EXECUTIVE SUMMARY
- TRUMP PLANS TO IMPOSE 25% TARIFFS ON MEXICO, CANADA FEB 1
- ECB’S KAZIMIR SEES THREE TO FOUR MORE CUTS STARTING NEXT WEEK
- FIRST FULL DAY OF WEF AT DAVOS UNDERWAY
- UK PRIVATE REGULAR WAGES A NOTABLE UPSIDE SURPRISE
Figure 1: Earnings to take some focus off Trump's first days in office
NEWS
MNI US EARNINGS SCHEDULE: Industrials in Focus
President Donald Trump said he planned to impose previously threatened tariffs of as much as 25% on Mexico and Canada by Feb. 1, reiterating his contention that America’s two immediate neighbors are letting undocumented migrants and drugs flood into the country. “We’re thinking in terms of 25% on Mexico and Canada, because they’re allowing vast numbers of people” into the US, Trump said in response to questions from reporters in the Oval Office on Monday night. “I think we’ll do it Feb. 1.”
US (BBG): Trump Starts Reshaping US Energy With Focus on Oil and Gas
President Donald Trump launched a sweeping overhaul of US energy policy hours after taking office Monday, putting the weight of the federal government behind fossil-fuel production and pulling back from the fight against climate change. Trump initiated the shift in a series of orders and memoranda directing action by the federal government, with implications that reach across the entire energy landscape, from oil fields and wind farms to light bulbs and pickup trucks.
US/CANADA (MNI): Canada Says US Tariffs Would Be Error, Set to Reply
Canadian Finance Minister Dominic LeBlanc said Monday Donald Trump's comment about imposing a 25% tariff on Feb. 1 would be "a mistake" drawing a response that hurts America's job creation and boosts inflation. “Our country is absolutely ready to respond,” LeBlanc told reporters in comments shown on the CTV network. "It would be a mistake for the American government to proceed with imposing tariffs. It would be a mistake in terms of the cost of living in the United States, in terms of jobs in the United States, the security of supply chains."
US/CANADA (MNI): Legault Still Sees US Advancing Canada Tariffs
Quebec's Premier said Monday Donald Trump will keep pushing for tariffs on Canada even as the new president declined to carry out a promise to do so on his first day, adding Trump is mistaken in saying the U.S. can get by without oil from its northern neighbor. “He seems to be very serious about reducing or even erasing his trade deficit, so he’s serious but it doesn’t look like it will happen today,” Francois Legault told reporters.
ECB (BBG): ECB’s Kazimir Sees Three to Four More Cuts Starting Next Week
A reduction in interest rates next week by the European Central Bank is all but certain and two to three more will probably follow, according to Governing Council member Peter Kazimir. Recent data suggest quarter-point, back-to-back rate cuts should continue, Kazimir said late Monday in an interview. Heightened uncertainty, however, means the ECB must remain nimble in case things change. “Three or four cuts in a row are feasible, but at the same time, I must say that we cannot swear to it,” the Slovak official said. As for next week, “for me personally, the deal is done.”
ECB (BBG): ECB’s Villeroy Says It’s Plausible to Act at Each Meeting
It’s possible that the European Central Bank will lower interest rates at each of its upcoming meetings, according to Governing Council member Francois Villeroy de Galhau. Officials’ task of bringing inflation back to 2% is on track, despite President Donald Trump’s threats of trade tariffs, the Bank of France chief told Bloomberg Television in Davos. That may allow the deposit rate to be lowered to 2% by summer from 3% now, he said. “There’s a plausible consensus that we will go on acting at each meeting which we have successfully practiced since September,” Villeroy said Tuesday.
GERMANY (MNI): 'Transatlantic Partnership Must Be Expanded' - Autos Associaton
Reuters reporting comments from Chancellor Olaf Scholz following the inauguration of US President Donald Trump. Scholz to Trump: 'Together we can provide decisive impetus for freedom, peace and security as well as prosperity and economic development on both sides of the Atlantic.' Scholz's comments come alongside those from the German Association of the Automotive Industry (VDA), the interest group representing Germany's economically and politically powerful automotive sector, focusing on the new Trump administration in the US and what it means for the German car sector.
UK (BBG): Reeves Warned Investors Won’t Believe in Future Spending Cuts
Chancellor of the Exchequer Rachel Reeves will struggle to convince the City of her fiscal credibility if she announces more delayed spending restraint, having already sought to move politically controversial decisions toward the end of Labour’s parliamentary term. Reeves is in danger of breaking her self-imposed fiscal rules, by which official forecasts must show the UK on track to cover day-to-day government spending with tax revenues by 2029/30.
UK (FT): Bridgewater Founder Ray Dalio Warns of UK ‘Debt Death Spiral’
Ray Dalio, the billionaire founder of hedge fund firm Bridgewater Associates, warned that the UK could be heading for a “debt death spiral”, in which it has to borrow more and more money to service its rising interest costs. Dalio told the Financial Times that the recent sell-off in the gilt market, coupled with bouts of sterling weakness, suggested that the market was struggling to absorb the UK’s higher borrowing needs since last October’s Budget.
UK (FT): Reeves Intervenes in UK Car Finance Mis-Selling Case to Protect Lenders
Chancellor Rachel Reeves on Monday launched a bid to shield car loan providers from multibillion-pound payouts in a landmark mis-selling case, after the Treasury warned it could damage Britain’s reputation as a place to do business. The Treasury has taken the unusual step of seeking permission to intervene in a forthcoming Supreme Court case, amid concerns that banks and other lenders could face a compensation bill costing tens of billions of pounds.
RIKSBANK (MNI): Thedeen Pushes Back on Mortgage Policy Proposals
Riksbank Governor Thedeen pushed back on the proposal for more relaxed macroprudential policies in the housing market, stating that "just making it easier to borrow will not solve long-term housing market challenges". The Inquiry, which was presented in November 2024, proposed a relaxation of amortisation requirements for households, an increase in the mortgage cap to 90% (from 85% currently) and a new debt-to-income cap of 550%.
CHINA (MNI): China Copper Prices Up on Trump Inauguration
MNI (Beijing) Copper prices have found support after President Donald Trump decided not to implement China tariffs immediately following his inauguration and alongside his signalled intention to visit Beijing during the first 100 days, easing analyst concerns over US-China trade tensions, Shanghai Metals Market (SMM) said in a note on Tuesday. The Shanghai Futures Market three-month copper contract stood at CNY75,670 per tonne on Tuesday lunchtime, up from CNY75,400 yesterday, according to SMM data.
CORPORATE (BBG): Orcel Says He Can Drop Commerzbank Deal If He Doesn’t See Value
UniCredit SpA Chief Executive Officer Andrea Orcel made clear he won’t pursue an acquisition of Commerzbank AG at all costs. Asked during a Bloomberg Television interview if he’s ready to walk away from the pursuit of the German lender, Orcel said “yes, of course.” UniCredit has built a large stake in Commerzbank over the past few months and Orcel has said he’s considering an acquisition. However, the surprise moves have irked the government in Berlin and Commerzbank’s top management has indicated scepticism as well, creating substantial headwinds to his approach.
DATA
UK DATA (MNI): Private Regular Wages a Notable Surprise - But MPC Could Play Down
- UK NOV AVE WEEKLY EARNINGS +5.6% YY
- UK NOV AVE WEEKLY EARNINGS EX-BONUS +5.6% YY
- UK DEC CLAIMANT RATE +4.6%
- UK DEC CLAIMANT CHG +700
Looking at more detail into that upside surprise for UK private regular wage data. It comes in at 5.96% Y/Y in the 3-months to November (so is a soft 6.0%, but still above the 5.8% MNI median). A decent amount of the surprise looks to be from an upward surprise to October single month data. That has been revised up to 6.68% Y/Y from 6.42% Y/Y. The new November single month data was 6.12% Y/Y. Revisions to a year ago are minor and the September single month data was barely revised. Remember that only a third of the sample is carried out each month, so really you need to compare the single month figures to where they were 3-months ago and for this cohort private regular pay was 4.60% in August (so we have still seen a notable increase to 6.12% Y/Y).
GERMANY DATA (MNI): ZEW Headline Expectations Fall in January
- GERMANY ZEW JAN ECONOMIC EXPECTATIONS 10.3
- GERMANY ZEW JAN CURRENT CONDITIONS -90.4
The German ZEW expectations index fell to 10.3 in January, compared to a consensus estimate of 15.1, and December's 15.7, indicating a broad stalling at a relatively low level. The current situation index meanwhile ticked up a bit, to -90.4, outperforming consensus of -93.1 but remains bleak. A wider update to German sentiment will follow later this week with the January flash PMIs, and Monday's IFO Business Climate.
FOREX: Tariff Targets Suffer as Trump Eyes February Levies on Mexico and Canada
- Dollar strength pervades early Tuesday, rallying against all others in G10. Dollar strength comes off the back of Trump's clarification having entered office that his administration will be targeting 25% tariffs on Mexico and Canada as soon as February, reversing the slightly easier start to his Presidency that markets enjoyed on Monday.
- As a result, EUR/USD trades back below the $1.04 handle, while USD/CAD has rallied back toward C$1.45. These levels remain important psychological pivot points, and will help drive sentiment in either direction in the coming sessions.
- CAD is the poorest performer so far, with NOK, AUD and NZD not far behind.
- Canadian CPI takes focus going forward, with markets expecting CPI to slow to -0.4% on a monthly basis (from 0.0% prior), dragging both the core-median and the core-trim subcomponents lower. The release comes during a period of particular sensitivity for the CAD, which rallied well yesterday on news that suggested no 'day one' tariffs from Trump - but those gains have been swiftly reversed on Trump's clarification that his admin will target February 1st for 25% tariffs on USMCA nations, with migrant flows the main focus.
- Central bank speak today consists of ECB's Centeno, who appears in Lisbon following comments from Villeroy today. Villeroy pointed to sequential ECB rate cuts to neutral, but stopped short of suggesting pressing policy into accommodative territory.
EGBS: Bunds Weaken Alongside USTs as Markets Digest Trump Inauguration
Bund futures have weakened through the morning, with the weaker-than-expected German ZEW survey providing little reprieve. Futures are -2 ticks today at 131.82.
- Fallout from US President Trump’s inauguration remains a key focus, with Bunds having moved away from overnight highs alongside Treasuries as markets assess the President’s jawboning around tariffs. Today's EGB supply developments will have also factored into price action.
- Bund futures have entered a corrective phase following the recovery from the January 14 lows, and a continuation higher would open 132.41, the 20-day EMA. The medium-term trend is unchanged though, it remains bearish.
- The German curve has twist flattened, with 2-year yields 1bp higher and 30-year yields 2.5bps lower.
- Orderbooks for today’s 15-year OAT syndication are in excess of E135bln, a record size for a French transaction. MNI expect a size of E5-8bln, with upside risks of E9-10bln.
- Lithuania are also holding a dual-tranche syndication today, while Germany has held a conventional green Bund auction.
- Spain has issued a mandate for a new 10-year Obli. We pencil in a transaction size of E10-15bln.
- 10-year peripheral spreads to Bunds are within 1bp of yesterday’s closing levels.
- ECB dove Centeno is scheduled to speak at 1100GMT/1200CET.
GILTS: Little Changed as Inputs Offset, Syndication Sees Huge Demand
Gilts are little changed on the day.
- Spill over from risk-off Asia-Pac trade centred on the latest developments surrounding U.S. tariffs quickly faded as the broader risk-off move moderated.
- Modest weakness surrounding the book opening of the 4.375% Jan-40 gilt syndicated tap also faded quickly, as bookrunners had previously flagged that the deal would be today’s business.
- Little lasting impact from mixed labour market data, which saw firm private sector wages and soft quantity outcomes. Accuracy of the data remains in question.
- Futures +2 at 91.60. range of 91.51-91.79.
- Initial resistance at the January 17 high (91.96) untested.
- That leaves the bearish technical trend intact in the contract, initial support at the January 16 low (90.68).
- Yields essentially unchanged across the curve.
- 2s10s and 5s30s curves remain below January highs.
- Focus on hedging around pricing of the aforementioned syndication.
- Books topped GBP119bln including JLMs, with the spread set at tight end of the guidance range. Books are now closed.
- BoE-dated OIS shows ~61bp of cuts through ’25 vs. 62bp late yesterday.
- SONIA futures flat to -2.0.
- Macro/Trump policy cues eyed.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Feb-25 | 4.481 | -21.9 |
Mar-25 | 4.433 | -26.7 |
May-25 | 4.305 | -39.5 |
Jun-25 | 4.254 | -44.6 |
Aug-25 | 4.169 | -53.1 |
Sep-25 | 4.146 | -55.4 |
Nov-25 | 4.099 | -60.1 |
Dec-25 | 4.089 | -61.1 |
EQUITIES: Bull Cycle in Eurostoxx 50 Futures Remains Intact
A bull cycle in the Eurostoxx 50 futures contract remains intact. Last week’s climb resulted in a breach of 5054.00, the Jan 8 high, to confirm a resumption of the uptrend. The contract is holding on to its gains. The focus is on a climb towards 5215.87, a Fibonacci projection point. Key short-term support has been defined at 4931.00, the Jan 13 low. A break of this level would be bearish. S&P E-Minis are trading higher, marking an extension of last week’s bull phase. The move higher undermines the recent bearish theme. The contract has traded through the 50-day EMA and attention is on resistance at 6107.50, the Dec 26 high. Clearance of 6107.50 would strengthen a bullish theme. Key support has been defined at 5809.00, the Jan 13 low. A reversal lower and a breach of this level would reinstate a bear theme.
- Japan's NIKKEI closed higher by 125.48 pts or +0.32% at 39027.98 and the TOPIX ended 2.23 pts higher or +0.08% at 2713.5.
- Elsewhere, in China the SHANGHAI closed lower by 1.755 pts or -0.05% at 3242.623 and the HANG SENG ended 180.74 pts higher or +0.91% at 20106.55.
- Across Europe, Germany's DAX trades lower by 24.6 pts or -0.12% at 20967.06, FTSE 100 higher by 11.59 pts or +0.14% at 8532.26, CAC 40 up 7.73 pts or +0.1% at 7741.23 and Euro Stoxx 50 down 2.57 pts or -0.05% at 5161.87.
- Dow Jones mini up 138 pts or +0.32% at 43835, S&P 500 mini up 21.5 pts or +0.36% at 6055, NASDAQ mini up 89.5 pts or +0.41% at 21685.
Time: 09:50 GMT
COMMODITIES: Gold Pierces Key Short-Term Resistance, Strengthening Bullish Theme
The trend structure in WTI futures remains bullish and recent gains reinforce current conditions. The latest strong impulsive climb has resulted in a breach of $75.91, the Oct 8 high. Attention is on $79.48, the Apr 12 ‘24 high. A clear break of this hurdle would strengthen the bullish theme and open 80.63, a Fibonacci projection. On the downside, a reversal lower would expose the 20-day EMA, at $73.89, a key short-term support. Gold is trading higher today. The yellow metal has pierced resistance at 2726.2, the Dec 12 high and a key short-term resistance. A clear breach of this hurdle would strengthen a bullish theme and signal scope for an extension higher near-term. This would expose $2790.1, the Oct 31 all-time high. On the downside, first support to watch is $2653.4, the 50-day EMA. A reversal lower and a breach of this average would reinstate a bearish threat.
- WTI Crude down $1.34 or -1.72% at $76.48
- Natural Gas down $0.07 or -1.77% at $3.878
- Gold spot up $14.5 or +0.54% at $2724.01
- Copper down $8.5 or -1.95% at $428.25
- Silver down $0.07 or -0.22% at $30.4855
- Platinum down $8.37 or -0.88% at $938.87
Time: 09:50 GMT
| Date | GMT/Local | Impact | Country | Event |
| 21/01/2025 | - |  EU | ECB's De Guindos in ECOFIN Meeting | |
| 21/01/2025 | 1330/0830 | *** |  CA | CPI |
| 21/01/2025 | 1330/0830 | ** |  US | Philadelphia Fed Nonmanufacturing Index |
| 21/01/2025 | 1445/0945 | *** | US | MNI Chicago Business Barometer Seasonal Adjustment |
| 21/01/2025 | 1630/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 21/01/2025 | 1630/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 21/01/2025 | 1800/1300 | * | US | US Treasury Auction Result for Cash Management Bill |
| 21/01/2025 | 1800/1300 | ** | US | US Treasury Auction Result for 52 Week Bill |
| 22/01/2025 | 2145/1045 | *** |  NZ | CPI inflation quarterly |
| 22/01/2025 | 0001/0001 | * |  GB | Brightmine pay deals for whole economy |
| 22/01/2025 | 0700/0700 | *** | GB | Public Sector Finances |
| 22/01/2025 | 0700/1500 | ** |  CN | MNI China Money Market Index (MMI) |
| 22/01/2025 | 1200/0700 | ** | US | MBA Weekly Applications Index |
| 22/01/2025 | 1330/0830 | * | CA | Industrial Product and Raw Material Price Index |
| 22/01/2025 | 1355/0855 | ** | US | Redbook Retail Sales Index |
| 22/01/2025 | 1515/1615 | EU | ECB's Lagarde in dialogue on Unlocking Europes potential | |
| 22/01/2025 | 1630/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 22/01/2025 | 1800/1300 | ** | US | US Treasury Auction Result for 20 Year Bond |
| 23/01/2025 | 2350/0850 | ** |  JP | Trade |