US futures rebound ahead of PCE data and Nvidia earnings and potential GPT-4.5 release this week

EU Mid-Market Update: DAX rises amid coalition talks; US futures rebound ahead of PCE data and Nvidia earnings and potential GPT-4.5 release this week; Zelenskiy offers personal sacrifice as war hits third anniversary.

Notes/observations

- Markets are finding some relief after Germany’s weekend election delivered a largely expected result, with the center-right CDU/CSU bloc taking 28.6% of the vote, ahead of the far-right AfD at 20.8% and the SPD at 16.4%. CDU leader Friedrich Merz is now racing to form a coalition—likely with the SPD—by Easter (Apr 20th), promising pro-growth policies and a potential tweak to the debt brake. DAX spiked 0.8% but later pared gains, while other European indices hovered between -0.1% and +0.3%.

- Germany’s Ifo Business Climate index flatlined at 85.2 in February, missing the 85.8 forecast, with a gloomier view of current conditions offsetting brighter expectations. German 10-year Bund yields edged up 2bps to 2.48%, reflecting bets on a looser fiscal stance.

- US futures rose modestly after last week’s selloff (Dow -2.5%, worst since Oct 2024). Traders recirculate TD Cowen note from Feb 21st saying that channel checks indicate that Microsoft has canceled US data center leases totaling a couple hundred megawatts with at least two private data center operators, following last week’s CEO Nadella comments from podcast saying that “there will be an overbuild in AI compute". Focus turns to Thursday’s PCE inflation report and earnings from Nvidia (Wed), Home Depot, and Lowe’s, as well as potential release of GPT-4.5 model this week. Treasury yields hovered near 4.4%, with markets pricing in Fed cuts amid softening PMI data. Trump’s latest China investment curbs (CFIUS restrictions, tech curbs) added to trade uncertainty, though Beijing signals openness to negotiations.

- WTI crude fell 0.8% to $70.1/bbl as Iraq-Turkey pipeline exports near restart after a two-year halt. Progress in Ukraine peace talks (Zelenskiy open to stepping down for NATO bid) could ease Russian supply sanctions. Middle East tensions linger as Hamas-Israel truce frays.

- Notable EU M&A: Subsea7 and Saipem announced merger talks, while Prosus acquired Just Eat Takeaway for €4.1B.

- Looking forward, ahead of China NPC meeting next week, UBS expects Beijing to set 2025 GDP target at ~5%, with fiscal deficit rising to 4% of GDP. HSBC warns external demand headwinds may push target to 4.5%-5.0%. Analysts expect PBOC rate cuts (30-40bps) post-NPC meeting.

- Asia closed lower with NZX50 underperforming -1.7%. EU indices +0.1-1.0%. US futures +0.6-0.7%. Gold +0.3%, DXY 0.0%; Commodity: Brent -0.1%, WTI -0.1%; Crypto: BTC -0.4%, ETH -3.9%.

Asia

- New Zealand Q4 Retail Sales (Ex Inflation) Q/Q: 0.9% v 0.5%e.

- Japan markets closed for holiday.

Global Conflict/tensions

- Ukraine Pres Zelenskiy stated that $500B figure not being considered in minerals deal anymore, US provided $100B to Ukraine for war effort; Ukraine-US talks on minerals deal were moving forward, all was okay; Ready to step down in exchange for peace in Ukraine or NATO membership.

- Russia Dep Foreign Min Ryabkov stated that US wanted to achieve 'quick' ceasefire in Ukraine without long-term settlement. Russia clearly and in very detailed way explained to the US that sole ceasefire in Ukraine was 'unacceptable'. Not preparing for Russia/US meeting in Riyadh on Feb 25th; next meeting will between heads of Dept, not at Dep Foreign Ministry level.

Europe

- German election results saw the center-right (conservative) parties of CDU/CSU coalition in the box seat to form a majority govt. Merz’s CDU/CSU bloc won 28.8% of the votes, followed by 20.2% for the far-right Alternative for Germany. Chancellor Scholz’s Social Democrats (SPD) finished third with 16.2%. Coalition between the CDU/CSU alliance and the Social Democrats looked feasible.

- ECB's Wunsch (Belgium) stated that ECB faced the risk of ‘sleepwalking’ into too many rate cuts. Felt "relatively comfortable" on inflation outlook and market expectation of 2% rates by year-end, 'give or take 50bps'.

- ECB’s Villeroy (France): Reiterates view that deposit rates could be at 2% by this summer.

- ECB’s Escriva (Spain) said to call for cautious’ policy decisions. Council was approaching matters meeting by meeting basis. Reiterated stance of no pre-established future path for rates.

- European Council Pres Costa stated that European leaders to meet on Mar 6th for an extraordinary summit to discuss Ukraine and European defense.

Americas

- Trump trade team said to be pushing Mexico towards tariffs on Chinese imports.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.19% at 554.90, FTSE +0.30% at 8,685.20, DAX +0.98% at 22,483.35, CAC-40 -0.14% at 8,143.22, IBEX-35 +0.55% at 13,022.47, FTSE MIB +0.21% at 38,503.00, SMI +0.39% at 12,986.60, S&P 500 Futures +0.55%].

Market Focal Points/Key Themes: European indices open mixed but quickly took on a negative bias; DAX leading the way higher following German election results; signs of slow economic growth seen weighing on risk appetite; among better performing sectors are real estate and utilities; sectors trending lower include energy and consumer discretionary; oil & gas subsector on the backfoot after Brent drop on Friday; JustEat takeaway to be acquired by Prosus; National Grid to sell its onshore assets in the US to Brookfield; Saipem to merge with Subsea7; earnings expected in the upcoming US session include Owens Corning, Zoom, and Domino’s Pizza.

Equities

- Consumer discretionary: Just Eat Takeaway [JET.UK] +52.5% (to be acquired by Prosus for €20.3/shr all cash; FY24 results and guidance for FY25), PostNL [PNL.NL] +2.5% (Q4 results).

- Energy: Saipem [SPM.IT] +1.0%, Subsea 7 [SUBC.NO] +6.5% (merger), RWE [RWE.DE] +2.5% (German elections results) - Financials: BBVA [BBVA.ES] +0.5% (increased FY25-29 target for sustainable business to €700B) - Healthcare: GSK [GSK.UK] +2.0% (Chinese team found new bat coronavirus last week that could infect humans via the same human receptor as the virus that causes Covid-19) - Industrials: Rheinmetall [RHM.DE] +4.0% (German elections results), Belimo [BEAN.CH] -4.5% (FY results) - Technology: Infineon [IFX.DE] -1.0% (traders recirculate TD Cowen note from Feb 21st saying that channel checks indicate that Microsoft has canceled US data center leases totaling a couple hundred megawatts with at least two private data center operators; last week's CEO Nadella comments from Feb 19th's podcast saying that “there will be an overbuild in AI compute" and that "supply and demand must have some equilibrium”; Also plans to lease a lot of compute capacity in 2027-2028) - Telecom: Eutelsat [ETL.FR] +2.5% (Eutelsat, Mediatek and Airbus announce world’s first 5G non-terrestrial network connection; Goldman cuts to sell)

-Real Estate: Vonovia [VNA.DE] +3.0%(German elections results).

Speakers

- ECB's Wunsch (Belgium) stated that the Key rate might no longer be restrictive after cut to 2.50%. Not shocked when looking at market expectations on rate path. Eurozone inflation should settle at target in mid-2025 (**Note Deposit Rate currently at 2.75% with market expectations that ECB to cut 25bps on Mar 6th).

- Russia govt spokesperson noted that further talks with US this week to focus on eliminating irritants in relations.

- Iraq Oil Minister commented that it was commitment to OPEC+ cuts and compensation plan. Oil exports from the Kurdish region would resume in a week.

Currencies/fixed income

- FX price action was subdued in the session with focus on any new tariff news and US-Russia-Ukraine peace talks.

- EUR/USD began the session above 1.05 level in the aftermath of the German Federal elections but the pair drifted lower during a quiet EU morning as dealers believed ECB’s loose policy stance should limit any euro gains. Focus now on German coalition talks especially regarding the debt break. Any reform to Germany's 'debt brake,' which restricts government spending, would have to rely on the support of either the far-left Linke or the far-right AFD. (**Note: latter was against debt-brake reform, while the former might support it to increase investment but not defense. Another headwind in the session was German business confidence remaining weak.

- USD/JPY at 149.55 with dealers noting the likelihood of higher JGB yields and firmer yen currency. Analysts believe BOJ's policy rate could likely to reach 1.25% by end-2026 (**Note: currently at 0.50%) yield is at 4.43% by mid-EU session; German 10-year yield at 2.47%.

Economic data

- (TR) Turkey Feb Real Sector Confidence: 102.8 v 102.6 prior; Real Sector Confidence NSA (unadj): 102.4 v 100.9 prior; Capacity Utilization: 74.5% v 74.6% prior.

- (AT) Austria Jan Final CPI M/M: 1.0% v 1.1% prelim; Y/Y: 3.2% v 3.3% prelim.

- (TW) Taiwan Jan M2 Money Supply Y/Y: 5.5% v 5.5% prior; M1 Money Supply Y/Y: 4.4% v 4.0% prior.

- (DE) Germany Feb IFO Business Climate Survey: 85.2 v 85.8e; Current Assessment Survey: 85.0 v 86.3e; Expectations Survey: 85.4 v 85.0e.

-(CH) Swiss weekly Total Sight Deposits (CHF): 438.1B v 432.5B prior; Domestic Sight Deposits: 430.2B v 424.4B prior.

- (PL) Poland Jan Real Retail Sales M/M: -17.3% v -19.8%e; Y/Y: 4.8% v 1.5%e; Retail Sales (current prices) Y/Y: 6.1% v 2.5%e.

- (EU) Euro Zone Jan Final CPI Y/Y: 2.5% v 2.5% advance; CPI Core Y/Y: 2.7% v 2.7% advance; CPI M/M: -0.3% v -0.3% advance.

- (CY) Cyprus Jan CPI Harmonized M/M: -0.5% v -0.3% prior; Y/Y: 2.9% v 3.1% prior.

Fixed income issuance

- (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 6-month Bills; Avg Yield: 4.27% v 4.43% prior; bid-to-cover: 2.84x v 2.53x prior.

Looking ahead

- (IL) Israel Leading Jan Leading ‘S’ Indicator M/M: No est v 0.7% prior.

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

- 05:30 (DE) Germany to sell combined €4.0B in 3-month and 9-month BuBills.

- 05:30 (EU) European Union to sell combined €5.0B in 2027 and 2038 NGEU bonds.

- 06:00 (BR) Brazil Feb FGV Consumer Confidence: No est v 86.2 prior.

- 06:00 (IL) Israel to sell combined ILD1.95B in 2027, 2029, 2035 and 2042 bonds.

- 06:00 (BE) Belgium Debt Agency (BDA) to sell combined €3.0B in 2029, 2034 and 2038 OLO Bonds.

- 06:00 (RO) Romania to sell combined RON1.1B in 2026 and 2031 bonds.

- 06:00 (NO) Norway bond announcement on upcoming issuance (held on Wed).

- 06:15 (UK) BOE's Pill (chief economist).

- 06:25 (BR) Brazil Central Bank Weekly Economists Survey.

- 07:00 (CL) Chile Jan PPI M/M: No est v 0.2% prior.

- 07:00 (MX) Mexico Dec Mexico Gold Production: No est v 5.3K prior; Silver Production: No est v 296.7K prior; Copper Production: No est v 44.5K prior.

- 07:00 (IN) India announces details of upcoming bond sale (held on Fridays).

- 08:00 (PL) Poland Jan M3 Money Supply M/M: -0.7%e v +1.9% prior; Y/Y: 9.1%e v 9.3% prior.

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

- 08:15 (CA) Bank of Canada (BOC) Dep Gov Gravelle.

- 08:15 (UK) BOE's Ramsden.

- 08:30 (US) Jan Chicago Fed National Activity Index: -0.05e v +0.15 prior.

- 09:00 (FR) France Debt Agency (AFT) to sell €6.2-7.8B in 3-month, 6-month and 12-month bills.

- 09:00 (IL) Israel Central Bank (BOI) Interest Rate Decision: Expected to leave Base Rate unchanged at 4.50%.

- 09:00 (BE) Belgium Feb Business Confidence: -13.0e v -13.6 prior.

- 10:30 (US) Feb Dallas Fed Manufacturing Activity: 6.4e v 14.1 prior.

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

- 13:00 (US) Treasury to sell 2-Year Notes.

- 13:00 (UK) BOE's Dhingra.

- 17:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 85.1 prior.

- 18:00 (HU) Hungary Feb Business Confidence: No est v -13.9 prior; Consumer Confidence Index: No est v -29.6 prior; Economic Sentiment: No est v -18 prior.

- 18:50 (JP) Japan Jan PPI Services Y/Y: 3.1%e v 2.9% prior.

- 20:00 (KR) Bank of Korea (BOK) Interest Rate Decision: Expected to leave 7-day Repo Rate unchanged at 3.00%.

- 20:25 (CN) China PBOC 1-Year Medium-Term Lending Facility (MLF) Setting: Expected to leave rate unchanged at 2.00%.

- 21:00 (KR) South Korea Jan Retail Sales Y/Y: No est v 8.9% prior; Department Store Sales Y/Y: No est v 1.1% prior; Discount Store Sales Y/Y: No est v -6.6% prior.

- 21:00 (KR) South Korea to sell KRW700B in 20-Year Bonds.

- 21:50 (AU) RBA Assist Gov Jones.

- 22:00 (TH) Thailand Central Bank to sell THB60B in 3-month bills.

- 22:30 (TH) Thailand Jan Customs Trade Balance: $1.5Be v -$0.0B prior; Exports Y/Y: 7.4%e v 8.7% prior; Imports Y/Y: 2.5%e v 14.9% prior.