Trump fails to rule out recession during 'transition period'

EU mid-market update: Trump fails to rule out recession during 'transition period' as market bets on fading US exceptionalism; Rise of China AI agent Manus called by some a "second DeepSeek moment".

Notes/observations

- Europe kicked off mixed, DAX jumped at the open but faded to flat. Trump’s weekend nod to a US “transition period”, sidestepping recession talk, rattled markets, driving volatility, weaker US equities, a softer dollar, and a Treasury yield pullback. Talk of fading US exceptionalism grows as investors pivot to Europe, betting on Germany’s fiscal boost. Eurogroup meets today in Brussels with ECB’s Lagarde, but Schnabel’s inflation warning over weekend hints at a rate cut pause.

- Commerce Secretary Lutnick reiterated that 25% tariffs on steel and aluminum will go into effect on Wednesday, March 12th.

- Trump’s threat of new Russia sanctions/tariffs to force Ukraine talks, paired with Italy PM Meloni’s NATO defense umbrella pitch for Ukraine gave tailwinds to defense stocks across Europe.

- The House could vote as soon as Tuesday on US government funding bill extending through September 30, but Speaker Johnson faces GOP resistance from Rep. Thomas Massie and potentially others opposed to a "clean" continuing resolution. The bill, backed by Trump, may struggle to gain support from vulnerable House Democrats and will need at least seven Senate Democrats to pass. It proposes a slight defense spending increase and moderate non-defense cuts, contradicting Democrats' demand for parity in spending changes.

- German economic data had bright spots but was dimmed by export slump. January industrial production beat expectations at +2% MoM, powered by autos (+6.4%) and food (+7.5%), but exports crashed 2.5% MoM (worst in three months) slashing the trade surplus to €16B (below €21B expected). Sales to the EU (-4.2%) and US (-4.2%) tanked, despite gains to Russia (+7.2%). Elsewhere, Sweden’s GDP contracted -0.5% MoM (sharpest since Nov ‘23), while Swiss consumer confidence missed at -34.

- Eurozone yield spreads tightened slightly but remain volatile ahead of Eurogroup talks on EU debt rule reforms.

- Manus, China’s new general AI agent, has garnered significant attention over the weekend for its ability to autonomously initiate tasks without explicit instructions, marking what some call a "second DeepSeek moment." Unlike ChatGPT or Gemini, which for now require human prompts, Manus dynamically processes information, breaks down complex tasks into subtasks using a multi-agent framework, and delivers fully optimized solutions. Its cloud-based asynchronous operation allows it to work independently in the background, making it more efficient than traditional AI models that rely on constant user input. Analysts warn that Manus could accelerate the industrialization of intelligence.

- Asia closed mixed with Hang Seng under-performing -1.9%. EU indices -0.2% to -0.5%. US futures -0.8% to -1.0%. Gold +0.1%, DXY -0.1%; Commodity: Brent +0.2%, WTI +0.2%; Crypto: BTC -3.5%, ETH -2.6%.

Asia

- China Feb CPI Y/Y: -0.7% v -0.5%e [largest decline since Jan 2024]; PPI Y/Y: -2.2% v -2.1%e v -2.3% prior (29th month of negative readings).

- Japan Jan Labor Cash Earnings Y/Y: 2.8% v 3.0%e.

- Real Cash Earnings Y/Y:-1.8% v -1.6%e.

- China MOFCOM: Will impose tariffs on some imports from Canada in retaliation for Canadian tariffs on Chinese goods; Effective March 20th.

- Vietnam PM Chinh: Willing to adjust tariffs with our major trading partners.

- Indonesia Mining Ministry said to consider raising royalties paid by producers of mining products such as coal, nickel, copper, gold and tin - press.

Taiwan

- Taiwan Semiconductor reports Feb (NT$) Rev 260.0B, +43.1% y/y (v +35.9% y/y prior v 293.3B m/m).

Global conflict/tensions

- White House reiterates that Iran nuclear concern can be dealt with by making a deal or militarily.

- Iran Supreme Leader Khamenei: Tehran will not negotiate under pressure by a "bullying country".

- Iran reportedly will consider 'limited' nuclear talks with US - UK press.

- US State Dept has not renewed a waiver for Iraq to purchase Iranian electricity; Waiver expires on March 9th.

- US has rejected a Canada proposal to establish a G7 task force to address Russia shadow fleet of oil tankers - press.

- North Korea unveils nuclear powered submarine under construction for the first time; Appears capable of carrying 10 missiles - Nikkei.

- Trump said Ukraine 'may not survive' as Ukraine loses ground in Kursk - press.

Europe

- Germany's CDU and SPD parties have completed prelim talks on forming a coalition govt.

- EU Commission Pres Von der Leyen: Even though 'decades-old certainties are crumbling', no reason to de-risk bloc's relationship with US.

- UK Housing Min Pennycook: To outline new planning rules next week that aim to halve approval time for major projects - FT.

- Romania far-right candidate Georgescu barred from postponed presidential election - press.

Americas

- Trump will not predict whether recession could result from tariffs, said the economy faces 'transition'; cites comments made on Fox News' Sunday Morning Futures – financial press.

- Trump: House and Senate have put together a very good funding Bill (“CR”); Urges Republicans to vote for it next week - Truth Social.

- Reportedly the House vote on US govt funding bill through the end of fiscal 2025 on Sept 30th could come as soon as Tuesday - press.

- Trump: US government funding 'lapse' probably will NOT happen; Reiterates not going to touch social security; Confirms looking at 'a lot' of things in regards to Russia tariffs; dealing with 4 different groups on TikTok.

- Trump to sign executive orders on Mon at 3 pm ET; to hold roundtable with Tech CEO council at 2 pm ET on Mon.

- Commerce Sec Lutnick affirmed President Trump is sticking to aluminum-steel tariff timeline – US financial press.

- State Dept Sec State Rubio: Officially cancelling 83% of programs at USAID - X post.

- Reportedly Sec of State Rubio had been "privately furious" with Elon Musk for weeks; Rubio reportedly said Musk was not being truthful, while Musk told Rubio he was “good on TV,” with the clear subtext being that he was not good for much else - NYT citing some Cabinet Room meeting.

- Canada Fin Min LeBlanc: Canada is ready for an immediate review of the USMCA trade agreement; There is still room for talks on steel and aluminum tariffs.

- Mark Carney wins race to become next Canada PM (as expected), he is expected to be sworn in as PM 'within days'.

- US said to be in exploratory talks with Congo about a potential minerals deal - FT.

- DOJ drops proposal to force Alphabet's Google to divest its investments in AI companies in antitrust case over online search dominance - press.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.31% at 551.60, FTSE -0.19% at 8,663.28, DAX -0.41% at 22,907.42, CAC-40 -0.15% at 8,108.42, IBEX-35 -0.92% at 13,132.74, FTSE MIB -0.22% at 38,509.00, SMI -0.29% at 13,056.20, S&P 500 Futures -0.92%].

Market Focal Points/Key Themes: European indices open generally higher, but quickly turned to trade mostly in the red through the early part of the session; markets apparently uncertain around economic growth projections; sectors managing to eke out gains include real estate and energy; sectors leading the way lower include materials and financials; Assura receives takeover offer from KKR; DBAY raises offer for Alliance Pharma; BWGI to take a majority stake in Verallia; Deliveroo sells its Hong Kong unit to foodpanda; earnings expected in the upcoming US session include Oracle.

Equities

- Consumer discretionary: Deliveroo [ROO.UK] +1.5% (to exit its Hong Kong operations (~5% of Group GTV in 2024) through a sale of certain assets to foodpanda and the closure of other assets).

- Financials: Assura [AGR.UK] +14.0% (received non-binding cash offer proposal from KKR and Stonepeak at 49.4p/shr; Rejected competing offer from PHP at 43.0p/shr), Hypoport [HYQ.DE] +1.5% (final FY24 results, affirms FY25 guidance).

- Industrials: Traton [8TRA.DE] -6.5% (earnings; guidance), Rheinmetall [RHM.DE] -0.5% (positive Trump's comments on outcome of Ukraine war), Porsche [P911.DE] -1.0% (reports prelim FY24 net loss due to non-cash effective impairments - after Fri close) - Technology: ASML [ASML.NL] -2.0% (TSMC monthly sales; China's new general AI agent called Manus got a lot of very positive press reviews, with some outlets calling it a "second DeepSeek moment").

- Telecom: Eutelsat Communications [ETL.FR] +16.0% (Elon Musk said Starlink will 'never' shut off its terminals in Ukraine; positive Trump's comments on outcome of Ukraine war).

- Real Estate: Leg Immobilien [LEG.DE] +1.0% (FY24 results, affirms FY25 guidance).

Speakers

- ECB’s Schnabel (Germany) said to ‘signal’ inflation concern in rate debate ‘salvo’ - financial press.

- Thailand MOF Pichai: Seeking to disburse third-phase of cash handout in Q2.

- Thailand PM: Affirms government policies can 'push' GDP growth to 3.0% in 2025.

Economic data

- (JP) Japan Jan Preliminary Leading Index CI: 108.0 v 108.2e; Coincident Index: 116.2 v 116.3e.

- (NL) Netherlands Jan Manufacturing Production M/M: +1.1% v -0.8% prior; Y/Y: +0.5% v -4.3% prior; Industrial Sales Y/Y: 3.9% v 2.3% prior.

- (SE) Sweden Feb SEB Housing-Price Indicator: 46 v 50 prior.

- (FI) Finland Jan Industrial Production M/M: +1.1% v -1.6% prior; Y/Y: 0.5% v 1.5% prior.

- (JP) Japan Feb Eco Watchers Current Survey: 45.6 v 48.5e [lowest since Aug 2022]; Outlook Survey: 46.6 v 47.5e.

- (DK) Denmark Feb CPI M/M: 1.0% v 0.6% prior; Y/Y: 2.0% v 1.5% prior; CPI EU Harmonized M/M: 1.0% v 0.7% prior; Y/Y: 2.0% v 1.4% prior.

- (DE) Germany Jan Trade Balance: €16.0B V €19.9BE; Exports M/M: -2.5% v +0.5%e; Imports M/M: 1.2% v 0.5%e.

- (DE) Germany Jan Industrial Production M/M: 2.0% V 1.5%E; Y/Y: -1.6% V -2.8%E.

- (NO) Norway Feb CPI M/M: 1.4% v 0.5%e; Y/Y: 3.6% v 2.6%e; CPI Underlying M/M: 1.0% v 0.5%e; Y/Y: 3.4% v 2.9%e; PPI (including Oil) M/M: 1.7% v 4.7% prior; Y/Y: 23.3% v 18.1% prior.

- (SE) Sweden Jan GDP Indicator M/M: -0.5% v +0.5% prior; Y/Y: 2.0% v 3.4% prior.

- (SE) Sweden Jan Household Consumption M/M: -0.7% v +0.1% prior; Y/Y: 0.1% v 0.8% prior.

- (SE) Sweden Jan Private Sector Production M/M: -0.8% v +1.1% prior; Y/Y: 1.9% v 2.5% prior; Industrial Orders M/M: 2.0% v 2.2% prior; Y/Y: 16.7% v 5.8% prior; Industry Production Value Y/Y: -2.1% v +10.1% prior; Service Production Value Y/Y: 5.1% v 0.8% prior.

- (TR) Turkey Jan Industrial Production M/M: -2.3% v 5.0% prior; Y/Y: 1.2% v 7.0% prior.

- (FI) Finland Jan Preliminary Trade Balance: -€0.2B v -€0.1B prior.

- (CH) Swiss Feb SECO Consumer Confidence: -33.6 v -28.0e.

- (CZ) Czech Jan Trade Balance (CZK): 20.0B v 15.5Be.

- (AT) Austria Jan Industrial Production M/M: 3.0% v 0.8% prior; Y/Y: +0.5% v -4.7% prior.

- (CZ) Czech Feb Unemployment Rate: 4.4% v 4.3%e.

- (IT) Italy Jan PPI M/M: 2.0% v 0.8% prior; Y/Y: 6.0% v 1.3% prior.

- (CH) Swiss Weekly Total Sight Deposits (CHF): 444.1B v 437.4B prior; Domestic Sight Deposits: 435.9B v 429.4B prior.

- (EU) Euro Zone Mar Sentix Investor Confidence: -2.9 V -9.3E (highest since June 2024); Current Situation: -21.8 v -25.5 prior; Expectation Survey (6-months ahead): 18.0 v 1.0 prior.

Fixed income issuance

- (TH) Thailand sells THB30B vs. THB30B indicated in 6-month bills; Avg Yield: 1.89222% v 2.07568% prior; bid-to-cover: 3.14x v 2.69x prior.

- (KR) South Korea sells KRW3.0T vs. KRW3.0T indicated in 3-year Bonds: Avg Yield: 2.586% v 2.615% prior; bid-to-cover: 2.60x v 3.09x prior.

- (PH) Philippines sells total PHP30.8B vs. PHP22.0B indicated in 3-month, 6-month and 12-month bills.

Looking ahead

- 06:00 (EU) Daily Euribor Fixing.

- 06:00 (GR) Greece Feb CPI Y/Y: No est v 2.7% prior; CPI EU Harmonized Y/Y: No est v 3.1% prior.

- 06:00 (GR) Greece Jan Industrial Production Y/Y: No est v 5.8% prior.

- 06:00 (HU) Hungary Feb Budget Balance YTD (HUF): No est v -67.8B prior.

- 06:25 (EU) Daily ECB Liquidity Stats.

- 06:30 (TR) Turkey to sell Bonds.

- 07:00 (RO) Romania to sell RON1.0B in 12-month bills.

- 07:00 (RO) Romania to sell RON800M in 6.85% July 2030 bonds.

- 07:00 (IL) Israel to sell combined ILS2.3B in 2027, 2029, 2035, 2042 and 2051 bonds.

- 07:00 (IE) Ireland Jan Industrial Production M/M: No est v 8.2% prior; Y/Y: No est v 6.5% prior.

- 07:00 (BR) Brazil Feb FGV Inflation IGP-DI M/M: No est v 0.1% prior; Y/Y: No est v 7.3% prior.

- 07:00 (IL) Israel Feb Consumer Confidence: No est v 45 prior.

- 07:25 (BR) Brazil Central Bank Weekly Economists Survey.

- 08:00 (IS) Iceland Feb Unemployment Rate: No est v 4.2% prior.

- 08:00 (MX) Mexico Feb Consumer Confidence: No est v 46.7 prior.

- 09:00 (UK) Daily Baltic Dry Bulk Index.

- 09:00 (ES) Spain Debt Agency (Tesoro) size announcement.

- 09:30 (UR) Ukraine Feb CPI M/M: No est v 1.2% prior; Y/Y: No est v 12.9% prior.

- 10:00 (FR) France Debt Agency (AFT) to sell €6.4-8.0B in 3-month, 6-month and 12-month bills.

- 10:00 (EU) European Finance Ministers Meeting (Eurogroup).

- 11:00 (US) Feb NY Fed 1-Yr Inflation Expectations: No est v 3.0% prior.

- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.

- 17:45 (NZ) New Zealand Q4 Manufacturing Activity Volume Q/Q: No est v -1.2% prior; Manufacturing Activity Q/Q: No est v -0.1% prior.

- 18:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 89.8 prior.

- 19:30 (JP) Japan Jan Household Spending Y/Y: 3.7%e v 2.7% prior.

- 19:30 (AU) Australia Mar Westpac Consumer Confidence Index: No est v 92.2 prior.

- 19:50 (JP) Japan Q4 Final GDP Q/Q: 0.7%e v 0.7% prelim; GDP Annualized Q/Q: 2.8%e v 2.8% prelim; GDP Nominal Q/Q: 1.3%e v 1.3% prelim; GDP Deflator Y/Y: 2.8%e v 2.8% prelim.

- 19:50 (JP) Japan Q4 Final GDP Private Consumption Q/Q: 0.1%e v 0.1% prelim; GDP Business Spending Q/Q: 0.3%e v 0.5% prelim; Inventory Contribution % GDP: -0.2%e v -0.2% prelim; Net Exports Contribution % GDP: 0.7%e v 0.7% prelim.

- 19:50 (JP) Japan Feb M3 Money Supply Y/Y: No est v 0.8% prior; M2 Money Supply Y/Y: No est v 1.3% prior.

- 20:00 (KR) South Korea Mar Imports 10 Days Y/Y: No est v 0.3% prior; Exports 10 Days Y/Y: No est v 0.8% prior.

- 20:01 (UK) Feb BRC LFL Sales Y/Y: No est v 2.5% prior.

- 20:30 (AU) Australia Feb NAB Business Confidence: No est v 4 prior; Business Conditions: No est v 3 prior.

- 21:01 (IE) Ireland Feb Construction PMI: No est v 48.2 prior.

- 21:10 (JP) BOJ Outright Bond Purchase Operation for 1~3 Years; 5~10 Years and 25Years~.

- 23:00 (ID) Indonesia Feb Consumer Confidence: No est v 127.2 prior.

- 23:00 (TH) Thailand Central Bank to sell THB60B in 3-month bills.