Via SchiffGold.com,

Earlier this week, Peter Schiff went live on X Spaces to discuss both Bitcoin and gold’s recent price action and interact with his followers in a Q&A. He dissects the current state of the global economy, lambasts retail investors and Wall Street, and paints a dire picture of fiscal mismanagement. 

Peter argues that retail investors and Wall Street are consistently off the mark, with the latter systematically underpricing the value of gold stocks:

It’s very rare that retail investors are right about anything. Since they’ve never been this wrong about gold, then gold is probably on the verge of its biggest rally. The reason that gold’s gone up, despite the fact that the public is dumping whatever they have, is because the central banks are gobbling it up. The central banks aren’t buying silver. The central banks aren’t buying gold stocks. … All the Wall Street firms, when they rate these gold stocks, they assume the price of gold is going to be much lower in the future than it is now. They have no confidence in this rally. That’s why they don’t want to buy gold stocks because they expect the price of gold to fall, even though it’s going to continue to rise. 

Addressing the state of monetary policy in America, Peter argues that the Fed will soon be impotent against a combination of inflation and economic stagnation:

Another big thing I think is happening is I don’t think people are looking at the stagflation problem that’s starting to evolve in the United States. In real terms, stagflation is already here in the United States, but it’s all over the world. That’s why I pointed this out. That’s why Powell says the Fed has no plans for stagflation, and they’re just going to hope we don’t have it. That’s why in their stress tests, they don’t even stress test for stagflation because they know every major bank would fail. Stagflation is basically like kryptonite to Superman as far as the Fed is concerned. That’s exactly what we already have, and it’s going to get worse.

He recounts the origins of the Fed’s 2% inflation target. Even with the Fed failing to keep inflation below 2%, the target was contrived from the beginning:

When they’re talking about inflation of 2 percent, they’re not talking about inflation, they’re talking about prices. They’re talking about prices going up by 2 percent a year. Inflation is the rate at which the money supply is expanding. … To say that there’s some kind of ideal rate at which prices should rise every year is complete folly. It’s nonsense. It was just made up by central bankers. The only time they started talking about a 2 percent target was when they were below it. No central banks were talking about getting it down to 2 percent when it was 3 or 4 or 5. They only invented this concept when they were able to report inflation rates below 2 percent. The only reason they could report rates that low was because the governments were lying about it. They had these rigged indexes that purported to measure in prices and it was all rigged. 

Foreseeing turbulence in the futures markets, Peter predicts that deliveries will increase with silver as they have with gold this month:

I’ve been saying for years that I thought that eventually, you were going to see the long positions on futures exchanges delivered, that there’s going to be big buyers that are going to go into the COMEX or the London Metal Exchange, they’re going to buy these futures, and then they’re going to take delivery of the 100-ounce bars of gold, and that that’s going to ultimately blow up the market because they’re going to run out of metal. They’re going to have to rush to buy more, and the prices are just going to go through the roof. I think that that will happen with silver, too, that they’ll try to take delivery of these contracts.

Later in the space, Peter explains why Bitcoin needs to crash. Like a recession, it’s an unfortunate but necessary economic correction:

Bitcoin crashing would be a very good thing. And it’s not that, look, I’m going to be happy that people are losing money. I actually feel very badly that a lot of people are going to lose money, that it’s unfortunate, that people are going to lose money because they were misled. They got suckered into the mania. So I’m not happy that people are going to lose money, but the sooner people stop putting money into this Ponzi scheme, the better. I mean, it’s a major distraction. It’s a major misallocation of capital and resources and labor. I think the whole crypto industry is doing tremendous damage to the global economy and now to the US economy in particular. 

Be sure to check out more of Peter’s analysis  on the latest episode of the Peter Schiff Show.

About a month after Blue Origin successfully launched its long-delayed flagship rocket from Cape Canaveral, Florida, the Jeff Bezos-backed rocket company reportedly prepares for its first round of layoffs. The move comes as Elon Musk’s SpaceX continues dominating the commercial space industry, raising questions about how far Blue Origin has fallen behind in the global space race. 

Bloomberg reports that Blue Origin CEO Dave Limp held an all-hands employee meeting on Thursday morning to address new cost-cutting measures, including terminating about 10% of the workforce. The report was based on insiders at the meeting. 

According to Bloomberg, Blue Origin has about 14,000 employees on payroll across its headquarters in Seattle and operation sites in Florida, Texas, and Alabama. The 10% cut would equate to about 1,400 employees and focus on “thinning out layers” of management.

On Jan. 16, Blue Origin’s New Glenn launched from Cape Canaveral, placing the company’s Blue Ring Pathfinder test satellite into orbit. 

pic.twitter.com/kIEqPxxwa7

— Jeff Bezos (@JeffBezos) January 16, 2025

However, the rocket’s reusable first-stage booster failed to land on a barge in the Atlantic Ocean, something SpaceX’s reusable booster rockets do weekly, blasting Starlink satellites into orbit. 

Last August, Bloomberg noted that testing included a “factory mishap that damaged a portion of a future New Glenn rocket,” adding the rocket company has “grappled with development delays, a sluggish corporate culture and explosive setbacks.” 

Bezos and Musk have had a rocket-size competition. Who has the bigger rocket?

As previously noted, SpaceX leads the global rocket race, launching 86% of all upmass to space in the third quarter of 2024. Also, SpaceX’s Starlink is dominating the global space internet race. 

By Michael Every of Rabobank

The US CPI print for January was red hot at 0.5% m-o-m headline and 0.4% core, with the former rising to 3.0% y-o-y and the latter to 3.3%. Even if due to things like eggs it leaves egg on the face of the “Rate cuts!” crowd forced to crowd the next Fed into end- 2025. Worse, as yields jumped and Fed Chair Powell huffed and puffed in Congress, President Trump demanded lower US rates and said they would sit alongside higher US tariffs, making clear economic statecraft is in and economic policy is out.

However, that was far less important than the ice-cold realpolitik served up next. US Defence Secretary Hegseth announced the US, while backing NATO, was pivoting to Asia and Europe must defend itself better by spending 5% of GDP on it, not 2%. That’s been rumored for a while and most of Europe has treated it as a joke, not a reality. Nobody is laughing now.

Not when Hegseth added Ukraine won’t enter NATO or recover its lost territory, and no US troops will be in the no-man’s land guarding it from Russia, only Europeans, who will not be covered by NATO’s Article 5 mutual defence pact. Moreover, Europe will pay most to rearm and rebuild Ukraine, while the US gets access to its rare earth and mineral rights for any aid provided to Kyiv. Some still might have seen this all as a joke.

Until President Trump started ceasefire talks with President Putin, with no European representation, suggesting a possible rapprochement: @vtchakarova asks what if Trump agrees to join China’s Xi and attend May’s 80th anniversary of its WW2 victory in Red Square?

Europe’s response via the “Weimar+” group was: “We are ready to enhance our support for Ukraine. We are committed to its independence, sovereignty and territorial integrity in the face of Russia’s war of aggression. We share the goal to keep supporting Ukraine until a just, comprehensive, and lasting peace is reached. A peace that guarantees the interest of Ukraine and our own. We are looking forward to discussing the way ahead together with our American allies. Our shared objectives should be to put Ukraine in a position of strength. Ukraine and Europe must be part of any negotiations. Ukraine should be provided with strong security guarantees. A just and lasting peace in Ukraine is a necessary condition for a strong transatlantic security. We recall that the security of the European continent is our common responsibility. We are therefore working together to strengthen our collective defence capabilities.”

However, let’s be equally clear: this group’s unfortunate title is historically confrontational; its pledges are *highly* aspirational, as Europe has not been invited to attend peace talks, cannot force admittance, and is talking about pushing Russia out of occupied territories without US help; and it must be transformational if the stated goals are going to be achieved.

We are talking Covid-era fiscal deficits for decades if Europe (already flirting with an energy price cap) and the UK (close to selling off two naval vessels to Brazil and returning the key Chagos islands to Mauritius) stop LARPing and truly rearm and rebuild Ukraine. That also means guns-not-butter choices given Russia is spending $462bn on defence on a PPP basis, more than Europe combined, and its war political economy won’t shift back to “because markets” and “Rate cuts!” when it just delivered this victory. Such wishful thinking is almost entirely European.

If Europe opts not to rearm nor arm Ukraine and tries to talk markets, rate cuts, and butter, Moscow will happily agree – but it will want a weaker, divided, energy-dependent, Finlandized Europe. Which some critics would allege is already mirrored from the US side.

For Europe, the ice-cold realpolitik logic is that for many years it likely plays second fiddle to the US tune; or Russia’s; or both; or it has to change its political-economy music entirely. But talk is cheap, and war and preventing war isn’t; and freedom isn’t free, and neither is it free trade or free money, even if there are potential upsides here, for example see our recent paper on the positive long-run productivity benefits of higher military R&D spending, which Europe could do with. Markets are not yet grasping the scale of these shocks, which is perhaps understandable. But when they do, they will move.

Similarly, in Canada, Liberal Party leadership candidate Carney has pledged to use the government’s emergency powers to “accelerate the projects that we need.” Like spending 5% of GDP on defence?

Meanwhile, in the Middle East, far closer to the EU than the US, Israel is reportedly considering strikes on Iran’s nuclear sites later in the year, news that comes days ahead of a deadline that may see it restart its war with Hamas.

And Asia has to start thinking about the consequences of the US pivoting in that direction. What does that mean for US ally defence spending? Does Japan have to think about a 5% of GDP figure in short order too? What about Australia and New Zealand? Has Hegseth learned the names of any ASEAN members yet? The fiscal, rates, FX, and real economy implications are again enormous – and that’s before we get to the geopolitical tensions inherent in this strategy, which should be clear. The Trump – Modi meeting we are about to see is also of great importance in this and other regards.

Do recall that we had months ago dubbed 2025 as ‘The Year of Living Dangerously’!

On which note, today we may also get US reciprocal tariffs announced. On that, Yannis Varoufakis talks of ‘Donald Trump’s economic masterplan: He is plotting an anti-Nixon shock’, which doesn’t refer to his latest pivot to Moscow to try to isolate Beijing, but underlines a hypothesis I’ve been floating for some time: the US wants to retain global dollar hegemony while NOT running a large structural trade deficit.

There may be some odd cause-and-effect thinking on rates and FX ordering in his article, but that central point is key, and again has tectonic significance for markets – who again don’t yet see it for the most part. Indeed, most economists will tell you this cannot be done when economic history, and Yannis, show mercantilism can get you there quite easily – just not in a way that markets or trading partners will like.

Put all this together and red-hot US CPI is playing second fiddle: it’s ice-cold realpolitik which is the real story.

Under the Biden-Harris administration, a December version of the US State Department’s procurement forecast for the 2025 budget included a line item for $400 million worth of “Armored Teslas.” The inclusion sparked criticism from MSNBC’s Rachel Maddow, who cited it as an example of Elon Musk’s self-dealings. Musk, however, stated that he had no prior knowledge of the armored Teslas, and hours after the report, the line item was revised by the Trump administration.

EV blog Electrek first broke the story about the State Department’s future procurement plans of “Armored Teslas.” The big misconception by far-left corporate media and Democrats is that this was approved under the Biden Administration – not the Trump administration. 

“But worry not; it was approved under the Biden Administration, so Elon Musk’s DOGE will undoubtedly eliminate this waste. Right?” Electrek noted. 

Hours later, MSNBC’s Rachel Maddow launched a misinformation and disinformation campaign about “Armored Teslas” and Musk’s alleged “self-dealings” while in Washington, DC. 

“Yet she conveniently left out that the procurement list was revised in Dec 2024, when Biden was President. The Tesla line item was last modified on December 13, 2024,” Tesla investor Sawyer Merritt said. 

Musk commented on Merritt’s post, asking why Maddow had to lie. 

Hey @maddow, why the lie? https://t.co/gUZax7mvef

— Elon Musk (@elonmusk) February 13, 2025

By late Wednesday, Merritt noted that the Trump administration had “edited the public procurement forecast document tonight, and it now no longer says the word Tesla.” 

UPDATE: The U.S. Government has edited the public procurement forecast document tonight and it now no longer says the word Tesla. Instead, it now says “Armored Electric Vehicles.”

The contract amount is still listed as being for $400 million. Other details are the same. https://t.co/72Yksr7Xu8 pic.twitter.com/FoQDay8cn8

— Sawyer Merritt (@SawyerMerritt) February 13, 2025

Musk also noted: “I’m pretty sure Tesla isn’t getting $400M. No one mentioned it to me, at least.” 

Was this line item just a leftover surprise from the corrupt Biden-Harris regime to sabotage (in terms of optics in headlines) Musk and DOGE?

Or maybe there are armored Teslas … Defense Firm Unveils Cybertruck For Special Forces, Able To Survive “IEDs”… 

. . . 

Authored by Brayden Lindrea via CoinTelegraph.com,

Investment bank Goldman Sachs increased its spot Ether exchange-traded fund (ETF) holdings by 2,000% in the fourth quarter of 2024, along with boosting its Bitcoin ETF stash to over $1.5 billion.

Goldman upped its Ether ETF exposure from $22 million to $476 million, split almost evenly between BlackRock’s iShares Ethereum Trust (ETHA) and the Fidelity Ethereum Fund (FETH), along with $6.3 million into the Grayscale Ethereum Trust ETF (ETHE), according to the company’s Feb. 11 Form 13F filing with the Securities and Exchange Commission.

Goldman also upped its Bitcoin ETF holdings by 114% to $1.52 billion. It purchased nearly $1.28 billion worth of shares in the iShares Bitcoin Trust (IBIT) — a 177% increase from Q3 — along with $288 million worth of shares in the Fidelity Wise Origin Bitcoin Fund (FBTC).

Goldman reported in Q4 that it owned $234.7 million worth of Fidelity’s Ether ETF. Source: SEC

The document — which investment managers holding over $100 million worth of securities must file each quarter — shows Goldman also owns $3.6 million worth of the Grayscale Bitcoin Trust (GBTC).

The increased exposure factored in rising market prices for BTC and ETH, which increased 41% and 26.3% from the beginning to the end of the fourth quarter, CoinGecko data shows.

Goldman also appeared to close its positions in Bitcoin ETFs from Bitwise and WisdomTree, along with joint offerings from Invesco and Galaxy, as well as ARK and 21Shares.

The larger positions build further on Goldman Sachs’ first entry into the spot crypto ETF market in the second quarter of 2024, where it disclosed purchasing $418 million worth of Bitcoin ETFs.

Goldman’s recent purchase of Bitcoin and Ether ETFs highlights the growing trend of institutional crypto adoption on Wall Street, fueled by an increasingly favorable regulatory environment.

The investment bank is also considering launching its own crypto platform for partners to trade financial instruments on blockchain rails, Bloomberg reported in November.

Goldman has, however, been criticizing Bitcoin and the broader industry since 2020, saying that crypto isn’t an asset class and that it is “not a suitable investment” for its clients.

A similar opinion was voiced by Goldman Private Wealth Management chief investment officer Sharmin Mossavar-Rahmani last April, around the time Goldman purchased its first stash of Bitcoin ETFs.

“We do not think it is an investment asset class,” Mossavar-Rahmani said at the time, comparing the recent crypto enthusiasm to the tulip mania of the 1600s. “We’re not believers in crypto.”

Robert F. Kennedy Jr. was confirmed as the Director of Health and Human Services on Thursday, despite Sen. Mitch McConnell (R-INO) as the sole Republican to vote against him. 

The vote – which is ongoing, came after a heated battle in the Republican-controlled Senate, which voted 53-47 on Wednesday to invoke cloture, setting up the final confirmation showdown. Kennedy, a longtime vaccine skeptic and former environmental activist, only needs a simple majority of 51 votes to secure the position.

Kennedy’s nomination has been a political firestorm from the start. His past claims linking vaccines to autism and other harms sparked a fierce backlash from Democrats, who grilled him in contentious confirmation hearings last month. But despite their objections, Kennedy managed to navigate the political minefield, thanks in part to key Republican senators who were initially hesitant but ultimately threw their support behind him.

CONFIRMED!

Congratulations, Bobby.
Congratulations, America.
Thank you, President Trump. pic.twitter.com/LQMYO1vdZR

— Nicole Shanahan (@NicoleShanahan) February 13, 2025

A GOP Divide Over RFK Jr.

With Democrats on the Senate Finance Committee refusing to advance Kennedy’s nomination, pressure fell on Sen. Bill Cassidy (R-LA), chair of the Senate Committee on Health, Education, Labor and Pensions (HELP). Cassidy, a physician himself, had expressed concerns about Kennedy’s anti-vaccine rhetoric but ultimately gave him the green light, citing a long list of commitments Kennedy made to ensure transparency and oversight.

“These commitments, and my expectation that we can have a great working relationship to make America healthy again, is the basis of my support,” Cassidy said.

Kennedy also won over GOP Sen. Susan Collins (Maine) and Sen. Lisa Murkowski (Alaska), both of whom had initially been skeptical. Murkowski admitted she remained wary of Kennedy’s stance on vaccines but pointed to his pledges to work with Congress and make data-driven policy decisions.

One of the biggest question marks was Sen. Mitch McConnell (R-KY), a staunch proponent of vaccines who contracted polio as a child. While McConnell voted to advance Kennedy’s nomination, all eyes were on whether he will break ranks with his party during the final confirmation vote.

Mitch McConnell voted no on RFK Jr.

TRAITOR

— Brian Eastwood (@BrianEastwood_X) February 13, 2025

Beyond vaccines, Kennedy has vowed to shake up HHS by tackling Big Pharma and the food industry, shifting the agency’s focus to chronic disease prevention and diet reform. His ‘Make America Healthy Again’ plan includes overhauling dietary guidelines, cracking down on ultra-processed foods, and addressing the root causes of the nation’s health crises.

“Our country is not going to be destroyed because we get the marginal tax rate wrong. It is going to be destroyed if we get this issue wrong,” Kennedy declared, warning of the dangers of chronic diseases.

From Political Outsider to Trump’s HHS Pick

Kennedy’s political arc has been quite interesting, to say the least. A lifelong Democrat, he frequently invoked his family’s legacy – his father, former Sen. Robert F. Kennedy, and his uncle, former President John F. Kennedy. But in recent years, he’s built strong alliances with right-wing figures, particularly over his vocal opposition to vaccine mandates.

Kennedy made headlines last August when he abruptly dropped his independent presidential bid and endorsed Trump, a move that shocked many in the Democratic establishment. After months of criticizing Kennedy, Trump embraced him, calling him “a man who has been an incredible champion for so many of these values that we all share.”

Trump wasted no time in rewarding Kennedy’s loyalty, nominating him for one of the most powerful roles in the federal government.

Kennedy’s confirmation comes just one day after another lightning-rod nominee, former Rep. Tulsi Gabbard, was confirmed as director of national intelligence in a 52-48 vote. If Thursday’s vote goes as expected, RFK Jr. will soon take the reins at HHS.

The Kremlin side has confirmed that a Putin-Trump summit is on the way, following yesterday’s phone call, revealed to have been an hour-and-a-half in length. Crucially the two leaders agreed to begin negotiating an end to the war in Ukraine.

A Thursday report in Russia’s state RT strikes a glowing and enthusiastic tone: “It is hard to overestimate the significance of the recent phone call between Russian President Vladimir Putin and his US counterpart Donald Trump, Kremlin spokesman Dmitry Peskov has said.”

Peskov had further said following the “very important conversation” Wednesday that each side is now organizing the groundwork for a summit. It further involved the presidents extending invitations to visit each other’s countries.

“They will focus on a separate meeting; they also agreed that instructions would be immediately given to the relevant assistants so that they would begin the relevant work,” Peskov said.

A handful of mainstream media pundits online had a fit over imagining Putin arriving on US soil for an official state visit, given they see him as global enemy number one. This dramatic shift, or possibly bringing Putin in from the diplomatic cold, comes after three years of Moscow and Washington relations reaching a low-point in modern history. There have been no contacts at the highest levels since the Ukraine war began.

“We are much more impressed by the position of the current administration, and we are open to dialogue,” Peskov had emphasized. “There is political will… to conduct a dialogue to reach a settlement… We need to wait for… at least the first results of the joint work,” he also cautioned.

Interestingly Putin’s spokesman took a swipe at the prior US administration during the post-call presser:

Unlike the administration of ex-US President Joe Biden, which believed that “everything must be done to ensure that the war continues,” the Trump team apparently “holds the view that everything must be done to stop the war and for peace to prevail,” Peskov said.

President Trump had immediately after the 90-minute call written on Truth Social, “Millions of people have died in a War that would not have happened if I were President, but it did happen, so it must end. No more lives should be lost!”

As for his call with Ukraine’s Zelensky, which took place after Putin, Trump wrote: “The conversation went very well. He, like President Putin, wants to make PEACE.”

Zelensky in follow-up on Thursday articulated that he doesn’t think Trump calling Putin before him is a sign of US priorities, but admitted it is “unpleasant”. He also emphasized that European allies should be at any future negotiating table, and that Ukraine’s direct participation in talks concerning the country’s fate is paramount.

Unpleasant… not nice:

Zelensky:

The question of the elections is not at issue at the moment, it’s really not very nice that Trump called Putin first.

I did not discuss joining NATO with Trump, but I know that Washington does not want us to be a member of the alliance. pic.twitter.com/z2AkGQTCQR

— Clash Report (@clashreport) February 13, 2025

Negotiators “cannot accept any agreements without us,” Zelensky has said. The Germans and French have come out insistent on this as well. Zelensky laid out that Ukraine will not accept any agreements made between Russia and the US without his involvement.

Zelensky described that he did not discuss the question of future NATO membership with Trump, something which the White House has taken off the table as an option, but said he knows the Trump admin does not want Ukraine as a member. Further, Trump didn’t raise the question of Ukraine elections during the phone call, Zelensky said.

Yesterday in a Guardian interview, Zelensky set forth the following:

If Donald Trump withdraws US support for Ukraine, Europe alone will be unable to fill the gap, Volodymyr Zelenskyy has suggested. ‘There are voices which say that Europe could offer security guarantees without the Americans, and I always say no,’ said the Ukrainian president during an hour-long interview with the Guardian at the presidential administration in Kyiv. ‘Security guarantees without America are not real security guarantees,’ he added.

Trump has said he wants to end the war in Ukraine, but sceptics fear a US-brokered deal could involve forcing Ukraine to capitulate to Vladimir Putin’s maximalist demands. Zelenskyy said he was ready to negotiate but wanted Ukraine to do so from a ‘position of strength’, adding that he would offer US companies lucrative reconstruction contracts and investment concessions to try to get Trump onside.

Lavrov gloats…

Western leaders ‘in a stupor’ after Putin-Trump call, unaccustomed to a simple polite conversation – Lavrov

In the past four years threats and pejoratives became the language of Western diplomacy

Russian Foreign Minister hopes Trump reminds everyone how real diplomacy works pic.twitter.com/y9JuQhLePP

— RT (@RT_com) February 13, 2025

Zelensky is at least realistic on the above, particularly about ‘no real security guarantees without the Americans.’ As for getting Trump onboard with Kiev’s point of view in negotiations, US Treasury Secretary Scott Bessent met with Zelensky in Kiev on Wednesday, where they reportedly agreed to a draft proposal for granting US access to the country’s rare earth minerals.

“We had a productive, constructive conversation. For me, the issue of security guarantees for Ukraine is very important, and we talked about minerals in general,” Zelensky said of the meeting.

Following yesterday’s hotter than expected surge in consumer prices, all eyes are on producer prices this morning as headline PPI rose 0.4% MoM (more than the 0.3% exp) in January, but December’s 0.2% MoM rise was revised dramatically higher (to +0.5% MoM). Between the hot headline and upward revisions, headline PPI rose 3.5% YoY (+3.3% exp) – the hottest PPI since Feb 2023…

Source: Bloomberg

That is the 13th straight month without a MoM decline in producer prices.

2024’s PPI data has been serially revised higher with December’s the biggest upward revision since Dec 2021…

Source: Bloomberg

Core PPI also rose more than expected (+0.3% vs +0.2% exp) which dragged prices (ex food and energy) up 3.6% YoY…

Source: Bloomberg

Under the hood, Goods costs rose at double the pace of Services….

PPI Highlights:

• Leading the broad-based January advance in the index for final demand, prices for final demand services rose 0.3 percent. The index for final demand goods moved up 0.6 percent.

• The index for final demand less foods, energy, and trade services rose 0.3 percent in January after moving up 0.4 percent in December.

• For the 12 months ended in January, prices for final demand less foods, energy, and trade services advanced 3.4 percent

PPI Services Details:

• The index for final demand services moved up 0.3 percent in January, the sixth consecutive increase. Three-fourths of the broad-based advance in January is attributable to prices for final demand services less trade, transportation, and warehousing, which rose 0.4 percent.

• The indexes for final demand transportation and warehousing services and for final demand trade services also increased, 0.6 percent and 0.1 percent, respectively.

  • Over one-third of the January rise in the index for final demand services can be traced to prices for traveler accommodation services, which advanced 5.7 percent.

  • The indexes for automobile retailing (partial); truck transportation of freight; food and alcohol retailing; apparel, jewelry, footwear, and accessories retailing; and bundled wired telecommunications access services also moved higher.

  • In contrast, margins for fuels and lubricants retailing fell 9.8 percent. Prices for securities brokerage, dealing, investment advice, and related services and for physician care also declined.

PPI Goods Details:

• The index for final demand goods moved up 0.6 percent in January, the fourth consecutive rise. Over half of the broad-based January advance can be traced to a 1.7-percent increase in prices for final demand energy.

• The indexes for final demand foods and for final demand goods less foods and energy also rose, 1.1 percent and 0.1 percent, respectively.

  • In January, a 10.4-percent increase in the index for diesel fuel was a major factor in the advance in prices for final demand goods.

  • The indexes for chicken eggs, beef and veal, gas fuels, jet fuel, and communication and related equipment also moved higher.

  • Conversely, prices for fresh and dry vegetables fell 22.3 percent. The indexes for pharmaceutical preparations and for residential electric power also decreased.

Energy deflation is over…

Source: Bloomberg

…but will energy deflation return next month?

Source: Bloomberg

None of this is a good sign for bullish micro investors (margins compressed)…

…or bullish macro investors (doves crucified once again on the cross of transitory).

So much for Fed Chair Powell’s comments this week that inflation expectations “appear to remain well-anchored” and central bankers have scope to be patient with rate adjustments…

Futures are flat, Europe’s Stoxx 600 slipped from session highs and the euro gave up an earlier advance against the dollar sparked by hopes for a Ukraine war ceasefire, after President Donald Trump signaled he’s about to announce reciprocal tariffs on trading partners, just as we warned last night he would. As of 8:00am ET, S&P futures are down 0.1% while Nasdaq futures rise by a similar percentage even as Chinese technology stocks saw a dramatic intraday turnaround to finish lower. TSLA is up 2.2% pre-market with the rest of Mag 7 largely unchanged this morning; CSCO rose 6.8% on the back of a higher revenue forecast. Bond yields are 2-3bp lower, while the USD reversed an earlier loss. Commodities are mostly lower: WTI and aluminum are -1.5% and -0.9% lower, respectively. Today, the macro focus will be PPI and any updates on Trump’s reciprocal tariff plan which the president said in a social media post will be announced on Thursday. Futures contracts on the S&P 500 and Nasdaq 100 erased early gains, while

While the main economic event of the day will be the January PPI (expected at 0.3% MoM and 3.3% YoY for both headline and core), traders will be focused instead on the latest front in Trump’s trade war after the president said in a Truth Social post the new levies will be announced on Thursday.

In premarket trading, Apple leads losses for the Mag7 as Tesla shares are up, putting the stock on track to extend gains after snapping a five-session streak of losses( Apple -0.4%, Nvidia, Alphabet, Amazon, Meta Platforms were edging lower, while Tesla +2.3%). Reddit shares tumbled as much as 18% after the social network reported fewer-than-expected daily active users. Jefferies said the user miss raises growth questions. Here are some more premarket movers:

• 10X Genomics shares sink 8.3% in premarket trading after the maker of biological-research equipment forecast revenue for 2025, without accounting for impact from the National Institutes of Health’s decision to put a cap on how much research institutions can charge the government. Analysts trim their price targets citing uncertainty and risks to the firm’s guidance.
• Albemarle shares rise 3.1% in premarket trading after the lithium producer reported adjusted Ebitda for the fourth quarter that was better than Wall Street’s expectations. Analysts also see the firm reaching breakeven free cash flow in 2025.
• Aspen Aerogels shares plunge as much as 34% in US premarket trading after the thermal insulation products maker’s first-quarter guidance fell short of expectations and it refrained from giving a full-year outlook. Analysts said this impacted the company’s visibility, and raised questions over orders from its client General Motors.
• Deere shares fall as much as 8.7% in premarket trading on Thursday as the tractor maker maintained its outlook as a slumping agriculture sector continues to hit farm machinery tractor sales.
• Dutch Bros shares soar 24% in premarket trading after the drive-thru coffee chain’s total revenue forecast for 2025 exceeded analyst estimates. Additionally, the company reported fourth-quarter comparable sales that topped consensus.
• Fastly shares fall as much as 21% in US premarket trading after the infrastructure software company’s outlook for the year disappointed, with analysts pointing to a hit from investments. However, some brokers noted that the guidance could be conservative given it doesn’t include US revenues from customer TikTok.
• HubSpot shares rise as much as 5.7% in premarket trading after the software company reported fourth-quarter results that beat expectations. KeyBanc upgrades the stock saying “there are a few indicators that 2025 could see material upside.”
• Kraft Heinz shares fall 1.3% in premarket trading after BofA downgraded the packaged-food company to underperform from buy, saying its organic sales are trending in the wrong direction.
• MGM Resorts shares jump 9.2% in premarket trading after the gaming and entertainment company reported fourth-quarter adjusted earnings per share that came ahead of estimates.
• Paycom Software shares are up 2.9% in premarket trading, after the company reported fourth-quarter results that beat expectations and gave an outlook analysts see as encouraging. It also named a new CFO.
• Robinhood Markets shares jump 16% in premarket trading after the retail brokerage reported fourth-quarter net revenue that topped expectations, with cryptocurrency revenue soaring as the US election fueled trading in digital assets.
• Target and Macy’s shares fall in premarket trading after Gordon Haskett downgraded the stocks in anticipation of lackluster first-quarter and full-year forecasts from retailers reporting earnings in the coming weeks.
• Trade Desk shares plummet 27% in premarket trading Thursday after the advertising technology company gave a first-quarter forecast that is weaker than expected. It also reported its fourth-quarter results, and said it is “disappointed that we fell short of our own expectations in the fourth quarter.”
• Upwork shares are down 1.4% in premarket trading, after the provider of online recruitment services reported its fourth-quarter results and gave an outlook. While analysts are broadly positive, they note ongoing macro headwinds.

The EUR reversed most of its gains after it climbed earlier as much as 0.6% on optimism that US-Russia talks could end the Ukraine war. Oil fell on speculation that risks to Russian supply may ease (it won’t according to JPM), and Ukraine dollar bonds rose the most among emerging-market peers. On Wednesday,  Trump agreed in a phone call with Russian President Vladimir Putin to start negotiating an end to the war in Ukraine. Trump revealed the conversation — his first publicly announced contact with Putin since retaking the US presidency — on social media.

“No concrete announcements, but the market reacted to the fact that discussions are starting,” said Georgios Leontaris, chief investment officer for EMEA at HSBC Global Private Banking. “There is still a long way, there is a lot to talk about. But the fact that the discussions are starting was reflected in the pricing of European assets.”

Aside from tracking developments over tariffs and Ukraine, Wall Street is preparing for a fresh batch of US economic data including initial jobless claims and producer-price inflation. Wednesday’s hot consumer price index numbers forced traders to push out bets on the next Federal Reserve interest-rate cut to December.

“An end to the conflict could eliminate war-related costs, particularly in energy, reduce uncertainty, and potentially boost business confidence and investment—crucial for Europe’s largest economies,” said Susana Cruz, a strategist at Panmure Liberum. “While sectors like defense might face a temporary selloff, this is likely to correct over time, as recent conflicts have underscored the need for increased defense spending.

European markets rose again, on pace for a 4th consecutive record high, as energy prices dropped on optimism about a possible end to the Ukraine war. The Stoxx 600 rose 0.7% and is on course for another record close. UK stocks underperform peers as earnings provide a drag while a stronger than expected GDP print reduced odds of a rate cut. Shares of Unilever, British American Tobacco and Barclays are down after their respective updates. Here are the most notable European movers:

• Nestle shares advance as much as 6.5%, the biggest intraday advance since February 2009, after the food giant reported fourth-quarter sales growth and second-half margin that beat estimates.
• Siemens shares rise as much as 7.3% to a record after the German industrial giant’s 1Q results beat estimates, with analysts encouraged by improving orders for Digital Industries automation products.
• Adyen shares jump as much as 14%, to the highest since August 2022, after the payments company reported net revenue that beat estimates and a better take rate.
• EssilorLuxottica shares rise as much as 3% to a record high after the Ray-Ban maker’s fourth-quarter sales beat estimates thanks to tech-enabled products like smart glasses.
• Legrand shares surge as much as 9%, the most in five years, after the company reported revenue and profits for the full year that beat consensus, with activity strong in North America and data centers.
• Geberit shares gain as much as 3.1% after Berenberg upgraded the Swiss building materials firm to buy from hold, and raised its price target on the stock by almost 20%.
• Thyssenkrupp shares rise as much as 11% after the German steel producer posted what Citi called better-than-expected results, with the firm set to be a key beneficiary of possible Ukrainian peace talks.
• Delivery Hero shares jump as much as 6.8% after the food delivery firm reported FY results ahead of estimates, with growth at other regions offsetting a steeper slump in its core market South Korea.
• Unilever shares drop as much as 6.1% in London, the biggest intraday drop since January 2022, after the consumer goods company’s management flagged a “slow start” to 2025.
• British American Tobacco shares fall as much as 8.5%, the most in more than a year, after the company’s FY25 guidance for revenue growth came in below consensus estimates.
• Neste shares drop as much as 14%, touching the lowest intraday since 2016, after reporting an adjusted net loss, while analysts had been expecting a profit.
• Swisscom shares fall as much as 3.1%, the most since October, after the telecom firm reported a softer 4Q24 in Switzerland despite a strong finish for Fastweb.

Asian stocks headed for a second day of gains as traders largely shrugged off stronger-than-expected US inflation data. Hong Kong shares fell as traders took profit after recent advances. The MSCI Asia Pacific Index rose as much as 1.4% before paring, with Alibaba and SK Hynix among the biggest boosts. Japanese and South Korean stocks were among the best performers in the region. A gauge of Chinese tech shares in Hong Kong erased earlier gains in the session to fall almost 1%, after the index became overbought on optimism for the nation’s artificial intelligence development. Alibaba shares briefly touched the highest level in about three years before pulling back. The positive sentiment in Asia came even as stronger-than-expected US inflation data eroded bets for more Federal  Reserve interest-rate cuts this year. Traders were instead focused on US-Russia talks to end the war in Ukraine.

In FX, the Bloomberg Dollar Spot Index falls 0.2%. The pound rose after Britain registered unexpected economic growth at the end of 2024. Gross domestic product rose 0.1% in the fourth quarter, an acceleration from the flat performance in the third quarter. It was better than the 0.1% fall expected by economists and the Bank of England. The euro rises 0.3% and back above $1.04.

In rates, treasuries rose across the curve, a day after their biggest selloff since December, supported by lower oil prices and bigger rally in bunds during European morning. Both markets also drew support from US President Trump’s social media post saying by reciprocal tariffs will be announced Thursday.  US yields are 1bp-3bp richer across maturities with the curve flatter, 2s10s and 5s30s spreads each by about 1bp; 10-year near 4.59% trails Germany’s by ~1.5bp. Gilts lag their European counterparts as traders trim their Bank of England interest-rate cut bets after the UK registered unexpected growth at the end of 2024. Treasury coupon auction cycle concludes with $25b 30-year bond sale at 1pm; demand was soft for Wednesday’s 10-year note auction, which tailed by almost 1bp. WI 30-year yield at ~4.795% is ~12bp richer than January’s auction result.

In commodities, WTI crude oil futures are down 1.1% after a 2.7% drop Wednesday while Brent crude futures are also down 1.3% to ~$74 a barrel. European natural gas prices drop ~5%. Spot gold climbs $15 to $2,919/oz.  

US economic data calendar includes January PPI and initial jobless claims (8:30am). Fed speaker slate empty for the session.

Market Snapshot

• S&P 500 futures little changed at 6,068.75
• STOXX Europe 600 up 0.3% to 549.61
• MXAP up 0.6% to 185.85
• MXAPJ up 0.1% to 585.72
• Nikkei up 1.3% to 39,461.47
• Topix up 1.2% to 2,765.59
• Hang Seng Index down 0.2% to 21,814.37
• Shanghai Composite down 0.4% to 3,332.48
• Sensex little changed at 76,146.30
• Australia S&P/ASX 200 little changed at 8,539.95
• Kospi up 1.4% to 2,583.17
• German 10Y yield little changed at 2.47%
• Euro up 0.3% to $1.0415
• Brent Futures down 1.0% to $74.46/bbl
• Gold spot up 0.3% to $2,913.74
• US Dollar Index down 0.22% to 107.70

Top Overnight News

• Trump’s Ukraine plans may cost European allies more than $3 trillion over 10 years to protect the country and expand their militaries, Bloomberg Economics said. Regional leaders, blindsided by his call with Vladimir Putin, insisted they shouldn’t be sidelined. BBG
• About 75,000 federal employees — or 3% — signed up for Trump’s voluntary resignation program, falling short of the 5% to 10% the White House hoped for and increasing the probability of deeper mass firings. BBG
• US Senate Budget Committee Chair Graham’s budget proposal could go to the Senate floor sometime the next couple weeks, via Punchbowl citing comments from Senate Majority Leader Thune.
• The EU hopes to avert a damaging trade war with the U.S. over impending metals tariffs by prioritizing negotiations rather than retaliatory countermeasures, EU officials signaled on Wednesday in a meeting to discuss the response to 25% tariffs on steel and aluminum imports. RTRS
• China’s property market shows signs of stabilizing, with land plots in key cities selling at high premiums and policymakers expected to continue supportive measures, the Economic Information Daily reported. BBG
• Japan’s PPI rose a more-than-expected 4.2% year on year in January. The Philippine central bank unexpectedly kept its benchmark rate unchanged, but signaled plans to cut lenders’ reserve requirement ratio in the first half by 200 bps. BBG
• Indian Prime Minister Narendra Modi will come bearing gifts when he meets Donald Trump on Thursday, hoping concessions on tariffs, fresh business deals and the prospect of cooperation on China will win the U.S. president’s favor. RTRS
• Israel is considering a “significant” strike against Iran’s nuclear facilities according to American intelligence assessments, as the IDF looks to capitalize on Tehran’s weakened state. WSJ
• Hamas said it’ll release Israeli hostages per the schedule agreed on under the Gaza ceasefire deal. BBG
• Apple’s iPhones will use Alibaba Group Holding Ltd’s AI technology, affirming reports the e-commerce pioneer had scored a coveted role in helping power the iPhone in the world’s top mobile arena. BBG

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded somewhat mixed albeit with a mostly positive bias among the major indices following the two-way price action across global markets owing to hot US CPI data and geopolitical optimism. ASX 200 touched a record high with advances led by the mining sector following results from South32 and Northern Star. Nikkei 225 climbed on the back of recent currency weakness despite the firmer-than-expected PPI data from Japan. Hang Seng and Shanghai Comp saw mixed price action as the Hong Kong benchmark extended its recent strong upward momentum, while the mainland traded cautiously as participants continued to await Trump’s reciprocal tariffs.

Top Asian News

• PBoC releases Q4 policy implementation report: Will implement appropriately loose monetary policy. Will adjust and optimise policy strength and pace at the appropriate time. Will revitalise stock of financial resources and improve efficiency of capital use. Will give full play to decisive role of markets in formation of exchange rates. Enhance the resilience and stabilise FX market expectations while strengthening market management. Will use policy tools including interest rates and RRR.
• US private equity groups invested billions of dollars in data centres serving ByteDance, according to FT.
• Nissan (7201 JT) 9M Net Profit 5.15bln (-98.4% Y/Y), 2024/25 forecast loss JPY 80bln. Cuts FY operating income to JPY 120bln (prev. JPY 150bln); Sees FY24/25 China sales of 697k (prev. 690k), North America Sales reaffirmed.

European bourses (Stoxx 600 +0.4%) are mostly firmer as market digest the constructive commentary from Trump surrounding the potential of Russia-Ukraine peace talks; though indices have cooled a touch off highs as traders await US PPI and then President Trump who is set to sign executive orders at 18:00 GMT. European sectors hold a strong positive bias, with the clear winners/losers associated with recent remarks out of the US. Energy underperforms given the slump in oil prices, as markets digest comments via Trump who said peace negotiations with Russia is to start “immediately” – this also weighed on the Defense sector; downside which has since pared as traders focus on comments via US Defense Secretary Hagseth who called for higher defence spending.

Top European News

• BoE Chief Economist Pill said he expects further rate cuts but urges caution on cutting interest rates and said the disinflation process is not yet complete, while he added that the BoE wage deal intentions survey shows the job is not done. Pill also commented that US trade tariffs could have substantial effects and the risk of second-round effects from the 2025 inflation hump is lower than after COVID.
• ECB sources “confirm growing confidence in disinflation, partly due to further economic weakness”, via Econostream; ‘I cannot see anything beyond March. Nothing. Nothing at all. Agree that likelihood of inflation going below 2% has risen lately. Market pricing is not unreasonable’ if projections keep materialising”.
• German Economy Ministry Report say noticeable economic recovery is not yet evident at the beginning of the year; still no sign of turnaround in the industrial economy, concerns about job security and ongoing political uncertainties to hinder a recovery.
• French Public Audit Office says debt service payments are set to increase to 3.2% of GDP by 2029, will need to reduce annual spending by EUR 110bln to achieve deficit target of 3% of GDP in 2029.

FX

• DXY is on the backfoot after struggling to hold onto post-CPI gains yesterday. USD faded it’s initial surge to 108.52 after being outmuscled by the EUR in the wake of comments from President Trump that he had a “highly productive” phone call with Russian President Putin, and they agreed to have their respective teams start negotiations immediately. Additionally, Trump’s lack of signing of reciprocal tariffs yesterday has also acted as a headwind for the USD. Albeit, it is worth noting that he is due to sign another round of executive orders at 18:00GMT. Today’s docket includes weekly claims data and PPI.
• EUR is one of the better performers vs. the USD with EUR/USD now up for a fourth session in a row after starting the week out just below the 1.03 mark. Gains stem via Trump refraining from signing reciprocal tariffs, as well as positive developments regarding Russia/Ukraine peace talks. EUR/USD is back above its 50DMA at 1.0396 and eyeing the Feb high at 1.0442.
• JPY is attempting to claw back some of the lost ground vs. the USD which has brought USD/JPY from a 150.92 base last Friday to a peak at 154.80 yesterday. JPY benefits via the softer Dollar as well as firmer-than-expected outturn for Japanese PPI metrics overnight. USD/JPY has been as low as 153.91 today but is still some way above its 200DMA at 152.72 and Wednesday’s low at 152.39.
• GBP is firmer vs. the USD and steady vs. the EUR. Today’s main macro event for the UK has come via a better-than-expected outturn for UK GDP which saw the December M/M print at 0.4% vs. Exp. 0.1%, leaving the Q4 print at 0.1% vs. Exp. -0.1%. As it stands, markets fully price the next cut in June with a total of 55bps of easing seen by year-end. Cable is back above its 50DMA at 1.2472 but sub-the Feb peak at 1.2549.
• Antipodeans are both softer vs. the USD and unable to benefit from the broad-based weakness seen in the dollar as participants still await the touted US reciprocal tariffs. AUD’s exposure to China is currently acting as a greater source of price action as opposed to domestic events.
• PBoC set USD/CNY mid-point at 7.1719 vs exp. 7.3000 (prev. 7.1710).

Fixed Income

• USTs are gradually lifting off the CPI-driven 108-04 WTD trough. As such, USTs find themselves comfortably in the green and around 10 ticks above that mark at best. Ahead, weekly claims prints alongside PPI though the jobs metrics do not coincide with the BLS period. Thereafter, 30yr supply due and in focus after the 10yr tailed by 0.9bps and the b/c came in softer than the prior and six-auction average.
• Bunds are firmer, also picking themselves up from their 132.10 US CPI-driven WTD low. However, and similarly to USTs, they have only managed to lift modestly from this to a current 132.38 session high; with the constructive geopolitical risk tone seemingly preventing a more pronounced move just yet in Europe. On this, some modest pressure was seen around reports in AFP that there is progress towards ending the Gaza truce crisis. Before that, no reaction to unrevised German inflation data or any pronounced follow through from UK data. ECB’s Nagel is due. Bunds currently at the session’s best at 133.43.
• Gilts are firmer, following the above. Gapped lower by nine ticks to a 92.36 low as the benchmark reacted to December/Q4 GDP data. Releases which were stronger than expected across the board and serve to provide the Chancellor with some much needed positive growth news after recent reports around the OBR. The release modestly tempered BoE cut expectations with 50bps no longer priced by September.
• Italy sells EUR 5.75bln vs exp. EUR 4.75-5.75bln 2.70% 2027, 3.15% 2031 & 3.45% 2031 BTP

Commodities

• The weakness in the crude complex continues after retreating yesterday amid reports that US President Trump conducted calls with Russian President Putin and Ukrainian President Zelensky about ending the war. Further downside was seen following reports the parties (Israel/Hamas) have come to an understanding, and the ceasefire agreement will be implemented; this was subsequently denied by Israeli PM Netanyahu’s Office. Brent trades towards the bottom of a USD 74.06-75.05/bbl parameter.
• Spot gold gradually edged higher overnight after rebounding from yesterday’s trough to back above the USD 2,900/oz level, while the recent fluctuations in the precious metal coincided with the swings in the greenback. Spot gold trades in a USD 2,900.54-2,922.88/oz parameter.
• Mixed trade across base metals as traders juggle the Russia-Ukraine market optimism with the looming reciprocal tariffs poised to be announced. 3M LME copper currently resides in a current 9,440.95-9,518.55/t range.
• IEA OMR: raises 2025 world oil demand growth forecast to 1.1mln BPD (prev. 1.05mln BPD). Fresh US sanctions on Russia and Iran roiled markets at the start of the year but they have yet to materially impact global oil supply. Iranian crude oil exports are only marginally lower while Russian flows, so far, continue largely unaffected.
• Russia’s Kremlin says Russian President Putin and US President Trump discussed the energy sector.

Geopolitics: Ukraine

• Ukraine Foreign Minister says NATO membership remains a strategic objective of Ukraine.
• Russia’s Kremlin says sanctions were not discussed on US President Putin and US President Trump’s call, Issue of recognition of Crimea and other territories was not raised on Putin-Trump callContacts will continue with Trump team. Focused on preparing a personal meeting with Trump, will need to wait for a time and place for such meeting.
• Chinese officials in recent weeks have floated a proposal to the Trump team through intermediaries to hold a summit between US President Trump and Russian President Putin and to facilitate peacekeeping efforts in Ukraine after an eventual truce, according to WSJ.
• Germany, France, the UK, the European Commission, and others express readiness to enhance support for Ukraine and commit to its independence, while it was separately reported that UK Defence Minister Healey said it is for Ukraine to decide when to begin negotiations and on what terms.
• Romanian Defence Ministry said radar detected drone breaches of its territory in Russian overnight attack on Ukraine.

Geopolitics: Middle East

• Israeli PM Netanyahu’s Office says the reaching of understandings with Hamas is “Fake-News”, according to Al Arabiya.
• “Al Jazeera sources: A statement will be issued shortly confirming the consensus on the commitment of the parties to implement the ceasefire agreement”, according to Al Jazeera.
• “Israel’s Channel 12 on official sources: After signals we received about Hamas’ commitment to the deal, we are committed to the agreement”, according to Al Jazeera
• US intelligence agencies concluded during the final days of the Biden administration that Israel is considering significant strikes on Iranian nuclear sites this year and is aiming to take advantage of Iran’s weakness, according to WSJ. It was separately reported that Israel is likely to attempt a strike on Iran’s nuclear program in the coming months in a pre-emptive attack that would set back Tehran’s program by weeks or perhaps months, according to Washington Post citing a US intelligence report.
• “AFP quoting a source: Progress towards ending the crisis related to the Gaza truce”, according to Sky News Arabia.

Geopolitics: Other

• South Korea said North Korea is removing a facility at Mount Kumgang meant for meetings between separated families, according to Yonhap.
• US Defence Secretary Hagseth says 2% defence spending is not enough; ultimately 5%/GDP as defence spending is critical.

US Event Calendar

• 08:30: Jan. PPI Final Demand MoM, est. 0.3%, prior 0.2%
• 08:30: Jan. PPI Ex Food and Energy MoM, est. 0.3%, prior 0%
• 08:30: Jan. PPI Final Demand YoY, est. 3.3%, prior 3.3%
• 08:30: Jan. PPI Ex Food and Energy YoY, est. 3.3%, prior 3.5%
• 08:30: Feb. Initial Jobless Claims, est. 216,000, prior 219,000
• 08:30: Feb. Continuing Claims, est. 1.88m, prior 1.89m

DB’s Jim Reid concludes the overnight wrap

Markets saw a moderate selloff yesterday, as an upside surprise for US inflation saw investors price in fewer rate cuts for the rest of the year. However, the news that the US and Russia were set to start negotiations over Ukraine saw those losses pared back, with the Euro spiking and oil prices falling after those headlines came through. But even so, that wasn’t enough to counteract the impact of the CPI report, which featured the strongest monthly print for core CPI since April 2023. In turn, that saw the 10yr Treasury yield (+8.6bps) post its biggest daily jump of 2025 so far, moving up to 4.62%. And it brought back uncomfortable echoes of last year, when a strong January inflation print was then followed by further upside surprises over the rest of Q1.

In terms of the details of the release, headline CPI came in at +0.47% in January (vs. +0.3% expected), which pushed the year-on-year rate up to +3.0% (vs. +2.9% expected). Moreover, there are growing signs that strong print isn’t just a blip, and in the most recent 3 months, CPI was running at an annualised +4.5% pace. Bear in mind that’s the strongest 3m rate since November 2022, so this really isn’t in a zone where the Fed can relax. Meanwhile for core CPI, that came in at +0.45% on the month (vs. +0.3% expected), pushing the year-on-year rate up to +3.3% (vs. +3.1% expected). This pattern of upside surprises in January has been a consistent theme over recent years, which is something Jim looked at in his chart of the day yesterday (link here). It shows how upside surprises for core CPI have been much more likely in H1 than H2, with January seeing the most upside surprises of any month.

With that release in hand, investors became increasingly alarmed about inflation risk, which has already been mounting over recent weeks. That’s been driven by several factors, including higher commodity prices, the prospect of higher tariffs, along with more resilient growth data. Indeed, we put in a note last month (link here) on how we’re currently experiencing the sort of conditions that have historically led to inflation spikes, as you’ve got several long-term forces interacting with more recent inflationary trends. And only yesterday, the 2yr inflation swap rose +3.4bps to 2.83%, which is the highest since March 2023, just before SVB’s collapse and the regional bank turmoil led to fears of another slowdown.

In terms of the Fed, the CPI release saw investors significantly dial back their expectations for rate cuts this year. For instance, the likelihood of a cut by the June meeting was down to just 37% by the close, having been at 59% the previous day. And looking further out, just 28bps of cuts were priced by the December meeting, or in other words, a bit over one 25bp rate cut. Meanwhile, Fed Chair Powell spoke before the House Financial Services Committee, where he said “we’re close, but not there on inflation”, and that “we want to keep policy restrictive for now”. We also heard from Chicago Fed President Goolsbee who said that the latest inflation numbers were “concerning” but that it was “just one month” of data. And Atlanta Fed President Bostic commented that “until we have more clarity” on policy changes by the new administration, “it’s going to be impossible to make a judgment about where our policy should go”.

As investors priced in higher inflation and a more hawkish Fed, US Treasuries sold off sharply across the curve yesterday. That meant the 10yr yield (+8.6pbs) was up to 4.62%, marking its biggest daily jump of 2025 so far. The moves were driven by higher real yields, with the 10yr real yield (+8.7bps) back up to 2.15%. And at the front end of the curve, the 2yr yield was up +7.2bps at 4.35%. Over in Europe it was much the same story, albeit to a lesser extent, with yields on 10yr bunds (+4.7bps), OATs (+3.2bps) and BTPs (+3.1bps) all moving higher. However, yields have reversed slightly overnight, with the 10yr Treasury yield down -1.0bps this morning to 4.61%.

Equities took a hit after the inflation surprise, but those losses had been largely pared back by the close. For instance, the S&P 500 initially fell -1.08% at the open, but was only down -0.27% by the close, which means it’s still only -1.09% beneath its all-time high back in January. However, there was a significant divergence between small-caps and mega-caps, with the small-cap Russell 2000 down -0.87%, whilst the Magnificent 7 only fell -0.18%. And over in Europe there was continued strength, with the STOXX 600 (+0.11%) paring back its post-CPI losses to reach another record high, with records for the FTSE 100 (+0.34%) and the DAX (+0.50%) as well. Looking forward, that equity recovery has continued overnight, with S&P 500 futures currently up +0.24%.

Staying on Europe, there were several headlines regarding Ukraine yesterday, as President Trump had a call with Russian President Putin. Trump said that the two “agreed to have our respective teams start negotiations immediately”, whilst US Defense Secretary Hegseth said that a return to Ukraine’s pre-2014 borders was an “unrealistic objective”, and that the US did not believe “that NATO membership for Ukraine is a realistic outcome of a negotiated settlement.” The prospect of negotiations saw the Euro spike by about half a percent to $1.043 as those headlines came through, whilst Brent crude oil prices fell -2.36% yesterday to $75.18, with the move lower also helped by the weekly EIA data showing a larger-than-expected rise in US crude inventories. European equity futures are also performing strongly this morning, with those on the DAX up +0.94%.  

Overnight in Asia, markets have put in a strong performance for the most part, with gains for the Nikkei (+1.47%), the KOSPI (+1.12%) and the Hang Seng (+1.71%). The exception to that has been mainland Chinese equities, where the CSI 300 (-0.09%) and the Shanghai Comp (-0.06%) are both slightly lower. In the meantime, 10yr Japanese government bond yields are up to 1.35% this morning, their highest since 2011. That follows the PPI data for January, which came in above expectations at +4.2% (vs. +4.0% expected), which is its fastest pace since June 2023.

To the day ahead now, and US data releases include the PPI reading for January and the weekly initial jobless claims. Meanwhile in Europe, there’s the UK GDP print for Q4 and Euro Area industrial production for December. Otherwise from central banks, the ECB will publish their Economic Bulletin, and we’ll hear from the ECB’s Cipollone and Nagel.

Palantir co-founder and billionaire venture capitalist Joe Lonsdale believes that the entrenched U.S. government bureaucracy has finally met its match in President Donald Trump’s second term—thanks to the world’s richest man and Department of Government Efficiency head, Elon Musk. Lonsdale, who is assisting DOGE from outside the cut cutting machine, made the remark during an interview with CNBC on Wednesday morning. 

🚨NEW: @JTLonsdale‘s epic CNBC debate on DOGE

Andrew Sorkin: I just think there’s a question about how careful @ElonMusk & DOGE need to be…

Joe Lonsdale: Andrew, we’ve been careful for 50 years, right? You have a bunch of white flag Republicans, you have a bunch of people on… pic.twitter.com/kziU8bURqb

— American Optimist (@AmOptimistShow) February 12, 2025

ANDREW ROSS SORKIN: I think there’s a question about how careful either Elon [Musk] or others need to be.

JOE KERNAN: Slash and burn a lot of the stuff.

JOE LONSDALE: Andrew, we’ve been careful for 50 years, right? You have a bunch of white flag Republicans, you have a bunch of people on the left making money off of it, people on the right making money off it too. Everyone wants to be careful and keep it going. You’re not going to get perfect answers in life. I think this is by far the best thing for our civilization, to very boldly confront this. You’re probably right—some things will need to be turned back on, and some things were mislabeled that no one knew what they were. It’s a mess, and it’s such a mess that I think being bold is the right answer. I get that it’s going to have a few mistakes, but I’d rather have those few mistakes and fix it.

REBECCA QUICK: This may be very deliberate because part of the Washington grinding machine is, “Don’t worry, we will survive this too. We’ll live through this too because the Washington grind machine always slows everything to a complete stop, and nothing gets done.” My guess is this was a very deliberate attempt or deliberate decision to do it this way just to make sure you actually make some progress.

JOE LONSDALE: Being careful and slow isn’t how we get to Mars. It is what it is.

JOE KERNAN: Joe, the deep state’s still going to win. Don’t you think?

JOE LONSDALE: I think they’ve met their match. I think they think they are going to win, but I think they’ve met their match.