EXECUTIVE SUMMARY
- US-RUSSIA TALKS UNDERWAY AS UK PM PROPOSES US 'BACKSTOP'
- RBA LOWERS CASH RATE 25BPS TO 4.10%
- BOE’S BAILEY PLAYS DOWN EXPECTED SPIKE IN UK INFLATION
- UK AWE DATA SOFTER THAN BOE MPR FORECAST
Figure 1: UK payrolls downtrend continuing gradually
Source: MNI
NEWS
GLOBAL POLITICAL RISK (MNI): US-Russia Talks Underway as UK PM Proposes US 'Backstop'
Talks are underway in the Saudi capital Riyadh between delegations from the US and Russia in what could prove the first step towards peace talks to end the war in Ukraine. The US has painted the discussions as preliminary talks to infer whether Russia is serious about holding eventual ceasefire negotiations. Russia, on the other hand, has said the talks will cover "the entire complex of Russian-American relations", preparations for peace talks, and planning for a meeting between Presidents Putin and Trump.
US (WSJ) Investors Haven’t Been This Pessimistic About Stocks Since 2023
Bearishness among individual investors—measured by the percentage who expect stock prices to fall over the next six months—reached 47.3% for the week ended Feb. 12, according to the latest survey from the American Association of Individual Investors. That is the highest level since November 2023.
US (WSJ): Republican Senators Try to Curb Influence of Trump Tariff Hawk
President Trump has peppered the first month of his presidency with trade actions even before the bulk of his trade team is in place. U.S. Trade Representative nominee Jamieson Greer still doesn’t have a slot for a confirmation vote before the full Senate. Commerce Secretary nominee Howard Lutnick, who Trump has said will lead the trade agenda, is likely to be confirmed this week, but likewise hasn’t been in office for the major trade decisions so far.
RBA (MNI): RBA Lowers Cash Rate 25bps to 4.10%
The Reserve Bank of Australia Board lowered the cash rate 25 basis points to 4.10% on Tuesday, its first move lower since November 2020. In a statement following the decision, the Board said underlying inflation had fallen faster than expected following Q4’s 3.2% y/y result. “There has also been continued subdued growth in private demand and wage pressures have eased,” the Board noted. “These factors give the Board more confidence that inflation is moving sustainably towards the midpoint of the 2–3% target range.”
BOE (BBG): BOE’s Bailey Plays Down Expected Spike in UK Inflation
Bank of England Governor Andrew Bailey played down the threat of a resurgence in UK inflation, saying it is “not telling us a story about the fundamental state of the economy.” Bailey was speaking on Tuesday at an event hosted by think tank Bruegel in Brussels, Belgium. His comments come ahead of figures on Wednesday that are expected to show inflation hitting a 10-month high of 2.8%. “We are facing a short-run hump in inflation. It’s going to go up but nothing like what it was a few years ago.”
UK (MNI): UK Path to 2.5% GDP Defence Spend Due in Spring
The UK will set a path towards spending 2.5% of GDP on defense soon after the government's spending review, expected in the spring, Secretary of Defence John Healy said on Wednesday. Speaking at an event hosted by the Institute of Government, Healy said the path to spending 2.5% of GDP on defence, up from the current 2.3%, would be set after the spending review. He would not be drawn on whether spending should be increased to a still-higher percentage.
GERMANY (BBG): Scholz, Merz Rule Out Governing Together After German Election
German Chancellor Olaf Scholz and conservative frontrunner Friedrich Merz effectively ruled out serving together in the same cabinet, whatever the outcome of Sunday’s election. Social Democrat Scholz and Merz, who heads the center-right CDU/CSU bloc, briefly coincided during a live Q&A with voters on Monday evening. A moderator for public broadcaster ARD asked them if they could envisage being in the same government after the ballot that opinion polls suggest Merz will win comfortably. “That’s something we both see as unlikely,” Merz replied.
CHINA (BBG): Xi’s Embrace of China Tech CEOs Spurs Hope of Big Economic Shift
President Xi Jinping’s embrace of Chinese tech bosses in a rare public meeting is fueling hope Beijing is shifting its stance to give the private sector a freer hand as it fights a trade war with Donald Trump. Four years after launching a regulatory crackdown that plunged the tech sector into turmoil, China’s top leader sat down publicly for the first time with Alibaba co-founder Jack Ma, whose firm bore the brunt of that campaign.
CHINA (MNI): NDRC to Support Private Sector
MNI (Beijing) Chinese officials will introduce a new version of the market access negative list soon to open infrastructure and major national scientific research infrastructure to private enterprises, Zheng Bei, the NDRC's deputy director, told state China Central Television on Tuesday. Local governments and state-owned enterprises need to accelerate clearing overdue debts owed to private firms, Zheng said.
JAPAN (BBG): Ex-BOJ Deputy Nakaso Sees BOJ Hiking to 1% and Perhaps Beyond
The Bank of Japan is set to continue raising its benchmark interest rate toward 1% for now and will likely look for further rate hike opportunities afterwards depending on economic conditions, according to a former deputy governor of the central bank. “The environment for continued interest rate hikes is reasonably well prepared in Japan,” former deputy Hiroshi Nakaso said at a press conference in Tokyo Tuesday. “The bank should continue raising interest rates as much as possible, making appropriate judgments at each meeting.”
INDIA (BBG): India Plans More Tariff Changes to Curb Trump Trade Threats
India’s top officials said they will continue to cut import taxes as the government looks to work around US President Donald Trump’s plan to impose reciprocal tariffs on trading partners. Weeks after she unveiled sweeping cuts to duties on imports from textiles to motorcycles, India’s finance minister said that she will carry on the process of reforming the nation’s tariff regime.
MNI RBNZ PREVIEW - FEBRUARY 2025: 50bp in Feb, Focus on OCR Path
With the economy broadly developing as the RBNZ expected in November with core inflation “converging” to the mid-point of the band and “considerable spare capacity” persisting, another 50bp of easing on February 19 remains the central case. It had this size of cut in its November projections. RBNZ dated OIS pricing has 49bps of easing for Wednesday, with a cumulative 112bps by November 2025. The RBNZ will also publish updated staff forecasts this month and the revised OCR path will be of particular interest as the policy rate approaches the bank's estimated 2.5-3.5% range for neutral.
MNI BI PREVIEW - FEBRUARY 2025: On Hold, Time on Their Side
According to the BI January's decision to cut was consistent with their inflationary forecasts for further low inflation for 2025 and 2026. The BI stated that it will continue to consider room for monetary easing to drive economic growth, whilst focusing on macroprudential, growth orientated policies. With Q4 growth at 5.0%, further rate cuts aren't urgent and the pivot to macro-prudential measures seems a logical stance from the BI, buying them time to move slowly on rates.
DATA
EUROZONE DATA (MNI): Broad-Based Wage Growth Easing in Latest Indeed Tracker
Eurozone wages saw a broad-based deceleration in January, according to the latest Indeed wage tracker. Annual posted wage growth was 2.57% Y/Y, down from 3.35% in December (vs 3.26% initial) for the lowest since October 2021. The 3mma Y/Y rate eased to 3.14% (vs 3.37% prior). Taken alongside the signals from the ECB's forward-looking wage tracker, pay growth appears to be decelerating in line with the ECB's projections. This is expected to feed through into lower services inflation through the course of this year and justify further policy easing.
UK DATA (MNI): AWE and PAYE Wage Data Both Softer - But RTI Data Showing Trend Lower
- UK DEC AVE WEEKLY EARNINGS +6% YY
- UK DEC AVE WEEKLY EARNINGS EX-BONUS +5.9% YY
- UK JAN CLAIMANT RATE +4.6%
- UK JAN CLAIMANT CHG +22000
Looking at the change in private regular AWE (which came in at 6.22% Y/Y in the 3-months to December, a little lower than the 6.29% pencilled in by the BOE's MPR), we think that the slight downside surprise was broadly equally attributable to both the fresh December data and a downward revision to November. There was no revision to the high 6.68% Y/Y for the single month October print, but the single month November print was revised down to 5.90% Y/Y from 6.12% Y/Y (leaving the 3-month November print at 5.89% Y/Y, down from 5.96%). The single month print for December was 6.09% Y/Y.
GERMANY DATA (MNI): ZEW Headline Outperforms Consensus in February
- GERMANY ZEW FEB ECONOMIC EXPECTATIONS 26
- GERMANY ZEW FEB CURRENT CONDITIONS -88.5
The German ZEW expectations index rose to 26.0 in February, outperforming a consensus estimate of 20.0, and January's 10.3, indicating some strengthening in sentiment amongst German financial market professionals. The current situation index meanwhile also improved further from December's multi-year low, to -88.5, stronger than consensus of -89.4. A wider update to German sentiment will follow on Friday with the February flash PMIs, and the IFO Business Climate index is scheduled for next Monday.
SWEDEN DATA (MNI): Increase in Jan CPI Seems Broad-Based, But Basket Effect Plays a Role
- SWEDEN FINAL JAN CPIF +2.2% Y/Y
The increase in Swedish January CPI looks quite broad-based, with several categories across core goods, services and food seeing higher-than-usual monthly inflation rates. Overall, CPIF ex-energy confirmed flash estimates at 2.7% Y/Y, notably above the Riksbank's 2.4% forecast in the December MPR. This should keep the Executive Board's base case of no March cut in tact, but we still have an eye on the activity data due at the end of this month.
FRANCE FINAL CPI 1.7% Y/Y, 0.2% M/M (MNI)
FRANCE FINAL HICP 1.8% Y/Y, -0.2% M/M (MNI)
FOREX: ECB's Cipollone and Canadian CPI Forms Tuesday Focus
- AUD trades well, with AUD/USD making another test on the year's high and first resistance at 0.6373. Moves follow the RBA rate decision overnight, at which the Bank lowered the cash rate to 4.10%. While the easing step was the first in nearly five years, the RBA's language pushed markets away from one-directional bets on policy ahead, warning that an overly aggressive approach to easing could result in disinflation stalling. Technically, the breach of resistance in the pair highlights a stronger reversal and paves the way for gains towards 0.6414, a Fibonacci retracement.
- The AUDNZD cross has advanced 0.58% on the session, close to recent highs of 1.1149. Late 2024 highs represent the most notable level on the topside at 1.1180, a breach of which would place the cross at the highest level since late 2022.
- The single currency trades more mixed, with EUR/GBP recovering just off the fresh February low of 0.8290 posted overnight. Near-term focus shifts to an appearance from ECB's Cipollone - who speaks with MNI on the topic of the ECB balance sheet and monetary policy.
- Canadian inflation data for January takes focus ahead, with CPI expected to pick up slightly in the month, evident in consensus looking for +2.6% for core Trim Y/Y from +2.5% previously. US Empire Manufacturing is also due, as well as appearances from Fed's Daly and Barr.
BONDS: Fresh Demand Seen Over The Last 20 mins, Gilt/Bund Spread 1bp Wider
Fresh demand for Bund and Gilt futures over the last 20 minutes, with the German contract still marginally outperforming Gilts on the session.
- Bund futures are -16 ticks at 132.06, up from a session low of 131.72. The stronger-than-expected German ZEW survey had little lasting market impact. A better indication of German sentiment will follow on Friday with the February flash PMIs.
- Today’s E4.5bln 2.20% Mar-27 Schatz supply has been digested smoothly
- German yields are flat to 0.7bps higher at typing, while EGB spreads are biased tighter. The 10-year BTP/Bund spread has pushed through 106bps, with the psychological 100bp handle coming into view,
- Gilt futures are at session highs of 92.77, but are still down 20 ticks on the day. The 10-year Gilt/Bund spread is 1bp wider at 204.5bps.
- This morning’s labour market data sent stronger-than-expected signals from the quantity side of the labour market, while pay growth was only a touch softer than expected.
- Little market moving commentary from BOE Governor Bailey, who noted that the labour market report has not fundamentally changed the outlook, while reiterating the meaning of “careful” in the bank’s rate guidance.
- The 4.00% Oct-63 Gilt saw decent demand metrics.
- ECB Executive Board Member Cipollone speaks on the ECB’s balance sheet at an MNI Event at 1400GMT/1500CET (sign up here).
EQUITIES: Bullish Trend Structure in Eurostoxx 50 Futures Remains in Play
The trend condition in Eurostoxx 50 futures remains bullish. 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. A major resistance at 5525.00, the March 2000 all-time high (cont), has been pierced. A clear break of it would highlight a key bullish technical breach. Support to watch is 5325.83, the 20-day EMA. S&P E-Minis continue to climb and the contract maintains a firmer tone. Attention is 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 higher by 96.15 pts or +0.25% at 39270.4 and the TOPIX ended 8.61 pts higher or +0.31% at 2775.51.
- Elsewhere, in China the SHANGHAI closed lower by 31.34 pts or -0.93% at 3324.49 and the HANG SENG ended 360.58 pts higher or +1.59% at 22976.81.
- Across Europe, Germany's DAX trades lower by 72.66 pts or -0.32% at 22726.07, FTSE 100 lower by 8.26 pts or -0.09% at 8759.9, CAC 40 down 24.22 pts or -0.3% at 8164.53 and Euro Stoxx 50 down 11.34 pts or -0.21% at 5508.37.
- Dow Jones mini up 21 pts or +0.05% at 44656, S&P 500 mini up 16.75 pts or +0.27% at 6148.75, NASDAQ mini up 83 pts or +0.37% at 22279.5.
Time: 09:50 GMT
COMMODITIES: Gold Holding Onto Bulk of Recent Gains, Bull Cycle Intact
WTI futures have pulled back from last week’s high and price 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 up $1.13 or +1.6% at $71.89
- Natural Gas down $0.15 or -3.89% at $3.581
- Gold spot up $15.61 or +0.54% at $2912.21
- Copper down $6.75 or -1.43% at $464.55
- Silver up $0.16 or +0.49% at $32.4995
- Platinum up $2.86 or +0.29% at $987.92
Time: 09:50 GMT
| Date | GMT/Local | Impact | Country | Event |
| 18/02/2025 | - |  EU | ECB's De Guindos in ECOFIN meeting | |
| 18/02/2025 | 1330/0830 | *** |  CA | CPI |
| 18/02/2025 | 1330/0830 | ** |  US | Empire State Manufacturing Survey |
| 18/02/2025 | 1400/0900 | * | CA | CREA Existing Home Sales |
| 18/02/2025 | 1400/1500 | EU | ECB's Cipollone in MNI Connect conference on Balance Sheet | |
| 18/02/2025 | 1500/1000 | ** | US | NAHB Home Builder Index |
| 18/02/2025 | 1520/1020 | US | San Francisco Fed's Mary Daly | |
| 18/02/2025 | 1630/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 18/02/2025 | 1630/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 18/02/2025 | 1800/1300 | ** | US | US Treasury Auction Result for 52 Week Bill |
| 18/02/2025 | 1800/1300 | US | Fed Governor Michael Barr | |
| 18/02/2025 | 2100/1600 | ** | US | TICS |
| 19/02/2025 | 2350/0850 | ** |  JP | Trade |
| 19/02/2025 | 2350/0850 | * | JP | Machinery orders |
| 19/02/2025 | - |  NZ | Reserve Bank of New Zealand Meeting | |
| 19/02/2025 | 0001/0001 | * |  GB | Brightmine pay deals for whole economy |
| 19/02/2025 | 0030/1130 | *** |  AU | Quarterly wage price index |
| 19/02/2025 | 0100/1400 | *** | NZ | RBNZ official cash rate decision |
| 19/02/2025 | 0700/0700 | *** | GB | Consumer inflation report |
| 19/02/2025 | 0700/0700 | *** | GB | Producer Prices |
| 19/02/2025 | 0900/1000 | ** | EU | EZ Current Account |
| 19/02/2025 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 19/02/2025 | 1000/1100 | * | EU | labour costs |
| 19/02/2025 | 1200/0700 | ** | US | MBA Weekly Applications Index |
| 19/02/2025 | 1330/0830 | *** | US | Housing Starts |
| 19/02/2025 | 1355/0855 | ** | US | Redbook Retail Sales Index |
| 19/02/2025 | 1800/1300 | ** | US | US Treasury Auction Result for 20 Year Bond |
| 19/02/2025 | 1900/1400 | US | FOMC Minutes | |
| 19/02/2025 | 1900/1400 | *** | US | FOMC Minutes |
| 19/02/2025 | 2200/1700 | US | Fed Vice Chair Philip Jefferson |