Authored by Mike Shedlock via MishTalk.com,

US consumers are increasingly dependent on Medicare, Medicaid, SNAP and Social Security.

Personal Current Transfer Receipts (PCTR) and income data from the BEA, chart by Mish.

Q: What are Personal Current Transfer Receipts?

A: The Bureau of Economic Analysis (BEA)explains PCTR consists of income payments to persons for which no current services are performed. It is the sum of government social benefits and net current transfer receipts from business.

Medicare, Medicaid, SNAP (food stamps), housing subsidies, and Social Security are examples.

PCTR Percent Detail

Personal Current Transfer Receipts (PCTR) and income data from the BEA, chart by Mish.

PCTR Observations

• PCTR tends to rise in recession the fall back some, but not to the previous level.
• This makes sense because of the decrease in jobs during recession followed by an increase in jobs after recession.
• When the decline in PCTR following a recession turns into an increase you have a recession warning but with a variable time lag.

Boomer Demographics and Immigration

Demographics, especially aging baby boomers, increase the reliance on Medicare and Social Security.

Immigration plays into Medicaid for children. But Trump has shut off all benefits for illegal immigrants.

Social Security and Medicare are the big issues. Fewer workers support a growing need by dependents.

Employment-Population Ratio

Employment Population Ratio from the BLS, chart by Mish.

What is the Employment-Population Ratio?

The employment-population ratio is a statistical measure that represents the percentage of a country’s working-age population that is currently employed.

It shows the proportion of people within a population who are actively working.

EPR is calculated by dividing the number of employed people by the total civilian non-institutional population aged 16 and over.

How Does Inflation Play Into This?

Personal Current Transfer Receipts (PCTR) and inflation data from the BEA, chart by Mish.

Real and Nominal PCTR

• Annualized PCTR were $4.74 trillion in January of 2025. This compares to $35 billion in July of 1965.
• Annualized Real PCTR were $3.78 trillion in January of 2025. This compares to $211 billion in July of 1965.

In January of 2025 people got $4.74 trillion but it felt like $3.78 trillion.

From a consumer standpoint, PCTR was overstated by $953 billion, 25.4 percent. However, the impact on the federal deficit was the full $4.74 trillion.

Thank You Fed and Congress

The Fed is not to blame for the three rounds of free money fiscal stimulus that fueled the massive post-Covid inflation.

However, the Fed is 100 percent to blame for its QE response to inflation that created asset bubbles and literally destroyed the housing market.

Inflationary and Deflationary Forces

• Free money and rising deficits are inherently inflationary

• The resultant rise in asset values is inflationary

• Boomer demographics and retirements are disinflationary but offset by rising asset prices and bubbles

• Inflation is punishing the non-asset holders who need PCTR to buy food and pay rent. This is deflationary.

• If asset prices sink, the entire mix becomes deflationary.

Government Dependence Synopsis

We have a growing dependence on government aid over time. The problem is exacerbated by rising benefit levels, inflation, and demographics.

Neither party will fix this. Neither party will fix anything because Congress is corrupt.

There are no fiscal conservatives to be found.

DOGE is a side-show relative to $4.74 trillion in PCTR and the entire budget.

Trump wants more money for defense and will get it by offering something to Democrats in return.

The Fed won’t fix anything either because fiscal policy will play an increasing role and the Fed does not even understand what inflation is.

Understanding Inflation

The Fed, Congress, and the White House have created a two-state economy that bails out the banks, the asset holders, and the wealthy time and time again.

The Fed does not recognize the result as inflation. Meanwhile, both parties support more spending on this in return for more spending on that fueling various bubbles.

Asset bubbles are by definition inflationary. Few understand that because the Fed and economists in general tout inflation as the CPI or PCE. The Fed repeatedly says “Inflation expectations are well-anchored”.

So what? Please consider Fedthink! The Fed Is Incompetent by Design and Can’t Be Fixed

Consumer inflation measures are a very poor measure of overall inflation. By failing to understand this simple point, the Fed has sponsored numerous bubbles of increasing amplitude over time.

Meanwhile, it takes more and more PCTR to keep the have-nots from revolting.

When the bubbles burst, the outcome will be very deflationary. Tariffs may easily be the proverbial straw.

Authored by James Rickards via DailyReckoning.com,

Even casual observers know that gold has been trading near all-time highs lately. The dollar price of gold has been trading around $2,955 per ounce, quite close to the all-time closing high and near the recent intraday high just below $3,000 per ounce. Since November 1, 2022, gold has rallied from $1,650 per ounce to $2,955 per ounce, an 80% gain in 28 months.

Since the U.S. dollar is also near interim highs based on leading indices, gold’s performance when measured in euros, sterling or Swiss francs is even stronger. We expect this trend to continue and to push gold solidly above the $3,000 per ounce level on its way to even higher levels in the months ahead.

Trump: Show Me The Gold!

That’s news in its own right but there’s a lot more going on in the gold space than just the price action. President Trump and Elon Musk (head of the Department of Government Efficiency, DOGE, and the world’s richest man) are planning to visit Fort Knox in the near future to “audit” the gold stocks and make sure all of the gold is where it’s supposed to be. I’m certain that visit will be the mother of all photo-ops.

Of course, Trump and Musk will not be conducting a real audit in the financial sense. They’ll just look around and show that the gold is actually there. This should lay to rest the rumors and ill-founded theories that the gold is somehow missing or has been shipped to JPMorgan. It hasn’t been.

Make U.S. Assets Great Again

Even this publicity visit has not captured all of the gold news lately. On a more serious note, Scott Bessent the U.S. Treasury Secretary said recently that “within the next twelve months, we’re going to monetize the asset side of the balance sheet for the American people. We’re going to put the assets to work.” There has been so much focus on the liability side of the balance sheet (basically the $38 trillion in national debt) that it’s refreshing to hear a senior official talk about the asset side.

The liberal critics will wail that Bessent plans to sell Yosemite National Park to real estate developers. Nothing like that will happen but the U.S. does have ample assets it can sell, lease or otherwise monetize without invading national parks or wilderness areas. These include mineral and mining rights, intellectual property, airwaves, rights of way, flight paths, and, yes, property development rights and land sales in non-sensitive areas. No one has any idea what all of this is worth, but it’s certainly worth in the trillions of dollars and can be monetized for the benefit of the American people including paying down the national debt.

Gold dealers and gold bugs immediately focused on one particular U.S. asset that could be monetized – gold. The U.S. has 8,133 metric tonnes of gold bullion in three locations – Fort Knox, West Point and the Denver mint – that could be sold. That gold has a current market value of $771 billion. Of course, any effort to sell more than a small fraction of that would drive the price of gold straight down. It would be an immense blunder to sell any of it anyway. The Treasury should be buying gold to maintain confidence in the dollar, not selling it.

Another take on monetizing gold revolves around the fact that the Federal Reserve currently holds a gold certificate issued by the U.S. Treasury in 1934 in compensation for the transfer of gold bullion from the Fed to the Treasury on orders of Franklin Roosevelt (backed up by legislation). That certificate is valued on the Fed’s books at $42.22 per ounce. If the Treasury ordered the Fed to write-up the value to market, that would add $760 billion to the Treasury’s general account, which could be used to finance the U.S. government without adding new debt.

Marked Up Gold: Not A Revenue Stream

Trump definitely wants new revenue streams for the government. I wouldn’t count marking-up the price of gold as a revenue stream. It does produce cash with no addition to the national debt but it’s not really a revenue stream; it’s just an accounting entry. It does produce cash but only on a one-time basis. In principle, you could repeat the process if gold went higher in the future but that’s uncertain and not completely reliable like taxes, leases and tariffs.

Despite the gold bug claims, there is no particular connection between marking up the price of gold (accounting) and selling gold reserves for cash (monetizing). One has nothing to do with the other. The government could sell the gold today at the market price without having to wash the accounting through the Treasury general account at the Fed. There’s nothing about marking up the price of gold on the Fed’s books that affects the government’s ability to sell the gold one way or the other.

Can The U.S. Even Sell Gold?

Still, the issue of monetizing gold has to be put in the context of whether the government can legally sell any gold at all. If you convert the Fed’s gold certificate into Troy ounces of gold (not dollars but ounces), it’s approximately equal to the entire U.S. gold reserve today (8,133 metric tonnes). If the Fed’s gold certificate is intended to be backed by physical gold, it’s possible the government cannot sell any gold without diluting the Fed’s gold certificate.

This is not discussed in economic literature to my knowledge, but it could be a simple derivative of the Fifth Amendment constraint that required the Treasury to give the Fed something of fair value when the gold was confiscated in 1934. This happened when the U.S. was on a gold standard and the weight and value of gold were interchangeable.

That’s not true today. Weight is constant but value fluctuates. It may be the case that the Treasury has to maintain a certain amount of gold by weight regardless of value in order to honor the original deal. If this analysis is correct, that’s extremely bullish for gold. It means the world’s largest single holder of gold (the U.S.) cannot be a seller!

Another idea which has surfaced in the hype surrounding Bessent’s comments about monetizing assets is that the U.S. could sell gold and use the proceeds to buy foreign government bonds that ostensibly produce higher yields than U.S. Treasuries. An alternative is to issue Treasury bonds backed by gold that would (in theory) carry a zero interest rate because they are “inflation proof.” This creates an arbitrage between higher yielding foreign government debt and supposedly zero interest U.S. Treasury debt that produces income for the Treasury.

This idea is nonsense for a long list of reasons.

In the first place, the U.S. already has inflation adjusted Treasury bonds. They’re called TIPS and offer investors a market interest rate plus an adjustment for inflation. An inflation-proof gold-backed bond is therefore redundant. If you like gold, just go buy some. We don’t need to make the Treasury jump through bond market hoops.

The second reason is that gold is not particularly correlated to inflation. In the past two-and-a-half years, gold has gone up 80% and cumulative inflation has been around 10%. Where’s the correlation? The price of gold is driven more by uncertainty, liquidity and geopolitics. Indexing Treasury bonds to gold prices would have resulted in windfalls for investors and a huge loss for the Treasury.

In addition, it’s not clear why selling or monetizing gold reserves has anything to do with buying foreign government bonds. The Fed could just buy them with printed money and the Treasury could just buy them with borrowed money. The gold reserve issue has nothing to do with it.

Finally, the calculation of whether buying foreign sovereign bonds makes sense for the Treasury involves a comparison of U.S. interest rates to German or Italian interest rates. Right now, German interest rates are about two points lower than U.S. rates, so those bonds would have negative carry from the U.S. perspective. That’s a bad deal. You also have to factor in exchange-rate risk. If the euro went down against the U.S. dollar, the Treasury would lose on the exchange rate and the interest rate. That’s a very bad deal.

As mentioned, I recommend gold as an investment asset and own it myself. It’s just not the case that the Treasury has to mess around in gold, bond and currency markets to achieve some opaque goal that can be achieved directly just by leaving the gold in Fort Knox and issuing TIPS.

A U.S. Sovereign Wealth Fund

In the midst of the noise set off by Bessent’s monetization comments was a striking remark by Trump that he would like to establish a U.S. sovereign wealth fund. That’s highly significant.

Right now, official U.S. reserves are about 70% in gold with the rest in a few foreign currencies. The idea of a sovereign wealth fund (SWF) is to allow a country with reserves to diversify into stocks, bonds, natural resources, property and a lot else instead of just holding gold and U.S. Treasuries.

Most countries with SWFs finance it with their trade surplus. Norway, Russia and Saudi Arabia are among the biggest SWF holders in part because of their oil revenue trade surpluses. The U.S. doesn’t have a trade surplus, but we might soon have substantial revenues from tariffs. The U.S. could always borrow money to finance a sovereign wealth fund. Then it would be more like a hedge fund, but that might be Trump’s style. (Scott Bessent was a hedge fund manager for Soros).

I did extensive collections and research on sovereign wealth funds for the Director of National Intelligence when it was a hot topic around 2007-2008. The SWF issue faded after 2009 as it was overshadowed by the global financial crisis. SWFs lost a lot of money in that panic. But they never went away and have recovered their losses since then. Trump may bring SWFs back into style.

Bessent’s asset monetization comment and Trump’s reference to a sovereign wealth fund for the U.S. are critical initiatives that we’ll be watching closely. In the short run, the gold bug and other hype has run far ahead of the reality. In the long run, both initiatives may come to fruition and mark a material reset in the international monetary system

CNN reports that a summit between Presidents Trump and Putin is now being fast-tracked in the wake of the explosive row with Zelensky, which saw him booted from the White House before a planned lunch was to take place Friday.

Last month saw talks in Riyadh aimed at fully restoring US-Russia relations end on a positive note between the delegations headed by Rubio and Lavrov. There was a follow-on meeting in Istanbul, leading to the restaffing of embassies (which had previously seen a tit-for-tat booting of diplomatic staff).

CNN writes in a fresh Monday report, “Whether it was orchestrated or not, Moscow – which reacted with glee to the White House slanging match – is now anticipating talks aimed at rebuilding the US-Russia relationship will continue, even accelerate, in the weeks ahead.”

“Nothing has been announced in public. But, privately, there’s talk of the Trump-Putin summit, always on the cards, now being fast-tracked,” the report continues.

“There is also renewed optimism in Moscow that, with President Zelensky at odds with President Trump and his team, difficult negotiations to end the war in Ukraine will now take a back seat to a raft of potentially lucrative US-Russia economic deals already being tabled behind closed doors,” CNN adds.

US National Security Advisor Mike Waltz has meanwhile warned Zelensky not to test the limits of American patience. He strongly suggested in a fresh Fox interview that Zelensky is fully rejecting the possibility of ceasefire in the over three-year long conflict.

“[Zelensky] is not ready to talk peace at all. Here is the problem, time is not on his side. Time is not on the side of just forever continuing this conflict,” Waltz said on Fox.

“It was really confounding to us that Zelensky could have left the White House Friday having the US and Ukraine bound together economically for a generation,” Walz said in reference to the rare earth minerals deal that was supposed to be signed.

Still, Ukraine’s Zelensky says US support is “crucial” as he attempts to salvage the relationship. After being accused of being ungrateful by Vice President JD Vance on Friday, Zelensky spent the weekend tweeting out a serios of ‘thank you’ messages, and also at one point expressed: “It’s crucial for us to have President Trump’s support.”

Even the Biden administration long complained that Zelensky seemed ungrateful for the tens of billions Washington has devoted to the war effort:

In 2022, NBC was reporting that Joe Biden lost his temper with Zelensky because he wasn’t grateful and he was very demanding.

That’s in 2022.

Wait, the media didn’t tell you about this? I wonder why… pic.twitter.com/Dd43B41IWS

— Insurrection Barbie (@DefiyantlyFree) March 2, 2025

He said in a series of posts on X Saturday morning of Trump, “He wants to end the war, but no one wants peace more than we do.” Zelensky has stressed that he sees this as impossible without strong security guarantees, however.

Update(1212ET): President Trump moments ago reacted fiercely to fresh statements of Ukrainian President Zelensky, who said that he sees the end of the war with Russia as being “very, very far away.” Zelensky had even added that he expects to keep receiving American support despite last Friday’s blow-up at the White House, wherein VP Vance charged that he is ungrateful.

“I think our relationship (with the U.S.) will continue, because it’s more than an occasional relationship,” Zelensky said late Sunday. “I believe that Ukraine has a strong enough partnership with the United States of America” to keep aid flowing. These were some of the remarks featured in the Associated Press article highlighted in a Truth Social post by Trump on Monday. 

Trump warned in response, “This is the worst statement that could have been made by Zelensky, and America will not put with it for much longer.” He added in reference to Zelensky that “this guy doesn’t want there to be Peace as long as he has America’s backing…”.

This comes amid various unconfirmed reports that Trump will discuss halting military aid to Ukraine in a meeting with key advisors on Monday. Given Trump’s lashing out at Zelensky this morning, this certainly does look accurate.

Here’s also what the NY Times reported Friday:

President Volodymyr Zelensky of Ukraine entered the White House for a meeting with President Donald Trump on Friday knowing that the flow of weapons and military hardware from the United States to his country had essentially stopped.

By the time he left, after a televised argument between the two leaders, the situation appeared even more dire.

As the two men met, it had been 50 days since the Pentagon had announced a new package of weapons to Ukraine and the new administration had said little about providing any more.

A Trump administration official said later on Friday that all U.S. aid to Ukraine — including the final shipments of ammunition and equipment authorized and paid for during the Biden administration — could be canceled imminently.

This scenario is clearly getting closer and closer, especially given Zelensky’s continued open defiance, issuing statements critical of the White House while appearing ‘tough’ for the European cameras.

Meanwhile…

INTEL: Trump is meeting with his aides today to discuss canceling U.S. military aid to Ukraine.

Odds he cuts all military aid have shot up to 25%. pic.twitter.com/Bil1WYNDOU

— Polymarket (@Polymarket) March 3, 2025

Trump’s Director of National Intelligence is also piling on in a fresh interview, highlighting the anti-democratic nature of the Zelensky regime…

Trump’s Director of National Intelligence Tulsi Gabbard:

Elections are canceled in Ukraine. Churches are being shut down. Political opposition is silenced and there is total government control of the media. pic.twitter.com/ALKqZon6lO

— Clash Report (@clashreport) March 3, 2025

* * *

Ukrainian President Volodymyr Zelensky has remained defiant in the wake of Friday’s explosive confrontation with President Trump and Vice President JD Vance in the Oval Office. He said from London Sunday that he will not apologize that that his country’s freedom is “not for sale”.

He acknowledged that the public spat “didn’t bring anything positive or additional to us as partner” – however he also said “This relationship will continue because this is more than a relationship in one moment.”

“If you don’t have an end to the war and you don’t have security guarantees, no one is able to control a ceasefire,” he told reporters while preparing to leave the UK, following a meeting with European leaders to agree on continued support for Ukraine.

Financial Times has underscored that Zelensky is not only rejecting calls from the US to apologize to Trump and Vance, but he’s now openly pushing back against ceasefire. The Ukrainian leader…

rejected calls for Ukraine to agree an immediate ceasefire in its war with Russia, saying it would be “failure for everyone” if a cessation of hostilities were not accompanied by detailed security guarantees.

“If you don’t have an end to the war and you don’t have security guarantees, no one is able to control a ceasefire,” Zelensky stressed in these latest remarks.

He still proclaimed that he remains “ready” to sign a US-Ukraine minerals deal, confirming that his aides are now speaking to Trump’s team about ways to move forward on it.

Zelensky says he is prepared to sign a mineral rights deal with the US and thinks the relationship with Washington can be salvaged. —NBC

But the mood from the White House appears to be one of willingness to cut Zelensky off altogether. There are reports that President Trump is mulling cutting off all continuing defense aid to Ukraine.

Administration officials have sought to clarify that this was no ambush which played out before media cameras on Friday, but that Zelensky was rude and confrontational the whole time, and never satisfied with what the US was providing to Ukraine.

National Security Advisor Michael Waltz told the Sunday news shows that President Trump “was frustrated and angry because it’s unclear if Zelensky truly wants to stop the fighting. The President and VP said enough is enough.”

Walz added: “This [lecturing] was the wrong approach, wrong time, and the wrong president to try to do this kind of a thing. This is not Joe Biden. The entire world saw that, crystal clear.”

Waltz tells what happened after the fight in the Oval Office – the Ukrainian team was in tears, but Zelensky stayed argumentative

Q: After the press left, you and Rubio told Zelensky he should leave the White House?

Waltz: We had a meeting, and advised the president that after… pic.twitter.com/JoN2zEGP8G

— Tymofiy Mylovanov (@Mylovanov) March 2, 2025

And this segment from Walz’s account in a Fox News interview is hugely revealing:

Q: How did Zelensky react after press left? Was he surprised?

Waltz: No. His team was. His ambassador, and adviser were practically in tears, wanting this to move forward. But Zelensky was still argumentative. I said “Mr. President, time is not on your side here, on the battlefield, and in terms of the world situation. And most importantly, USAID, and the taxpayers’ tolerance, is not unlimited”.

Waltz: I think Zelensky is used to hearing that “as long as it takes” and blank check from Biden.

He has not gotten the memo that this is a new sheriff in town. This is a new president, and we are determined to take a new approach towards peace.

European leaders are meanwhile trying to absorb the blowback and fallout, now talking about an alternative peace plan backed by “boots on the ground and planes in the air“. UK Prime Minister Sir Keir Starmer is leading the way on plans for a ‘stabilization force’ to back a Ukraine ceasefire, likely involving France – and which the Europeans hope Trump can sign on to. But the Kremlin is likely to immediately reject it, given the Western ‘boots on the ground’ aspect to the plan.

*  *  *

Grow your own food with HEIRLOOM SEEDS (39 varieties – 4,500 seeds) from ZH Store!  Free shipping in the USA.

Europe has seen a surge in terror attacks, many carried out by migrants, further pushing the continent into a major crisis. This has only fueled growing support for the Alternative for Germany (AfD), which doubled its voter base in February’s election, securing its position as the Bundestag’s second-largest party. Yet another attack in Germany only suggests that AfD’s support will likely strengthen as liberals have mismanaged the migrant crisis and far-left progressive governments have failed to protect their citizens. 

Germany has suffered a wave of terror attacks, with cars and knives used as deadly weapons. The latest attack occurred in Mannheim on Monday when a man drove into a crowd of people. 

Here’s more on the incident from Reuters:

Police detained the car’s driver and later said he had acted alone, with no broader threat seen for the public. People were seen lying on the ground at the scene and at least two were being resuscitated, an eyewitness told Reuters. Bild newspaper reported that two people were killed and 25 injured, 15 of them seriously, citing security sources.

The man in the car rushed at breakneck speed into the crowd today in Mannheim just seconds before the massacre of the innocents. pic.twitter.com/i5uZTqq4tB

— RadioGenoa (@RadioGenoa) March 3, 2025

TERROR IN GERMANY: Car rams into crowd in Mannheim, Germany, near Wasserturm. Multiple injuries reported, 1 reported dead. Suspect arrested. Police lock down city center amid carnival season. pic.twitter.com/v3mxAXFLgY

— Breaking911 (@Breaking911) March 3, 2025

BREAKING:

The death toll has risen to 2 in the suspected terror attack in Germany 🇩🇪

A driver plowed down groups of people along a street in Mannheim.

25 injured, 15 of which are in critical condition. Videos show torn off legs on the street. Absolute horror… pic.twitter.com/VEBH9U3JEc

— Visegrád 24 (@visegrad24) March 3, 2025

It remains unclear whether the driver acted deliberately or by accident. However, car-ramming attacks in Germany have been on the rise.

The morning after he says this, a terrorist just once again drove a car through a crowd in Mannheim, Germany.

Multiple people dead, dozens injured.

Viral images of limbs laying on the street. https://t.co/3c0aSBsX8q

— Geiger Capital (@Geiger_Capital) March 3, 2025

According to The Telegraph:

• Last month, a man drove a car into a trade union demonstration in the southern city of Munich, killing a two-year-old girl and her mother.

• In December, a car-ramming attack targeted a Christmas market in the eastern city of Magdeburg, killing six people and wounding hundreds.

• In August, three people were killed and eight injured in a knife attack in Solingen. The suspect was a suspected member of the Islamic State group.

The series of attacks on German citizens has given AfD momentum following its surge in voter support to 20.8% in February’s election, making it the second-largest party in the Bundestag.

And support continues to rise…

Germany’s AfD Soars To 23% (Greens & SPD Crater) In Aftermath of Aschaffenburg Attack https://t.co/QVSDqyouVt

— zerohedge (@zerohedge) January 30, 2025

Website European Conservative listed a timeline of the latest terror attacks in Europe:

• February 21, 2025—Syrian refugee stabs and seriously injures a Spanish tourist at Berlin’s Holocaust memorial. Investigators said his goal was to kill Jews. 

• February 19, 2025—Austrian authorities announce the arrest of a 14-year-old boy with Turkish roots. He had been planning to carry out an attack on one of Vienna’s largest train stations, the Westbahnhof. The boy was radicalised on social media.

• February 15, 2025—A 23-year-old Syrian man randomly selects and stabs passers-by in the southern Austrian town of Villach. A 14-year-old boy is killed, and five others are wounded. The perpetrator had sworn allegiance to the Islamic State (ISIS) terror group.

• February 13, 2025—Afghan asylum seeker Farhad Noori drives his car into a crowd of demonstrators in Munich, killing two people, and injuring dozens more. Prosecutors say the attacker, who is a failed asylum seeker, had an Islamist motive for the crime.

• January 22, 2025—28-year-old Enamullah O. attacks a group of preschool children, killing a 2-year-old toddler and a 41-year-old man, and injuring three more people in the Bavarian city of Aschaffenburg. The Afghan migrant is a failed asylum seeker.

• December 20, 2024—A Saudi Arabian man rams his car into a crowd of shoppers at the Magdeburg Christmas market in Germany, killing six people and injuring at least 299 others.

• December 4, 2024—A 37-year-old Iraqi asylum seeker is arrested in Augsburg, Germany, for planning a terrorist attack on the city’s popular Christmas market. The man had scouted the market and engaged with Islamic State operatives online.

• December 2, 2024—Four men are charged in Sweden with participation in a terrorist organisation following the raid on an Islamic association and several homes in Tyresö outside Stockholm in March of 2024. The men are suspected of preparing a terrorist attack against Jewish targets. The investigation uncovers links to the Islamic State in Somalia.

• November 12, 2024—Police in Germany announce that a 17-year-old male of Turkish origin they had arrested the previous week in the northern town of Elmshorn had been planning a terror attack on a local Christmas market. The suspect was aiming to intentionally kill people by driving a truck into them.

• November 6-7, 2024—In the wake of rising antisemitism in Western Europe, Israeli football fans are attacked by a pro-Palestine mob in Amsterdam following a match between Dutch team Ajax and Israeli club Maccabi Tel Aviv. Twenty to thirty people sustain light injuries, and five people are hospitalized.

• October 19, 2024—A Libyan failed asylum seeker is arrested in Bernau, a town just outside of Berlin for intending to carry out a high-profile attack with firearms on the Israeli embassy in Germany. He reportedly was in contact with a member of the Islamic State terror group.

• September 28, 2024—A 41-year-old Syrian man sets fire to two buildings, rams his vehicle into a grocery store, and threatens passers-by with a machete in the western German city of Essen, injuring a total of 31 people.

• September 19, 2024—One person is killed and another seriously wounded in the Dutch port city of Rotterdam after 22-year-old Ayoub M. randomly attacks passers-by, shouting “Allahu akbar” (‘God is greatest’) during his stabbing spree.

• September 13, 2024—A Syrian man is arrested for planning an Islamist machete attack on army soldiers. The suspect planned to attack Bundeswehr soldiers in Hof, northern Bavaria, during their lunch break, “aiming to kill as many of them as possible.”

• September 11, 2024—France’s counterterrorism prosecutor says authorities stopped three plots to attack the 2024 Olympics and Paralympics in Paris in the summer.

• September 5, 2024—An Austrian man of Bosnian extraction fires shots near the Israeli consulate in Munich before being killed by police officers. The man, who had become religiously radicalised, wanted to attack the Israeli consulate.

• August 24, 2024—A 33-year-old Algerian man breaks into a synagogue in La Grande Motte, a popular French seaside resort on the Mediterranean, and sets off multiple fires during the Shabbat service but only a handful of people are inside, and no one is injured. President Emmanuel Macron describes the incident as “an act of terror.”

• August 23, 2024—Issa al Hasan, a Syrian failed asylum seeker, attacks festivalgoers in the western German city of Solingen, killing three people, and injuring eight more. The Islamic State terror group claims responsibility for the attack.

• August 21, 2024—German prosecutors charge two Afghan men with preparation for a terrorist attack near the parliamentary building in Stockholm, Sweden. One of them is suspected of being a member of a terrorist group, while the other is suspected of supporting a terrorist group.

• August 7, 2024—Authorities arrest a 19-year-old Austrian national with North Macedonian roots, in the town of Ternitz, and a 17-year-old of Turkish-Croatian origin in Vienna for planning a suicide attack at a Taylor Swift concert in the Austrian capital, intending to use explosives and knives. The former pledged allegiance to the Islamic State.

As EU progressives fuel economic discontent and a migrant crisis, the rise of AfD and similar parties will likely gain further momentum. However, Brussels can still suppress its political opponents through dystopic censorship laws.

The takeaway is that each new terror attack in Germany further strengthens AfD’s support.

In the peace of two business days, The Atlanta Fed’s GDPNOW forecast for Q1 2025 has collapsed from +2.33% to -2.825% – a stunning 510bps plunge in growth expectations.

Today’s drop to a 2.825% contraction is the worst forecast for GDP since the COVID lockdowns in 2020…

Source: Bloomberg

Friday’s plunge was blamed on the trade deficit, as we detailed earlier:

The January Goods Trade Deficit fell to a record -$153 billion versus expectations of -$116 billion. 

Moreover, as we share below, courtesy of MacroBond, the monthly decline of $31 billion is more than double any other instance since 1955. Imports rose by 12% while exports increased by 2%. The steep decline in the trade deficit is primarily due to US companies front-running tariffs. Approximately $22 billion of the $31 billion, or about two-thirds of the decline, came from industrial supplies. Consumer goods ($4 billion), food and beverages ($2 billion), and other goods ($2.3 billion) account for the bulk of the rest of the change. A similar large trade deficit will likely be reported for February.

The steep decline, mainly due to tariffs, will likely normalize over the coming months. The import demand will be less than typical as inventories for specific products are now bloated for those frontrunning the tariffs.

 

However, as we detailed here, most of the widening in the trade deficit in January was driven by a surge in gold imports.

We have discussed previously the dynamics in the gold market that has led to a jump in the amount of the metal leaving Europe and heading to the US.

It is likely to do with an ongoing squeeze in the physical metal in vaults in London and Switzerland driven by several years of EM central-bank hoarding – so nothing to do with cyclical economic growth in the US.

Today’s plunged from -1.5% to -2.8% was blamed on this morning’s blip lower in ISM Manufacturing survey:

After this morning’s releases from the US Census Bureau and the Institute for Supply Management, the nowcast of first-quarter real personal consumption expenditures growth and real private fixed investment growth fell from 1.3 percent and 3.5 percent, respectively, to 0.0 percent and 0.1 percent.

Now, to help people clarify what the fuck is going on here, the ISM Manufacturing survey (a soft survey data point being used to forecast hard data economic growth), fell from 50.9 (expansion) to 50.3 (still expansion)

So, to clarify – a 0.6ppt decline in the noisy-as-fuck ISM Manufacturing (which remains in expansion) was enough to drive The Atlanta Fed’s forecast for economic growth to its most recessionary since the COVID lockdowns?

Of course, as Treasury Seretary Bessent opined earlier, the all-too-convenient narrative is, of course, that this is all Trump (and Musk’s) fault. 

In fact, as Bessent explains “We’re seeing the hangover from the excess spending in the Biden 4 years. In 6 to 12 months, it becomes Trump’s economy.”

Treasury Secretary Scott Bessent was just questioned if we’re in a recession.

“We’re seeing the hangover from the excess spending in the Biden 4 years. In 6 to 12 months, it becomes Trump’s economy.”

Translation: They want the market crash soon. https://t.co/NfSOVRpQV0 pic.twitter.com/QzryPJT1IO

— Financelot (@FinanceLancelot) February 28, 2025

Just as we forecast would occur in full detail back in July…

The Pentagon is deploying a Stryker Brigade Combat Team and a General Support Aviation Battalion to the southwestern border, accelerating efforts to fulfill President Trump’s directive to bolster military support in securing the U.S. – Mexico border. The units, equipped with wheeled vehicle and air capabilities, are set to reinforce border operations in the coming weeks, Pentagon Press Secretary Sean Parnell announced over the weekend.

Each SBCT is a mechanized infantry force of approximately 4,400 soldiers, and the Army’s nine SBCTs — seven active-duty and two National Guard — are known for their rapid deployment and versatility. Built around the Stryker vehicle — an eight-wheeled armored platform — the brigade balances mobility, protection and firepower. Capable of transport via C-130 Hercules aircraft within 96 hours, the Stryker excels in operations requiring swift response. 

Complementing this, the GSAB, with roughly 650 troops, brings aviation muscle — UH-60 Black Hawks for command and medical evacuation, and CH-47 Chinooks for heavy lift — enhancing operational reach and support.  

The Stryker’s design — lighter than tanks, yet more robust than light infantry — makes it ideal for the border’s vast terrain, while the aviation battalion’s air traffic control and lift capacity ensure seamless coordination. 

“These forces will arrive in the coming weeks, and their deployment underscores the department’s unwavering dedication to working alongside the Department of Homeland Security to secure our southern border and maintain the sovereignty, territorial integrity and security of the United States under President Trump’s leadership,” Parnell said in a statement today.

This deployment marks the latest wave of active-duty troops sent to the border since Trump’s inauguration on Jan. 20, 2025. Following his declaration to “seal the border” and combat illegal immigration and drug trafficking, initial deployments included 1,600 Marines and soldiers by late January, joining 2,500 reservists already mobilized.  

Defense Secretary Pete Hegseth, addressing the mission’s scope on his first official day in late January, emphasized adaptability. “Whatever is needed at the border will be provided,” he said, signaling a robust commitment to the president’s homeland defense priority.

Futures are higher with both tech and small caps outperforming as investors look for Canada/Mexico tariffs to be adjusted lower or delayed again based on Trump comments of the border being closed (Fox News) and Hegseth comments warning of military action without compliance. As of 8:00am ET, S&P futures are up 0.5% and Nasdaq futures rise 0.8% in what appears to be a powerful short squeeze after the second biggest shorting spree by hedge funds in the past five years. Pre-market Mag7 is mixed with AAPL/NVDA lower but Semis and Cyclicals higher. Defense firms surged again in Europe with leaders fast-tracking their spending plans, while bond yields jumped as markets brace for a new debt-funded spending spree. Asian stocks also rose, although China’s benchmark CSI 300 Index erased gains of as much as 1% to end the day little changed. Treasuries dip, with the US administration on the verge of slapping new tariffs on Canada and Mexico while doubling a levy on China. US 10-year yields climb 4 bps to 4.25%. The Bloomberg Dollar Spot Index falls 0.3%. Commodities are mixed with precious/softs leading and oil flat. The macro data focus today is on ISM-Mfg, Construction spending, and vehicle sales. JPM followed other banks to cut its Q1 2025 GDP estimate from 2.25% to 1.5%.

In premarket trading, cryptocurrency-exposed stocks rally as Bitcoin recoups some of its recent losses after President Donald Trump once again talked up his plan for a strategic crypto reserve (MicroStrategy +13%, Coinbase +9.2%, Riot Platforms +9.9%, MARA Holdings +11%, Bit Digital +9.8%, CleanSpark +11%, Hut 8 +12%). Bitcoin traded around $92,000, paring some of its weekend gains but up about 20% from its Friday lows. Chipotle shares gain 2.4% after the restaurant operator was upgraded to overweight from equal-weight at Morgan Stanley as stock’s weakness presents an opportunity to buy into an “excellent tech play.”

• Allegro MicroSystems (ALGM) shares rise 14% after the semiconductor devices company is said to be drawing takeover interest from larger competitor ON Semiconductor
• AppLovin (APP US) shares rise 5.9% after the marketing services company modified the current limit of its share repurchase program, which had about $1.77 billion remaining
• AST SpaceMobile (ASTS) jump as much as 8.8% in premarket trading after the company signed an agreement with Vodafone to create a jointly-owned European satellite service business
• Aurora Innovation (AUR) shares rise 5.0% after Morgan Stanley initiated coverage of the stock with an overweight rating and a Street-high price target, saying the self-driving technology company is “on the cusp of history”
• Capri Holdings (CPRI) shares climb 7.2% as Prada is said to be moving closer to a deal to buy Versace, after agreeing to a price of nearly €1.5 billion ($1.6 billion)
• Check Point Software Technologies (CHKP) shares are up 0.7%, after Piper Sandler upgraded the company to overweight from neutral
• Dollar General (DG) shares slip 0.6% after Deutsche Bank downgraded the discount retailer to hold from buy, citing intensifying competition and pricing pressures
• Lexicon Pharmaceuticals (LXRX) shares were down as much as 57% after reporting a lack of separation in ADPS reduction between Pilavapadin’s 20 mg dose arm and placebo
• Southwest Airlines (LUV) shares fall 2.3% after JPMorgan downgraded the carrier to underweight from neutral, citing its surging valuation premium

“How much more cautious can the market get?” Katrina Dudley, senior investment strategist at Franklin Templeton, said on Bloomberg TV. “If you look at that fear and greed index, we are right in the red zone that flashes and says: caution.”

Defense stocks lead gains in Europe as a concerted push by regional leaders to demonstrate broad support for Ukraine fueled bets on a wave of military spending. The Stoxx 600 was up 0.5% while the euro climbs 0.7%. Defense stocks soared: BAE Systems Plc soared 13%, Rheinmetall AG gained 10% and Saab AB gained 9%. Tech shares also rose, while utilities and real estate sectors fall. Bonds in Germany and France fell on expectations for increased debt issuance. Germany’s next government is exploring options for large-scale investments in defense and infrastructure spending which could amount to hundreds of billions of euros, according to Reuters. Here are some of the biggest movers on Monday:

• European defense shares soar on back of European pledges to support Ukraine and fast-track the continent’s military capabilities. JPMorgan increases price targets in the sector by an average of 25%. Avon Technologies shares rise as much as 8.5% to the highest level since 2021 — amid a broad rally in defense stocks — as the maker of respiratory equipment and helmets received an order worth $17.6 million from the US army.
• Gubra shares surge as much as 29% after the Danish drug developer and AbbVie announced a license agreement to develop GUB014295, a potential best-in-class, long-acting amylin analog for the treatment of obesity.
• Valneva shares gain as much as 7.5%, putting them among the top performers on France’s CAC Mid 60 Index on Monday, following positive developments for the company’s chikungunya vaccine called Ixchiq.
• Bunzl drops as much as 7.1% following full-year results, with analysts at Jefferies saying they remain cautious on the value-added distributor amid weak growth and disappointment that the margin guidance has not been improved.
• Tecnicas Reunidas shares climb as much as 6.9% after analysts at Barclays said the engineering and construction services provider’s results released on Friday have left them feeling more confident that the company can deliver its 2028 ambitions.
• Scout24 shares rise as much as 5.8% after analysts at Deutsche Bank hiked their price target on online property platform, saying it has laid the foundations to fuel growth going forward.
• Warsaw-listed Ukrainian stocks slide after the acrimonious White House meeting between Volodymyr Zelenskiy and Donald Trump dampened hopes of a speedy deal that could end the conflict in Ukraine.
• Brunello Cucinelli shares drop as much as 2.3% after Stifel downgrades the Italian luxury stock to hold from buy, noting the strong year-to-date rally and the lack of significant earnings upgrades.
• Carrefour shares fall as much as 2.6% after Bryan Garnier & Co cut its recommendation on the French retail chain to sell from neutral.
• Senior shares drop as much as 5% on Monday after Jefferies said consensus expectations for this year may come under pressure due to rising costs in the UK.

Earlier in the session, Asian stocks also rose with Indonesia’s stock gauge leading gains in the region after JPMorgan upgraded the nation’s banks. The MSCI Asia Pacific Index advanced as much as 0.8%, with China’s Tencent and Alibaba among the biggest contributors ahead of the nation’s annual national parliament meeting. The Jakarta Stock Price Index surged by the most in almost five years. Shares gained in Japan as they tracked their US peers higher. Investors will be watching the Two Sessions for Beijing’s plan to counter risk from US tariffs after Trump threatened to add an additional 10% levy from Tuesday. Any effort to boost technological advancements will also be crucial to sustain the artificial intelligence-led rally in Hong Kong. The tariffs “would deliver a negative signal to the market that the trade conflict between China and the US is going to escalate,” said Jason Chan, a senior investment strategist at Bank of East Asia. “It may hurt the near-term market sentiment and trigger an ongoing technical correction toward Chinese equities, especially for those AI thematic stocks with rich valuations.”

In FX, Bloomberg Dollar Spot Index falls 0.3%. EUR/USD rose as much as 0.9% to 1.047 on the prospect of more EU defense spending; Hedge funds cut bearish euro wagers for a second straight week, according to the latest CFTC data; the Polish zloty and Hungarian forint led gains among emerging-market currencies.USD/SEK fell as much as 1% to 10.67 as the Swedish krona led Group-of-10 gains against the dollar; Strategists at Societe Generale say the large size of the nation’s defense sector as a proportion of GDP is buoying the currency. 

In rates, treasuries are cheaper as US trading gets under way, following bigger losses in core European rates, where German curve steepens on prospect of increased supply tied to support for Ukraine and improved security measures for the continent. US yields are 3bp-4bp higher across maturities with curve spreads steeper but within 1bp of Friday’s closing levels; 10-year is around 4.25% with bunds and gilts in the sector lagging by an additional 5bp and 1bp. Bunds fall, led by longer-dated maturities, as any increase in defense spending will likely be funded by higher debt issuance, which in turn means QE is just around the corner. German 30-year yields rise 7 bps to 2.77%. German two-year borrowing costs climb 3 bps and rose to session highs after euro-area headline and core February CPI topped estimates and contributed to the selloff during London morning.

In commodities, spot gold rises $13 to around $2,870/oz. WTI falls 0.5% to $69.40 a barrel.

Bitcoin is on a firmer footing and sits comfortably above $92K, as sentiment in the complex is lifted following Trump’s recent announcement. Trump is to host the first White House cryptocurrency summit on March 7th. Trump also commented that the executive order on digital assets directed a strategic reserve that included XRP, Sol and ADA. Trump also stated that BTC and ETH, as other valuable cryptocurrencies, will be at the heart of the reserve, as well as commented that he loves Bitcoin and Ethereum.

US economic data calendar includes February S&P Global US manufacturing PMI (9:45am), January construction spending and February ISM manufacturing (10am). Fed speaker slate includes Musalem at 12:35pm; later this week, Chair Powell is slated to speak on the economic outlook Friday

Market Snapshot

• S&P 500 futures up 0.2% to 5,972.50
• STOXX Europe 600 up 0.3% to 559.12
• MXAP up 0.7% to 184.69
• MXAPJ little changed at 577.22
• Nikkei up 1.7% to 37,785.47
• Topix up 1.8% to 2,729.56
• Hang Seng Index up 0.3% to 23,006.27
• Shanghai Composite down 0.1% to 3,316.93
• Sensex down 0.2% to 73,066.35
• Australia S&P/ASX 200 up 0.9% to 8,245.65
• Kospi down 3.4% to 2,532.78
• German 10Y yield little changed at 2.43%
• Euro up 0.3% to $1.0410
• Brent Futures down 0.4% to $72.50/bbl
• Gold spot up 0.4% to $2,868.30
• US Dollar Index down 0.36% to 107.22

Top Overnight News

• Zelensky says he is prepared to sign a mineral rights deal w/the US and thinks the relationship with Washington can be salvaged. NBC
• Trump posted on Truth “We should spend less time worrying about Putin, and more time worrying about migrant rape gangs, drug lords, murderers, and people from mental institutions entering our Country – So that we don’t end up like Europe!”.
• Trump commented on Truth “Treasury Department has announced that they are suspending all enforcement of the outrageous and invasive Beneficial Ownership Information (BOI) reporting requirement for U.S. Citizens”.
• Treasury Secretary Bessent said will appoint an affordability czar to address high prices: CBS News.
• Commerce Secretary Howard Lutnick over the weekend suggested the Mexico/Canada tariffs due to come into effect on Tues could be less than the 25% previously mentioned. FT
• The Pentagon is sending mechanized infantry and air support to help secure the US border with Mexico, including a combat team of about 4,400 soldiers. BBG
• Trump risks losing support from Americans who say he isn’t prioritizing the battle against inflation, two polls suggest. BBG
• House Speaker Johnson said he wants a clean Continuing Resolution for the fiscal year through September: Punchbowl.
• China’s Caixin manufacturing PMI came in a bit ahead of expectations at 50.8 for Feb (up from 50.1 in Jan and better than the Street’s 50.4 forecast). WSJ
• China will target US agricultural and good products as it formulates a response to the latest round of Washington tariffs. Global Times
• Singapore is investigating whether some Dell and Super Micro servers that were shipped from the country to Malaysia contained Nvidia chips that are barred from China — and whether those servers were then sent to other destinations, potentially violating US sanctions. BBG
• Eurozone CPI for Feb runs a bit hot, coming in at +2.4% on the headline (down from +2.5% in Jan, but above the Street’s +2.3% forecast) and +2.6% for core (down from +2.7% in Jan, but above the Street’s +2.5% forecast). BBG

Tariffs/Trade

• US Commerce Secretary Lutnick said Mexico and Canada have done a reasonable job on the border and there will be tariffs on Canada and Mexico on Tuesday but President Trump will decide at what levels. Lutnick added that China tariffs are set unless they end fentanyl trafficking into the US.
• White House official announced on Saturday evening that President Trump ordered to bolster the supply of forest resources and directed the Commerce Secretary to investigate harm to US National Security from imported lumber, while any tariffs resulting from the lumber investigation would be added to other tariffs, including fentanyl-related tariffs on Canada, Mexico and China. Furthermore, the official said China, Canada and Mexico could take quick action to avert fentanyl-related tariffs.
• China is studying countermeasures in response to the US March 4th tariff threat, while countermeasures will likely include both tariffs and a series of non-tariff measures with US agricultural and food products most likely to be listed, according to Global Times.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks began the new trading month mostly higher in a rebound from Friday’s Asian session sell-off and despite geopolitical uncertainty from the fallout of the Trump-Zelensky heated exchange in the Oval Office, while participants digested better-than-expected Chinese PMI data from over the weekend. ASX 200 traded higher with gains led by strength in the tech, real estate, telecoms, miners and materials sectors, while quarterly Australian company gross profits growth smashed forecasts. Nikkei 225 recovered some of Friday’s substantial losses despite the lack of fresh drivers and ongoing tariff uncertainty. Hang Seng and Shanghai Comp were underpinned following the better-than-expected official Chinese Manufacturing PMI data over the weekend which showed a surprise return to expansion territory, while Caixin Manufacturing PMI also topped forecasts. However, the gains in the mainland were contained as the tariff threat lingered with US Commerce Secretary Lutnick noting that China tariffs are set unless they end fentanyl trafficking into the US and with China reportedly studying relevant countermeasures in response to the US March 4th tariff threat.

Top Asian News

• Japan’s Top-Currency Diplomat Mimura says the bright spots in the economy include tourism and strong corporate investment. Hearing not only big firms but from small/medium ones about the strong prospect of wage increases. Weaker JPY is a matter of inflation domestically, via increased import costs. Adds, Japan should increase reliance on foreign investors in the JGB market as the BoJ tapers and the population shrinks.

European bourses (STOXX 600 +0.3%) are mixed vs opening modestly firmer across the board; a significant sell-off was seen soon after the cash open, but with little fundamental driver at the time. As it stands, indices have rebounded from worst levels and look to be approaching the earlier highs. The complex was initially little reactive to slightly hotter-than-expected EZ HICP but then retreated from best levels thereafter. European sectors are mixed vs opening with a strong positive bias. Industrials take the top spot and is by far the clear outperformer, as Defence names prop up the industry. The likes of Rheinmetall (+8%), BAE Systems (+13%) and Rolls Royce (+5%) all gain for the reasons listed in the next bullets. Firstly, sentiment regarding a Ukraine-Russia peace deal has been hit after the recent bust-up between US President Trump and Ukrainian President Zelensky at the Oval Office on Friday. Secondly, French President Macron’s proposed to raise the EU’s defence spending to 3.5% of GDP. And finally, Germany is reportedly considering defence-specific funds in the formation of a new government.

Top European News

• Austrian liberal NEOS party members voted in favour of a coalition agreement which paves the way for a three-party government to take office.
• S&P affirmed France at AA-; Outlook revised to Negative from Stable and upgraded Portugal to A; Outlook Positive.
• S&P Global says US Tariffs would likely dent growth prospects in central Europe; weaker growth could compound existing fiscal challenges, impact of these tariffs are likely to be smaller than that of the weakening demand for German cars in China.
• Riksbank Business Survey: Economic activity is weak in most parts of the economy and largely unchanged compared with the previous survey in the autumn.

NOTABLE US HEADLINES

FX

• DXY is giving back some of Friday’s upside, following the heated exchange between Trump, Vance and Zelensky. Focus today turns back to the US ISM Manufacturing PMI and on US tariffs. On the latter, US Commerce Secretary Lutnick said there will be tariffs on Canada and Mexico on Tuesday but President Trump will decide at what levels, and could be lower than 25%. DXY is around the 107 mark.
• EUR is firmer vs. the softer USD and one of the better performers across the G10 complex. Despite the tense conversation on Friday between Trump-Vance-Zelensky, markets remain optimistic over Europe’s efforts to provide a plan to get the US and Ukraine back to the negotiation table. Elsewhere, EZ manufacturing PMI was revised a touch higher but ultimately remained below the 50 threshold. EZ flash CPI for February saw the headline (2.4% vs. Exp. 2.3%) and super-core (2.6% vs. Exp. 2.5%) metrics print a touch above expectations, whilst services fell to 3.7% from 3.9%. EUR/USD has moved back above its 50DMA at 1.0388 and gained a firmer footing on the 1.04 handle, towards highs of 1.0444.
• USD/JPY has pulled back after hitting resistance at the 151.00 level with the pair dragged lower amid the softer dollar and the early mild upside in Japanese yields; 30-year JGB yield touched its highest since October 2007. USD/JPY briefly made its way onto a 149 handle with a current session trough at 149.95.
• GBP is a touch firmer vs. the broadly weaker USD with UK newsflow on the light side and potentially set to remain so this week given the light calendar. The only real notable even this week is BoE Governor Bailey’s appearance before the Treasury Select Committee on Wednesday. UK Manufacturing PMI printed a touch above the prior – but ultimately had little impact on price action. Cable currently sits towards the upper end of a 1.2577-1.2649 range.
• Antipodeans both have received some mild reprieve after trickling lower throughout most of last week, while the latest manufacturing PMI data from Australia and New Zealand’s largest trading partner China also provided some encouragement.
• PBoC set USD/CNY mid-point at 7.1745 vs exp. 7.2857 (prev. 7.1738).
• SNB Chairman Schlegel said the SNB will only reintroduce negative interest rates if necessary.

Fixed Income

• A softer start for Bunds as sentiment in Europe has shrugged off the Zelensky-Trump fallout with Chinese PMIs and the APAC handover seeing a stronger start to the session which has been exacerbated by blockbuster performance in European defence names on reports/remarks around spending. Final Manufacturing EZ PMIs were revised modestly higher; EZ Inflation measures printed slightly hotter than expected and spurred a modest hawkish reaction, which then continued to take Bunds to a fresh session trough of 132.15.
• USTs are a touch softer as the latest geopolitical/defence developments don’t have quite the same ramifications for the US as they do for Europe. Currently at the lower end of a 110-27+ to 111-03 band, with recent pressure coming alongside the pressure seen across the pond. US newsflow is very much focused on the fallout from Trump-Zelensky, as we await concrete details into a potential Italian-led gathering, and the implementation of tariffs on Canada and Mexico tomorrow. Ahead, focus will be on US ISM Manufacturing PMI which will be scoured for tariff-related movements in input prices, as this could be indicative of a resurgence in inflation in the months ahead.
• Gilts are softer, trading in-fitting with European peers. As such, the benchmark is at the bottom end of a 92.76 to 93.39 band. February’s Manufacturing PMI was revised marginally higher but remains well into contractionary territory with internal commentary bleak.

Commodities

• Crude is flat but off overnight highs, as the complex unwinds some of the geopolitical premia seen overnight. Focus has been on both the Middle East and on Ukraine-Russia (Friday clash between Trump/Zelensky); on the former, Israel blocked aid to Gaza after the first phase of the truce deal expired over the weekend with no phase two deal in place. Brent’May trades around USD 72.90/bbl, and off worst levels.
• Some of the pressure today could be attributed to traders digesting news over the weekend that suggested Ukrainian President Zelensky is still “ready” to sign a minerals deal with Trump.
• Precious metals are on a firmer footing, with gold benefiting from the geopolitical uncertainty, with a softer USD also helping; XAU currently towards the upper end of a USD 2856.08-2876.62/oz range.
• Base metals are mixed; 3M LME copper was initially firmer as the complex digested the better-than-expected Chinese Manufacturing PMI figures – but the upside has gradually faded. 3M LME Copper is back towards opening levels of USD 9358 in USD 9330-9432 parameters.
• Guyana’s President Ali said a Venezuelan armed patrol ship entered Guyanese waters on Saturday morning and threatened oil production ships, claiming they were in Venezuelan waters, according to News Source Guyana.
• Canada is to extend mineral exploration tax credit for two more years, according to the Natural Resources Minister.
• Russian President Putin’s ally Matthias Warnig pushes a deal to restart the Nord Stream 2, according to FT.
• Russian oil products from Black Sea port of Tuapse planned at 0.798mln T in March vs 0.799mln T scheduled for February, according to traders cited by Reuters.
• Diesel loadings from Russia’s Primorsk port set at 1.8mln T for March vs 1.73mln T scheduled for Feb, according to traders cited by Reuters.

Geopolitics: Middle East

• Israel conducted strikes on Gaza on Sunday which killed four Palestinians, according to Reuters citing Gaza health officials. Furthermore, the Israeli military said it eliminated suspects who were planting an explosive device in Gaza.
• Israeli PM’s office said they will adopt the outline of US envoy Witkoff for a temporary ceasefire for the Ramadan and Passover holidays.
• Israel announced that it had ceased the entry of humanitarian aid into Gaza. It was separately reported that Israel’s Foreign Minister Saar said Hamas rejected the framework for a ceasefire and this is why were not able to move forward for the time being, while he added that the commitment for goods to enter was only for the first phase which has lapsed and the US understands Israel’s stance on the decision to halt Gaza aid. Saar also said that Israel is ready for the second phase of the agreement but “not for free”.
• Israel plans to increase pressure on Hamas to accept the proposal to extend the first phase of the Gaza agreement, according to Israeli media cited by Asharq News.
• Hamas said Israeli PM Netanyahu’s decision to halt humanitarian aid is cheap blackmail and a coup on the agreement while it urged Gaza ceasefire mediators to compel Israel to end punitive measures against Gaza. Furthermore, a Hamas official said the group will not agree to extend the first phase of the ceasefire deal and that the hostage release will only occur under the agreed phased deal, according to Reuters.
• Egypt’s Foreign Minister said Egypt will continue intensive efforts to start negotiations on the second phase of a Gaza ceasefire deal and the Gaza reconstruction plan has been completed which will be presented at the emergency Arab summit on Tuesday for approval, while foreign ministers of the Organisation of Islamic Cooperation will meet in Saudi Arabia after the emergency summit. Furthermore, Egypt’s Foreign Minister said using aid as a weapon of collective punishment and starvation in Gaza cannot be accepted or permitted.

Geopolitics: Ukraine

• Russia’s Kremlin on the London Summit, says this as not aimed at a peaceful settlement. On the Oval Office clash: Russia President Putin is aware of what happened at the Oval Office. Says Ukrainian President Zelensky does not want peace. Russia-US: Russia continues dialogue with the US on normalising bilateral ties. If Russian assets are given to Kyiv then there will be grave legal consequences.
• Ukrainian President Zelensky said late on Friday that he wants peace but will require security guarantees to prevent Russia from attacking again, while he is very thankful to US President Trump and said he respects him and the American people but refuses to apologise and believes the relationship with Trump can be repaired.
• Ukrainian President Zelensky commented on Sunday that they are ready to sign the minerals deal which he believes the US would be ready to sign as well, while he believes the relationship with the US will continue. Zelensky also said there has not been a day when they have not felt gratitude to the US for support and after meeting with European leaders, he said there will be more diplomatic peace efforts for the sake of Ukraine, all of Europe, and definitely America.
• Ukrainian President Zelensky met with UK PM Starmer on Saturday, while Ukraine and the UK signed an agreement that provides an additional GBP 2.26bln in loans towards Ukraine’s defence. It was separately reported that Zelensky said he met with Italian PM Meloni to discuss a common plan to end the war.
• UK PM Starmer said Europe needs a security guarantee from the US and that the UK, France and maybe others will work with Ukraine on a plan to stop the fighting which they will then discuss with the US and thinks it is a step in the right direction. Starmer said he would not trust Russian President Putin’s word and he does not think Ukrainian President Zelensky has done anything wrong, while he is clear that US President Trump does want lasting peace and added that there is a moment of real fragility in Europe.
• UK PM Starmer said on Sunday following the Ukraine summit that a new deal will allow Ukraine to use GBP 1.6bln of export finance and this will help protect Ukraine’s critical infrastructure, while he added that they agreed to keep military aid flowing to Ukraine and the economic pressure on Russia. Starmer said in the event of peace, they will boost Ukraine’s defence capabilities and the UK is willing to have boots on the ground and planes in the air regarding peacekeeping troops.
• US National Security Adviser Waltz said it was not clear Ukrainian President Zelensky was ready to negotiate in good faith at the White House and it is absolutely false that the Oval Office meeting was some kind of ambush. Waltz said Zelensky needs to make clear he is ready for peace and the US needs a Ukraine leader who can deal with Washington and Russia and end the war, while he added the US seeks a permanent end to the Ukraine war with European-led security guarantees, according to CNN.
• US Treasury Secretary Bessent said it is impossible to get an economic deal without a peace deal in Ukraine and the plan is for the EU to provide security guarantees for Ukraine not NATO.
• Ukraine’s Foreign Ministry condemned the breach of Ukraine’s territorial sovereignty by IAEA employees who visited the Zaporizhzhia nuclear plant via occupied territory which it said was the result of Russian blackmail.
• Russian Foreign Minister Lavrov said US President Trump is a pragmatist with the slogan common sense and the discussion in Europe about peacekeepers for Ukraine is arrogant. Lavrov said that the US bluntly said it wants to end the conflict in Ukraine but Europe demands the war to continue, while he added the West cannot explain what will happen to the territory of Ukraine and to the Russian language if European peacekeepers are deployed.
• Russia’s Medvedev said Russia is prepared to show flexibility in talks on Ukraine but only in accordance with the Russian constitution and realities on the ground, while he added Russia is ready to discuss a settlement but only with those who are ready to communicate.
• Russian Defence Ministry said Russian forces captured two new villages in eastern Ukraine, while Russian forces also struck gas processing plants in Ukraine, according to IFAX.
• French President Macron said France and Britain propose a one-month truce in Ukraine, according to The Telegraph.
• Germany reportedly discussed setting up special funds for defence and infrastructure, according to sources. It was separately reported that German Chancellor Scholz said they need to financially and militarily support Ukraine. Scholz also said they need a strong army in Ukraine in the future when the war is over and that Thursday’s summit will be about how to do more for their own defences.
• Polish PM Tusk said he supports Italian PM Meloni’s proposal to organise a US-Europe summit, while he sees no other power in the world than the US that can stop Russian aggression. Tusk separately commented that Ukraine summit participants declared they are ready to ramp up defence spending.
• EU’s von der Leyen said that they urgently need to rearm Europe and need to step up massively and have a surge in defence, while she added member states need more fiscal space to do a surge in defence and that they want the US to know that they are ready to defend democracy.
• Canadian PM Trudeau said everything is on the table when asked if he would contribute to a peacekeeping force in Ukraine and said nothing is more important to Canadians right now than standing up for their sovereignty, as well as noted regarding the Trump-Zelensky meeting that he stands with Zelensky.

US Event Calendar

• 09:45: Feb. S&P Global US Manufacturing PM, est. 51.6, prior 51.6
• 10:00: Jan. Construction Spending MoM, est. -0.1%, prior 0.5%
• 10:00: Feb. ISM Manufacturing, est. 50.8, prior 50.9

DB’s Jim Reid concludes the overnight wrap

A belated welcome to March, and as it’s the first business day of the month, Henry has published our monthly/YTD performance review here. Interestingly most assets in our sample made steady gains, despite the threat of US tariffs and the huge transatlantic tensions around the war in Ukraine. In a rare move in recent times, the US equity market (-1.3%) underperformed (especially European markets), and the Magnificent 7 (-8.7%) posted its worst month since December 2022, which in turn dragged down US equities more broadly.

As we kick off a new month, this week’s highlight will again revolve around the US President as tariffs on Canada, Mexico and China come into force tomorrow barring any last minute negotiations. US commerce secretary Lutnick said on Fox yesterday that they will be implemented but that the level is still being decided. That could signal some room for the 25% on Canada and Mexico to be lower. On top of that Mr Trump is set to address a joint session of Congress outlining his agenda tomorrow, his first such speech since his inauguration last month. The fall out from an extraordinary televised row on Friday in the Oval Office between Trump and JD Vance on one hand and Zelenskiy on the other will also be a big talking point. Yesterday we had a large number of NATO countries’ leaders convene in London for an emergency (another!) summit on Ukraine. This was planned before Friday’s argument in the White House but it took on added importance after the clash. There was a lot of solidarity for Ukraine after the meeting but a lot still hinges on the US’s involvement.

In Germany things are moving fast after the election and speculation has increased over special funds for defence and infrastructure being established while the existing parliament sits rather than wait for the new one where centrist policies won’t have the two-thirds majority to reform the debt break on their own. Reuters reported yesterday that economists advising the talks have suggested the need for a EU400bn fund for defence and a EU400-500bn one for infrastructure. If this actually occurs before the new coalition is formed it will be a real positive “shock and awe” for Germany and Europe. Let’s see what we hear on this in the coming days. Things continue to move at pace in Europe and after we paraphrased Lenin’s famous “There are decades where nothing happens; and there are weeks where decades happen” quote two weeks ago, after the Munich Security Conference, the phrasing might need to be updated from weeks to days!

In terms of the data, the main focus will be on the US jobs report (Friday) and ISM indices in the US (today and Wednesday). Powell has a keynote economic speech on Friday to look forward to. In Europe, the ECB will likely cut rates a further 25bps on Thursday, the same day as a special EU summit on defence and Ukraine is set to take place. It’s getting hard to keep up with all these summits and emergency meetings. MNI sources yesterday suggested that we will hear about a EU100bn common funding for defence at this meeting which is a mere drop in the ocean as to what Europe will likely need to spend on defence in the next several years.

In China we see the annual session of 14th NPC starting on Wednesday where the government is expected to outline its plans for 2025 including targets for the fiscal deficit and government bond issuance. In Japan, the release of the annual shunto wage hike demands by labour unions on Thursday is a key event. As earnings season winds down after 485 of the S&P 500 and 310 of the Stoxx 600 have now reported, maybe keep an eye out for Broadcom’s results on Thursday which is the next cab off the ranks in terms of the Mag-7 or a firm member of the BATMMAAN group of stocks. Their market cap briefly went above Tesla last week and is only just behind now.

Going through a couple of the main events this week in a little more detail now and all roads point to the tariff deadline tomorrow and payrolls on Friday. Our economists have previously published here that 25% tariffs on Canada and Mexico, If sustained, would likely create a 0.4-0.7ppts drag on 2025’s US GDP and boost core PCE by 0.3-0.7ppts. It is possible that the revenues from the tariffs allow for larger US tax cuts which may help reduce the growth impact but we’re also starting to see some of the trade uncertainty hit confidence so there are a lot of moving parts. Overall, it’s hard to see China tariffs being negotiated lower but there’s still a chance that those on Mexico and Canada are lower than 25% as hinted by Lutnick yesterday. We will see today.

With regards to payrolls, our economists expect headline (160k forecast vs. 143k previously) and private (150k vs. 111k) payroll gains to rebound from weather-related and potential seasonal-factor related drags in the prior month. However there is a drag factored in from the start of federal government layoffs even if March may see a larger impact. DB think the unemployment rate will tick up a tenth to 4.1%. Today’s manufacturing ISM (DB at 51.8 vs. 50.9 last month) and Wednesday’s services ISM (DB at 52.1 vs. 52.8) will have employment components that along with Wednesday’s ADP report may sharpen the street’s forecasts as the week progresses.

Asian equity markets are mostly rebounding at the start of the month tracking Friday’s strong finish on Wall Street. As I check my screens, the Nikkei (+1.67%) is outperforming with the Hang Seng (+1.12%), and the Shanghai Composite (+0.27%) also edging higher on strong Chinese factory activity data (more below). Additionally, hopes of a fresh fiscal stimulus from China after the policy meeting this week, offsetting the looming tariffs, is supporting risk sentiment. Elsewhere, the S&P/ASX 200 (+0.84%) is also higher. Markets in South Korea are closed for a public holiday. S&P 500 (+0.15%) and NASDAQ 100 (+0.14%) futures are higher and yields on 10yr USTs are +2.5bps, settling at 4.233% as I type.

Over the weekend, Chinese manufacturing activity grew more than expected in February, indicating a strong start to 2025 led by bouncebacks in new orders. China’s official manufacturing PMI rebounded to 50.2 in February, up from 49.1 in January (v/s 49.9 expected). The non-manufacturing PMI saw a smaller uptick in February, to 50.4 from 50.2, in line with consensus forecasts. The index has been at, or above, the 50 threshold for 26 months now. At the same time, the Caixin’s manufacturing PMI also rebounded to 50.8 in February (v/s +50.4 expected) from 50.1, a three-month high, benefiting from an uptick in both output and new orders.

In the crypto world, US President Donald Trump in a social media post over the weekend has revealed the names of five cryptocurrencies that he says he’d like to be included in a new strategic reserve to establish the US as the Crypto Capital of the World thus sending their values skyrocketing and partly reversing a recent slump. Following the announcement, the price of the two major digital currencies (Bitcoin and Ether) rose more than 9% and 13% on Sunday respectively. So one to watch.

Looking back at last week, there was a clear risk-off move across global markets as investors faced up to the threat of more US tariffs again. That was exacerbated by some weak US data, including a decline in the Conference Board’s consumer confidence reading, as well as Nvidia’s results, which showed the smallest revenue beat in two years. By the end of the week, that meant the S&P 500 was down -0.98%, even as it recovered by +1.58% on Friday thanks to a late month-end rally with all the gains for the day occurring in the last 90 minutes. The big tech stocks were the main driver of that in both directions, with the Magnificent 7 falling -4.73% in its worst weekly performance since September despite a +2.04% rebound on Friday. Over in Europe, there was a much stronger performance however, and the STOXX 600 posted a 10th consecutive weekly gain, with a +0.60% advance (+0.01% Friday).

On Friday, we also got the latest PCE inflation data for January, which is the Fed’s target measure. That was broadly as expected, with headline PCE at +0.33% on the month, and core PCE at +0.28%. However, it meant both headline and core PCE were still lingering above the Fed’s 2% target on an annual basis, at +2.5% and +2.6% respectively. The other important release was the merchandise trade deficit, which unexpectedly surged more than +25% to $153.3bn in January (vs. $116.6bn expected). The surge likely reflects companies seeking to import goods before tariffs come into place, with gold shipments one potential factor. The release caused a big hit to Q1 GDP estimates with the Atlanta Fed’s GDPNow estimate plummeting to show an annualised contraction of -1.5%, though traditional nowcast models may need to be heavily discounted given the nature of the trade distortions.

For sovereign bonds, the risk-off tone pushed yields lower around the world, with the 10yr Treasury yield falling -22.3bps last week (-5.2bps Friday) to 4.21%. That’s the 7th consecutive weekly decline for the 10yr yield, which is the first time that’s happened since June 2019. Meanwhile in Europe, yields on 10yr bunds fell -6.4bps (-0.8bps Friday) to 2.40%. And over in Japan, the 10yr yield fell -5.2bps (-2.3bps Friday) to end a run of 7 consecutive weekly increases.

Finally, the risk-off move last week hit several other asset classes. Commodities fell back across the board, with Brent crude oil prices down -1.68% on the week to $73.18/bbl. Bitcoin saw a significant decline, closing at a 3-month low on Friday of $84,212 before the weekend rally. And credit spreads widened too, with US HY widening +4bps to 275bps, whilst Euro HY was up +3bps to 284bps

US Treasury Secretary Scott Bessent did the mainstream media press tour this weekend, clarifying two critical bullshit talking points to the propagandists: first, DOGE is doing a good job; and second, the US economy faces some significant headwinds as a hangover from ‘Bidenomics’ spendfest.

Speaking in a Feb. 28 interview on Bloomberg Podcasts, Bessent was asked whether DOGE’s cost-cutting measures would have a “material” impact on deficit reduction.

“I think we can make a pretty big hit here,” he replied, explaining that if DOGE identifies $300 billion in savings – which he suggested is possible – it could reduce the annual deficit by approximately 1 percentage point as a share of gross domestic product (GDP).

Even if the savings total only $150 billion, he said, this is still “moving us back toward the target, and we’re determined to get this down.”

As The Epoch Times’ Tom Ozimek reports, Bessent emphasized that DOGE, which was tasked by President Donald Trump with rooting out waste, fraud, and abuse in federal spending, has already uncovered substantial inefficiencies—and a surprising amount of outright fraud.

When in comes to “waste, fraud, and abuse, I think most of us think in terms of waste and abuse,” Bessent said. 

“I’ve got to tell you that I’m slightly shocked at some of the fraud we’re finding, and you’re going to be hearing about more of that over the next couple of weeks.”

As for the ultimate savings that DOGE will deliver, Bessent said:

“We’ll see.”

DOGE, led by Elon Musk in a special government role, has an 18-month mandate to slash $2 trillion in federal spending before its scheduled dissolution on Independence Day 2026. Musk has acknowledged the ambitious nature of this goal, saying that even cutting half that amount would be a major step toward reducing inefficiency and lowering deficits.

Over the past month, Musk and DOGE staffers have moved aggressively to pursue reforms across federal agencies, reporting $65 billion in savings through canceled grants, asset sales, workforce reductions, and terminated contracts and leases.

Trump recently urged Musk to push even harder to root out waste and fraud. He also signed an executive order directing federal agencies to work with DOGE to eliminate costly or duplicative regulations, further accelerating its deficit-cutting mission.

“We either solve the deficit, or all we’ll be doing is paying debt,” Musk said in a recent interview with Fox News. “It’s not optional. America will go bankrupt if this is not done.”

According to the Congressional Budget Office (CBO), the federal deficit is projected to average $1.9 trillion per year between 2025 and 2034, or approximately 5.4 percent of GDP over that period. If DOGE’s projected $300 billion in savings materializes—a figure Bessent said was not out of the question—it would lower the deficit to $1.6 trillion and reduce the deficit-to-GDP ratio by nearly 1 percentage point, improving fiscal sustainability.

The CBO has warned that persistently high debt could slow economic growth, increase interest payments to foreign creditors, heighten the risk of a fiscal crisis, and limit policymakers’ ability to respond to future downturns. It has stressed that lawmakers must pursue comprehensive fiscal reforms, including spending cuts, revenue increases, or a combination of both, to put the budget on a sustainable long-term path.

Meanwhile, DOGE’s aggressive efforts have drawn criticism from Democrats in Congress, who accuse the agency of overstepping its authority and operating without sufficient oversight or transparency. The agency also faces multiple lawsuits, some challenging its access to federal data and others questioning its constitutional legitimacy.

Despite the legal and political battles, DOGE appears to have significant public support. A recent poll of Epoch Times readers found overwhelming backing for DOGE and the Trump administration’s push to curb waste, fraud, and abuse. At the same time, respondents called for greater visibility into DOGE’s findings, with some demanding greater accountability—including the prosecution of individuals found to have engaged in fraud.

Bessent’s remarks suggest that such accountability may be on the horizon.

The second part of Bessent’s anti-propaganda tour focused on the current ‘growth scare’-driven-by-DOGE-narrative (as we saw Atlanta Fed’s GDPNOW indicator plunge into recession on Friday):

What is lost on most was the reason for this precipitous decline was a surge in imports (relative to exports), which can simply be blamed on US firms front-running Trump’s tariff threats and bringing in goods before costs rise.

The all-too-convenient narrative is, of course, that this is all Trump (and Musk’s) fault. 

Bessent explained to ‘Face The Nation’ in his stoic and unflappable manner, that this is all bullshit (our word, not his):

“What I find interesting is, for the past year & a half, & during the campaign, most of the media said, ‘Oh, the economy is great. It’s just a vibecession.’ Now that President Trump’s in office, there’s an ‘economic problem.'”

“It took 4 years to get us here. President Trump’s been in office 5 weeks & I can tell you we’re working everyday…”

SEC. BESSENT: “What I find interesting is, for the past year & a half, & during the campaign, most of the media said, ‘Oh, the economy is great. It’s just a vibecession.’ Now that President Trump’s in office, there’s an ‘economic problem.'”

“It took 4 years to get us here.… pic.twitter.com/ubVwhjSCQA

— Breaking911 (@Breaking911) March 2, 2025

“Vibecession” vs small business optimism…

In fact, as Bessent explains “We’re seeing the hangover from the excess spending in the Biden 4 years. In 6 to 12 months, it becomes Trump’s economy.”

Treasury Secretary Scott Bessent was just questioned if we’re in a recession.

“We’re seeing the hangover from the excess spending in the Biden 4 years. In 6 to 12 months, it becomes Trump’s economy.”

Translation: They want the market crash soon. https://t.co/NfSOVRpQV0 pic.twitter.com/QzryPJT1IO

— Financelot (@FinanceLancelot) February 28, 2025

Just as we forecast would occur in full detail back in July…