EXECUTIVE SUMMARY
- TRUMP SAYS A NEW TRADE DEAL WITH CHINA IS POSSIBLE
- GOP SENATORS SPLIT ON TRUMP’S ATTACKS ON ZELENSKY, REVERSALS ON UKRAINE
- CHINA’S LOAN PRIME RATE REMAINS UNCHANGED
- AUSTRALIA UNEMPLOYMENT AT 4.1%, 44K JOBS CREATED
Figure 1: Energy deflation becomes more prominent in Germany Jan PPI release
Source: MNI, Destatis
NEWS
US/CHINA (BBG): Trump Says a New Trade Deal With China Is Possible
When asked about forming a new trade deal with China, President Donald Trump tells reporters aboard Air Force One “it’s possible.” “We had a great trade deal with China,” Trump says. Repeats he has a “very good relationship” with Chinese leader Xi Jinping.
US/CHINA (MNI): U.S. Should Consult Before Tariffs Imposed - MOFCOM
The U.S. should work with other countries to find solutions through consultation before imposing reciprocal tariffs on trading partners, He Yadong, spokesperson for the Ministry of Commerce said on Thursday. Speaking to reporters, He said China was deeply concerned by U.S. plans to impose measures against all trading partners, adding the move would undermine the multilateral trading system developed over the past 80 years.
US (WaPo): GOP Senators Split on Trump’s Attacks on Zelensky, Reversals on Ukraine
Republican lawmakers were split Wednesday over President Donald Trump's attacks on Ukrainian President Volodymyr Zelensky - but their pushback was muted, underscoring the GOP's shifting stance on Russia's invasion. Several senators distanced themselves from Trump's Wednesday declaration that Zelensky is a "dictator without elections" but stopped short of directly criticizing Trump's remarks. Others piled on, amplifying Trump's claims. Senate Republicans were once strongly behind Ukraine, but that support has eroded considerably over the past few years.
US (WSJ): Trump Weighs Direct Payments to Americans From DOGE Savings
President Trump said he is considering using a portion of the savings from Elon Musk’s cost-cutting initiative to provide direct payments to Americans. “We’re thinking about giving 20% back to the American citizens and 20% down to pay back debt,” Trump said at the FII Priority summit, a gathering of business and tech executives sponsored by Saudi Arabia’s sovereign-wealth fund. “If it were a real-estate balance sheet, the debt is tiny, but we still, we still want to pay it down.”
EUROPE (BBG): Macron to Defend Europe in US Talks Next Week, Minister Says
French President Emmanuel Macron will defend Europe’s interests regarding Ukraine when he meets US President Donald Trump in Washington next week, a French minister said. “He will come to speak for the Europeans and the security of Europe,” the French minister for European affairs, Benjamin Haddad, said in an interview with LCI TV on Thursday. Haddad added that Ukraine’s future can’t be decided without the Ukrainians and the Europeans.
UK (FT): US Congressional Committee Warns on New Chinese Embassy in London
A US House of Representatives committee has sounded the alarm over China’s plan to build a huge embassy in London, saying the project raises “significant security concerns” for the UK financial services industry. “The People’s Republic of China mega-embassy in the UK raises significant security concerns: from interference and surveillance to risks for sensitive infrastructure like London’s financial services,” the House China committee wrote on X.
CHINA (MNI): China Feb LPR Remains Unchanged
MNI (Beijing) China's Loan Prime Rate remained unchanged on Thursday according to a People's Bank of China statement, in line with expectations as the central bank held its easing pace to curb over-leverage in the bond market and reduce pressure on the yuan. The LPR was held at 3.1% for the one-year maturity and 3.6% for the five-year tenor and over. Both rates fell in October by 25 basis points, the largest cuts since the reform of the new LPR pricing system in 2019, following the PBOC’s 20bp reduction on its 7-day reverse repo rate in September.
CHINA (MNI): China to Ensure Foreign Firms in Procurement
MNI (Beijing) China will support foreign firms through standardising government procurement activity to ensure equal access with Chinese companies, said Li Ji, a vice minister at the Ministry of Commerce on Thursday, noting the issue had become a concern of international enterprises. Speaking with reporters, Li said the system will ensure products produced by domestic and foreign-funded firms in China can equally participate in public procurement.
JAPAN (BBG): BOJ’s Ueda Holds Regular Meeting With Ishiba to Discuss Economy
Bank of Japan Governor Kazuo Ueda said he held a regular meeting with Prime Minister Shigeru Ishiba to exchange views on the economy and financial markets ahead of a Group of 20 meeting next week. “We just exchanged general views on financial and economic developments,” Ueda told reporters in Tokyo Thursday, after meeting with Ishiba at the prime minister’s office. “I was also given the opportunity to meet with him just before I am due to attend the G-7 and G-20 meetings next week.”
RBA (BBG): RBA’s Hauser Says Rate Pause Would Have Seen CPI Undershoot
Australia’s central bank assessed that keeping interest rates unchanged this year would have resulted in core inflation going below the 2.5% midpoint of its target, Deputy Governor Andrew Hauser said. In updated economic forecasts released at the same time as Tuesday’s policy announcement, the Reserve Bank estimated that trimmed mean inflation would fall to 2.7% from mid-2025 and remain there through mid-2027. That estimate was based on market pricing for three rate cuts this year.
DATA
GERMANY DATA (MNI): German PPI ex-Energy Unchanged in January
- GERMANY JAN PPI -0.1% M/M, 0.5% Y/Y
German PPI rose by 0.5 Y/Y in January, considerably slower than consensus expectations of 1.2% Y/Y and remaining below December's 0.8% rate. While there was a significant disparity of estimates ahead of the release, PPI came in below even the lowest projection. On a sequential basis, PPI fell by 0.1% M/M, vs +0.6% consensus and -0.1% in December. Energy deflation was more prominent than before, at -1.0% Y/Y (vs -0.2% prior) - that is a bit at odds with the unchanged yearly rate in German energy CPI in January, and might explain parts of the downside surprise in headline PPI.
UK DATA (BBG): UK Consumer Confidence Sinks to Lowest Since Labour Elected
Confidence among UK households slipped to a new low under the Labour government, as consumers brace for higher prices and businesses warn of a hiring hit from rising payroll taxes. Half of Britons expect the British economy to worsen over the next three months, while just one-in-eight expect a pickup, according to the British Retail Consortium’s sentiment monitor. The net score of minus 37 is the worst since Keir Starmer’s party won a landslide victory last July and marks a sharp reversal from the plus 2 reading seen in his first month as prime minister.
AUSTRALIA DATA (MNI): Aussie Jan Unemployment at 4.1%, 44k Jobs Created
- AUSTRALIA JAN UNEMPLOYMENT RATE +4.1%
- AUSTRALIA JAN EMPLOYED PERSONS CHANGE 44K
- AUSTRALIA JAN F-T EMPLOYED PERSONS CHANGE 54.1K
The unemployment rate lifted 10 basis points to 4.1% as expected over January, while the economy created 44,000 jobs, more than double the anticipated amount, data from the Australian Bureau of Statistics revealed Thursday. “The rises in both the number of people employed and unemployed saw the participation rate rise by 0.1 percentage point, to a new record high of 67.3%,” noted Bjorn Jarvis, head of labour statistics at the ABS. “This was 0.8 pp higher than a year ago and 1.8 pp higher than March 2020.”
FOREX: JPY Trade-Weighted Index Pierces a New High, BoJ Pricing Supports
- JPY strength again stands out once again as USD/JPY and CHF/JPY are pressed to new YTD pullback lows. Market pricing for BoJ monetary policy this year is again largely responsible, as markets continue to price out easing as a response to the recent run higher in both nominal Japanese GDP and wages data that remain supportive of tightening.
- Evidence of heavy selling volumes, a break of the bear trigger in USD/JPY at 150.93 and a generally softer USD all added extra weight, prompting a sharp move lower in the 3m USD/JPY risk reversal - which spilled to 1.5 points in favour of puts, and closer to the February low. The JPY trade-weighted index probes a new YTD high.
- Despite the sharper market moves in JPY, EUR/USD trades with more poise, recovering gradually off yesterday's lows just ahead of the $1.0400 handle. This keeps the pair within range of a series of really sizeable option strikes - with notional set to expire today across the $1.0400-1.0450 strikes amounting to more than $10bln. Certainly the largest size of the year so far.
- The dip in the USD Index has tipped prices back below the 107.00 handle, but serious support won't cross until the mid-February pullback low of 106.566.
- Weekly jobless claims and the Philly Fed Business Outlook mark the US data highlights Thursday, shortly followed by the preliminary Eurozone consumer confidence release for February. Fed's Goolsbee, Musalem, Barr and Kugler are set to make appearances, while ECB's Nagel makes a panel appearance in Germany.
EGBS: Futures Off Lows Following Decent Spanish and French Auctions
Major EGB futures are off session lows, with this morning’s Spanish and French nominal supply now in the rear-view.
- Bund futures are -7 ticks at 131.45. A bearish technical theme is in play after the breach of 132.12, a trendline drawn from the Jan 15 low. Initial support is yesterday’s low at 131.26, before 131.00 (Jan 24 low) and 130.94 (2.60% 10-year yield level).
- German yields are up to 1bp lower across the curve.
- This morning’s Bono/Obli and MT OAT auctions saw solid demand metrics. France will also hold a linker auction at 1050GMT.
- The 10-year BTP/Bund spread is 1.5bps tighter at ~106.5bps, with European equity futures partially retracing yesterday’s ~1.5% selloff.
- Flash February Eurozone consumer confidence headlines today’s regional calendar at 1500GMT. The increasing trend since September 2022 has stalled somewhat in recent months, and consensus (-14.0) expects only a slight improvement from January’s -14.2 reading.
GILTS: Early Bid Fades, Futures Hover Above Initial Support
Gilts have faded from opening highs, taking cues from core global FI markets thus far.
- The bullish reaction to Fed balance sheet discussions revealed in the January meeting minutes (released last night) has been tempered by spill over from EGB weakness linked to set up for auctions and continued worry surrounding increased supply to facilitate European defence spending.
- Futures hover above initial support at yesterday’s low (91.91), which protects more meaningful support at the Jan 24 low (91.52).
- Yields flat on the day across the curve.
- We wrote a brief update on gilt swap spreads, which continue to show elevated issuance/fiscal risk premium when compared to pre-Budget levels.
- BoE pricing is little changed on the day, showing ~50bp of cuts through the remainder of ’25.
- Only lower tier data evident on the UK calendar today, so focus is likely to remain on wider macro and cross-market cues.
- However, the UK release schedule picks up again on Friday, with flash PMIs, retail sales and public borrowing data all due.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Mar-25 | 4.449 | -0.5 |
May-25 | 4.254 | -20.0 |
Jun-25 | 4.192 | -26.3 |
Aug-25 | 4.060 | -39.4 |
Sep-25 | 4.032 | -42.2 |
Nov-25 | 3.970 | -48.4 |
Dec-25 | 3.957 | -49.7 |
EQUITIES: Eurostoxx 50 Futures Remain Close to All-Time Highs
The trend condition in Eurostoxx 50 futures remains bullish, with prices edging to a new alltime high on the continuation contract this week. The move higher last week confirmed once again, 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. Support to watch is 5325.83, the 20-day EMA. S&P E-Minis have faded off intraday highs yesterday, but remain firm and hold the bulk of the recent phase of strength. Attention remains on resistance at 6162.25, the Jan 24 high. Clearance of this level would expose the key resistance at 6178.75, the Dec 6 ‘24 high. A move above this hurdle would resume the primary uptrend. On the downside, initial key support has been defined at 6014.00, the Feb 10 low. A break would highlight a bearish development.
- Japan's NIKKEI closed lower by 486.57 pts or -1.24% at 38678.04 and the TOPIX ended 32.65 pts lower or -1.18% at 2734.6.
- Elsewhere, in China the SHANGHAI closed lower by 0.756 pts or -0.02% at 3350.783 and the HANG SENG ended 367.26 pts lower or -1.6% at 22576.98.
- Across Europe, Germany's DAX trades higher by 129.36 pts or +0.58% at 22563.37, FTSE 100 lower by 17.52 pts or -0.2% at 8695.14, CAC 40 up 58.33 pts or +0.72% at 8169.05 and Euro Stoxx 50 up 33.3 pts or +0.61% at 5494.11.
- Dow Jones mini down 63 pts or -0.14% at 44649, S&P 500 mini down 13.5 pts or -0.22% at 6149.25, NASDAQ mini down 63.5 pts or -0.29% at 22186.75.
Time: 09:55 GMT
COMMODITIES: Fade in WTI Futures Wednesday Confirms Presence of Bear Threat
WTI futures traded firmer Wednesday, before fading into the close and confirming the still-present bear threat. Earlier this week, price pulled back from the recent high and has again traded below the 50-day EMA - at $71.62. Attention is on $70.20 (pierced), the Feb 6 low. A clear break of it would undermine a bullish theme and confirm a breach of the 50-day EMA. This would strengthen a bearish threat and open $67.75, the Dec 20 ‘24 low. Key S/T resistance has been defined at $74.06, the Feb 3 high. A move above this level would reinstate a bull theme. A bull cycle in Gold remains in play and the yellow metal continues to hold on to the bulk of its recent gains. Fresh highs once again confirm a resumption of the uptrend and maintain 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 $2833.2, the 20-day EMA.
- WTI Crude down $0.11 or -0.15% at $71.91
- Natural Gas down $0.07 or -1.71% at $4.209
- Gold spot up $18.96 or +0.65% at $2951.92
- Copper up $4.5 or +0.98% at $465.75
- Silver up $0.4 or +1.22% at $33.0926
- Platinum up $6.15 or +0.63% at $981.93
Time: 09:55 GMT
| Date | GMT/Local | Impact | Country | Event |
| 20/02/2025 | 1100/1100 | ** |  GB | CBI Industrial Trends |
| 20/02/2025 | 1330/0830 | * |  CA | Industrial Product and Raw Material Price Index |
| 20/02/2025 | 1330/0830 | *** |  US | Jobless Claims |
| 20/02/2025 | 1330/0830 | ** | US | Philadelphia Fed Manufacturing Index |
| 20/02/2025 | 1435/0935 | US | Chicago Fed's Austan Goolsbee | |
| 20/02/2025 | 1500/1600 | ** |  EU | Consumer Confidence Indicator (p) |
| 20/02/2025 | 1530/1030 | ** | US | Natural Gas Stocks |
| 20/02/2025 | 1600/1100 | ** | US | DOE Weekly Crude Oil Stocks |
| 20/02/2025 | 1630/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 20/02/2025 | 1630/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 20/02/2025 | 1705/1205 | US | St. Louis Fed's Alberto Musalem | |
| 20/02/2025 | 1800/1300 | ** | US | US Treasury Auction Result for TIPS 30 Year Bond |
| 20/02/2025 | 1930/1430 | US | Fed Governor Michael Barr | |
| 21/02/2025 | 2200/0900 | *** |  AU | Judo Bank Flash Australia PMI |
| 20/02/2025 | 2200/1700 | US | Fed Governor Adriana Kugler | |
| 21/02/2025 | 2330/0830 | *** |  JP | CPI |
| 21/02/2025 | 0001/0001 | ** | GB | Gfk Monthly Consumer Confidence |
| 21/02/2025 | 0030/0930 | ** | JP | Jibun Bank Flash Japan PMI |
| 21/02/2025 | 0700/0700 | *** | GB | Public Sector Finances |
| 21/02/2025 | 0700/0700 | *** | GB | Retail Sales |
| 21/02/2025 | 0745/0845 | ** |  FR | Manufacturing Sentiment |
| 21/02/2025 | 0815/0915 | ** | FR | S&P Global Services PMI (p) |
| 21/02/2025 | 0815/0915 | ** | FR | S&P Global Manufacturing PMI (p) |
| 21/02/2025 | 0830/0930 | ** |  DE | S&P Global Services PMI (p) |
| 21/02/2025 | 0830/0930 | ** | DE | S&P Global Manufacturing PMI (p) |
| 21/02/2025 | 0900/1000 | *** |  IT | HICP (f) |
| 21/02/2025 | 0900/1000 | ** | EU | S&P Global Services PMI (p) |
| 21/02/2025 | 0900/1000 | ** | EU | S&P Global Manufacturing PMI (p) |
| 21/02/2025 | 0900/1000 | ** | EU | S&P Global Composite PMI (p) |
| 21/02/2025 | 0930/0930 | *** | GB | S&P Global Manufacturing PMI flash |
| 21/02/2025 | 0930/0930 | *** | GB | S&P Global Services PMI flash |
| 21/02/2025 | 0930/0930 | *** | GB | S&P Global Composite PMI flash |
| 21/02/2025 | 1330/0830 | ** | CA | Retail Trade |
| 21/02/2025 | 1330/0830 | ** | US | WASDE Weekly Import/Export |
| 21/02/2025 | 1330/0830 | ** | CA | Retail Trade |
| 21/02/2025 | 1430/1530 | EU | ECB's Lane Speech at FIW-Research Conference | |
| 21/02/2025 | 1445/0945 | *** | US | S&P Global Manufacturing Index (Flash) |
| 21/02/2025 | 1445/0945 | *** | US | S&P Global Services Index (flash) |
| 21/02/2025 | 1500/1000 | *** | US | NAR existing home sales |
| 21/02/2025 | 1500/1000 | * | US | Services Revenues |
| 21/02/2025 | 1500/1000 | ** | US | U. Mich. Survey of Consumers |
| 21/02/2025 | 1630/1130 | US | Fed Vice Chair Philip Jefferson | |
| 21/02/2025 | 1630/1130 | US | San Francisco Fed's Mary Daly | |
| 21/02/2025 | 1730/1230 | CA | BOC Governor speech/press conference. |