Market looks to Fed Minutes for clues on policy

EU mid-market update: Sterling unfazed by bump in UK inflation; Trump criticizes Zelenskiy; Market looks to Fed minutes for clues on policy.

Notes/observations

- European markets opened mixed as Trump’s proposed 25% tariffs on auto, pharma, and semiconductor imports (effective April 2nd) rattled sectors. Auto stocks like Mercedes and BMW dipped, though Stellantis bucked the trend. Geopolitical focus remains on Ukraine peace talks, with Trump signaling confidence in a deal with Putin and pushing for elections in Ukraine - a key Russian demand. France’s Macron reiterated reluctance to deploy troops, stressing reliance on US support, ahead of another EU’s Ukraine peace summit in Paris today.

- UK Headline CPI accelerated to 3.0% YoY in January (vs. 2.8% forecast), driven by transport, food, and education costs. Services inflation softened to 5% (below BoE’s 5.2% estimate), but wage growth and sticky core inflation (3.7%) kept gilt yields elevated - 10-year gilts hit 4.6%, a three-week high. BoE’s Bailey downplayed risks, calling the spike “transitory,” though markets now price fewer rate cuts.

- Ukraine Pres Zelenskiy reiterated his stance that any minerals deal not fair without security guarantees, after US Pres Trump criticized Ukraine’s role in peace negotiations, emphasizing that Ukraine “should have never started it” and that he is "very disappointed" that Ukraine upset about not having a seat in yesterday’s talks, as "they had a seat for three years".

- Russia govt spokesperson Peskov said that Pres Putin meeting with US Pres Trump in February is not excluded, which implies meeting as soon as next week.

- EU trade chief Sefcovic scheduled to meet US Pres Trump’s top trade officials in Washington on Wednesday, Feb 19th in a bid to avoid a transatlantic tariff war.

- Notable EU Corporate News: Glencore tumbled >4% after weak FY profits, dragging the FTSE 100 lower; HSBC edged up 0.5% on a $2B buyback plan despite revenue misses; Philips sank 6% post-Q4 sales miss, while BAE Systems faced profit-taking despite strong defense demand; BP explores a $10B sale of its lubricants unit amid activist pressure.

- Looking ahead: Fed Minutes later today eyed for clues on rate-cut timelines, dollar index (DXY) down marginally ahead of release.

- Asia closed mixed with KOSPI outperforming +1.7%. EU indices -0.1% to +0.7%. US futures +0.1%. Gold +0.3%, DXY +0.1%; Commodity: Brent +0.8%, WTI +0.9%; Crypto: BTC +0.8%, ETH +2.2%.

Asia

- New Zealand Central Bank (RBNZ) cut the Official Cash Rate (OCR) by 50bps to 3.75% (as expected) for its 4th straight cut under the current easing cycle. Statement noted If economic conditions continue to evolve as projected it had the scope to lower OCR further through 2025.

- RBNZ Gov Orr post rate decision press conference noted inflation outlook provided confidence for more cuts. Saw about 50bps of cuts by mid-July (in two 25bps steps), as per OCR path projections.

- New Zealand Q4 PPI Input Q/Q: -0.9% v +1.9% prior; PPI Output Q/Q: -0.1% v +1.5% prior.

- Australia Jan Westpac Leading Index M/M: +0.12% v -0.02% prior.

- Australia Q4 Wage Price Index Q/Q: 0.7% v 0.8%e; Y/Y: 3.2% v 3.2%e (lowest growth q/q since Mar 2022).

- Japan Jan Trade Balance: -¥2.759T v -¥2.103Te; Exports Y/Y: 7.2% v 7.7%e; Imports Y/Y: 16.7% v 9.3%e.

- Japan Dec Core Machine Orders M/M: -1.2% v +0.5%e; Y/Y: 4.3% v 7.5%e.

- China Jan New Home Prices M/M: -0.1% v -0.1% prior; Used Home Prices M/M: -0.3% v -0.3% prior.

- BOJ Gov Ueda testified it was hard to asses impact of US admin policy on their economy; uncertainty over its outlook has weaken given solid jobs growth.

- BOJ Board member Takata noted it was necessary for BOJ to shift gears as appropriate; BOJ's policy flexibility has increased.

Americas

- President Trump noted would have announcements in the next few weeks of car and chip companies bringing manufacturing back the US; Expect auto tariffs to be 25% and pharmaceuticals to be 25% or higher.

- Dec Total Net TIC Flows: $87.1B v $134.1B prior; Net Long-Term TIC Flows: $72.0B v $53.2B prior.

Energy

- Brazil said to plan to join OPEC+ group of oil exporters.

- President Trump stated that he might not allow Venezuela export oil via Chevron.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.04% at 557.40, FTSE -0.05% at 8,762.66, DAX +0.03% at 22,869.25, CAC-40 -0.14% at 8,194.84, IBEX-35 -0.24% at 13,114.10, FTSE MIB +0.80% at 38,863.00, SMI -0.30% at 12,864.50, S&P 500 Futures +0.04%].

Market focal points/key themes: European indices open with a modest positive bias but failed to make headway through the early part of the session, trading mostly mixed; tariffs back in focus, impeding risk appetite; among better performing sectors are energy and utilities; underperforming sectors include materials and consumer discretionary; reportedly BP considering sale of its lubricants unit; press speculation that Akzo Nobel will sell its paint unit in India; Telefonica reportedly looking to sell its Uruguay unit; focus on release of FOMC minutes later in the day; earnings expected in the upcoming Americas session include Analog Devices, Carvana, Garmin and Crown Castle.

Equities

- Consumer discretionary: Delivery Hero [DHER.DE] -4.5% (Citigroup cuts to sell), Straumann [STMN.CH] -2.0% (FY results).

- Financials: HSBC [HSBC.UK] +0.5% (FY results; buyback), ASR Nederland [ASRNL.NL] +4.0% (earnings; buyback).

- Healthcare: Philips [PHIA.NL] -11.0% (recall settlement; Q4 results, initial FY25 guidance).

- Industrials: BAE Systems [BA.UK] -2.5% (US Pres Trump speech on Ukraine; FY24 results, above estimates, initial FY25 guidance), MTU Aero Engines [MTX.DE] -7.0% (final Q4 results, raises FY25 guidance).

- Technology: Nexans [NEX.FR] +7.5% (FY24 results, affirms FY25 guidance), Temenos [TEMN.CH] -3.0% (Q4 results - post close), STMicroelectronics [STM.FR] +5.5% (analyst upgrade).

- Real Estate: Vopak [VPK.NL] -6.5% (Q4 results, announces €100M share buyback).

Speakers

- ECB’s Panetta (Italy) commented that signs of weakness in Euro Zone economy were more persistent than were anticipating. Stressed that a weak economy posed downside risks to inflation.

- Indonesia Central Bank Policy Statement noted it would continue looking at room to lower rates by looking at FX, inflation and growth. Decision to keep policy steady consistent with IDR currency (Rupiah) stabilization and supporting economic growth.

Currencies/fixed income

- FX price action was subdued during the EU session. Focus on upcoming FOMC Jan Minutes.

- GBP/USD was little changed and off its recent 9-week highs despite a jump in Jan inflation readings. Pair steady at 1.2615 as the higher UK CPI reading was attributed to base effects. Nonetheless the BOE was seen keeping policy steady at the next MPC in March.

- EUR/USD at 1.0440 area as the key resistance at 1.05 area remained intact.

- USD/JPY at 151.70.

- 10-year US Treasury yield at 4.56%; 10-year Gilt yield at 4.60% and 10-year German Bund yield at 2.52%.

Economic data

- (FI) Finland Jan CPI M/M: +0.2% v -0.1% prior; Y/Y: 0.7% v 0.7% prior.

- (UK) Jan CPI M/M: -0.1% v -0.3%e; Y/Y: 3.0% v 2.8%e; CPI Core Y/Y: 3.7% v 3.7%e; CPI Services Y/Y: 5.0% v 5.1%e; CPIH Y/Y: 3.9% v 3.7%e.

- (UK) Jan RPI M/M: -0.1% v 0.0%e; Y/Y: 3.6% v 3.7%e; RPI (ex-mortgage payments) Y/Y: 3.2% v 2.9% prior; Retail Price Index: 391.7 v 392.1e.

- (UK) Jan PPI Input M/M: 0.8% v 0.7%e; Y/Y: -0.1% v -0.6%e.

- (UK) Jan PPI Output M/M: 0.5% v 0.2%e; Y/Y: 0.3% v 0.1%e.

- (ID) Indonesia Central Bank (BI) left the Bi-Rate unchanged at 5.75% (as expected).

- (ES) Spain Dec Total Mortgage Lending Y/Y: 44.9% v 23.4% prior; Mortgage Approvals Y/Y: 30.0% v 16.6% prior.

- (EU) Euro Zone Dec ECB Current Account: €38.4B v €25.1B prior.

- (PL) Poland Feb Consumer Confidence: -14.8 v -14.7e.

- (UK) Dec ONS House Price Index Y/Y: 4.6% v 3.9% prior.

- (IT) Italy Dec Current Account Balance: +€4.2B v -€0.3B prior.

- (PT) Portugal Dec Current Account Balance: -€0.9B v +€0.4B prior.

- (GR) Greece Dec Current Account Balance: -€3.6B v -€3.2B prior.

Fixed income issuance

- (SK) Slovakia Debt Agency (Ardal) opens book to sell EUR-denominate 15-year bonds via syndicate; guidance seen +140bps to mid-swaps.

- (DK) Denmark sold total DKK1.765B in 2035 and 2052 DGB bonds.

- (UK) DMO sold £4.25B in 4.375% Mar 2028 Gilts; Avg Yield: 4.294% v 4.384% prior; bid-to-cover: 3.09x v 3.20x prior; Tail: bps v 0.2bps prior.

- (SE) Sweden sold total SEK10.0B vs. SEK10.0B indicated in 3-month and 6-month bills.

- (GR) Greece Debt Agency (PDMA) sold €600M vs. €500M indicated in 6-month Bills; Avg Yield: 2.19% v 2.45% prior; bid-to-cover: 2.21x v 2.36x prior.

Looking ahead

- (ZA) South Africa Budget.

- (IL) Israel Feb 12-month CPI Forecast: No est v 2.7% prior.

- (AR) Argentina Dec Leading Indicator: No est v 2.5% prior.

- (IT) Italy Debt Agency (Tesoro) to sell new 8-year BTP Valore (retail bond).

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (DE) Germany to sell €4.5B in 2.5% Dec 2035 Bunds.

- 05:30 (PT) Portugal Debt Agency (IGCP) to sell €0.75-1.0B in 12-month Bills.

- 06:00 (ZA) South Africa Dec Retail Sales M/M: No est v 0.8% prior; Y/Y: 3.9%e v 7.7% prior.

- 06:00 (IE) Ireland Dec Property Prices M/M: No est v 0.7% prior; Y/Y: No est v 9.4% prior.

- 06:00 (EU) EU Commission to sell combined €4.0B in 3-month, 6-month and 12-month Bills.

- 06:00 (RU) Russia to sell OFZ Bonds.

- 07:00 (US) MBA Mortgage Applications w/e Feb 14th: No est v 2.3% prior.

- 07:00 (UK) Weekly PM Question time in House.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:30 (US) Jan Housing Starts: 1.397Me v 1.499M prior; Building Permits: 1.460Me v 1.483M prior; Housing Starts M/M: -6.8%e v 15.8% prior; Building Permits M/M: -1.5%e v -0.7% prior.

- 08:30 (US) Feb New York Fed Services Business Activity: No est v -5.6 prior.

- 08:55 (US) Weekly Redbook LFL Sales data.

- 11:00 (RU) Russia Jan PPI M/M: No est v 0.4% prior; Y/Y: No est v 7.9% prior.

- 11:30 (US) Treasury to sell 17-Week Bills.

- 13:00 (US) Treasury to sell 20-Year Notes.

- 13:30 (MX) Mexico Central Bank (Banxico) Quarterly Inflation Report (QIR).

- 14:00 (US) Jan FOMC Jan Minutes.

- 16:00 (KR) South Korea Jan PPI Y/Y: No est v 1.7% prior.

- 16:00 (KR) South Korea Feb Consumer Confidence: No est v 91.2 prior.

- 16:30 (US) Weekly API Oil Inventories.

- 17:00 (US) Fed’s Jefferson.

- 19:30 (AU) Australia Jan Employment Change: +20.0Ke v +56.3K prior; Unemployment Rate: 4.1%e v 4.0% prior; Full Time Employment Change: No est v -23.7K prior; Part Time Employment Change: No est v +80.0K prior; Participation Rate: 67.1%e v 67.1% prior.

- 20:00 (CN) China PBOC Monthly Loan Prime Rate Setting (LPR); Expected to leave 1-year and 5-year LPR unchanged at 3.10% and 3.60% respectively.

- 20:00 (CN) China Jan Swift Global Payments (CNY): No est v 3.8% prior.

- 22:00 (ID) Indonesia Q4 Current Account Balance: -$2.0Be v -$2.1B prior.

- 23:00 (MY) Malaysia Jan Trade Balance (MYR): 13.2Be v 19.2B prior; Exports Y/Y: 4.8%e v 16.9% prior; Imports Y/Y: 2.5%e v 11.9% prior.

- 23:00 (TH) Thailand Central Bank to sell THB20B in 6-month bills.