UK GDP and production data disappoints

EU mid-market update: UK GDP and production data disappoints; Themes complex as Putin issues demands on Ukraine ceasefire deal and Trumps aggressive tariff on EU wine angers producers.

Notes/observations

- European indices open in positive territory, buoyed by relief after US lawmakers averted a government shutdown, but gains pared as focus shifts to US recession risks and Trump’s 200% EU wine tariff threat.

- Putin’s openness to a ceasefire proposal offers a potential calming influence in Eastern Europe, though Russian demands remain steep for Ukraine.

- On data front, Sterling fell 0.2% to $1.2926 after UK GDP unexpectedly contracted 0.1% MoM in Jan (vs +0.1% forecast), with industrial production cratering -1.5% y/y. Gilts rallied (10y yield -2bps to 4.675%) on bets for more BOE cuts, but ING notes “upward trajectory” later in 2025 as fiscal stimulus filters through.

- Ontario Premier Ford described his meeting with U.S. Commerce Sec Lutnick as highly productive, noting that tensions in the trade dispute appear to be easing. Ford emphasized that it was the best meeting he has ever had in Washington, expressing optimism about future discussions. He acknowledged Lutnick’s strong negotiating skills in defending U.S. interests but highlighted the extensive exchange of views between them. Ford remains positive about the direction of talks and looks forward to further engagement next week.

- Democratic Senators and aides believe there will be enough support for cloture in Friday’s vote on the House’s continuing resolution (CR), preventing a government shutdown. Senate Minority Leader Chuck Schumer told colleagues he will vote to advance the bill, arguing that a shutdown would be worse than passing a GOP-backed stopgap measure. With the government funding deadline set for Saturday, Schumer needs six more Democrats to join him, and Senator Fetterman has already indicated his support.

- Chinese government officials from key financial and economic institutions, including the finance and commerce ministries and the PBOC, will hold a press conference on Monday to potentially announce measures aimed at boosting consumption.

- No update on German party talks between SPD, CSU and Green party ahead of 1st vote on Mar 18th.

- Asia closed higher with Hang Seng outperforming +2.1%. EU indices +0.3-0.6%. US futures +0.6-1.1%. Gold +0.3%, DXY +0.1%; Commodity: Brent +0.9%, WTI +1.0%; Crypto: BTC -0.9%, ETH +0.1%.

Asia

- South Korea Feb Import Price Index M/M: -0.8% v +2.2% prior; Y/Y: 6.3% v 6.5% prior; Export Price Index M/M: -0.6% v +1.3% prior; Y/Y: 6.3% v 8.6% prior.

- New Zealand Feb Manufacturing PMI: 53.9 v 51.7 prior (2nd month of expansion).

- New Zealand Feb Food Prices M/M: -0.5% v +1.9% prior.

Global conflict/tensions

- Russia Pres Putin thanked Pres Trump for attention to Russia/Ukraine conflict; Agreed to stop fighting in Ukraine, but it should lead to long-standing peace; Ukraine would benefit from 30-day ceasefire under current circumstances.

- Russia President Putin said to seek any deal to “lead to long-term peace” and “eliminate the original causes of this crisis”; Russia said to seek guarantees that Ukraine will neither receive weapons shipments nor mobilize or train soldiers during any 30-day pause. Also technical questions to clarify on who would monitor the front line for violations.

Europe

- German CDU Leader Merz (Chancellor-in-waiting) had offered concessions to Greens over ‘historic’ spending plan ‘Merz vowed to allocate one-tenth of a planned €500B infrastructure fund to the green transition.

- German Green Party Leader Habeck stated that he did not trust a word the CDU leader was saying.

- UK PM Starmer said to have suffered a cabinet uprising over planned cuts to welfare and other public spending.

Americas

- Senate Minority Leader Chuck Schumer (D., NY) said he would vote to advance a Republican measure to fund the government through the rest of the year (**Note: Move to allow enough Democrats to help the Republicans clear the chamber’s critical 60-vote hurdle).

-Vice President Vance: Fundamentals of the economy are 'quite strong right now'.

- Treasury Sec Bessent stated that he was not concerned about a little market volatility over three weeks; Our policies to lay the ground word for real income gains. Hopefully would not get a recursive 'Biden-flation'; very vigilant, it could happen again.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.43% at 542.76, FTSE +0.37% at 8,573.89, DAX +0.53% at 22,652.17, CAC-40 +0.68% at 7,992.29, IBEX-35 +0.59% at 12,890.21, FTSE MIB +0.34% at 38,130.00, SMI -0.14% at 12,819.90, S&P 500 Futures +0.76%].

Market focal points/key themes: European indices open generally lower but quickly reversed to trade modestly positive across the board; optimism over progress in resolving some trade issues and advances towards peace in Ukraine seen supporting risk appetite; among sectors leading the way higher are materials and technology; communication services and financials among the lagging sectors; oil & gas subsector supported after Brent returns above $70/bbl; Roularta Media to be acquired by Koinon ECB to allow Unicredit increasing stake in Commerzbank; no major earnings expected in the upcoming Americas session.

Equities

- Consumer discretionary: Kering [KER.FR] -13.5% (appointing Demna as Gucci's new Artistic Director).

- Energy: BP [BP.UK] +1.0% (plans to sell 50% stake in Lightsource BP (solar business) to appease activist investor Elliott and raise funds - press) - Financials: Commerzbank [CBK.DE] +1.5% (ECB confirms to approve Unicredit raising stake in Commerzbank to up to 29.9%), Swiss Life [SLHN.CH] -6.0% (earnings).

- Industrials: BMW [BMW.DE] -2.0% (Q4 results, misses estimates, weak guidance), Daimler Truck [DTG.DE] +1.5% (Q4 results), Thyssenkrupp [TKA.DE] -3.0% (Morgan Stanley cuts to underweight) - Technology: STMicroelectronics [STM.FR] +1.0% (Italy set to use veto powers over STMicro governance - Italian press).

Speakers

- ECB’s Villeroy (France) reiterated to bring Euro Zone inflation down to 2% ECB target this year. EU had resources to retaliate to Trump tariffs on wine and liquor.

- German economic advisor Schnitzer stated that CDU's Merz must offer Green party more in its debt talks plan.

- Germany DIW Institute cut its 2025 and 2026 GDP growth outlook. Cut the 2025 GDP growth from 0.2% to 'stagnate' and cut 2026 GDP growth forecast from 1.2% to 1.1%.

- Greece PM appointed Pierrakakis as new Finance Minister (change was expected).

- EU envoys said to agree to renew Russian sanctions on over 2,400 individuals and entities.

- Poland Fin Min Domanski stated that saw end-2025 CPI close to 4.0%.

- Poland Central Bank (NBP) Kotecki stated that saw chance for rate cut as soon as July. Expressed doubt on recent Poland Staff Projections.

- Poland Central Bank (NBP) Member Wnorowski noted that it did begin debate at most recent MPC meeting on potential rate cuts; believed move in July was a bit smaller.

- Japan trade union Rengo pledge 5.46% for wage hikes after the 1st round of talks (**Note: below the 6.09% demanded for 2025).

Currencies/fixed income

- USD consolidated in tight ranges in quiet trading on Friday. Sentiment was positive after Senate Minority Leader Chuck Schumer (D., NY) said he would vote to advance a Republican measure to fund the government through the rest of the year. Greenback had been on soft footing as recent depreciation reflected rising worries of a US economic slowdown and mounting bets for a possible recession later this year.

- EUR/USD at 1.0845 with continued focus on German fiscal policy developments.

- GBP/USD was softer following weaker-than-expected monthly GDP data. Focus turned to next week’s BOE rate decision where the central bank is seen keeping its policy steady.

- USD/JPY at 148.70 as Japan trade union Rengo pledged 5.46% for wage hikes after the 1st round of talks (**Note: below the 6.09% demanded for 2025). Focus turning to next week’s BOJ meeting. Market currently seeing the BOJ on hold at the March meeting.

- Spot gold probing the $3,000/oz level as the yellow metal continued to make fresh all-time highs.

- 10-year German Bund yield at 2.87% and 10-year Gilt yield at 4.67%. 10-year Treasury yield at 4.29%.

Economic data

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

- (FI) Finland Feb CPI M/M: 0.3% v 0.2% prior; Y/Y: 0.5% v 0.7% prior.

- (UK) Jan Monthly GDP M/M: -0.1% v +0.1%e; GDP 3M/3M: 0.2% v 0.2%e.

- (UK) Jan Industrial Production M/M: -0.9% v -0.1%e; Y/Y:-1.5 % v -0.6%e.

- (UK) Jan Manufacturing Production M/M: -1.1% v 0.0%e; Y/Y: -1.5% v -0.5%e.

- (UK) Jan Construction Output M/M: -0.2% v -0.2%e; Y/Y: 0.2% v 0.4%e.

- (UK) Jan Index of Services M/M: 0.1% v 0.1%e; 3M/3M: 0.4% v 0.3%e.

- (DE) Germany Feb Final CPI M/M: 0.4% v 0.4% prelim; Y/Y: 2.3% v 2.3% prelim.

- (DE) Germany Feb Final CPI EU Harmonized M/M: 0.5% v 0.6% prelim; Y/Y: 2.6% v 2.8% prelim.

- (DE) Germany Feb Wholesale Price Index M/M: 0.6% v 0.9% prior; Y/Y: 1.6% v 0.9% prior.

- (SE) Sweden Feb Unemployment Rate: 9.4% v 10.4% prior; Unemployment Rate (SA): 8.9% v 8.9%e; Trend Unemployment Rate: 9.0% v 8.9% prior.

- (CN) Weekly Shanghai Copper Inventories (SHFE): 255.5K v 267.4K tons prior.

- (TH) Thailand May Foreign Reserves w/e Mar 7th: $247.7B v $244.8B prior.

- (FR) France Feb Final CPI M/M: 0.1% v 0.0% prelim; Y/Y: 0.8% v 0.8% prelim.

- (FR) France Feb Final CPI EU Harmonized M/M: 0.0% v 0.0% prelim; Y/Y: 0.9% v 0.9% prelim; CPI (ex-tobacco index): 119.02 v 118.97e.

- (ES) Spain Feb Final CPI M/M: 0.4% v 0.4% prelim; Y/Y: 3.0% v 3.0% prelim.

- (ES) Spain Feb Final CPI EU Harmonized M/M: 0.4% v 0.4% prelim; Y/Y: 2.9% v 2.9% prelim.

- (ES) Spain Feb CPI Core M/M: +0.3% v -0.5% prior; CPI Core (final) Y/Y: 2.2% v 2.1% prelim.

- (RU) Russia Narrow Money Supply w/e Mar 7th (RUB): 18.09T v18.07 T prior.

- (IS) Iceland Feb International Reserves (ISK) 899B v 902B prior.

- (PL) Poland Feb CPI M/M: 0.3% v 0.4%e; Y/Y: 4.9% v 5.3%e.

- (IT) Italy Jan Industrial Production M/M: 3.2% v 1.4%e; Y/Y: -0.6% v -2.9%e; Industrial Production NSA (unadj) Y/Y: -3.6% v -1.0% prior.

- (IT) Italy Jan General Government Debt: €2.981T v €2.966T prior.

- (CN) China Feb New Yuan Loans (CNY): 6.140T v 6.380Te.

- (CN) China Feb Aggregate Financing (CNY): 9.290T v 9,757Te.

- (CN) China Feb M2 Money Supply YoY: 7.0% v 7.0%e; M1 Money Supply YoY: 0.1% v 1.0%e; M0 Money Supply YoY: 9.7% v 17.2% prior.

Fixed income issuance

- None seen.

Looking ahead

- (ZA) South Africa to sell combined ZAR1.0B in I/L 2033, 2043 and 2058 Bonds.

- (DE) Germany Jan Current Account Balance: No est v €24.0B prior.

- 06:00 (EU) Daily Euribor Fixing.

- 06:00 (FR) France Debt Agency (AFT) announcements on upcoming issuance ((bills, Oats).

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

- 07:00 (UK) DMO to sell £6.0B in 1-month, 3-month and 6-month bills (£0.5B, £2.5B and £3.0B respectively).

- 07:30 (IN) India Forex Reserve w/e Mar 7th: No est v $638.7B prior.

- 07:30 (BR) Brazil Jan Nominal Budget Balance (BRL): +32.0Be v -80.4B prior (revised from -80.7B); Primary Budget Balance: 104.0Be v 15.7B prior; Net Debt % GDP: 61.0%e v 61.1% prior.

- 08:00 (IL) Israel Feb CPI M/M: 0.3%e v 0.6% prior; Y/Y: 3.7%e v 3.8% prior.

- 08:00 (BR) Brazil Jan Retail Sales M/M: +0.1%e v -0.1% prior; Y/Y: 3.5%e v 2.0% prior.

- 08:00 (BR) Brazil Jan Broad Retail Sales M/M: +1.5%e v -1.1% prior; Y/Y: 1.5%e v 1.4% prior.

- 08:30 (CA) Canada Jan Manufacturing Sales M/M: 2.0%e v 0.3% prior Wholesale Sales (ex-Petroleum) M/M: +1.8%e v -0.2% prior.

- 09:00 (RU) Russia Jan Trade Balance: No est v $5.6B prior; Exports: No est v $31.3B prior; Imports: No est v $25.7B prior.

- 09:00 (RU) Russia Gold and Forex Reserve w/e Mar 7th: No est v $632.4B prior.

- 09:00 (PL) Poland Central Bank (NBP) Feb Minutes (2 decisions ago).

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

- 09:15 (IT) ECB's Cipollone (Italy).

- 10:00 (US) Mar Preliminary University of Michigan Confidence: 65.0e v 64.7 prior.

- 10:00 (BR) Brazil Feb Vehicle Production: No est v 175.5K prior; Vehicle Sales: No est v 171.2K prior; Vehicle Exports: No est v 28.7K prior.

- 11:00 (CO) Colombia Jan Retail Sales Y/Y: 7.3%e v 7.8% prior.

- 11:00 (CO) Colombia Jan Manufacturing Production Y/Y: 1.2%e v 1.9% prior; Industrial Production Y/Y: -0.1%e v -0.3% prior.

- 12:00 (EU) Potential sovereign ratings after European close (S&P on Spain & Ireland; Moody's on Greece; Fitch on France & Portugal).

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

- 15:00 (AR) Argentina Feb National CPI M/M: 2.3%e v 2.2% prior; Y/Y: 66.8%e v 84.5% prior.