Markets look to US Retail Sales for next catalyst

EU mid-market update: Trade tensions linger, but delayed tariffs offer a window for diplomacy; Markets look to US retail sales for next catalyst.

Notes/observations

- European markets opened mixed after President Trump announced plans for country-specific reciprocal tariffs, delaying implementation until April 1st to allow negotiations. The absence of immediate action eased near-term trade war fears, though autos, pharma, and semiconductors remain targeted. EU Trade Chief Sefcovic engaged Trump’s team to seek solutions, with Brussels pledging a response. STOXX 50 and 600 dipped after recent record highs, while luxury stocks rallied on Hermes’ strong Q4 sales. Natwest lagged on muted earnings.

- Final Spanish CPI matched flash estimates, while German wholesale prices rose on food and raw materials. Netherlands’ Q4 GDP grew 0.4% QoQ, driven by trade (exports +0.4%) and consumption. UK housing saw first-time buyers surge 19% in 2023; a major gas field discovery (~£112B GDP potential) and financial regulation merger talks lifted sentiment.

- US 10-year yields held ~4.54% as markets weighed delayed tariffs against hot CPI/PPI prints. Core PCE components signaled cooling, aligning with the Fed’s cautious rate-cut stance. The dollar index fell to 2-month lows (-1% weekly) on eased trade risks.

- Oil edged higher as tariff delays and IEA’s upgraded demand outlook offset surplus concerns.

- Looking ahead, focus is on US retail sales at 08:30 ET.

- Asia closed mixed with Hang Seng outperforming +3.7%. EU indices -0.2% to +0.3%. US futures -0.2% to +0.1%. Gold +0.2%, DXY -0.1%; Commodity: Brent +0.5%, WTI +0.4%; Crypto: BTC +0.9%, ETH +1.0%.

Asia

- South Korea Jan Unemployment Rate: 2.9% v 3.2%e.

- South Korea Jan Import Price Index M/M: 2.3% v 2.3% prior; Y/Y: 6.6% v 6.8% prior.

- South Korea Jan Export Price Index M/M: 1.2% v 2.3% prior; Y/Y: 8.5% v 10.5% prior.

- New Zealand Jan Manufacturing PMI: 51.4 v 46.2 prior (1st expansion in 23 months).

- New Zealand Jan Food Prices M/M: 1.9% v 0.1% prior.

- Singapore Q1 Final GDP Q/Q: 0.5% v 0.1% prelim; Y/Y: 5.0% v 4.3% prelim; Overall 2024 GDP Y/Y: 4.4% v 4.0% prelim.

- Japan Economic Revitalization Min Akazawa stated that would respond appropriately to US reciprocal tariffs. Closely watching currency moves; weak Yen had various impacts on real economy.

- Japan Lower House approved Junko Koeda (potential hawk) as BOJ board member; Awaited full endorsement in the legislature; To replace Seiji Adachi (dove) from Mar 26th, 2025.

Europe

- SNB board member Tschudin stated that maintaining price stability was SNB's most important task. Inflation could be outside 0-2% range for a short time and not be a problem. The bank's toolbox included FX interventions and negative interest rates.

- Halifax stated that 1st time buyers accounted for fifth of housing market.

Americas

- House Republicans: Budget resolution passed through committee.

- Treasury Secretary Bessent commented that if tariffs created inflation it would be a 'one-time' increase.

- Peru Central Bank (BCRP) left the Reference Rate unchanged at 4.75% (as expected). Resumed its pause under the current phase of its easing cycle.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.12% at 554.40, FTSE -0.20% at 8,747.00, DAX -0.09% at 22,591.50, CAC-40 +0.55% at 8,208.66, IBEX-35 -0.04% at 12,929.72, FTSE MIB +0.28% at 38,016.00, SMI -0.20% at 12,925.50, S&P 500 Futures +0.06%].

Market focal points/key themes: European indices open generally mixed with CAC-40 slightly outperforming other indices after Hermes results; among sectors leading the way higher are retail and industrials; lagging sectors include financials; on corporate front, shares of John Wood Group trade over 20% lower following disappointing trading update; Natwest in London also trade lower following quarterly results; focus on US retails sales and Moderna earnings.

Equities

- Consumer discretionary: Hermes [RMS.FR] +3.5% (Q4 results, beats estimates), Lagardere [MMB.FR] +8.5% (earnings).

- Financials: Natwest [NWG.UK] -2.0% (Q4 results, beats estimates).

- Industrials: Safran [SAF.FR] +1.0% (FY results), John Wood Group [WG.UK] -26.0% (trading update) - Materials: Umicore [UMI.BE] -6.5% (FY results) - Telecom: Ubisoft [UBI.FR] +1.0% (earnings), Eutelsat [ETL.FR] -5.0% (H1 results, beats estimates).

Speakers

- Czech Central Bank (CNB) Feb Minutes noted that members urged caution on approach to more rate cuts. Services inflation remained the primary risk. Macroeconomic forecast noted inflation slightly above 2% target but seen declining and then stable from mid-2025.

- Norway Wage Committee noted that 2024 wage growth was at 5.3%. It forecasted 2025 Headline CPI at 2.5% and Core CPI at 2.9%.

- Finland Central Bank proposed Rehn for another 7-year term as governor.

- Russia govt Spokesperson noted that G7 was irrelevant and gvot was more interested in working with G20.

Currencies/fixed income

- FX markets saw the USD drift to multi-week lows against major currency pairs as market participants digest President Trump’s reciprocal tariff proposal. Green back was softer as tariffs would be assessed on a country-by-country basis from possibly April 1st. This provided time for govt to fine-tune strategies but measures would continue to hang over markets. The lower US yields following the recent PPI data aided risk sentiment over the past 24 hours.

- EUR/USD at 3-week highs as it approached the key 1.05 resistance level.

- GBP/USD at 6-week highs as it approached the 1.26 handle.

- USD/JPY at 152.50.

- German 10-year Bund yield at 2.43%; UK 10-year Gilt Yield at 4.51%; French 10-year Oat yield at 3.17%; Italian 10-year BTP yield at 3.51%.

Economic data

- (FI) Finland Dec GDP Indicator Y/Y: 0.9% v 1.2% prior.

- (IN) India Jan Wholesale Prices (WPI) Y/Y: 2.3% v 2.5%e.

- (DE) Germany Jan Wholesale Price Index M/M: 0.9% v 0.1% prior; Y/Y: 0.9% v 0.1% prior.

- (RO) Romania Jan CPI M/M: 0.9% v 0.7%e; Y/Y: 5.0% v 4.9%e.

- (RO) Romania Q4 Advance GDP Q/Q: 0.8% v 0.6%e v 0.0% prior; Y/Y: 0.7% v 0.9%e.

- (TR) Turkey Central Bank (TCMB) Febn Inflation Expectation Survey: 25.3% v 25.4% prior.

- (CH) Swiss Jan Producer & Import Prices M/M: 0.1% v 0.0% prior; Y/Y: -0.3% v -0.9% prior.

- (CN) Weekly Shanghai Copper Inventories (SHFE): 230.3K v 184.8K tons prior.

- (TH) Thailand May Foreign Reserves w/e Feb 7th: $243.6B v $242.1B prior.

- (RU) Russia Narrow Money Supply w/e Feb 7th (RUB): 18.28T v 18.27T prior.

- (ES) Spain Jan Final CPI M/M: 0.2% v 0.2% prelim; Y/Y: 2.9% v 3.0% prelim.

- (ES) Spain Jan Final CPI EU Harmonized M/M: -0.1% v -0.1% prelim; Y/Y: 2.9% v 2.9% prelim.

- (ES) Spain Jan CPI Core M/M: -0.5% v +0.4%e; Y/Y (final): 2.4% v 2.4% prelim.

- (NL) Netherlands Q4 Preliminary GDP Q/Q: 0.4% v 0.3%e; Y/Y: 1.8% v 1.7% prior.

- (NL) Netherlands Jan Trade Balance: 10.3B v €12.5B prior ; Exports Y/Y: % v 4.2% prior; Imports Y/Y: % v 1.8% prior.

- (NL) Netherlands Dec Consumer Spending Y/Y: 1.8% v 0.9% prior.

- (IS) Iceland Jan International Reserves (ISK): 902B v 886B prior.

- (PL) Poland Jan Preliminary CPI M/M: 1.0% v 0.7%e; Y/Y: 5.3% v 5.0%e.

- (CN) China Jan New Yuan Loans (CNY): 5.13T v 4.53Te (record high).

- (CN) China Jan Aggregate Financing (CNY): 7.06T v 6.5Te.

- (CN) China Jan M2 Money Supply Y/Y: 7.0% v 7.3%e; M1 Money Supply Y/Y: 0.4% v -0.5%e; M0 Money Supply Y/Y: 17.2% v 13.0% prior.

- (IT) Italy Dec General Government Debt: €2.966T v €3.004T prior (moves away from record level).

- (EU) Euro Zone Q4 Preliminary GDP (2nd reading) Q/Q: 0.1% v 0.0% advance; Y/Y: 0.9% v 0.9% advance.

- (EU) Euro Zone Q4 Preliminary Employment Q/Q: 0.1% v 0.2% prior; Y/Y: 0.6% v 1.0% prior.

- (CY) Cyprus Q4 Preliminary GDP Q/Q: 0.3% v 0.9% prior; Y/Y: 2.6% v 3.9% prior.

- (GR) Greece Jan CPI Y/Y: % v 2.6% prior; CPI EU Harmonized Y/Y: % v 2.9% prior.

Fixed income issuance

- (IN) India sold total INR390B vs. INR390B in 2027, 2034 and 2074 bonds.

- (ZA) South Africa sold total ZAR vs. ZAR1.0B indicated in I/L 2031, 2046 and 2058 bonds.

Looking ahead

- (RO) Romania Central Bank (NBR) Interest Rate Decision: Expected to leave Interest Rate unchanged at 6.50%.

- (NG) Nigeria Jan CPI Y/Y: No est v 34.8% prior.

- (MX) Mexico Jan ANTAD Same-Store Sales Y/Y: No est v 1.2% prior.

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

- 05:30 (RU) Russia Central Bank (CBR) Interest Rate Decision: Expected to leave One-Week Auction Rate unchanged at 21.00%.

- 06:00 (UK) DMO to sell £5.0B in 1-month, 3-month and 6-month bills (£0.5B, £1.5B and £3.0B respectively).

- 06:30 (IN) India announces upcoming bill issuance (held on Wed).

- 06:30 (IN) India Forex Reserve w/e Feb 7th: No est v $630.6B prior.

- 06:30 (CL) Chile Central Bank Traders Survey.

- 07:00 (IL) Israel Jan CPI M/M: +0.5%e v -0.3% prior; Y/Y: 3.7%e v 3.2% prior.

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

 -RO) Romania Central Bank (NBR) Interest Rate Decision.

- (RU) Russia Central Bank (CBR) Gov post rate decision press conference.

- 08:00 (ES) Spain Debt Agency (Tesoro) on upcoming issuance.

- 08:30 (US) Jan Advance Retail Sales M/M: -0.2%e v +0.4% prior; Retail Sales (Ex Auto) M/M: 0.3%e v 0.4% prior; Retail Sales (Ex Auto and Gas): 0.3%e v 0.3% prior; Retail Sales (Control Group): 0.3%e v 0.7% prior.

- 08:30 (US) Jan Import Price Index M/M: 0.4%e v 0.1% prior; Y/Y: 1.9%e v 2.2% prior; Import Price Index (ex-petroleum) M/M: 0.2%e v 0.2% prior.

- 08:30 (US) Jan Export Price Index M/M: 0.3%e v 0.3% prior; Y/Y: 1.4%e v 1.8% prior.

- 08:30 (CA) Canada Dec Manufacturing Sales M/M: 0.7%e v 0.8% prior; Wholesale Sales (ex Petroleum) M/M: +0.2%e v -0.2% prior.

- 09:15 (US) Jan Industrial Production M/M: 0.3%e v 0.9% prior; Capacity Utilization 77.7%e v 77.6% prior; Manufacturing Production: 0.1%e v 0.6% prior.

- 10:00 (US) Dec Business Inventories: -0.1%e v +0.1% prior.

- 10:00 (CO) Colombia Dec Trade Balance: -$0.9Be v -$1.4B prior; Total Imports $5.4Be v $5.9B prior.

- 10:00 (CO) Colombia Dec Retail Sales Y/Y: 8.7%e v 10.4% prior.

- 10:00 (CO) Colombia Dec Industrial Production Y/Y: -1.2%e v -2.1% prior; Manufacturing Production Y/Y: +0.2%e v -0.8% prior.

- 11:00 (RU) Russia Jan CPI M/M: 1.2%e v 1.3% prior; Y/Y: 9.9%e v 9.5% prior.

- 11:00 (RU) Russia Jan CPI Core M/M: No est v 1.0% prior; Y/Y: No est v 8.9% prior.

- 11:00 (EU) Potential sovereign ratings after European close (Fitch on Iceland; S&P on Austria; Moody’s on Australia and Sweden).

- 13:00 (US) Weekly Baker Hughes Rig Count data.

Weekend data

- (PE) Peru Jan Unemployment Rate: No est v 5.5% prior.

- (PE) Peru Dec Economic Activity Index (Monthly GDP) Y/Y: 3.9%e v 3.9% prior.