Key points:
- Macro: US and Russian high-level delegates met in Riyadh to discuss Ukraine
- Equities: S&P 500 rose 0.2% to a new record close. SMCI up 16.5%
- FX: USD rose with higher yields; AUD fell after RBA cut rate by 25bps
- Commodities: Gold held firm close to its all-time high
- Fixed income: Treasuries fell as corporate bond issuance surged
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Disclaimer: Past performance does not indicate future performance.
Macro:
- Markets remained stable as US and Russian high-level delegates met in Riyadh to discuss Ukraine. Russian Foreign Minister Lavrov described the talks as "not unsuccessful." Ukrainian President Zelensky postponed his Saudi Arabia visit to March 10th, reportedly to avoid legitimizing the meeting.
- Donald Trump said 25% tariffs will hit imports of autos, chips and pharmaceuticals as soon as 2nd April 2025.
- RBA cut its cash rate by 25bps to 4.1% in February, the first reduction since November 2020, due to slowing underlying inflation.
- UK’s unemployment rate remained unchanged at 4.4% from October to December 2024, contrary to expectations of an increase to 4.5%. This rate is still the highest since the three months ending in May, primarily due to a rise in individuals unemployed for up to 12 months.
- Canada’s inflation rose to 1.9% from 1.8%, staying below the Bank of Canada's 2% target for the sixth month, indicating likely continued easing. Transportation inflation increased to 3.4%, with gasoline costs up 8.6% due to higher oil and gas prices.
Equities:
- US - The S&P 500 rose 0.2% to a new record close on Tuesday, while the Nasdaq 100 and Dow Jones remained mostly unchanged. Investors considered the potential end of the Ukraine war, tariffs, and interest rate developments. Intel is up 16% amid speculation that the iconic chipmaker could be split in a deal involving Taiwan Semiconductor Manufacturing Co (TSMC) and Broadcom Inc. TSMC has considered operating Intel's US factories and holding a controlling stake in the venture. Meanwhile SMCI gained a further 16.5% as market speculates that it could avoid delisting ahead of the 25th February deadline for its 10-K report.
- EU – The DAX climbed 0.3% to 22,863 on Tuesday, reaching new highs as traders factor in increased European military spending for Ukraine. US-Russia talks in Riyadh, seen as "positive," raised hopes for ending the war and potentially setting up a Trump-Putin meeting. Commerzbank led with a 1.9% gain, followed by Daimler Truck (+1.7%) and Airbus (+1.6%). Meanwhile, Rheinmetall slipped 0.3%, and Zalando fell 3.1%.
- HK - HSI rose 1.6% to 22,977 after President Xi's meeting with tech leaders, promising support amid US competition. Tech and consumer stocks rose over 2%. Geely Auto gained 4.7% after a Renault deal, while Kuaishou Tech (8.9%), Xiaomi Corp. (6.2%), and Laopu Gold (4.8%) posted robust gains.
Earnings this week
Wednesday: Etsy, SolarEdge, Garmin, Wix, Fiverr
Thursday: Alibaba, Walmart, Unity, Wayfair, Newmont
Friday: Mercado Libre, Rivian, Block, Booking Holdings, Texas Roadhouse
FX:
- USD strengthened in a higher yield environment, with news primarily focused on US-Russia talks concerning Ukraine. Recent Fed comments had minimal impact on price action, while attention in the US shifted to remarks from President Trump and the FOMC Minutes.
- EUR weakened against the stronger USD but stayed above 1.04, with European focus on Russia-Ukraine talks. ECB officials, including Holzmann, noted that the March rate decision will rely on data and stressed that rate cuts cannot replace economic strategy.
- GBP slightly weakened, trading above 1.26 level, but losses were limited by better-than-expected jobs data and rising average earnings.
- AUD dropped below $0.635, reversing earlier gains after the Reserve Bank of Australia cut its cash rate by 25 basis points to 4.1%, as expected.
- CAD weakened past 1.42 against USD with mixed inflation data. January's inflation rose to 1.9%, staying below the BoC's 2% target, supporting expectations for continued easing. Core inflation measures remained high at 2.7%, above forecasts.
- Major economic data: UK inflation rate, US building permits preliminary, US housing starts, FOMC minutes
Commodities:
- Gold remained near a record high, driven by tariff threats from President Trump and geopolitical tensions. It traded above $2,934 an ounce after a 1.4% rise, as US-Russia talks on Ukraine and potential easing of sanctions on Russia raised concerns in Europe and Kyiv.
- Oil rose to nearly $72 a barrel as OPEC+ considered delaying April supply increases, easing surplus fears despite the IEA's forecast of a daily 450,000-barrel overhang and high US inventories.
Fixed income:
- Treasuries declined due to increased corporate bond issuance and oil prices ahead of the 20-year auction. Yields rose 4bp-7bp, with the 10-year at 4.545%, pressured by UK gilts. Canadian bonds underperformed on higher CPI, prompting a projected rate cut by June. Treasuries also faced $30 billion in corporate offerings, indicating strong demand.
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