Authored by Daniel Lacalle,

The latest figures published by the Department of Government Efficiency (DOGE) are staggering. $75 billion saved in two weeks. Some of the items they have slashed are astonishing, including payments to transgender musicals in Ireland, DEI in Serbia, or decolonization of curriculum vitae. This is a two-week result, so it should be applauded. However, there is a lot more that needs to be done.

The Congressional Budget Office (CBO) estimates that the United States will have a $6.1 trillion deficit, despite record receipts of $17 trillion, a growing economy, and declining unemployment. Furthermore, they expect an annual deficit of $5.6 trillion in the 2026-2029 period.

As Scott Bessent has correctly stated, the United States does not have a revenue problem; it has a spending problem. The CBO expects annual outlays of $23 trillion in the 2026-29 period.

What do we know?

No revenue measure will eliminate the deficit. 

The United States’ governments have implemented numerous tax increases in the past decades and the national debt continues to reach record levels. Additionally, when revenues rise, governments spend even more than before.

The US spending problem comes from a completely unsustainable increase in mandatory spending, which is never audited and simply rises without control. 

Mandatory spending is expected to increase to $14 trillion per annum. 

Overspending and inefficiencies in these programs have never been properly tackled.

The measures announced by the Trump administration so far may bring an additional $300 billion in revenues. If the current pace of savings announced by DOGE is sustained, it could reach $1 trillion. However, as time passes, some of the savings are more difficult to find. Furthermore, the deep state machine is doing all it can to prevent any more cost savings, even using the judicial system.

The United States needs a chainsaw, like Milei implemented in Argentina. Considering that state and local departments will resist as much as they can and try to sabotage any spending cut, the government needs to implement a mandatory zero deficit in all administrations, effectively stopping the debt hemorrhage in the system.

The United States needs to do this because it is the only way to end the persistent inflation problem that plagues America, and it is essential to maintain the United States dollar as the world reserve currency. Furthermore, not implementing these drastic cuts will likely lead the United States to an economic decline like the French and UK ones. High taxes, elevated government spending, and constant deficits have made these once strong economies stagnate, lose competitiveness, and cripple investment.

Milei proved that drastic cuts can be implemented without hurting the economy. He has slashed inflation and reduced poverty, and the economy was already in a robust growth mode by the third quarter. The Argentina case was significantly more challenging than the United States one. It is time to bring the chainsaw and end the political spending spree.

President Donald Trump said in a Monday interview with Fox News that Iran is terrified after losing almost all its air defenses amid last year’s Israeli aerial attack and is now seeking to make a deal with the Untied States.

“Iran is very concerned. Iran is very frightened, to be honest with you, because their defense is pretty much gone,” Trump said of the October Israeli airstrikes. US intelligence has described that several Russian-supplied S-300 anti-air defense systems were destroyed.

“Maybe they are trying to get new defense as we speak but their defense is largely gone… Iran is very nervous. I think they’re scared. I think Iran would love to make a deal and I would love to make a deal with them without bombing them,” Trump added.

The remarks came days after Trump restored “maximum pressure” and fresh sanctions targeting Iranian oil exports, which reflects the policy of his first term, when he pulled the US out of the JCPOA nuclear deal with Tehran.

“Everybody thinks Israel with our help or our approval will go in and bomb the hell out of them,” Trump said while noting that Israeli would need approval from Washington in that scenario.

“I would prefer that not happen. I’d much rather see a deal with Iran where we can do a deal, supervise, check it, inspect it,” the president continued.

That’s when Trump made one of the more interesting and provocative comments of the interview…

There’s two ways to stopping them: With bombs or a written piece of paper.

Trump:

Iran can’t have nukes. There’s two ways to stopping them: With bombs or a written piece of paper.

I think Iran is very concerned, scared & would love to make a deal. Their defence is largely gone.

I would love to make a deal with them without bombing them. pic.twitter.com/SOQOhFYPxy

— Clash Report (@clashreport) February 11, 2025

He stressed there are essentially two paths forward: with bombs or striking a new deal. “I would love to make a deal without bombing them,” Trump said.

But earlier the same day Iranian President Masoud Pezeshkian charged that the US is not “sincere” about negotiations with Iran following last week’s new sanctions.

“If the US were sincere about negotiations, why did they sanction us?” Pezeshkian posed in a speech in Tehran commemorating the 46th anniversary of Iran’s Islamic revolution.

On February 5th Trump had revealed his thinking further in a post on X: “I want Iran to be a great and successful Country, but one that cannot have a Nuclear Weapon. Reports that the United States, working in conjunction with Israel, is going to blow Iran into smithereens,” ARE GREATLY EXAGGERATED,” he wrote.

The US is now increasingly worried that given last year’s tit-for-tat exchange of major strikes with Israel, Tehran leaders are more incentivized than ever to secretly develop a nuke.

However, the CIA has long assessed, even recently, that Iran’s leadership has not yet ordered the pursuit of a bomb. The Ayatollahs throughout the decades have also condemned atomic weapons as ‘unIslamic’.

Via Middle East Eye

Egypt has announced an emergency Arab summit to be held on February 27 in response to US President Donald Trump’s recent call to expel Palestinians from Gaza. Trump said he plans to take over the Gaza Strip, transfer its Palestinian population to other countries, and rebuild the territory into the “Riviera of the Middle East”. 

The US leader further questioned why Palestinians would ever want to return there when asked whether they would be allowed to return. Speaking at a White House press conference last Tuesday, with visiting Israeli Prime Minister Benjamin Netanyahu looking on, Trump said that Egypt and Jordan would “give us the kind of land that we need to get this done”.

On Sunday, the Egyptian Foreign Ministry said that it has communicated with several Arab countries in light of the “escalating developments in the Palestinian issue“.

“Over the past few days, Egyptian Foreign Minister Badr Abdelatty made a series of phone calls with several Arab counterparts to mass regional efforts in a bid to thwart the US proposal of displacing the Palestinian people,” the ministry said.

Trump’s announcement last week sparked confused and angry reactions across the globe, with Hamas rejecting his surprise plans on Gaza, saying it was aimed at eliminating the Palestinian cause.

Egypt and Jordan have rejected the plan outright, with their leaders, foreign ministers, and several senior officials expressing their opposition. Arab diplomats stressed to Haaretz the gravity of the US president’s remarks on Cairo and Amman, noting that they are taking them “very seriously“.

Middle East Eye learned in early February that Jordan is ready to declare war on Israel in the event that Netanyahu attempts to forcibly expel Palestinians into its territory.

Well-placed sources in Amman and Jerusalem told MEE that the last thing Jordan wants is war and it is eager for a peaceful solution. But they are adamant that the Jordanians will close the border if refugees begin to cross into the country. 

One source told MEE that Trump’s proposal was an “existential issue” both for Jordan and the Hashemite dynasty, pointing out that the country is the third-poorest in terms of water in the world.

Meanwhile, MEE has also revealed that Trump’s explosive comments earlier this month had sent shockwaves across Egyptian diplomatic and intelligence circles, Two diplomatic sources – one Egyptian and one Arab – revealed that Arab countries, led by Egypt, are scrambling to offer alternatives to Trump’s displacement plan. 

Among the proposals discussed is a major reconstruction initiative involving US companies in Syria, Lebanon, Iraq, Libya, Sudan and Gaza – without displacing its residents. This plan would be funded through lucrative Arab contracts to entice Trump and divert his attention from forced relocation.

‘This is not possible’

Former Egyptian ambassador to the UN, Mootaz Ahmadein, said Trump’s words “should be taken very seriously”.

“Cairo must respond with a simple yet powerful phrase that could unsettle him: ‘No, this is not possible,’” Ahmadein told MEE. Ahmadein further suggested that Egypt should coordinate with other nations that have been affected by Trump’s controversial policies – such as Canada, Panama, Greenland (Denmark), Colombia, Brazil, Mexico and the European Union – and seek their support in opposing him. 

Jordan’s King Abdullah II faces a tense meeting with Donald Trump at the White House on Tuesday as he leads opposition from Arab nations to the US president’s controversial Gaza takeover plan ➡️ https://t.co/lU1uDGouNe pic.twitter.com/EglzrNNXdM

— AFP News Agency (@AFP) February 11, 2025

A senior Palestinian official speaking to Haaretz said that while a unified stance against the forcible expulsion of Palestinians is crucial, there needs to be a clear outline on who will “manage and reconstruct” the beseiged enclave. 

“Will Hamas control Gaza, and if not, will the Palestinian Authority? How can this be implemented, how to move forward in the reconstruction process and also in the political process, if at all? These questions still have no answer,” the diplomat expressed.

The Geneva Conventions, which both the US and Israel have ratified, prohibit the forcible relocation of populations. Netanyahu is already wanted by the International Criminal Court (ICC) in The Hague for war crimes and crimes against humanity. More than 47,000 Palestinians have been killed in the 15 months since he declared war on Gaza.

According to the UN agency, OCHA, almost all of the homes in Gaza have been damaged or destroyed. Despite these losses, Palestinians in Gaza have strongly rejected any resettlement plan, stating their determination not to allow Israel to successfully execute another Nakba.

Having surged (by the most on record) to its highest level since 2018 after Trump’s election victory, Small Business Optimism faded in January as ‘uncertainty’ soared higher (by the most on record, data back to 1986)…

Source: Bloomberg

The National Federation of Independent Business optimism index fell 2.3 points to 102.8 last month. 

Seven of the 10 index components decreased, led by the steepest monthly decline in capital spending plans since 1995.

Source: Bloomberg

The ‘DeepSeek’ effect? Not for Small businesses… With uncertainty at its third-highest level on record, the survey suggests companies are growing cautious about investment as the Fed puts rate-cuts on hold Trump begins moving forward with tariffs.

Sales expectations eased only slightly from the highest level since the start of 2020, while a smaller share of firms said now is a good time to expand operations.

Additionally, the share of firms planning to raise prices has been stuck in the same 10-point range for more than a year, underscoring concerns that progress toward taming inflation is stalling.

Source: Bloomberg

Despite this, small-business owners remain largely upbeat about the economy’s prospects, with a net 47% expecting the economy to improve in coming months.

On Monday night Defense Secretary Pete Hegseth announced that he signed an order restoring the name of the storied special operations forces base in North Carolina back to Fort Bragg.

The Biden administration had changed the name to Fort Liberty in 2023 as part of a national policy of ditching names for military bases named after Confederate leaders. Several other bases were impacted in the sweeping change.

Hegseth announced: “That’s right. Bragg is back!” – in a video posted to X announcing the renaming. Like many other iconic base names which have been in usage for many decades, such as the sprawling Ft. Hood in Texas (now named Ft Cavazos), troops and locals have never really switched.

The Pentagon chief signed the memo shortly before landing in Stuttgart, Germany aboard a US Air Force C-17. He spent time with US soldiers doing PT on Tuesday, and he’ll attend a NATO defense ministers meeting in Brussels this week.

There’s a bit of twist behind the renaming which gets around WW2 era law preventing the US government ever issuing new names to bases inspired by Confederate soldiers.

The new Bragg is not from the Confederate General Braxton Bragg from Warrenton, North Carolina (as before) – but the new name honors Pfc. Roland L. Bragg, a World War II hero who earned the Silver Star and Purple Heart for valor on battlefield during the Battle of the Bulge.

This is certainly a creative way to bring the name back. 

Always pic.twitter.com/Jrj5XTKAHG

— Pete Hegseth (@PeteHegseth) February 11, 2025

“This change underscores the installation’s legacy of recognizing those who have demonstrated extraordinary service and sacrifice for the nation,” a Pentagon statement said.

Trump’s Pentagon chief has long lobbied to change the base names back in acknowledgement of simple history and the avoidance of political correctness:

Hegseth, a National Guard veteran and former longtime Fox News host, strongly opposed removing the names of Confederate generals from US military bases and has described the renaming efforts as “a sham,” “garbage,” and “crap” in various media appearances, CNN previously reported. He has also suggested they should be changed back, particularly Fort. Bragg.

He has also previously expressed that it’s about legacy and honoring those many generations who served at the base and know it only as Bragg: “We should change it back. We should change it back. We should change it back, because legacy matters. My uncle served at Bragg. I served at Bragg. It breaks a generational link,” he said in a prior media interview.

And we should add that Rambo First Blood makes sense again, and its famous references to Bragg will once again be recognizable to future generations…

Authored by Zachary Stieber via The Epoch Times,

U.S. District Judge Angel Kelley entered a temporary restraining order on Feb. 10 preventing the federal government from cutting medical research funding in 22 states in response to a lawsuit filed in federal court in Massachusetts.

The order is in place until further word from the court, Kelley said.

Government lawyers were also ordered to, within 24 hours, and at biweekly intervals thereafter, confirm with the judge that they are regularly disbursing medical research funding in the states, which include Arizona, California, Connecticut, Massachusetts, New York, and Oregon.

California, New York, and Massachusetts receive the most funding from the National Institutes of Health (NIH).

The legal challenge targets the U.S. National Institutes of Health directive that imposes a lower cap on indirect research costs for institutions receiving government funding after a quarter of $35 billion in NIH research funds went to indirect costs in 2024.

The new cap was set in the Feb. 7 directive at 15 percent, which is largely in line with private funding limits, and down from what the NIH said was an average of 27 percent to 28 percent.

“The United States should have the best medical research in the world. It is accordingly vital to ensure that as many funds as possible go towards direct scientific research costs rather than administrative overhead,” according to an NIH memorandum from the agency’s Office of the Director.

Dr. Matthew Memoli is the acting NIH director while the Senate considers President Donald Trump’s nominee, Dr. Jay Bhattacharya.

In an emergency motion for a temporary restraining order, attorneys general representing the states alleged that institutions, if the change were allowed to go through, would lead to “catastrophic financial consequences, which could result in layoffs and furloughs, research program closures, financial defaults, and disruptions to clinical trials, potentially jeopardizing people’s lives and health.”

The states also said the change violates a law that prohibits the NIH from changing the cap on indirect research costs.

“Even were NIH to have the authority it claims, a demanding regulatory process would be required; but NIH took none of the steps mandated by that process. In addition, the agency did not consider the detrimental effect of its decision on ongoing research that NIH itself has determined is integral to public health,” the motion stated. 

“Nor did NIH address the considerable reliance interests that are impaired when thousands of existing grants, totaling billions of dollars, are changed unilaterally over a weekend.”

The government has not issued a response to the motion.

After granting the request for a restraining order, Kelley set a hearing on the matter for Feb. 21.

Authored by Steve Watson via Modernity.news,

Leftist outlet Axios has published an article claiming that mental health experts are seeing a huge increase in patients who are Democrat voters complaining of “despair and burn out” in the wake of President Trump winning the election and taking office for the second time.

The piece claims that the worn out whiners are whinging about not being able to keep up with the pace of Trump’s “rapid fire policies.”

Mental health experts are seeing an increase in patients, largely Democrats, citing burnout and despair in part to the energy required to keep up with Trump’s rapid-fire policies.https://t.co/rUEiMsN6aC

— The Daily Beast (@thedailybeast) February 10, 2025

The article notes “Mental health professionals say even people who don’t see themselves as directly affected by administration actions are feeling frazzled by the dizzying pace and Trump’s enduring ability to command attention.”

“They may feel it through the venting of a spouse, the distress of a neighbor with a trans child or an anxious friend who works for a government contractor,” it hilariously adds.

The piece further states that Andrea Bonior, a Georgetown University psychology professor “said she’s seen an uptick in patients, particularly Democrats, expressing a sense of burnout, guilt and despair at losing an old way of life.”

It adds that “Bonior pointed to federal workers who aren’t sure if they’ll be let go as well as others concerned about their immigration status or worried about loved ones whose refugee flights were canceled.”

“It feels, no matter which way you go, you’re like, ‘Oh, my God, I’m being ruled by a very different system that I thought I was living in,’” New York-based neuropsychologist Sanam Hafeez told Axios.

Yes.

Won’t someone think of the bureaucratic federal workers and the illegal immigrants who now face “uncertainty” because borders and limits on government spending have been restored.

The world’s smallest violin is playing for them.

Diagnosis: cope and seethe complications due to TDS.

— 🥀🖋Polly Illuminaughty❤️‍🔥 (@MissPollyO) February 10, 2025

Democrats are so weak.

— JWF (@JammieWF) February 10, 2025

This is funny. Thank you for posting.

— 🥜🫃🏼💉🇺🇦🥥Hollaria Briden, Esq. (@HollyBriden) February 10, 2025

pic.twitter.com/kMtwJyZccf

— Rob (@parlfunk) February 10, 2025

This is what is called efficient governing. They’re not used to working so much.

— Rebecca (@blackviolas) February 10, 2025

Poor babies. It’s only February. 47 months to go!

— Redneck Rogue Elf, 🐿 Whisperer (@TheRogue_Elf) February 10, 2025

Perhaps these despairing Democrats need to hold some more group crying sessions and go ‘forest bathing.’

Pollster Mark Halperin previously predicted that America will experience the biggest mental health crisis in its history during a second Trump term.

Halperin urged that Trump has been so demonised for years that for tens of millions of Americans, Trump now becoming President again is “so traumatic” that it will become “impossible for even the most mentally healthy person to truly process and incorporate in the daily life.”

“They think that their fellow citizens supporting Trump is a sign of fundamental evil at the heart of their fellow citizens and of the nation,” concluded Halperin.

We’re already seeing Democrats completely losing it, screeching about Elon Musk being a Neo-Nazi and one State Rep. even saying she has sterilised herself as a protest against Trump.

*  *  *

Your support is crucial in helping us defeat mass censorship. Please consider donating via Locals or check out our unique merch. Follow us on X @ModernityNews.

A winter blast is expected today across the Mid-Atlantic, including the Washington-Baltimore metro area, while Philadelphia and New York City could see snow. Ice storms are expected in Western North Carolina. 

“Impactful winter weather is expected today and tonight as snow and freezing rain are expected to spread across the Ohio Valley, Central Appalachians, and Mid-Atlantic states,” the NWS Weather Prediction Center wrote in an early morning update on X. 

Private weather forecaster NY NJ PA Weather noted on X, “Based on the 12Z and 18Z data, I feel confident about the current snow forecast” for the Mid-Atlantic area into the Northeast. 

Capital Weather Gang’s DC Snow Forecast:

“Over 80 million people are under winter weather alerts, spanning from coast to coast, as snow and rain are already underway in the Ohio Valley,” Fox Weather reported. 

It’s just a matter of time before FlightAware’s Misery Map of Flight Cancellations begins stacking up across the Mid-Atlantic and Northeast airports.

Meteorologist Matthew Cappucci explained in a short video that this winter storm setup is “weird.” 

DMV folks — our snowstorm is a weird setup.

We don’t have much of a surface low. Just some stubborn cold and nearby.

But moisture rides in on mild southwesterly winds at the mid levels. Then we get a temperature clash called “frontogenesis.”

Here’s how that makes snow: pic.twitter.com/fulnLFuRM6

— Matthew Cappucci (@MatthewCappucci) February 10, 2025

The question is: With USAID funds running dry for nonprofits linked to radical leftists, will they still have enough money to supply heaters for Democratic lawmakers protesting outside federal buildings about Elon Musk’s DOGE budget cuts and his efforts to make the government more efficient?

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

President Donald Trump said in a new interview that he’s serious when he talks of wanting Canada to be a part of the United States.

Trump was asked by Fox News host Bret Baier in an interview that aired ahead of the Super Bowl on Feb. 9 about comments made by Canadian Prime Minister Justin Trudeau on the issue on Feb. 7. In remarks caught on a hot mic, Trudeau told attendees at the Canada–U.S. Economic Summit in Toronto that Trump’s wish for Canada to become a part of the United States “is a real thing.”

Baier asked Trump if it is indeed a “real thing” as Trudeau suggested, to which the president responded, “Yeah, it is.”

“I think Canada would be much better off being the 51st state because we lose $200 billion a year with Canada. And I’m not going to let that happen,” Trump said. “Why are we paying $200 billion a year, essentially a subsidy to Canada?”

Trump claims his Canada as a 51st state troll is real.

We should hold provincial referendums on this. Let the provinces decide. Those who vote yes join the US, those who vote no get Canada and Carney and his WEF eco-dystopia.pic.twitter.com/rvIU8ipGF8

— Jason James (@jasonjamesbnn) February 9, 2025

Trump appeared to be referring to how the United States buys more products from Canada than Canada buys from the United States, according to remarks that he made earlier on Feb. 9. The trade deficit in goods with Canada was $63.3 billion in 2024, according to the Bureau of Economic Analysis. The White House did not immediately respond to a request for comment.

Trump has said in recent weeks that Canada would be better off being a U.S. state rather than its own country, in part because it would be more secure from a military standpoint. He has said that merging the countries, if it happens, would take place through “economic force” rather than military force.

Canadian officials have reacted negatively to Trump’s comments.

“There isn’t a snowball’s chance in hell that Canada would become part of the United States,” Trudeau wrote on social media platform X at one point.

Conservative leader Pierre Poilievre has also said that Canada would never be a U.S. state.

About one-third of Canadians and one-fifth of Americans polled in January said they think that Trump is serious about his talk of taking Canada into the United States. Some Canadians said they think Trump might resort to military force to annex Canada.

Trump told reporters as he traveled to New Orleans for the Super Bowl on Feb. 9 that Canada’s relatively low military spending levels are because of the country’s leaders’ assumption that the United States is going to protect them. Compared with U.S. spending of about 3.4 percent of its gross domestic product on its military, Canada spends about 1.3 percent of its gross domestic product on its military.

“That’s not an assumption they can make, because why are we protecting another country?” Trump said. “I love the people of Canada, we have a great relationship; but, if they became our 51st state, it would be the greatest thing they could ever do; it would be unbelievable. It would be a cherished state. And think about how beautiful that country would be without that artificial line.”

Trump also said the United States subsidizes Canada because it allows it to make vehicles and other goods sold in the United States.

“If we stop allowing them” to do that, through tariffs and other measures, “they’re not viable as a country,” he said.

Trump has vowed to impose additional tariffs on steel and aluminum. Canada is the largest exporter of steel and aluminum to the United States.

Matthew Horwood contributed to this report.

US equity futures, treasuries and the dollar are all lower as the latest tariff news sparked a risk-off move, with traders also looking ahead to testimony from Jerome Powell at 10am ET today. As of 8:00am, S&P futures are down 0.2% while Nasdaq futures drop 0.5%, as Mag 7 stocks all lower with NVDA (-1.2%) and TSLA (-0.6%) underperforming; Europe’s Stoxx 600 index was held back by tumbling mining and travel shares and a gauge of Asian stocks dropped. Trump signed the 25% tariffs on all steel and aluminum imports with no exceptions after market close yesterday. Moreover, the announcement of reciprocal tariffs is expected to arrive in the next few days, which adds further uncertainty on stocks. Gold touched a fresh record high rising as high as $2942 before retracing, while an index of the dollar dropped from Monday, and treasury yields rose. Commodities are mostly higher: oil and aluminum added 1.3% and 1.2%, respectively; Ags are also higher. Today, key macro focus are Powell’s testimony, KO/GILD/SPGI earnings and any updates from Washington.

In premarket trading, Phillips 66 jumped 5% as Elliott Investment Management has built a more than $2.5 billion stake in the oil refiner; the news follows reports that Elliott had also built up a sizable stake in flailing European energy giant BP. Coca-Cola rose 3% after profit beat Wall Street expectations as shoppers paid higher prices for the company’s sodas, energy drinks and juices. Meanwhile, amazon is one of the largest decliners for the Magnificent Seven group (GOOGL -0.4%, AMZN -0.7%, AAPL -0.4%, MSFT -0.2%, META -0.3%, NVDA -0.6% and TSLA -0.4%). Here are the other notable premarket movers:

• Amkor Technology (AMKR) falls 9% after the semiconductor manufacturer’s forecast for first-quarter net sales missed the average analyst estimate.
• Astera Labs (ALAB) slips 4% after the semiconductor connectivity company reported gross margins that were slightly below analyst estimates.
• DuPont de Nemours Inc.’s (DD) rises 4% as earnings jumped on growth in the electronics market, suggesting the conglomerate’s push to cut costs and break up into smaller, more focused businesses is paying off.
• Fidelity National (FIS) drops 6% after providing a forecast for 1Q profit that missed the average analyst estimate.
• Fluence Energy (FLNC) plunges 36% after the renewable-energy equipment maker cut its total revenue guidance for the full year to a level below Wall Street estimates.
• Harmonic (HLIT) sinks 26% after the communications equipment company issued weaker-than-expected forecasts for revenue and profit for the current quarter and full year.
• Incyte (INCY) falls 3% after the drugmaker’s fourth-quarter profits fell short of estimates, and analysts pointed to disappointing guidance for its Opzelura drug, despite multiple catalysts ahead.
• Inspire Medical Systems Inc. (INSP) said in a filing that the company received a request for information from the Department of Justice. The medical device falls as much as 8% postmarket
• Lattice Semi (LSCC) rises 13% after the semiconductor device company gave reassuring 1Q guidance.
• Mitek Systems Inc. (MITK), a software company focused on digital identity verification, falls 7% after posting fiscal 1Q revenue that slightly beat estimates and reiterating year revenue guidance.
• Phillips 66 (PSX) rises 5% as Elliott Investment Management has built a more than $2.5 billion stake in the oil refiner.
• Shopify (SHOP) falls 8% after reporting quarterly results.

The latest market moves underscore how investors are struggling to gauge the potential flow-on effects from Trump’s actions for global trade, corporate earnings and inflation. The European Union said Tuesday it will respond to any tariffs the US might impose on it, escalating a potential transatlantic trade dispute.

“The best approach in terms of asset allocation is to find assets that can protect you,” said Christian Mueller-Glissmann, head of asset allocation research for Goldman Sachs, on Bloomberg Television. “The big challenge is that this is going to be much more difficult from here because the tariffs are very specific.”

Trump on Monday set 25% tariffs on steel and aluminum shipments from all countries, including major suppliers Mexico and Canada, effective March 12. The president also said he would announce reciprocal levies this week on countries that tax US imports.

Aside from the global trade picture, investors will also be focused on this week’s key inflation data and Federal Reserve Chair Jerome Powell’s testimony before Congress. Expected inflation rates over the next year and three years ahead were both unchanged in January at 3%, according to results of the New York Fed’s Survey of Consumer Expectations published Monday.

“The CPI data will be the most important this week,” said Viktor Hjort, global head of credit and equity derivatives strategy at BNP Paribas. “The risks are asymmetric; if inflation were to go higher, that’s worse for credit markets than the upside if inflation were to move lower. The selloff in Treasuries today — which is a moderate one — could easily be rationalized as positions paring ahead of a pretty important data print.”

European stocks hover near a record high as investors look ahead to the latest round of corporate earnings reports and weigh the potential for a broader trade war with the US. Energy and media sectors outperformed, while miners and travel were the biggest laggards. Among single stocks, Kering rallies after earnings showed a slight improvement, while Entain shares slide after a surprise CEO departure after just five months. Here are the most notable movers:

• Kering shares rise as much as 6.7% after the Gucci owner’s earnings showed a slight improvement. Analysts had flagged weak sentiment for the luxury goods stock ahead of its release.
• DSM-Firmenich shares gain as much as 5.5% in Amsterdam after the nutrients and flavors company agreed to sell its stake in a partnership called the Feed Enzyme Alliance to Novonesis for €1.5 billion ($1.6 billion).
• Mediobanca shares gain as much as 3.2% to the highest level in almost 18 years after the Italian lender posted 2Q profit ahead of analysts’ estimates and raised 2026 guidance.
• Var Energi shares gain as much as 4.9% after the Norwegian oil company raised its dividend policy for 2025 and lifted production guidance to above 400,000 barrels of oil equivalent per day by the end of 2025.
• AMS-Osram shares rise as much as 19% after the chipmaker says it’s expecting free cash flow to exceed €100m this year, a goal that JPMorgan says is a positive for investors after its cash outflow in 2023.
• Barco shares jump as much as 17% after the visualization specialist’s strong cost control measures helped margins come in higher than expected, resulting in annual earnings beating estimates.
• Kemira shares plunge as much as 9.3% after the Finnish company reported 4Q operating Ebitda that missed average analyst estimates.
• UniCredit shares retreat from a 14-year high as a softer outlook for lending revenue offset a beat in 4Q net income and plans to distribute €9 billion to shareholders.
• Entain shares sink as much as 11% after the sports betting company announced in a statement that CEO Gavin Isaacs is stepping down with immediate effect after five months.
• TUI shares slide as much as 8% as signs of normalizing booking trends in key markets overshadowed what analysts said was a strong first-quarter reportl
• Stora Enso shares fall as much as 5% after the paper and packaging firm said it will no longer provide annual Ebit guidance.
• Bellway shares drop as much as 6.8%, most since October, after a trading update sees Citi lower its 2026-27 earnings estimates on weaker demand. Shares of some rival UK homebuilders also decline.

On the UK monetary policy front, Bank of England rate-setter Catherine Mann said she voted for a bumper half-point interest-rate reduction at last week’s BOE meeting to “cut through the noise” after seeing more evidence of a weakening economy. The pound weakened before paring the move. Before last week, Mann was seen as the BOE’s most hawkish rate-setter and was the only member of the Monetary Policy Committee not to back either of the previous two reductions of the cutting cycle.

Earlier in the session, Asian stocks headed for a second day of losses as traders digested the impact of US President Donald Trump’s decision to impose 25% tariffs on all imports of steel and aluminum. The MSCI Asia Pacific ex-Japan Index fell as much as 0.5%, with Chinese tech shares such as Tencent and Xiaomi among the biggest drags. Benchmarks in China declined, offsetting gains in South Korea and Taiwan. Japan was closed for a holiday. The risk-off mood in Asia reflects investors’ ongoing concern about a global trade war, with the potential for other nations to roll out retaliatory tariffs against the US. It could also affect corporate earnings, inflation and the Federal Reserve’s monetary policy.

In FX, the Bloomberg Dollar Spot Index is 0.1% lower. GBP/USD was little changed at 1.2369; Bank of England voting member Catherine Mann said she voted for a bumper half-point interest-rate reduction to “cut through the noise” after seeing more evidence of a weakening economy. The euro added 0.2% and is the strongest of the G-10 currencies.

In rates, treasuries dip before Fed Chair Jerome Powell delivers his semi-annual Humphrey-Hawkins testimony on Capitol Hill at 10am ET, while US inflation data due Wednesday also coming into view. US 10-year yields rise 4 bps to 4.54%, with the yield curve steeper as US trading gets under way, extending Monday’s widening of 2s10s and 5s30s spreads. US long-end yields are 3bp-4bp higher on the day, widening 2s10s spread by nearly 3bp, 5s30s by ~1bp.  Wider losses across core European rates support higher Treasury yields ahead of Powell’s testimony. In Europe, France mandates banks for a new 30-year bond offering, adding to supply pressure. Gains in oil add to upside pressure on Treasury yields with WTI futures advancing 1.1% after rising nearly 2% Monday; commodities broadly are in focus after US President Trump set 25% tariff on steel and aluminum imports to take effect March 12. US Treasury coupon auctions resume with $58b 3-year note sale at 1pm, to be followed by $42b 10-year and $25b 30-year Wednesday and Thursday. WI 3-year yield near 4.31% is ~2bp richer than last month’s auction, which tailed by 1.2bp. 

In commodities, oil advanced from near its lowest levels this year as shrinking Russian production eased concerns over a glut; Brent crude futures rose 1.3% toward $77 a barrel, after rising 2% on Monday. Gold set a fresh peak above $2,940 an ounce, before retracing some of that advance. Bullion has surged about 11% this year, setting successive records, as Trump’s disruptive moves on trade and geopolitics reinforce its role as a store of value in uncertain times. Bitcoin rises 0.8% above $98,000.

Looking at the day ahead, US economic data calendar is blank with January CPI ahead Wednesday. Fed speaker slate includes Hammack (8:50am), Powell (10am), Williams and Bowman (3:30pm).

Market Snapshot

• S&P 500 futures down 0.3% to 6,068.25
• STOXX Europe 600 down 0.1% to 545.37
• MXAP down 0.4% to 184.65
• MXAPJ down 0.5% to 580.04
• Nikkei little changed at 38,801.17
• Topix down 0.2% to 2,733.01
• Hang Seng Index down 1.1% to 21,294.86
• Shanghai Composite down 0.1% to 3,318.06
• Sensex down 1.3% to 76,325.96
• Australia S&P/ASX 200 little changed at 8,484.00
• Kospi up 0.7% to 2,539.05
• German 10Y yield up 4 bps at 2.40%
• Euro little changed at $1.0316
• Brent Futures up 1.1% to $76.73/bbl
• Gold spot up 0.0% to $2,908.99
• US Dollar Index little changed at 108.29

Top Overnight News

• US judge temporarily blocked the Trump administration’s cuts to universities and medical centres’ research funding.
• US Speaker Johnson intends to begin presenting outlines of his budget reconciliation package today, he believes he’s “very close” to a final budget resolution: Punchbowl.
• Sam Altman said OpenAI is not for sale, rebuffing a $97.4 billion bid by an Elon Musk-led group. BBG
• South Korea’s state-run think tank cuts its growth forecast for the country and warned that Trump trade uncertainty is a downside risk. WSJ
• China’s vehicle sales fell in January, pressured by subdued demand and a front-loading effect from the previous month. Retail sales of passenger cars fell 12.1% to 1.79 million vehicles in January from a year earlier. Sales declined 32% from December, remaining at historically low levels. WSJ
• The EU vowed “firm” countermeasures to any tariffs imposed by the US. Donald Trump warned metals levies “may go higher” than his 25% charge on all US imports of steel and aluminum from March 12. The president also said he’ll be looking at tariffs on cars and chips. BBG
• The UK is set to sell a record £13 billion of 10-year bonds after attracting more than £140 billion of orders — the highest-ever demand for such securities — from investors keen to lock-in yields near multi-decade highs. BBG
• Trump and the US will consider an exemption for Australia from the 25% tariff it imposed on steel and aluminum imports this week, leaders from both countries said after a phone call. Nikkei
• Israel should call off its ceasefire deal with Hamas if hostages aren’t returned this weekend, Trump said. He threatened to cut off aid to Jordan and Egypt if they don’t take Palestinian refugees from Gaza. BBG
• Jordan’s King Abdullah II will deliver a concerted message from the Arab world that Trump needs to think again on his plans for Gaza. He’s set to meet with the president in Washington today. BBG
• JD Vance said that the Trump administration will work to make the US the “gold standard worldwide” for AI as he issued strong warnings against regulating political speech and took aim at the EU’s tough regulatory approach. BBG

Tariffs

• US President Trump signed proclamations to reimpose a 25% tariff on steel and aluminium imports and declared there are no exceptions or exemptions, effective March 12th. Trump said they are looking at tariffs on cars, pharmaceuticals and chips and will hold meetings over the next four weeks, while they will do reciprocal tariffs over the next two days. Trump also commented that tariffs on metals could go higher and he does not mind if other countries retaliate. Furthermore, it was also reported that President Trump is expected to sign executive orders on Tuesday at 15:00EST/20:00GMT.
• Canada’s Industry Minister said US tariffs on steel and aluminium are “totally unjustified”, while he is consulting with international partners on US steel and aluminium tariffs, as well as noted that the response will be “clear and calibrated”.
• Australian PM Albanese said he had a great conversation with US President Trump and they committed to working constructively to advance Australian and American interests, while he noted that President Trump agreed to consider an exemption for Australia on steel tariffs.
• Hong Kong said US tariffs are inconsistent with WTO rules and it will file a complaint on US tariffs to the WTO, while it noted the US has completely ignored the city’s status as a separate customs territory from China.
• EU Trade Ministers set to hold video conference on Wednesday after Trump confirms steel and aluminium tariffs. EU Commission President von der Leyen says unjustified tariffs on the EU will not go unanswered; they will trigger firm and proportionate countermeasures.
• EU Trade Commissioner Sefcovic says they are looking into the possibility of stronger trade ties with Gulf-nations.
• South Korean acting President says they are to prepare support for firms hit by US tariffs; to discuss response measures with Japan and the EU.
• Canadian PM Trudeau says “our response will be firm and clear and we will stand up for Canadian workers”, in relation to the new Trump tariffs.
• “Britain is not expected to join the EU in retaliating against the US after Donald Trump announced plans to hit steel imports with 25% tariffs”, according to Times’ Swinford. “The EU said it will ‘react to protect the interests’ of businesses, workers and consumers”. “But senior govt sources said that retaliatory tariffs would have little impact and would ultimately serve to provoke Trump further”. “Starmer, Reynolds and Lammy have all been very clear that Britain is philosophically opposed to tariffs of any kind”.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were ultimately mixed after the tech-led gains on Wall St and as participants digested US President Trump’s 25% tariffs on steel and aluminium which take effect from March 12th, while Japanese markets were closed for a holiday. ASX 200 closed flat with gold stocks underpinned after the precious metal extended on its record highs, while the tech sector took impetus from the strength seen in its US counterpart. Hang Seng and Shanghai Comp were subdued following US President Trump’s latest tariff actions, while he reiterated they will do reciprocal tariffs in the next two days and is also looking at tariffs on cars, pharmaceuticals and chips with meetings to take place over the next four weeks. Furthermore, Hong Kong criticised the US tariffs and will file a complaint on US tariffs to the WTO, as well as claimed that the US has completely ignored the city’s status as a separate customs territory from China.

Top Asian News

• US President Trump said he had spoken to Chinese President Xi since his inauguration but didn’t provide further details.

European bourses (Stoxx 600 U/C) are mixed and trading on either side of the unchanged mark, continuing the indecisive mood in APAC trade overnight, as markets digest Trump signing a reimposition of 25% tariffs on steel and aluminium. Markets are also awaiting updates over the next few days re. tariffs on cars/pharmaceuticals/chips. In recent trade, some downside has picked up a touch. European sectors are mixed and with the breadth of the market very narrow. Media takes the top spot, joined closely by Energy; the latter is buoyed by strength in underlying oil prices. Consumer Products was initially the outperformer, lifted by post-earning strength in Kering (+2.2%) – but the upside has since mostly pared.

Top European News

• BoE’s Mann said UK inflation is less of a threat as corporate pricing power weakens and pricing is coming very close to 2% target-consistent levels in the year ahead, while she added that demand conditions are weaker than before and that she had changed my mind on that, according to FT.
• BoE’s Mann says as an activist policy maker, she opted for 50bps cut in February to 1) ‘cut through the noise’, 2) anchor expectations through the inflation hump, and 3) acknowledge structural impediments and macroeconomic volatility in longer term. On the Bank Rate: “I note that respondents in our Market Participants’ Survey have been consistent in putting this longer-run average at about 3-3½ percent. I’m more likely at the higher end of that range.” “I expect that Bank Rate will average well above the nominal equilibrium rate implied by the estimates set out in the August 2018 Inflation Report”. “it seemed to me that the two quarter-point cuts last year had not appreciably loosened financial conditions.”. “Indeed, the projections in the February Monetary Policy Report were conditioned on a path for Bank Rate that is above four percent for the entirety of the forecast horizon which, given my assessment of the UK outlook, was not consistent with achieving the 2% target sustainably.”. On being the activist policymaker, “The activist policymaker needs to maintain policy rate discipline and restrictiveness even after this immediate decision. This ensures that, as we move through the inflation hump, expectations remain anchored both in the near and longer term.”.
• BoE’s Mann says “my active rate policy does not mean cut, cut, cut”. “A 50bps cut now, 50 next time would not be a full reading of what I have said”. Looking to see that wage settlements will be moderate and that firms pricing power is moderate. Not expecting additional second-round effects.
• Barclays said UK January consumer spending rose 1.9% Y/Y which is the largest rise since March 2024 and Consumer Sentiment was at +21% which is the lowest since the series began in April 2024.
• European Commission President von der Leyen says the EU aim to mobilise EUR 200bln in AI investments in Europe

FX

• DXY is a little lower as markets digest the latest bout of tariff updates. Trump’s tariff regime remains the main focus throughout trade thus far after the President signed proclamations to reimpose a 25% tariff on steel and aluminium imports and declared there are no exceptions or exemptions, effective March 12th. Furthermore, Trump said they are looking at tariffs on cars, pharmaceuticals and chips and will hold meetings over the next four weeks, while they will do reciprocal tariffs over the next two days. US President Trump is expected to sign executive orders on Tuesday at 15:00EST/20:00GMT. A slew of Fed speakers are due to today, with Chair Powell also scheduled for 10:00EST/15:00GMT.
• EUR is trivially firmer vs. the USD after a session of shallow losses yesterday. In the early stages of the Trump Presidency, markets were relieved that no immediate action was taken against the US. However, the recent imposition of steel tariffs by the US has brought this to an end. Actions have subsequently triggered a response from the bloc with European Commission President von der Leyen stating that unjustified tariffs on the EU will not go unanswered. ECB thought-leader Schnabel due to speak at 17:00GMT. EUR/USD is holding above the 1.03 mark and within Monday’s 1.0282-1.0336 range.
• JPY saw some fleeting support vs. the USD in early European trade following as markets digested the latest ramp-up in global trade tensions. Fresh macro drivers for Japan were lacking overnight with the nation away for holiday. USD/JPY is currently tucked within Monday’s 151.17-15253.
• GBP is trivially higher vs. the USD after three sessions of losses in the wake of last week’s “dovish” cut from the BoE. 50bps dissenter Mann has been on the wires overnight and throughout the morning justifying her decision to go back a larger rate reduction. Mann noted that her decision was made on the basis that she is an activist policy maker and wished to “cut through the noise” by taking bold action. Governor Bailey is due to speak at 12:15GMT. Cable has been as high as 1.2377 but is yet to threaten the 1.24 mark.
• Antipodeans are both a touch higher vs. the USD. Focus for AUD has been on the recent imposition of steel tariffs by the US. Australian PM Albanese said President Trump agreed to consider an exemption for Australia on steel tariffs. Trump later declared no exceptions or exemptions.
• PBoC set USD/CNY mid-point at 7.1716 vs exp. 7.3067 (prev. 7.1707).

Fixed Income

• A slightly constrained start to the session on account of a Japanese holiday and as such there was no overnight cash UST trade. Nonetheless, the bias is bearish as participants digest and assess the inflation implications of Trump’s latest measures and commitments to respond from Canada and the EU. Action which has weighed on USTs to a 109-01+ trough, a tick below Monday’s base but just above the 109-01 low from Friday. Trump is set to sign an executive order at 15:00 EST, with commentary via Fed Chair Powell also due at that time.
• Bunds have moved in tandem with peers. EU Commission President von der Leyen said they will trigger firm and proportionate countermeasures while Trade Commissioner Sefcovic remarked that closer ties with Gulf nations are being looked at; remarks which have had little impact on the complex. Bunds down to a 133.04 base, have seemingly found a slight floor just above the 133.00 mark. ECB Schnabel is due later.
• Gilts are in-fitting with the above. Not quite as pressured as Bunds but not far behind, some modest recent respite has come from reporting around the 2035 Gilt syndication which just before books closed had reportedly attracted orders in excess of GBP 130bln. Prior to these reports, a length text release dropped from BoE dissenter Mann (voted for 50bps cut, decision was 25bps). A speech which sparked a modest hawkish move as the release made clear that Mann continues to favour and wants to maintain “policy rate discipline and restrictiveness”.
• Netherlands sells EUR 2bln vs exp. EUR 1.5-2.0bln 2.75% 2047 DSL: average yield 2.773% (prev. 0.403%)
• Orders for Italy’s new 15yr BTP bond exceeds EUR 83bln, spread set at +7bps over BTP maturing in 2039, via Reuters citing leads.
• UK to sell GBP 13bln of 4.5% 2035 Gilt via syndication (a record), according to a bookrunner; orders in excess of GBP 140bln.
• Germany sells EUR 3.777bln vs exp. EUR 5bln 2.40% 2030 Bobl: b/c 2.0x (prev. 2.52x), avg. yield 2.17% (prev. 2.42%) & retention 24.60% (prev. 24.14%).

Commodities

• Firmer trade across the crude complex this morning amid Middle Eastern geopolitical updates and in the aftermath of tariff escalations after US President Trump signed proclamations to reimpose a 25% tariff on steel and aluminium imports and declared there are no exceptions or exemptions, effective March 12th. Brent sits in a USD 75.90-76.74/bbl parameter at the time of writing.
• Mixed/mostly lower trade across precious metals with silver and palladium hampered by the implications of US levies, but spot gold trading flat. Silver has both monetary and industrial uses, with around half of its demand coming from industrial applications (electronics, solar panels, etc.). Gold is cushioned by haven properties, with the yellow metal pulling back after printing a fresh high overnight at USD 2,942.78/oz.
• Base metals are lower across the board amid the implication on demand from the aforementioned tariffs. 3M LME copper sits towards the bottom end of a USD 9,364.00-9,452.55/t range at the time of writing.
• Russia’s First Deputy Energy Minister believes sanctions won’t hinder oil trade with India and said more time is needed to assess the impact of the latest sanctions, while the official added that Russia has the technology to develop energy resources and will continue to meet market demand for energy.
• Russian Deputy PM Novak says will looking to proposals regarding possibility of gasoline export ban.

Geopolitics: Middle East

• US President Trump said if all Gaza hostages aren’t returned by noon on Saturday, he would say cancel the ceasefire and let all hell break out, while he added that Israel can override it and thinks Jordan will take refugees. Trump also said the US could withhold aid to Jordan and Egypt if they don’t take refugees, while he might talk to Israeli PM Netanyahu about the Saturday deadline.
• Al-Qassam Brigades Tulkarm said their fighters, accompanied by the Al-Quds Brigades and the Al-Aqsa Martyrs Brigades, targeted an Israeli force in the vicinity of Tulkarm camp, according to Al Jazeera.
• US President Trump said Iran is very concerned and very frightened because their defence is pretty much gone and now would love to make a deal with the US, according to an interview with Fox News cited by Iran International.
• Egyptian sources say that “Trump’s threat to cut off aid to Egypt would mean that the peace treaty between Israel and Egypt “would have no meaning,” and that the tension in relations between the United States and Egypt was the greatest in three decade”.
• Israeli “security cabinet is now convening at the Prime Minister’s Office in Jerusalem to discuss Israel’s response to Hamas’s postponement of the release of hostages”, via Times of Israel.

Geopolitics: Ukraine

• Russian Deputy Foreign Minister meets the US envoy, according to RIA.
• “A Gulfstream jet registered to a company controlled by Steve Witkoff, United States Special Envoy to the Middle East, is moments away from landing in Moscow…It is unclear if Witkoff himself is on board”, according to HuffPost’s Ali.
• Ukraine’s Energy Minister said Russia launched an air attack on Ukraine’s gas infrastructure overnight and in the morning, while emergency power restrictions were imposed to minimise possible consequences.
• Russia’s aviation watchdog suspended flights at four airports to ensure safety after officials reported drone attacks.
• Industrial facility in Russia’s Saratov region was on fire after a Ukrainian drone attack, according to the regional governor, while Russia’s Shot Telegram news channel reported explosions were heard in the area of the oil refinery in Saratov.
• US President Trump said he will speak with Ukrainian President Zelensky this week and special envoy Kellogg is going to Ukraine soon. It was also reported that the Trump administration will push European allies to purchase more US weapons for Ukraine, while weapons approved by the Biden administration are still flowing to Ukraine, according to Reuters citing sources and the US Special Ukraine Envoy.

Geopolitics: Other

• North Korea said a US nuclear submarine has arrived at a South Korean port, escalating security tensions, according to KCNA. Furthermore, North Korea said Washington’s sending of a nuclear submarine to Seoul is a serious threat.

US Event Calendar

• 06:00: Jan. SMALL BUSINESS OPTIMISM 102.8, est. 104.7, prior 105.1

Central Bank Speakers

• 08:50: Fed’s Hammack Speaks on Economic Outlook
• 10:00: Fed’s Powell Testifies to Senate Banking
• 15:30: Fed’s Bowman Speaks on Bank Regulation
• 15:30: Fed’s Williams Gives Keynote Remarks

DB’s Jim Reid concludes the overnight wrap

Morning from Heathrow as the DB outlook tour hits Brussels today before I have a dinner in Paris tonight. Thankfully the Trump 2.025 outlook we published in November is still live in terms of views. On balance the risks are perhaps skewed towards a more aggressive tariff view than we had penciled in but the reality is that we’d priced in enough to suggest that the Fed wouldn’t be able to cut rates this year due to elevated inflation and a combination of this and the data means we still believe this.

The tariff news has continued to build over the last 24 hours but risk assets got the week off to a solid start yesterday, with the S&P 500 (+0.67%) moving back to within 1% of its all-time high, while global bond markets saw muted moves. Yet despite the mostly positive headline moves, there were several mounting risks looming on the horizon, including the threat of reciprocal tariffs from the US, along with European natural gas prices at a two-year high. In both cases, the problem is that it’s reviving investors’ fears about inflation, which in turn is raising questions about whether we’re going to get the rate cuts that are currently priced in. So it meant the US 2yr inflation swap (+2.7bps) hit its highest level in nearly two years, at 2.75%, whilst gold prices (a classic inflation hedge) moved above $2,900 for the first time as well.

In terms of the latest on tariffs, shortly after the US market close yesterday Trump signed the executive order imposing 25% tariffs on US steel and aluminum imports, which will be effective from March 12. The tariffs will affect all countries, though Trump confirmed he was considering an exemption for Australia. Procedurally, the move revives and expands tariffs introduced back in 2018. Meanwhile, Trump commented that details on reciprocal tariffs would come over the next two days, while also saying that tariffs on metals “may go higher” and that his administration would be looking at chips and cars, two product groups he’s previously floated as potential tariff targets.

Our US economists published a piece suggesting that if sustained, steel and aluminium tariffs combined with reciprocal tariffs could increase core PCE in 2025 by an additional 30-40bps, depending on the ultimate passthrough to consumer prices. If the delayed Canada and Mexico tariffs were to ultimately go into effect as well, inflation in 2025 could be above 3.5%, though the assumption is that tariffs would have limited impact beyond this year. While our economists’ baseline is that the Fed would prefer to “look through” the price level impact by keeping rates steady, their ability to do so could be constrained if inflation expectations begin to rise and / or the labour market reemerges as an additional source of inflationary pressure. Recent data suggest both these outcomes cannot be fully discounted. See their piece here.

Staying on the theme, in a piece yesterday, the FX team looked at which countries would be hit most by reciprocal tariffs, but the key point is that the impact varies widely depending on how reciprocity is defined.

Meanwhile in Europe, the main story was the mounting price of natural gas, which brought back unhappy echos of the energy crisis back in 2022. In terms of the latest, natural gas futures moved up another +4.16% to €58.04/MWh, which is their highest closing level in over two years, and more than double their levels a year ago. Now admittedly, we’re still a long way from the situation in late-2022, when prices averaged above €100/MWh, but gas storage is falling right now, and is currently at its lowest level at this point in the year since 2022. And more broadly, this is adding to the risk that inflation remains sticky above target, making it more difficult for the ECB to cut rates over the rest of the year.

Yet despite the bad news on inflation from tariffs and higher gas prices, there was some better news from the New York Fed’s Survey of Consumer Expectations. That showed inflation expectations were broadly stable in January, with 1yr and 3yr expectations unchanged at 3.0% even if the 5 year expectation edged up three tenths to 3.0%. Importantly for markets, the overall release was a contrast to the University of Michigan’s preliminary survey for February, which showed 1yr expectations surging up to 4.3%, so it helped to reassure investors that the UMich number wasn’t being replicated more broadly. After all, if inflation expectations become unanchored, that’s a huge problem for central banks as it raises the risk of a self-fulfilling prophecy where firms set prices and workers bargain for wages according to those higher expectations. And it was a big success during the recent inflationary wave that long-term US inflation expectations remained in check, helping to prevent a repeat of the 1970s. Looking forward, the focus today will turn back to the Fed, as Fed Chair Powell is delivering his semiannual testimony before the Senate Banking Committee, ahead of the CPI release for January, which is out tomorrow, before Powell’s second congressional testimony of the week.

Even with the uncertain backdrop yesterday, the absence of definitive negative newsflow was sufficient for equities to put in a strong performance, with the major indices on both sides of the Atlantic moving higher on the day. Tech stocks outperformed, with the NASDAQ up +0.98%, though the Magnificent 7 (+0.42%) saw a more modest gain, weighed upon by a -3.01% decline for Tesla. The S&P 500 rose +0.67%, with the energy sector (+2.15%) the strongest performer as Brent crude oil rose +1.96% to $76.12/bbl amid a tighter supply outlook, including a Bloomberg report that Russia’s oil production fell below its OPEC+ quota in January. In Europe, the STOXX 600 (+0.58%), the FTSE 100 (+0.77%) and the DAX (+0.57%) all closed at record highs.

For bonds it was also a decent picture, despite the lingering concern about inflation. For Treasuries, the 2yr yield fell -1.3bps on the day to 4.28%, with a 2.6bps decline in the real yield more than offsetting higher breakevens, whilst the 10yr yield was little changed (+0.2bps to 4.50%). Meanwhile in Europe, 10yr yields also fell across the continent, with those on bunds (-1.0bps), OATs (-0.9bps) and BTPs (-1.7bps) all moving lower.

In Asia markets are quiet with Japan on holiday. Chinese stocks are slightly underperforming after climbing for several consecutive sessions with the Hang Seng (-0.33%) leading losses with the Shanghai Composite (-0.12%) trying to get back to flat. Elsewhere, the KOSPI (+0.73%) is bucking the negative trend while the S&P/ASX 200 (+0.06%) is flat. S&P 500 (-0.22%) and NASDAQ 100 (-0.28%) futures are lower with Treasuries not yet trading due to the Japanese holiday.

To the day ahead now, and there are lots of central bank speakers, including Fed Chair Powell’s testimony to the Senate Banking Committee. Otherwise, we’ll hear from the Fed’s Hammack, Williams and Bowman, the ECB’s Schnabel, BoE Governor Bailey, and the BoE’s Mann. Otherwise, data releases from the US include the NFIB’s small business optimism index. And today’s earnings releases include Coca-Cola.