MNI EUROPEAN OPEN: Geopolitics In Focus
EXECUTIVE SUMMARY
- BESSENT NOT WORRIED ABOUT MARKET, CALLS CORRECTIONS HEALTHY - BBG
- US VOWS TO KEEP HITTING HOUTHIS UNTIL SHIPPING ATTACKS STOP - RTRS
- US PRESIDENT TRUMP TO SPEAK TO RUSSIAN PRESIDENT PUTIN ON TUES - BBG
- POLL SHOWS TWO MORE ECB CUTS EXPECTED - BBG
- EUROPEAN FOREIGN MINISTERS MEET TO DISCUSS UKRAINE - EC
Fig 1: Australia-US 10 year differential %
Source: MNI - Market News/Bloomberg/Refinitiv.
UK
UKRAINE (BBC): “Prime Minister Sir Keir Starmer has said military planning to protect a potential Ukraine ceasefire is moving to an "operational phase" after a virtual meeting with 29 other world leaders.”
EU
ECB (BBG): “The European Central Bank is expected to lower borrowing costs two more times, with back-to-back cuts likely in April and June.”
US/RUSSIA (BBG): “President Donald Trump said he will speak with Russian President Vladimir Putin on Tuesday to discuss an end to fighting in Russia's war in Ukraine.”
RUSSIA (RTRS): “Russia will seek "ironclad" guarantees in any peace deal on Ukraine that NATO nations will exclude Kyiv from membership and that Ukraine will remain neutral, a Russian deputy foreign minister said in remarks published on Monday.”
DEFENCE (MNI): “France will not apply for a national escape clause to exempt any increase in defence spending from European Union fiscal constraints, a French official confirmed to MNI, as it becomes clear that applications for such exemptions from around the EU may fall well short of the potential maximum of EUR650 billion in additional fiscal space.”
EU (EUROPEAN COUNCIL): Foreign Affairs Council, 17 March 2025 “Ministers will exchange views on Russia’s war of aggression against Ukraine, after a short intervention of the Minister of Foreign Affairs of Ukraine Andrii Sybiha via videoconference. They will then hold discussions on the situation in the Middle East, Iran and EU-US relations.”
UKRAINE (POLITICO): “Military chiefs from about 30 Kyiv allies will hold a fresh “operational planning meeting” in London on Thursday to game out how they would commit peacekeeping troops to a post-war Ukraine.”
TRADE (POLITICO): “French Prime Minister François Bayrou on Sunday questioned the European Commission's decision to hit American bourbon and other products with tariffs as part of an escalating tit-for-tat trade war between Washington and Brussels.”
TRADE (POLITICO): “French President Emmanuel Macron wants to lead a charm offensive to convince EU countries to stop buying U.S. defense equipment and buy French and European instead.”
DEFENCE (POLITICO): “The European Commission is considering a new satellite network to bolster military intelligence amid doubts about sustained support from the United States, European Defense and Space Commissioner Andrius Kubilius said in an interview with the Financial Times.”
DEFENCE (FRANCE24): “Spurred by the war in Ukraine and the prospect of US disengagement, European countries are debating a return to compulsory military service to counter Russian expansionism.”
GERMANY (BBC): “Germany's conservative leader, Friedrich Merz, has clinched an enormous financial package to revamp defence and infrastructure, ahead of a crunch vote in parliament next Tuesday.”
GERMANY (DW): “The head of the conservative CDU/CSU bloc Friedrich Merz said that the next German government will have to cut costs despite his suggested debt-backed financial package, worth €500 billion ($545 million).”
FRANCE (POLITICO): “Asked in an interview with France Inter whether he would consider returning the retirement age to the level it was before the pensions reform pushed by French President Emmanuel Macron, Bayrou said “no.””
RUSSIA (CNN): “Although Kyiv is now on the back foot in Kursk, Zelensky and military analysts have questioned Putin’s claims – echoed by US President Donald Trump – that Russian forces have surrounded Ukraine’s soldiers.”
UKRAINE (POLITICO): “Western sanctions on Russia could ultimately be dropped if it helps deliver security and justice for Ukraine, Kyiv’s top sanctions official told POLITICO, as United States President Donald Trump steps up bilateral negotiations with Moscow in a bid to end the war.”
HUNGARY (POLITICO): “Hungary’s Prime Minister Viktor Orbán on Saturday vowed to crack down on a “shadow army” of political opponents, journalists, judges and activists in the country, who he said were working for foreign powers. In an inflammatory speech at a party rally in Budapest marking Hungary’s 1848 revolution against Austrian rule.”
GREENLAND (BBC): “Greenland's leading political parties have issued a joint statement to condemn Donald Trump's "unacceptable behaviour", after the US president seemed to escalate his campaign to take over the island.”
US
MARKETS (BBG): “Treasury Secretary Scott Bessent, a former hedge fund manager, said he’s not worried about the recent downturn that’s wiped trillions of dollars from the equities market as the US seeks to reshape its economic policies. “I’ve been in the investment business for 35 years, and I can tell you that corrections are healthy, they are normal,” Bessent said Sunday on NBC’s Meet The Press. “I‘m not worried about the markets. Over the long term, if we put good tax policy in place, deregulation and energy security, the markets will do great.”
MIDDLE EAST (RTRS): “The United States will keep attacking Yemen's Houthis until they end attacks on shipping, the U.S. defense secretary said on Sunday, as the Iran-aligned group signaled it could escalate in response to deadly U.S. strikes the day before. The airstrikes, which the Houthi-run health ministry said killed at least 53 people, are the biggest U.S. military operation in the Middle East since President Donald Trump took office in January. One U.S. official told Reuters the campaign might continue for weeks."
FED (MNI INTERVIEW): "Consumer expectations for inflation soared in March while sentiment about the labor market sagged to lows not seen since the Global Financial Crisis, placing the Federal Reserve in an increasingly difficult position, the head of the University of Michigan's Survey of Consumers told MNI."
RUSSIA (POLITICO): “U.S. Secretary of State Marco Rubio and Russian Foreign Minister Sergey Lavrov held a call on Saturday as Washington pushes for a ceasefire in Ukraine.”
OTHER
CANADA (MNI BRIEF): “Mark Carney was sworn in as Canada's prime minister Friday and he began by naming Francois-Philippe Champagne as the new finance minister as they prepare to navigate an election and a trade war against the United States.”
CANADA (MNI BRIEF): “Mark Carney used his debut press conference as Prime Minister on Friday to call U.S. President Donald Trump's talk of making Canada the 51st state "crazy" and said he will first visit London and Paris rather than Washington to develop more reliable security and trade partners.”
CHINA
CONSUMPTION (BBG/XINHUA): “China will take steps to revive consumption by boosting people’s incomes, the official Xinhua News Agency reported on Sunday, citing a statement from the State Council.”
CONSUMPTION (MNI): "China's retail sales quickened to a four-month high of 4.0% y/y over January-February, rising from December's 3.7% growth and meeting the 4.0% forecast, despite a higher comparison base for the same period last year, according to data released Monday by the National Bureau of Statistics, which typically combines results of the first two months to smooth out the Spring Festival impact."
HOUSING (SECURITIES TIMES): “China will raise its standard for housing construction to meet buyers’ upgrading needs, which were included in the annual Government Work Report for the first time and will open more space for the real-estate market, Securities Times reported.”
FOREIGN INVESTMENT (PEOPLE’S DAILY): “China will soon release the latest edition of the catalogue of industries encouraged for foreign investment, which will include more items in advanced manufacturing, modern services, high-tech, energy-saving and environmental protection sectors, People’s Daily reported citing Hua Zhong, head of foreign investment at the National Development and Reform Commission.”
CHINA MARKETS
MNI: PBOC Net Drains CNY2.5 Bln via OMO Monday
MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY481 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY2.5 billion after offsetting the maturity of CNY96.5 billion 7-day reverse repos and CNY387 billion MLF today, according to Wind Information.
- The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.7937% at 10:12 am local time from the close of 1.8121% on Friday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 47 on Friday, compared with the close of 48 on Thursday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.
MNI: PBOC Sets Yuan Parity Lower At 7.1688 Mon; -0.41% Y/Y
MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.1688 on Monday, compared with 7.1738 set on Friday. The fixing was estimated at 7.2217 by Bloomberg survey today.
MNI: China CFETS Yuan Index Down 0.24% In Week of Mar 17
The CFETS Weekly RMB Index was 98.81 on Mar 17, down 0.24% compared with 99.05 as of Mar 7.
MARKET DATA
UK MARCH RIGHTMOVE HOUSE PRICES +1.1% M/M; FEB. +0.5%
UK MARCH RIGHTMOVE HOUSE PRICES +1% Y/Y; FEB. +1.4%
NEW ZEALAND FEB. BNZ SERVICES PSI 49.1; JAN. 50.4
CHINA FEB. NEW HOME PRICES -0.14% M/M; JAN. -0.07%
CHINA FEB. EXISTING HOME PRICES -0.34% M/M; JAN. -0.34%
CHINA JAN.-FEB. RETAIL SALES +4% Y/Y; EST. 3.8%
CHINA JAN.-FEB. INDUSTRIAL OUTPUT +5.9% Y/Y; EST. 5.3%
CHINA JAN.-FEB. FIXED INVESTMENT +4.1% Y/Y; EST. 3.2%
CHINA JAN.-FEB. PROPERTY DEV. INVESTMENT -9.8% Y/Y; EST. -8.9%
CHINA END-FEB. SURVEYED JOBLESS RATE 5.4%; EST. 5.1%; JAN. 5.2%
SOUTH KOREA JAN. ADJUSTED L MONEY SUPPLY +0.8% M/M; DEC. +0.2%
SOUTH KOREA JAN. ADJUSTED M2 MONEY SUPPLY +0.5% M/M; DEC. +0.9%
MARKETS
US TSYS: Futures Give Early Strength Ahead Of Retail Sales
In today's Asia-Pac session, TYM5 is 110-20+, unchanged from closing levels, after giving up early strength. Today's high has so far been 110-26.
- According to MNI’s technical team, initial technical support is at 110-12.5/110-00 (Low Mar 6 / High Feb 7).
- Cash US tsys are flat to 1bp richer in today’s Asia-Pac session after Friday’s modest sell-off. Cash tsys finished Friday weaker amid a cautious rise in risk sentiment, with the 2-year yield 6bps higher at 4.02% and the 10-year 4bps higher at 4.31%.
- Fed remains in Blackout until after Wednesday's FOMC policy announcement. Monday's US data focus is on Retail Sales, Empire Manufacturing and NAHB Housing Market Index measures.
JGBS: Twist-Steepener Ahead Of US Retail Sales, BoJ Decision On Wednesday
JGB futures are stronger, +16 compared to settlement levels, but off the session’s best level.
- The local data calendar has been empty today.
- The market’s focus is on Wednesday’s BoJ decision. The BoJ is widely expected to maintain its policy rate at 0.50%. The BoJ’s January rate hike marked a significant policy shift, bringing short-term rates to levels unseen since 2008. However, policymakers do not appear to see an urgent need for another increase at the March meeting.
- Market expectations point to a gradual path toward policy normalisation. The BoJ is projected to raise its policy rate to 0.75% by July or September and to reach 1.0% by the first quarter of 2026.
- Cash US tsys are flat to 1bp richer in today’s Asia-Pac session after Friday’s modest sell-off. The Fed remains in Blackout until after Wednesday's FOMC policy announcement. Monday's US data highlight is Retail Sales.
- Cash JGBs are 2bps richer to 7bps cheaper across benchmarks, with a steepening bias. The benchmark 10-year yield is 0.2bps higher at 1.518% versus the cycle high of 1.58%.
- Swap rates are 1bp lower to 3bps higher. Swap spreads are mixed.
- Tomorrow, the local calendar will see the Tertiary Industry Index and Tokyo Condominiums for Sale data alongside 1-year note supply.
AUSSIE BONDS: Subdued Session Ahead Of US Retail Sales, Jobs Data On Thursday
ACGBs (YM flat & XM +1.0) are little changed.
- Today, the local calendar has been empty. The next event on the local calendar is Sarah Hunter's, Assistant Governor (Economic) speech at the AFR Banking Summit tomorrow.
- However, the highlight of the week is likely to be Thursday’s jobs data for February. Jobs have consistently printed stronger than expected with January up 44k. Bloomberg consensus is forecasting a 30k rise in new jobs with the unemployment rate stable at 4.1% and the participation rate at 67.3%. It will also be important to monitor the underemployment, youth unemployment and hours worked. The RBA said that the strong labour market would have been the key reason to leave policy on hold in February.
- Cash US tsys are flat to 1bp richer in today’s Asia-Pac session after Friday’s modest sell-off.
- Cash ACGBs are 1bp richer, with the AU-US 10-year yield differential at +10bps.
- Swap rates are flat.
- The bills strip is modestly weaker, with pricing -1 to -2.
- RBA-dated OIS pricing is flat to 4bps firmer across meetings today. A 25bp rate cut in April is given a 7% probability, with a cumulative 65bps of easing priced by year-end (based on an effective cash rate of 4.09%).
BONDS: NZGBS: Closed On A Weak Note, Q4 GDP On Thursday
NZGBs closed on a weak note, with benchmark yields 3-4bps cheaper.
- Both the BNZ services and manufacturing performance indices in Q1 have improved compared to Q4 but the manufacturing sector is outperforming recording growth in both January and February leaving the Q1 average at 52.8 up from 45.9 in Q4. Services returned to contractionary territory in February falling to 49.1 from 50.4 leaving the Q1 average close to the breakeven-50 mark at 49.8 up from Q4’s 47.9. NZ growth remains weak but is gradually recovering. Q4 GDP prints on Thursday and is forecast to rise 0.4% q/q.
- Cash US tsys are flat to 1bp richer in today’s Asia-Pac session after Friday’s modest sell-off.
- Swap rates closed 2-3bps higher.
- RBNZ dated OIS pricing closed flat to 3bps firmer, with November leading. 25bps of easing is priced for April, with a cumulative 65bps by November 2025.
- Tomorrow, the local calendar will see Non-Resident Bond Holdings data.
- On Thursday, the NZ Treasury plans to sell NZ$250mn of the 4.50% May-30 bond, NZ$200mn of the 4.25% May-36 bond and NZ$50mn of the 5.0% May-54 bond.
- The RBNZ will start the repurchase program of the Sep-25 inflation-indexed bond on March 21. The operation has no implications for monetary policy stance.
FOREX: G10 FX Moves Limited As Equities Generally Stronger
The BBDXY USD index is moderately higher today after falling 0.2% on Friday. It has trended higher since its intraday low early in the session supported by a softer yen. USDJPY is 0.2% higher at 148.92, close to the intraday high of 149.07.
- While G10 moves have been muted, risk-sensitive Kiwi has outperformed again today with NZDUSD up 0.2% to 0.5758 after a high of 0.5763. The NZ PSI for February printed below breakeven-50 again but the Q1 average is still above Q4’s.
- AUDUSD rose to 0.6338 and has trended down since to be moderately higher on the day at 0.6329 pressured by mixed China activity data and lower China equities. This has left AUDNZD down 0.1% to 1.0992.
- European currencies are little changed during the APAC session with EURUSD around 1.0878 and GBPUSD 1.2936. NOK has benefited from increased geopolitical tensions in the Middle East with US attacks on Houthi positions in Yemen. EURNOK is down 0.1% to 11.5745.
- Equities are mixed with the Hang Seng up 1.1% and ASX +0.8% but CSI 300 down 0.2% and S&P e-mini -0.5%. Oil prices are higher with WTI +0.7% to $67.67/bbl. Copper is down 0.1% and iron ore has been $102-103/t.
- Later US March Empire manufacturing and February retail sales print. ECB President Lagarde appears.
ASIA STOCKS: Strong Day on China Stimulus
The China stimulus news has given equity markets in the region a boost, with most in the green today.
- The Hang Seng has led the day for China’s key bourses up +1.05% with Shanghai up just +0.17% whilst the CSI 300 is down -0.22% and Shenzhen flat.
- In Korea the KOSPI having a very strong day after a slow end the last week and is up +1.50% today, making it one of the best regional performers.
- Malaysia’s FTSE KLCI continues its recent good run, rising +1.13%.
- Indonesia’s Jakarta Composite remains in a challenging period, having finished the end of last week with heavy losses, is weak again today down -1.00% one of the worst regional performers.
- Other key indices are positive with the FTSE Straits Times of Singapore +0.66% and Philippines +0.66%
- India’s NIFTY 50 is opening in positive territory also, up +0.35% in early trading.
OIL: Crude Higher Boosted By Geopolitical Tensions & China Stimulus Hopes
Oil prices are off their intraday highs but are still moderately stronger on the session. They were boosted early in trading by news of intensive US strikes against Houthi positions in Yemen due to the resumption of their targeting of vessels in the Red Sea. WTI is 0.7% higher at $67.68/bbl after a peak of $68.37 where it found resistance (initial resistance at $68.36). Brent is up 0.7% to $71.10/bbl following a high of $71.80, still below resistance at $71.92. The USD index is little changed.
- There is significant uncertainty around both the demand and supply outlooks for oil with tariffs likely to weigh on the former and higher OPEC and US output increasing the latter. The degree additional supply will be offset by tighter sanctions on Iran and Russia is not yet known.
- Goldman Sachs has reduced its Brent forecast by $5 to $71/bbl for December 2025 for these reasons, according to Bloomberg. It expects Brent to trade between $65 and $80 and average $68 in 2026.
- China’s activity data for February was mixed but IP, investment and retail sales printed better than expected. Plans to stimulate consumption and stabilise the troubled property market have helped to support oil prices.
- The outlook for Russian sanctions is also unclear with talks regarding a ceasefire in Ukraine ongoing. US President Trump is due to speak to Russian President Putin on Tuesday.
- Later US March Empire manufacturing and February retail sales print. ECB President Lagarde appears.
GOLD: Unable to Hold at New Highs.
- Gold opened Monday strongly initially touching $2,994.20 before lower at $2,987.25
- The Belgian government is considering the sale of a portion of its gold reserves (valued at €20bn) to bolster its defense budget, according to L’Echo newspaper.
- Ramelius Resources Ltd. will acquire Spartan Resources Ltd. in a deal valuing the latter at A$2.4 billion with the combined entity expected to become a leading Australian gold producer, with output exceeding 500,000 ounces a year by 2030.
- The relentless demand for gold ETF’s in India continued in February with net inflows of US$260m. Whilst down from January it still represented the second highest total since records began.
- Gold finished Friday at US$2,984.16 up +2.5% for the week.
- Having reached a new high, trading through $3,000 briefly, gold’s retreat looks driven by profit taking rather than a change in its fortunes. .
- Many strategists have revisited their gold forecasts for 2025 with some suggesting $3,500 as their target.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 17/03/2025 | 0900/1000 | ** |  IT | Italy Final HICP |
| 17/03/2025 | 1215/0815 | ** |  CA | CMHC Housing Starts |
| 17/03/2025 | 1230/0830 | * | CA | International Canadian Transaction in Securities |
| 17/03/2025 | 1230/0830 | *** |  US | Retail Sales |
| 17/03/2025 | 1230/0830 | ** | US | Empire State Manufacturing Survey |
| 17/03/2025 | 1300/0900 | * | CA | CREA Existing Home Sales |
| 17/03/2025 | 1400/1000 | * | US | Business Inventories |
| 17/03/2025 | 1400/1000 | ** | US | NAHB Home Builder Index |
| 17/03/2025 | 1400/1500 |  EU | ECB's Lagarde awarding of diplomas at University Aix-Marselle | |
| 17/03/2025 | 1530/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 17/03/2025 | 1530/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 18/03/2025 | - |  JP | Bank of Japan Meeting | |
| 18/03/2025 | 0930/0930 |  GB | Consumer Price inflation weight update | |
| 18/03/2025 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 18/03/2025 | 1000/1100 | * | EU | Trade Balance |
| 18/03/2025 | 1000/1100 | *** |  DE | ZEW Current Expectations Index |
| 18/03/2025 | - | US | FOMC Meetings with S.E.P. | |
| 18/03/2025 | 1230/0830 | *** | CA | CPI |
| 18/03/2025 | 1230/0830 | *** | US | Housing Starts |
| 18/03/2025 | 1230/0830 | ** | US | Import/Export Price Index |
| 18/03/2025 | 1255/0855 | ** | US | Redbook Retail Sales Index |
| 18/03/2025 | 1315/0915 | *** | US | Industrial Production |
