EXECUTIVE SUMMARY
- TRUMP UNVEILS PLANS FOR 25% TARIFFS ON STEEL, ALUMINUM IMPORTS
- ISRAEL BEGINS PULLING OUT OF GAZA CORRIDOR AS PART OF CEASE-FIRE DEAL
- MERZ SIGNALS HE IS OPEN TO REFORMING GERMANY’S STRICT BORROWING RULES
- CHINA CPI QUICKENS TO FIVE-MONTH HIGH IN JANUARY
Figure 1: Gold/Silver Ratio Edges Towards New Multi-Year High
Source: MNI/Bloomberg
NEWS
US (BBG): Trump Unveils Plans for 25% Tariffs on Steel, Aluminum Imports
President Donald Trump plans to impose 25% tariffs on all imports of steel and aluminum into the US, broadening his trade salvo and threatening ties with some of the country’s top trading partners. Trump, speaking to reporters Sunday on Air Force One, said the tariffs would apply to imports of the metals from all countries. Asked whether major suppliers Mexico and Canada would be included, he said the levies would cover “everybody.” He didn’t specify when the duties would take effect.
US/EU (MNI): Commission - No Justificaton for Tariffs, Will React to Protect Interests
The European Commission has released a short statement following the announcement by US President Donald Trump of 25% tariffs on all aluminium and steel imports into the US. The Commission says that it has not yet received and official notification regarding the imposition of tariffs, adding that it will not respond to 'broad announcements' without additional detail. Nevertheless, the statement says: "The EU sees no justification for the imposition of tariffs on its exports. We will react to protect the interests of European businesses, workers and consumers from unjustified measures."
US/AUSTRALIA (BBG): Australia PM Albanese Says Call With Trump Scheduled on Tariffs
Albanese said he will make the case that Australia should be exempt from steel and aluminum tariffs. “We will navigate any differences that are there diplomatically and we will continue to make the case to the United States for Australia to be given an exemption on any steel and aluminum tariffs,” he told parliament in Canberra
US/INDIA (BBG): Indian LNG Buyers Negotiate US Deals Ahead of Modi-Trump Summit
India’s top importers of liquefied natural gas are holding talks to buy more fuel from US suppliers, ahead of Prime Minister Narendra Modi’s expected meeting with President Donald Trump in Washington this week. Firms, including Indian Oil Corp., are in discussions to buy LNG on a long-term basis from top US exporter Cheniere Energy Inc. and other companies with access to American supply, according to people with knowledge of the matter.
ISRAEL/MIDDLE EAST (WSJ): Israel Begins Pulling Out of Gaza Corridor as Part of Cease-Fire Deal
The Israeli military began a full withdrawal from a sprawling security zone within the central Gaza Strip as part of a cease-fire agreement with Hamas, Israeli and Palestinian officials said. The withdrawal, which began overnight between Saturday and Sunday, leaves Israel with a small footprint inside the enclave as the two sides look toward extending the deal that would end the war and release the remaining Israeli hostages.
GERMANY (FT): Merz Signals He Is Open to Reforming Germany’s Strict Borrowing Rules
Germany’s election frontrunner Friedrich Merz said on Sunday he was open to reforming the country’s strict borrowing rules as he came under pressure about how he would finance higher defence spending. In a televised debate ahead of the parliamentary election on February 23, the Christian Democrat (CDU) leader conceded Germany’s constitutional “debt brake” could require reform as he said that defence spending in Europe’s largest economy would “probably go towards 3 per cent” of GDP amid pressure from US President Donald Trump.
FRANCE (FT): Macron Unveils Plans for €109bn of AI Investment in France
French President Emmanuel Macron has announced €109bn worth of investments in artificial intelligence in France over the coming years, as Europe seeks a greater foothold in the fast-growing industry dominated by the US and China. Macron touted the new funding ahead of the AI Action Summit in Paris which starts on Monday, featuring discussions between world leaders and AI executives such as OpenAI’s Sam Altman.
CORPORATE (BBG): BP Shares Jump After Activist Investor Elliott Builds Stake
BP Plc shares surged after one of the world’s most aggressive activist investors built a stake in the company, seeking to end years of under-performance. Elliott Investment Management, led by Paul Singer, has amassed a significant holding in the British energy giant, Bloomberg reported on Saturday. This is typically the first step in a playbook it has deployed to successfully push for change at many other big public companies. Over the years, the fund’s efforts have led to strategy shifts, CEO departures and even corporate breakups.
CORPORATE (BBG): Nvidia AI Server-Maker Hon Hai Signals Stronger Revenue Outlook
Hon Hai Precision Industry Co., the main supplier of Nvidia Corp. AI servers, posted a 3% rise in January sales and strengthened its first-quarter outlook. Hon Hai, also the world’s largest assembler of Apple Inc. iPhones, reported revenue of NT$538.7 billion ($16.4 billion) last month. The comparison with 2024 was skewed by the fact that the week-long Lunar New Year break fell this year in January, versus February 2024.
DATA
UK DATA (MNI): KPMG/REC Report on Jobs Paints Another Gloomy Picture for UK Labour Market
The KPMG/REC Report on Jobs for January pointed to another downbeat assessment of the UK labour market. Most notable is probably that permanent salary growth eased to the "slowest in the current sequence of inflation" and was "well below the historical trend." Permanent placements continued to fall (at a relatively similar pace albeit slightly slower than in December). But perhaps more significantly, temporary placements fell at their fastest pace since mid-2020. Vacancies fell with the press release noting for permanent workers "the rate of contraction accelerating for the fifth successive month to a near four-and-a-half-year peak."
NORWAY DATA (MNI): Food and Goods Drove Firmer Than Expected Jan Inflation
Norwegian January CPI-ATE was above Norges Bank's December MPR projection (2.8% Y/Y vs 2.6% expected, 2.7% prior). However, the upside surprise appears driven by food and goods inflation, rather than services. This should support expectations for a gradual Norges Bank easing cycle this year. Food prices rose a solid 2.3% M/M (above the 2000-2019 avg of 0.4%), corresponding to an annual rate of 5.0% Y/Y (vs 4.0% prior), the highest since May 2024.
SWEDEN DATA (MNI): Household Consumption Ends 2024 Firmly, But Final Confirmation Needed
Although the household consumption indicator fell 0.3% M/M in December, 3m/3m growth ended 2024 at 1.0% (vs 1.2% in November). This suggests consumption will be a positive contributor to Q4 GDP (Flash 0.2% Q/Q, Riksbank 0.4%). The final Q4 GDP print is due Feb 28. This will be an important release, because the monthly and quarterly flash statistics are often unreliable and revision-prone. Private sector production rose 1.0% M/M in December, corresponding to a 3.0% Y/Y (vs 2.5% prior). This was the joint-highest annual reading since October.
CHINA DATA (MNI): China Jan CPI Quickens to Five-Month High
China's Consumer Price Index rose 0.5% y/y in January, growing at the fastest pace in five months from December's 0.1% and beating an expectation of 0.4%, though weakness in factory-gate inflation persisted, data from the National Bureau of Statistics showed Sunday. The 1.1% y/y rise in service prices, led by tickets of movie and performances as well as airlines, have buoyed the headline CPI by 0.42 percentage points. A 0.4% gain in food prices also helped lift CPI by 0.07 pps, reversing the 0.09 pps drag in December. CPI grew 0.7% m/m, improving from December’s 0.0%.
JAPAN DATA (MNI): Japan Jan Sentiment Rises; Outlook Indexes Drop
Japan's sentiment index for the current economic climate stood at a seasonally adjusted 48.6 in January, down from 49.0 in December, its first drop in three months, while the outlook index for two-three months ahead fell 1.4 points to 48 for the second straight drop, the Economy Watchers report released by the Cabinet Office showed Monday. The indexes linked to households and labour market conditions fell, while the index linked to business rose.
FOREX: USD Index Eases From Overnight Highs, Japanese Yen Underperforming
- The focus in currency markets to start the week has once again been on tariff developments, amid early headlines from Trump that steel and aluminium tariffs would be announced. These headlines drove USD gains across the board, and the USD index briefly extended session gains to 0.37% at 108.44.
- However, given the US is not a major importer of steel, the initial move higher for the greenback has moderated through the remainder of the APAC and early European sessions. Price action is best summed up through the lens of USDJPY, which has benefited from both greenback sentiment and the swift recovery for major equity indices.
- The Japanese Yen remains broadly weaker on Monday, with USDJPY having briefly extended its recovery from Friday’s lows to around 150 pips, printing a 152.54 session high. Spot stands around 152.25 approaching the NY crossover.
- Overall, the recovery for Cross/JPY appears to be very much a correction to the broader developing theme we saw last week. Assisting the bounce, it is worth highlighting that Trump said on Friday he wants to end the trade deficit with Japan and that tariffs on the country were “an option”.
- Although well off the overnight highs of 1.4380, USDCAD remains higher on the session given Canada is exposed via both steel and aluminium exports to the US. Spot trades around 1.4330 last, up 0.27% from last Friday’s close.
- There are no tier one data releases so attention will be on ECB Lagarde’s EU Parliament address at 1400GMT. As a reminder, US CPI data is due Wednesday.
EGBS: NatGas Rally Contains Upside in Bund Futures
Bund futures are +3 ticks at 133.28, with today’s rally in European natural gas futures containing upside in the contract. There has been more activity in Bobl futures (~239k cumulative volumes) than Bunds (~234k) this morning.
- There was a fairly limited reaction overnight reaction to US President Trump’s latest tariff threats on steel and aluminium imports, with Bunds comfortably within Friday’s wide US-payrolls impacted range.
- A bull cycle remains in play in Bunds, with initial resistance at 133.73 (50.0% retracement of the Dec 2 - Jan 14 bear leg) before 133.86 (Jan 2 low).
- The February Sentix survey was stronger-than-expected at -12.7 (vs -16.5 cons, -17.7 prior), but wasn’t a market mover.
- German yields are up to 1bp higher at typing, with the curve lightly steepening.
- Light outperformance in 10-year peripheral bonds against Bunds, with European equity futures off Friday’s lows.
- Focus turns to ECB President Lagarde’s EU Parliament address at 1400GMT/1500CET.
GILTS: Light Bull Steepening, Supply & BoE Speakers Eyed Tomorrow
Continued U.S. tariff worry (albeit not generally focused on the UK) and the latest downbeat assessments of the UK labour market (REC-KPMG report on jobs and comments from Bank of America) provide background support for gilts today.
- Futures +18 at 93.38 (93.13-49).
- The short-term bullish cycle in the contract extended last week, initial support and resistance located at 92.50 & 94.35, respectively.
- Yields flat to 1.5bp lower across the curve, front end outperforms.
- 2s10s and 5s30s ~2.5bp and ~4bp below respective ’25 closing highs.
- BoE-dated OIS shows 61.5bp of cuts through-year end, with only modest (6bp) pricing of a follow up rate cut in March and the next 25bp decrease in Bank Rate fully priced through May. We believe a March cut is unlikely at this stage, but it may be a very close vote (potential for a 5-4 vote split is high).
- SONIA futures flat to +3.5, last week’s highs untested.
- Little of note on the UK calendar today, with comments from BoE Governor Bailey & MPC member Mann (after her dovish pivot) eyed on Tuesday.
- This week’s DMO issuance comes via a syndication of the new 4.50% Mar-35 gilt (we expect this to price tomorrow, pencilling in a size of GBP8.5-10.0bln) and GBP1bln of the 0.625% Mar-45 I/L line (Wednesday).
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Cut-Adjusted SONIA Rate (bp) |
Mar-25 | 4.396 | -5.8 |
May-25 | 4.193 | -26.1 |
Jun-25 | 4.108 | -34.6 |
Aug-25 | 3.965 | -48.9 |
Sep-25 | 3.926 | -52.8 |
Nov-25 | 3.857 | -59.7 |
Dec-25 | 3.838 | -61.6 |
EQUITIES: Eurostoxx 50 Futures Holding Onto Recent Gains
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 Feb 3 initial sell-off 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.
- Japan's NIKKEI closed higher by 14.15 pts or +0.04% at 38801.17 and the TOPIX ended 4.22 pts lower or -0.15% at 2733.01.
- Elsewhere, in China the SHANGHAI closed higher by 18.503 pts or +0.56% at 3322.17 and the HANG SENG ended 388.44 pts higher or +1.84% at 21521.98.
- Across Europe, Germany's DAX trades higher by 0.88 pts or +0% at 21787.71, FTSE 100 higher by 28.37 pts or +0.33% at 8728.8, CAC 40 down 0.6 pts or -0.01% at 7972.43 and Euro Stoxx 50 up 7.48 pts or +0.14% at 5332.88.
- Dow Jones mini up 117 pts or +0.26% at 44538, S&P 500 mini up 21.5 pts or +0.36% at 6071, NASDAQ mini up 117.25 pts or +0.54% at 21708.
Time: 10:05 GMT
COMMODITIES: Gold Rallies to Fresh Record High Again
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 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, today. 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 $2900.0 handle next. The first key support to watch is $2776.3, the 20-day EMA.
- WTI Crude up $0.73 or +1.03% at $71.71
- Natural Gas up $0.1 or +2.99% at $3.409
- Gold spot up $42.57 or +1.49% at $2903.46
- Copper up $1.7 or +0.37% at $460.7
- Silver up $0.48 or +1.52% at $32.3018
- Platinum up $8.56 or +0.87% at $987.16
Time: 10:05 GMT
| Date | GMT/Local | Impact | Country | Event |
| 10/02/2025 | 1400/1500 |  EU | ECB's Lagarde participates in plenary debate on ECB 2023 Report | |
| 10/02/2025 | 1530/1030 |  CA | BOC market participants survey | |
| 10/02/2025 | 1600/1100 | ** |  US | NY Fed Survey of Consumer Expectations |
| 10/02/2025 | 1630/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 10/02/2025 | 1630/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 11/02/2025 | 0001/0001 | * |  GB | BRC-KPMG Shop Sales Monitor |
| 11/02/2025 | 0700/0800 |  NO | GDP | |
| 11/02/2025 | 0845/0845 | GB | BOE's Mann lecture on Economic Prospects | |
| 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 | 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 |