, Outperform Bunds, Sizeable Syndi Demand Seen
Gilts hold lower on the day.
- Early pressure stemmed from the burden of heighted government bond supply, an uptick in oil and tariff risks.
- Weakness then extended on some hawkish caveats within BoE hawk-turned-dove Mann’s thinking (after her switch to voting for a 50bp cut last week).
- Books have since closed on the syndicated offering of the new 4.50% Mar-35 gilt, orderbooks topped GBP110bln at the latest count (expect a further update on this), with the spread set at the tight end of the initial guidance range.
- Futures as low as 93.13, before a recovery to 93.25.
- Initial support and resistance (92.50 & 94.35) remain untested, with the short-term bullish technical theme intact.
- Yields little changed to 2.5bp higher, ’25 closing highs in both 2s10s and 5s30s remain intact.
- 10-Year spread to Bunds ~2bp tighter at 207.5bp.
- BoE-dated OIS shows 63bp of cuts through year-end vs. 64bp early today.
- SONIA futures flat to -3.0.
- Comments from BoE Governor Bailey due later (12:15 London).
- Also watch for hedging pressure around the pricing of today’s syndication (timing still to be confirmed).
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Cut-Adjusted SONIA Rate (bp) |
Mar-25 | 4.401 | -5.3 |
May-25 | 4.197 | -25.7 |
Jun-25 | 4.112 | -34.2 |
Aug-25 | 3.962 | -49.2 |
Sep-25 | 3.923 | -53.1 |
Nov-25 | 3.848 | -60.6 |
Dec-25 | 3.826 | -62.8 |
EQUITIES: Eurostoxx 50 Futures Holding Onto Gains, Bull Cycle Remains in Play
Eurostoxx 50 futures are holding on to their recent gains and a bull cycle remains in play. Last week’s gains marked a resumption of the uptrend that started on Nov 21 ‘24. Moving average studies are in a bull mode set-up too, highlighting a dominant uptrend. The focus is on 5381.13 next, a Fibonacci projection. Initial firm support to watch lies at 5211.11, the 20-day EMA. The 50-day EMA is at 5094.95. The initial sell-off on Feb 3 in the S&P E-Minis contract and the breach of support at 5948.00, Jan 27 low, continues to highlight a possible S/T reversal threat. If correct, it suggests that the latest bounce is a correction. A resumption of weakness would open 5892.37, a Fibonacci retracement point. On the upside, a stronger rally would expose key resistance at 6178.75, the Dec 6 ‘24 high. Clearance of this hurdle would resume the primary uptrend.
- In China the SHANGHAI closed lower by 4.113 pts or -0.12% at 3318.057 and the HANG SENG ended 227.12 pts lower or -1.06% at 21294.86.
- Across Europe, Germany's DAX trades higher by 8.06 pts or +0.04% at 21944.46, FTSE 100 lower by 1.7 pts or -0.02% at 8764.82, CAC 40 down 2.76 pts or -0.03% at 8009.47 and Euro Stoxx 50 up 0.79 pts or +0.01% at 5364.12.
- Dow Jones mini down 106 pts or -0.24% at 44482, S&P 500 mini down 20 pts or -0.33% at 6070.25, NASDAQ mini down 92 pts or -0.42% at 21758.5.
Time: 09:55 GMT
COMMODITIES: WTI Futures Extend Recovery Off Last Week's Lows
Recent weakness 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 $72.20. Price has traded through the average, a clear break of it would suggest scope for a deeper retracement. This would open $68.05, the Dec 20 ‘24 low. On the upside, a clear 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 and the yellow metal has again traded to a fresh cycle high. The continued appreciation once again confirms a resumption of the uptrend and maintains 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 $2776.3, the 20-day EMA.
- WTI Crude up $0.83 or +1.15% at $73.17
- Natural Gas up $0.05 or +1.48% at $3.492
- Gold spot down $2.06 or -0.07% at $2908.02
- Copper down $7.65 or -1.63% at $462.9
- Silver down $0.27 or -0.85% at $31.787
- Platinum down $4.19 or -0.42% at $987.84
Time: 09:55 GMT
| Date | GMT/Local | Impact | Country | Event |
| 11/02/2025 | 1100/0600 | ** |  US | NFIB Small Business Optimism Index |
| 11/02/2025 | 1215/1215 |  GB | BOE Bailey's speech on changes in financial markets | |
| 11/02/2025 | - | *** |  CN | Money Supply |
| 11/02/2025 | - | *** | CN | New Loans |
| 11/02/2025 | - | *** | CN | Social Financing |
| 11/02/2025 | 1330/0830 | * |  CA | Building Permits |
| 11/02/2025 | 1350/0850 | US | Cleveland Fed's Beth Hammack | |
| 11/02/2025 | 1355/0855 | ** | US | Redbook Retail Sales Index |
| 11/02/2025 | 1500/1000 | US | Fed Chair Jerome Powell | |
| 11/02/2025 | 1500/1000 | *** | US | US Fed Chair Speech |
| 11/02/2025 | 1630/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 11/02/2025 | 1700/1200 | *** | US | USDA Crop Estimates - WASDE |
| 11/02/2025 | 1700/1800 |  EU | ECB's Schnabel in Nuremberg Talk Series' panel | |
| 11/02/2025 | 1800/1300 | *** | US | US Note 03 Year Treasury Auction Result |
| 11/02/2025 | 2030/1530 | US | New York Fed's John Williams | |
| 11/02/2025 | 2030/1530 | US | Fed Governor Michelle Bowman | |
| 12/02/2025 | 0030/1130 | ** |  AU | Lending Finance Details |
| 12/02/2025 | 0900/1000 | * |  IT | Industrial Production |
| 12/02/2025 | 1000/1000 | * | GB | Index Linked Gilt Outright Auction Result |
| 12/02/2025 | 1000/1100 | EU | ECB's Elderson in roundtable at the MNI Connect event | |
| 12/02/2025 | 1200/0700 | ** | US | MBA Weekly Applications Index |
| 12/02/2025 | 1330/0830 | *** | US | CPI |
| 12/02/2025 | 1330/0830 | ** | US | US CPI Annual Revised |
| 12/02/2025 | 1500/1000 | US | Fed Chair Jerome Powell | |
| 12/02/2025 | 1500/1500 | GB | BOE's Greene speech at Institute of Directors | |
| 12/02/2025 | 1530/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 12/02/2025 | 1700/1200 | US | Atlanta Fed's Raphael Bostic | |
| 12/02/2025 | 1800/1300 | ** | US | US Note 10 Year Treasury Auction Result |
| 12/02/2025 | 1830/1330 | CA | BOC Meeting Minutes | |
| 12/02/2025 | 1900/1400 | ** | US | Treasury Budget |
| 12/02/2025 | 2205/1705 | US | Fed Governor Christopher Waller |