MNI EUROPEAN OPEN: Trump Moves to Impose Reciprocal Tariffs

Feb-14 05:24By: Jamie Grant

Europe

EXECUTIVE SUMMARY

TRUMP MOVES TO IMPOSE RECIPROCAL TARIFFS AS SOON AS APRIL - BBG
EUROZONE SET FOR MODERATE DOWNWARD GROWTH REVISION - MNI
FORMER PBOC OFFICIAL ON CHINA GROWTH OUTLOOK - MNI
DENOUNCING INDIA TARIFFS, TRUMP AGREES TO TRADE TALKS - RTRS

Fig 1: USD BBDXY Index & 10yr Nominal Tsy Yield

Source: MNI - Market News/Bloomberg/Refinitiv.

UK (BCC) : “New US Tariff Proposals Would Hit UK Economy according to the British Chamber of Commerce. Reacting to the proposals for new reciprocal tariffs outlined by the US Government today, William Bain, Head of Trade Policy, said: “These new proposals for reciprocal and differential tariffs will create more cost and uncertainty for investors, businesses and consumers across the world. “Plans to factor in countries’ VAT regimes could lead to especially complex and costly tariff scenarios which upend established trade norms.”

EU (MNI BRIEF): Stagnation in some eurozone countries in the final quarter of last year will mean downwards revision to 2025 growth forecasts, a senior EU official said on Wednesday.

RUSSIA/UKRAINE/US (WSJ): "Vice President JD Vance said Thursday that the U.S. would hit Moscow with sanctions and potentially military action if Russian President Vladimir Putin won't agree to a peace deal with Ukraine that guarantees Kyiv's long-term independence."

EU (BBG) : “The European Union is planning to introduce simpler state-aid rules to encourage clean tech investments and boost industrial competitiveness.”

EU / US (BBG): “The Trump administration has told European allies that they should buy American weapons and military equipment to maintain the NATO alliance.”

NORWAY: (MNI) Norges Bank Governor Ida Wolden Bache downplayed the likely extent of rate cuts in her annual address, with the Norwegian central bank yet to start the easing cycle. "The job of bringing inflation down is not finished," Wolden Bache said adding that there was some room to ease, but policy needed to remain restrictive. Nevertheless, in a speech that centred on the openness of the Norwegian economy, she said its interest rate level "cannot over time differ significantly from the level among our trading partners."

US (BBG) : “President Donald Trump ordered his administration to consider imposing reciprocal tariffs on numerous trading partners, raising the prospect of a wider campaign against a global system he complains is tilted against the US.”

US (MNI) : U.S. consumer delinquency rates increased at a slower pace in the fourth quarter of 2024 compared to prior quarters, the New York Fed said Thursday, a sign that consumers were in good shape overall. At the end of December, 3.6% of outstanding debt were in some stage of delinquency, up a tenth from the third quarter.

TECH/CHINA (BBG): "Apple Inc. is working to bring its AI features to China by the middle of this year, accelerating a complex undertaking that has required software changes and deep reliance on local partners."

TECH/CHINA (BBG): "Apple Inc. and Alphabet Inc.’s Google are restoring ByteDance Ltd.’s TikTok to their app stores on Thursday following assurances in a letter from US Attorney General Pam Bondi that a ban wouldn’t immediately be enforced. "

OTHER

JAPAN (BBG): "Japan will sell 210,000 tons of rice from its emergency stockpiles as households are paying record prices for the grain."

US/INDIA (RTRS): "U.S. President Donald Trump said on Thursday that Indian Prime Minister Narendra Modi offered to talk about easing tariffs, buying more U.S. oil, gas and combat aircraft, and potential concessions that don't yet end a standoff on trade."

AUSTRALIA (DJ): “The Reserve Bank of Australia is on track to lower interest rates for the first time in the current global easing cycle, but the outcome of next week's policy meeting is more finely balanced than what is implied by pricing in money markets, according to Jonathan Kearns, a former senior manager at the central bank.”

INDONESIA (BBG): " Indonesian President Prabowo Subianto said the nation’s new sovereign wealth fund will start on Feb. 24 and invest in a range of industries as he steps up efforts to boost growth to his goal of 8%. "

CHINA

GROWTH (MNI): A former PBOC official shares his China growth outlook. On MNI Policy MainWire now, for more details please contact sales@marketnews.com

CHINA MONETARY POLICY: (Xinhua) -- “China's central bank will utilize a variety of monetary policy tools and adjust the intensity and timing of policies as appropriate, based on domestic and international economic and financial conditions, as well as financial market operations, according to a report released by the People's Bank of China (PBOC) on Thursday. The aim is to maintain ample liquidity and ensure that social financing and money supply growth align with the country's goals for economic growth and overall price levels, according to the PBOC's fourth-quarter 2024 monetary policy report.”

CHINA (Yicai) : “The tax cuts, fee reductions, and tax refunds resulting from China's supportive policies for science and technology innovation and the development of the manufacturing industry totaled CNY2.63 trillion (USD366.8 billion) last year.”

CHINA MARKETS

MNI: PBOC Net Drains CNY85.2 Bln via OMO Friday

MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY98.5 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY85.2 billion after offsetting the maturity of CNY183.7 billion today, according to Wind Information.

The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.8497% at 09:51 am local time from the close of 1.8199% on Thursday.
The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 61 on Thursday, compared with the close of 48 on Wednesday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.

MNI: PBOC Sets Yuan Parity Lower At 7.1706 Fri; -1.30% Y/Y

MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.1706 on Friday, compared with 7.1719 set on Thursday. The fixing was estimated at 7.2769 by Bloomberg survey today.

MARKET DATA

NEW ZEALAND BUSINESS MANUFACTURING PMI JANUARY 51.4; PRIOR 46.2 (REVISED UP).

NEW ZEALAND FOOD PRICES JANUARY MOM 1.9% ; PRIOR 0.1%

SOUTH KOREA UNEMPLOYMENT RATE JANUARY 2.9%; MEDIAN 3.2%; PRIOR 3.7%

SOUTH KOREA EXPORT PRICE INDEX YOY JANUARY 8.5%; PRIOR 10.5% REVISED DOWN.

SOUTH KOREA IMPORT PRICE INDEX YOY JANUARY 6.6%; PRIOR 6.8% REVISED DOWN

MARKETS

US TSYS: Tsys Futures Steady Ahead Of Retail Sales

Not too much to mention for tsys during Asia today, the curve has steepened slightly, with the 2s10s roughly +1bps at 22.632. Volumes in tsys futures are well below recent averages, TU is +00⅜ at 102-21⅝, the only contract in the green, while TY is -01+ at 108-29+
The 10yr is unchanged at 4.529%, the 10yr has slightly out-performed the 5-30yrs part of the curve over the past week. BBG have reported that MLIV survey participants expect the 10yr to rise to 4.80% over the coming 6 months, the 10yr last reached this level in early Jan.
January retail sales are expected to soften due to harsh weather that dampened vehicle sales and shopping activity, despite strong labor market and inflation data. Headline retail sales are expected to have fallen 0.4%, while core sales (excluding autos and gas) likely to have risen 0.2%. Rebuilding efforts from natural disasters may have boosted sales of building materials, though small-business data and consumer sentiment suggest downside risks. Despite this, robust Q4 consumer spending—driven by higher wages and front-running of tariff hikes—is expected to continue supporting demand, particularly for durable goods.
• Projected rate cuts through mid-2025 steady to slightly firmer vs. Thursday (*) as follows: Mar'25 steady at -0.5bp, May'25 steady at -3.9bp, Jun'25 at -11.1bp (-9.8bp), Jul'25 at -15.1bp (-13.6bp).
The market is still pricing in the first rate cut in October, after briefly pushing out the first cut expectation to December following CPI on Wednesday, note there is no meeting in November
Focus now turns to Retail Sales later tonight, followed by Industrial Production later in the session

JGBS: Subdued Session, Rice Prices Surge, Q4 GP On Monday

JGB futures are stronger, +4 compared to settlement levels, but well off the session’s best levels.

Given that today’s 5-year auction was offering a yield approximately 10-15bps higher than last month, marking a cyclical peak, mixed demand metrics were viewed as somewhat disappointing.
Outside of the previously outlined International Investment Flow data, there hasn't been much by way of domestic drivers to flag.
Japan will sell 210,000 tons of rice from its emergency stockpiles as households are paying record prices for the grain. The average retail price for 5 kilograms of rice surged 82% to 3,688 yen ($24) in the week of Jan. 27th compared with a year ago, according to the Ministry of Agriculture, Forestry and Fisheries. (per BBG)
Cash US tsys are little changed in today’s Asia-Pac session after yesterday’s solid rally which took yields back to pre-CPI levels from Wednesday. Details of January's PPI offered some hope for easing price pressures in the PCE Deflator
Cash JGBs are little changed across benchmarks out to the 10-year and 1-2bps richer beyond.
Swap rates are 1-2bps higher. Swap spreads are wider.
On Monday, the local calendar will see Q4 GDP (P) and December IP (F).

AUSSIE BONDS: Richer But Off Bests, RBA Decision On Tuesday With At 85% Priced

ACGBs (YM +4.0 & XM +6.0) sit stronger but off the session’s best levels on a local data-light session.

Cash ACGBs are 4-5bps richer with the AU-US 10-year yield differential at -11bps.
Swap rates are 3-5bps lower, with the 3s10s curve flatter.
The bills strip has bull-flattened, with pricing +1 to +5.
“The Reserve Bank of Australia is on track to lower interest rates for the first time in the current global easing cycle, but the outcome of next week's policy meeting is more finely balanced than what is implied by pricing in money markets, according to Jonathan Kearns, a former senior manager at the central bank.” (per DJ via BBG)
Reuters Poll shows 40 out of 43 economists expect the RBA to cut the cash rate to 4.10% on February 18, while three predict no change.
RBA-dated OIS pricing is flat to 3bps softer across meetings today. A 25bp rate cut is more than fully priced for April (119%), with the probability of a February cut at 84% (based on an effective cash rate of 4.34%).
The local calendar is empty until the RBA Policy Decision next Tuesday.
Next week, AOFM plans to sell A$800mn of the 2.75% 21 June 2035 bond on Wednesday and A$700mn of the 2.50% 21 May 2030 bond on Friday.

BONDS: NZGBS: Closed Near Cheaps But Held Bull-Flattener

NZGBs closed near session cheaps. Nevertheless, the market showed a bull-flattener, with benchmark yields 1-5bps lower. The NZ-US 10-year yield differential rose 2bps to -2bps, with the NZ-AU differential unchanged at +9bps.

“NZ Treasury Secretary Iain Rennie says the country needs to address its high cost of capital, which is a key driver of its poor productivity growth. Renni identifies "relatively high tax rates on businesses" as part of a policy landscape that discourages investment and the inflow of foreign capital, and suggests focus on four areas to lift productivity growth.” (per BBG)
Food prices in NZ rose 1.9% m/m in January, a leap from the 0.1% uptick in December 2024 to mark the highest increase since July 2022. "The proportion of the food basket that increased by over 5% in price was the highest in five years,": StatsNZ
Swap rates closed flat to 3bps lower, with the 2s10s curve flatter.
RBNZ dated OIS pricing closed slightly softer across meetings today.
Notably, OIS pricing is 2–14bps firmer than pre-Q4 Labour Market data levels from February 4. Nevertheless, 48bps of easing is priced for February, with a cumulative 116bps by November 2025.
On Monday, the local calendar will see the Performance Services Index and Net Migration data.

FOREX: A$ & NZD Near Important Resistance Levels, USD Lower For The Week

The USD BBDXY index sits little changed in the first part of Friday dealing, last near 1292.4. We have seen slight outperformance from NZD and AUD, but aggregate moves are modest at this stage.

The BBDXY index is comfortably down for the week, with EUR and EU related currencies outperforming. Ukraine peace hopes, coupled with no fresh tariffs in the near term, is weighing on USD sentiment.
For today, NZD/USD is up a little over 0.20%, last near 0.5690. This brings us back within striking distance of the 50-day EMA (near 0.5700), which also coincides with early Feb highs.
Earlier we had a surge in the NZ PMI back above 50.0, while Jan NZ food prices were also very strong. This comes ahead of next week's RBNZ meeting. A 50bps cut is expected. Today's data outcomes may have more influence on the RBNZ outlook beyond next week's meeting.
NZ-US 2yr swap spreads also remain within recent ranges, last near -78bps, so we may need more upside on this front to sustain higher NZD levels.
AUD/USD has edged up, but at 0.6320 is still short of key resistance at 0.6331 (the Jan 24 high). Iron ore prices are higher, amid supply fears due to weather conditions in Western Australia
We have seen a continued rally in Hong Kong equities, while China markets are also higher today. Tech optimism continues to fuel gains.
US equity futures are up a touch, while US yields are little changed.
USD/JPY is near 152.80, unchanged for the session, but yen has been a notable underperformer the past week, particularly against EU currencies.
Looking ahead, we have EU GDP, while in the USD retail sales is likely to be the main focus point. Will also hear from the Fed's Logan.

ASIA STOCKS: China & Hong Kong Equities Trade Higher, Tech Surges

Hong Kong and Chinese equities extended their rallies on Friday, driven by optimism over AI advancements and a measured U.S. approach to tariffs. The Hang Seng Index surged 2.3%, heading for its fifth consecutive weekly gain, while the Hang Seng Tech Index jumped 3.2%, surpassing its October highs. Chinese offshore tech stocks rallied, with Alibaba (+2.3%), Tencent (+4%), and Meituan (+4.4%) leading gains, supported by investor enthusiasm over AI startup DeepSeek and its impact on China's AI sector.
On the mainland, the CSI 300 Index rose 0.8%, while the Shanghai Composite added 0.1%. Sentiment was further lifted by reports of a potential state-backed National Data Group, consolidating key industry data, driving stocks like Beijing E-Hualu (+15%) and Beijing Topnew Info&Tech (+20%) higher.
While some remain cautious about the sustainability of the AI rally, hedge fund flows into Chinese stocks have accelerated, with China's growing tech momentum, as per BBG
Investors now turn their focus to March's Two Sessions meetings for potential policy support to sustain the rally.

ASIA STOCKS: Asian Equities Higher Following Positive Tariff News

Asian equities are higher today as investors reacted positively to the prospect that reciprocal US tariffs may take weeks to materialize, raising hopes for negotiations that could soften their impact. The MSCI Asia Pacific rose for the third consecutive day, supported by Wall Street's rally, where the S&P 500 neared a record high. The South Korean won gained, while the yen fluctuated. Optimism around China’s artificial intelligence sector further fueled gains, with Hong Kong-listed Chinese tech stocks performing strongly. Meanwhile, US tsys yields fell overnight, helping risk sentiment, and the AUD hit a two-month high against the USD.

Hong Kong’s HSI jumped 2.3%, continuing its recent rally driven by strong gains in Chinese technology stocks. Tencent, Xiaomi, and Meituan all surged over 4%, supported by renewed investor interest in the sector following DeepSeek’s AI breakthrough. Optimism around China’s broader AI capabilities and a wave of new AI model releases from firms such as Alibaba and Baidu further boosted sentiment. Mainland China equities are higher, however are again underperforming HK listed stocks, The Shanghai Composite edged up 0.25%, while the CSI 300 is trading 0.75% higher.
Japan’s Nikkei 225 slipped 0.65%, despite the broader rally in Asian equities. Selling pressure was evident as investors weighed Trump’s comments targeting Japan for potential reciprocal tariffs. Meanwhile, JX Advanced Metals Corp. set an indicative share price for its IPO, marking Japan’s largest such deal since 2018. The semiconductor sector was in focus, with sentiment dampened by questions over the benefits of TSMC’s reported partnership with Intel.
South Korea’s KOSPI climbed 0.90%, benefiting from broader risk-on sentiment and a stronger won. Tech stocks were a key driver, mirroring gains in the Chinese sector. However, South Korea remains under scrutiny after being singled out by Trump for potential reciprocal tariffs, which could impact trade-sensitive industries.
Taiwan's TAIEX has struggled today with the index down 1%, as TSMC dropped 2.30%.
Australia's ASX 200 hit a fresh record, rising 0.30% and marking its third record high this week, with the index briefly trading above 8,600 before pulling back, with strong gains in utilities and mining offsetting losses in financials and healthcare. Origin Energy surged 2.8%, leading the utilities sector, while BHP, Fortescue, and Rio Tinto all advanced. However, Cochlear slumped 13% after issuing a cautious profit outlook, and AMP plunged 13.7% following a disappointing earnings report.

Oil Set for Weekly Gain as Tariffs Take Centre Stage.

Oil markets are on track for a weekly gain, following three successive weeks of losses.
As President Trump signed a measure proposing reciprocal tariffs on numerous trading partners, assessing tariffs on a country by country basis, markets realized that tariffs are not imminent and turned positive.
WTI opened the day at US$71.52 bbl and trended marginally higher throughout the day to $71.40.
WTI is enjoying a positive week and on track to be +0.55% higher.
Brent opened at $75.02 and rose modestly throughout to reach $75.20.
Brent too is on track for a positive week up +0.70%
The International Energy Agency had reduced its forecasts for oil surplus in 2025.
The IEA reduced their forecasts for output from Russia and Iran, given the focus from the US on halting their shipments and imposition of sanctions, and revising up their assumptions for demand in Asia.
In signs that the focus on Russia is working, ship tracking data shows that over 50% of the oil tank listers blacklisted by the Biden administration are currently not shipping oil (as per BBG).

Gold Delivers Seventh Straight Week of Gains.

President Trump has issued a directive that tariffs must be assessed on a country-by-country basis, a move which may delay time for them to be imposed whilst driving uncertainty.
The move raises the possibility of an all out global trade war, driving demand for safe haven assets like gold and contributing to it rising more than 10% this year.
Starting the day at US$2,927.79 gold’s ascent throughout the day was modest as it rose towards a new high of $2,933.89 before moderating to $2,923.58.
In a move that could have serious implications for gold markets, the Trump government is looking at not only mark to marking the US gold reserves, but even selling them.
A move to mark-to-market the gold reserves could have up to a $700 billion impact on the valuation of the holdings, creating a windfall for the Trump administration.
This could have major implications for the funding requirements of the government going forward.

UP TODAY (TIMES GMT/LOCAL)

Date	GMT/Local	Impact	Country	Event
14/02/2025	0800/0900	***	ES	HICP (f)
14/02/2025	1000/1100	***	EU	GDP (p)
14/02/2025	-	***	CN	Money Supply
14/02/2025	-	***	CN	New Loans
14/02/2025	-	***	CN	Social Financing
14/02/2025	1330/0830	**	CA	Monthly Survey of Manufacturing
14/02/2025	1330/0830	**	CA	Wholesale Trade
14/02/2025	1330/0830	***	US	Retail Sales
14/02/2025	1330/0830	**	US	Import/Export Price Index
14/02/2025	1415/0915	***	US	Industrial Production
14/02/2025	1500/1000	*	US	Business Inventories
14/02/2025	1800/1300	**	US	Baker Hughes Rig Count Overview - Weekly
14/02/2025	2000/1500		US	Dallas Fed's Lorie Logan