Daily Market Roundup

North America News

Major US Indices Start the Week in the Red, NASDAQ Leads Declines

US stock markets kicked off the week with broad losses, led by a sharp decline in the NASDAQ index (-1.20%) as tech stocks faced selling pressure. The Russell 2000 also posted a steep decline of -1.28%, reflecting weakness in small-cap stocks.

Market Performance Overview

• Dow Jones Industrial Average: Fell 122.75 points (-0.28%) to 44,421.91.
• S&P 500 Index: Dropped 45.96 points (-0.76%) to 5,994.57, slipping below the key 6,000 level.
• NASDAQ Composite Index: Declined 235.49 points (-1.20%) to 19,391.96, leading the day’s losses.
• Russell 2000 Index: Fell 29.27 points (-1.28%) to 2,258.41, showing weakness in small-cap stocks.

Earnings Highlight: Palantir Surges on Strong Results

After the market closed, Palantir Technologies (PLTR) announced better-than-expected Q4 earnings of $0.14 per share, beating estimates of $0.11. The company also reported $827.5 million in revenue, well above the forecasted $780 million.

Palantir shares surged 15.12% to $96.31 in after-hours trading, as investors reacted positively to the earnings beat and strong revenue growth.

US January ISM manufacturing 50.9 vs 49.8 prior

• US January manufacturing survey from the Institute for Supply Management

• Prior was 49.2
• Prices paid 54.9 vs 53.5 expected (prior 52.5)
• Employment 50.3 vs 45.3 prior
• New orders 55.1 vs 52.1 prior
• Production 52.5 vs 49.9 prior
• Imports 51.1 vs 49.7 prior

Comments in the report:

• “Customer orders slightly stronger than expected. Seeing more general price increases for chemicals/raw materials. No International Longshoremen’s Association strike is a tremendous help.” [Chemical Products]
• “Alleviating supply chain conditions are noticeably pivoting back into acute shortage situations, with headwinds following. For aerospace and defense companies, critical minerals supply chains are tightening dramatically due to Chinese restrictions. Concerns are growing of an environment of more supply chain shortages.” [Transportation Equipment]
• “As the U.S. administration transfers, we will continue to monitor impact of tariffs on materials used for manufacturing. China stimulus is helping us win orders and increase use of services and consumables. Cost pressures remain for all materials and parts but are starting to stabilize.” [Computer & Electronic Products]
• “Volume in 2025 is targeting 2-percent growth. The organization is mindful of potential tariffs and what to do with re-routing or cost increases in supply chains that are impacted.” [Food, Beverage & Tobacco Products]
• “Although we are in our busy season, our demand for the first two weeks of 2025 has outpaced normal levels for this period of time.” [Machinery]
• “Business is slowly improving.” [Electrical Equipment, Appliances & Components]
• “Capital equipment sales are starting 2025 off strong. Normally, we see a soft start to the year, so this strong start is unusual.” [Fabricated Metal Products]
• “New orders are still good but decreasing compared to previous quarters. Working through current backlog.” [Miscellaneous Manufacturing]
• “Automotive order demand continues to be consistent and on a steady pace. Beginning to look at hiring additional team members once again. Pricing is holding firm. Having to work overtime to cover plant inefficiency to date.” [Primary Metals]
• “Looking forward to a year of strong customer demand and higher sales than 2024.” [Textile Mills]

US January final S&P Global manufacturing PMI 51.2 vs 50.1 prior

• US January S&P Global manufacturing PMI

• Prelim was 50.1
• Prior was 49.4
• Optimism in the year-ahead outlook for production hit a 34-month high
• New export orders nonetheless continued to fall in January,

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence

“A new year and a new President has brought new optimism in the US manufacturing sector. Business confidence about prospects for the year ahead has leaped to the highest for nearly three years after one of the largest monthly gains yet recorded by the survey. Over the past decade, only two months during the reopening of the economy from pandemic lockdowns have seen business sentiment improve as markedly as recorded in January.

“Manufacturers report that political uncertainty has cleared and the pro-business approach from the new administration has brightened their prospects. Production has already improved after falling throughout much of the last half of 2024, amid rising domestic sales. Factories have also stepped up their hiring to meet planned growth of production capacity.

“However, a rise in the rate of increase of both input costs and selling prices could become a concern if this intensification of inflationary pressures is sustained in the coming months, especially as the combination of higher price pressures alongside accelerating economic growth and rising employment is not typically conducive to cutting interest rates.”

US construction spending for December 0.5% versus 0.2% estimate

• US construction spending for December 2024

• Prior month 0.0% revised to +0.2%
• Construction spending for December 0.5% vs 0.2% expected
• YoY +6.5%

Private Construction (Dec 2024): $1,688.5B (+0.9% MoM)

• Residential: $939.5B (+1.5% MoM)
• Nonresidential: $749.0B (+0.1% MoM)

Private Construction (Full-Year 2024): $1,661.7B (+5.6% YoY)

• Residential: $917.9B (+5.9% YoY)
• Nonresidential: $743.8B (+5.3% YoY)

Public Construction (Dec 2024): $503.6B (-0.5% MoM)

• Educational: $109.5B (-0.6% MoM)
• Highway: $143.3B (+0.7% MoM)

Public Construction (Full-Year 2024): $492.7B (+9.3% YoY)

• Educational: $105.2B (+8.5% YoY)
• Highway: $142.7B (+4.1% YoY)

Fed’s Collins: Big tariffs will push up price levels, could also have second-round impacts

• Comments from the Boston Fed President

On CNBC:

• Fed would try to look through one-time price level increases
• US has limited experience with large-scale tariffs
• I see the US economy as being in a good place overall
• Labor market has been in good shape, we’re near full employment
• It’s appropriate for policy to be patient, careful, no urgency to change rates
• There is no urgency to lower rates again
• A number of reason why long-term rates are moving as they have seen
• Fed must weigh both sides of dual mandate

Fed’s Bostic: Businesses are not confident in their outlook at this point

• Atlanta Fed Pres. Bostic is speaking

• The current degree of uncertainty has broadened considerably
• Tariffs are an aspect of uncertainty; challenging to figure out how to incorporate it
• Because things are changing so rapidly the most important thing to do is ask questions of business contacts, look at possible other outcomes
• Fed needs to keep a sense of how businesses and families might react to changing conditions
• Fed’s emphasis is still on inflation
• Fed needs to get to 2% for the credibility of the institution
• The US can support a much tighter labor market than was previously understood
• The outlook is for inflation to continue to fall
• Fed expects housing inflation to continue to fall
• Outlook is for job markets remain solid.
• Labor market right now is not a constraint on business
• Want to see what the 100 basis points of cuts last year translates to in the economy
• Uncertainty has been increasing, want to be cautious and not have policy leaned in a direction and have to switch
• Risk, uncertainty may be one reason long rates have been rising
• See nominal interest rate between 3% and 3.5%
• Tariffs are a type of a tax, and impacts depend on details, application, retaliation
• Crypto has grown, but is still a small portion of the financial system, not clear what it might substitute for
• Businesses asked about tariffs expect to pass the cost through
• Businesses are uniformly saying they will pass on the cost of tariffs
• There is an outcome where the Fed might look through tariffs but also one where it could affect price expectations
• Businesses say pricing power is in decline. It would be a surprise if it quickly flipped
• Says he doesn’t expect enough clarity by March to adjust interest rates
• To cut rates again would want to see the housing market slow

Trump: China tariffs were an opening salvo

• Trump comments on Mexico, Canada, China and others

Trump signed an Executive Order to create a sovereign wealth fund.

• Says will be doing something perhaps with TikTok if we can make the right deal.
• TikTok could go in sovereign wealth fund
• Says Elon Musk is accessible only to letting people go if we need to
• Nobody is an out of tariffs
• We had a great talk with Mexico but we have to stop fentanyl
• We have not agreed on tariffs yet with Mexico
• Had a good talk with Trudeau, but we are not treated well by Canada
• We do not need Canadian cars, lumber and agriculture
• Would not mind making our cars in the US
• We will have a big negotiation with Mexico
• We will speak with China within the next 24 hours..
• China will not be involved with the Panama Canal for long
• China will be dealt with on Panama Canal
• China tariffs were an opening salvo
• China tariffs will go up if we can’t make a deal
• I have not seen a conflict with Elon
• I am not happy with the Panama situation but they have agreed to some things

Trump confirms that Mexican tariffs will be paused, says negotiations will start

• What Trump said

“I just spoke with President Claudia Sheinbaum of Mexico. It was a very friendly conversation wherein she agreed to immediately supply 10,000 Mexican Soldiers on the Border separating Mexico and the United States. These soldiers will be specifically designated to stop the flow of fentanyl, and illegal migrants into our Country. We further agreed to immediately pause the anticipated tariffs for a one month period during which we will have negotiations headed by Secretary of State Marco Rubio, Secretary of Treasury Scott Bessent, and Secretary of Commerce Howard Lutnick, and high-level Representatives of Mexico. I look forward to participating in those negotiations, with President Sheinbaum, as we attempt to achieve a “deal” between our two Countries.”

WH economic council director says Trump will decide what he will or won’t call off

• Remarks by White House economic council director, Kevin Hassett

• We have noticed that Mexico is “serious” about Trump’s executive order
• Canada appears to have misunderstood the language
• Trump has given Canada and Mexico an enormous amount of leverage
• Outcome is likely to be positive for everyone involved

Canada January S&P Global manufacturing PMI 51.6 vs 52.2 prior

• Canada January manufacturing sector survey
• Prior was 52.2

Commenting on the latest survey results, Paul Smith, Economics Director at S&P Global Market Intelligence said:

“January’s survey highlighted the complex impact that possible US tariffs are presently having on the Canadian manufacturing economy. Firms noted that clients in some instances were bringing forward their orders to get ahead of these potential tariffs, and output amongst manufacturers was being raised in response. Firms even took on additional staff to help service additional workloads, and this helped them to keep on top of their current orders.

“However, the threat of tariffs from the US is leading to a huge amount of uncertainty in product markets, and firms are growing increasingly concerned about a potential trade war with a key trading partner. Subsequently, confidence in the outlook dropped quite noticeably in January, whilst growth rates for both output and new orders deteriorated since the end of 2024.”

Bank of Canada will implement six consecutive quarter-point interest rate cuts

• Will take the policy rate to 1.5% by October

Bank of Montreal (BMO) has revised its outlook for Canadian interest rates in response to the economic impact of Trump’s 25% tariff.

• BMO now anticipates the Bank of Canada will implement six consecutive quarter-point interest rate cuts, bringing the policy rate down to 1.5% by October.

This shift in expectations reflects concerns about the potential fallout from heightened trade tensions, which could dampen economic growth, disrupt supply chains, and increase costs for Canadian businesses and consumers. BMO’s updated forecast suggests that the Bank of Canada will adopt a more aggressive easing cycle to counteract these headwinds, support domestic demand, and mitigate the risk of an economic slowdown.

The anticipated rate cuts are also expected to influence the Canadian dollar, potentially putting downward pressure on the currency, while providing some relief to borrowers through lower lending costs. BMO’s outlook underscores the growing uncertainty in the global economic landscape and the need for a more accommodative monetary policy to navigate potential challenges ahead.

Persistent Trump tariffs mean a minus 5% hit to Canada’s economy, Mexico -8%, US -1%

• Mitch McConnell says tariffs will “be paid for by UIS consumers”

Analysts at US-based investment bank Piper Sandler with the estimated negative hits to economies over a year of Trump’s tariffs:

• Canada economic growth (GDP) sees a minus 5% hit
• Mexico’s GDP a minus 8%
• US economy a minus 1%

Senior Republican Senator Mitch McConnell spoke with US TV show ’60 Minutes’:

• says he objects to tariffs pushed by Trump
• “It’ll be paid for by American consumers. I mean why would you want to get in a fight with your allies over this?”

Commodities News

Gold Surges to Record High as US Tariffs Drive Safe-Haven Demand

Gold prices soared to a new all-time high on Monday, climbing 0.87% to $2,821, as investors sought safety amid heightened trade tensions. The US government’s decision to impose 25% tariffs on Canada and Mexico, and 10% on China fueled market uncertainty, reinforcing gold’s appeal as a hedge against economic instability.

Market Reaction: Gold Holds Gains Despite Improved Sentiment

Despite a slight improvement in market mood, gold maintained its strong gains, reflecting ongoing concerns over the long-term impact of tariffs. The US Dollar Index initially peaked at a two-week high but later retreated as news of a potential delay in US-Mexico tariffs tempered its momentum.

Meanwhile, President Trump announced plans for discussions with Canada’s Prime Minister Justin Trudeau, raising hopes for a possible resolution. However, with tariffs on Canada and China still set to take effect Tuesday, investors remain on edge.

Key Market Drivers and Economic Indicators

• US ISM Manufacturing PMI rose to 50.9, beating expectations of 49.8 and signaling expansion in business activity.
• The Prices Paid sub-index increased from 52.5 to 54.9, indicating rising input costs.
• The Employment Index climbed to 50.3, suggesting improved labor market conditions.

Expert Commentary: Gold Could See Further Upside

Bart Melek, Head of Commodity Strategies at TD Securities, noted that the market has yet to fully price in the effects of the trade war. “We haven’t seen a complete response from gold yet. If this trade war drags on, we could see significantly higher gold prices in the coming months,” he stated.

Federal Reserve’s Stance on Rate Cuts

• Boston Fed President Susan Collins suggested the Fed remains cautious on rate cuts due to tariff-related uncertainty.
• Atlanta Fed President Raphael Bostic emphasized the need to bring inflation down to 2%, reinforcing the Fed’s credibility.
• Money market futures now indicate 44 basis points of rate cuts in 2025, with traders expecting the first move in June.

Crude oil futures settle at $73.16

• Up $0.63 or 0.87%

The price of crude oil is settling at $73.16, which is up $0.63 or 0.87%. The high for the day reached $75.16. The low was at $72.05.

OPEC+ JMMC meeting to make no recommendation on oil output – report

• Reuters report

This is no surprise. The JMMC will next meet on April 5.

Goldman Sachs says the medium term risks to oil prices is skewed to the downside

• Also say they don’t think tariffs will be around in the medium term.

Goldman Sachs:

• potential tariff-driven decline in US natural gas imports from Canada is too small to significantly raise natural gas prices
• medium-run risks to oil prices skewed downside because persistent broad tariffs would weigh on global;l GDP and oil demand

JP Morgan on Trump tariffs – reinforce their bullish view on gold

• Well, at least they’re getting a dip to buy into if they want

JP Morgan on the Trump tariff trade war:

• reinforces their bullish view on gold
• maintain their near-term bearish on base metals

LME base metals prices are likely to face solid near-term bearish pressure on

• growth concerns
• macro risk-off
• USD strength

Europe News

Eurozone January final manufacturing PMI 46.6 vs 46.1 prelim

• Latest data released by HCOB – 3 February 2025
• Prior 45.1

HCOB notes that:

“It’s definitely too early to talk about green shoots in the manufacturing sector, but we see the increase in the HCOB PMI as a first step towards stabilisation, ending two months of the deepening of the recession.

“Higher input prices are a challenge for the manufacturing sector, given its weak economic position over the past two years. These higher input prices, partly due to average oil prices rising by almost 7% in January, could also pose a challenge for the ECB, as the previous easing of overall inflation was largely due to lower energy prices.

“Even though the new US administration will likely hit the European manufacturing sector and its export industry with tariffs and other measures, confidence in the future has made a remarkable jump. The index for future output is four points higher and slightly above its long-term average. Maybe there’s hope that the lethargy is ending, with general elections in Germany and possibly France, and a climate of “the time is ripe to change things and get things done.”

“Germany and France hold the red lantern in the eurozone’s manufacturing sector, with Austria and Italy not faring much better. At least the manufacturing recession has slowed somewhat in all these countries, and this applies across a broad range of sectors. In Germany and France, the situation for capital goods, intermediate goods, and consumer goods is no longer as dramatic as it was the previous month. It’s possible that things will improve further this year. Despite all of Trump’s tariff threats, we must remember that for most countries in the eurozone, 90% or more of exports go to countries other than the US.”

Eurozone January preliminary CPI +2.5% vs +2.4% y/y expected

• Latest data released by Eurostat – 3 February 2025

• Prior +2.4%
• Core CPI +2.7% vs +2.6% y/y expected
• Prior +2.7%

Germany January final manufacturing PMI 45.0 vs 44.1 prelim

• Final reading released by HCOB – 3 February 2025
• Prior was 42.5

Key findings:

• HCOB Germany Manufacturing PMI at 45.0 (Dec: 42.5). 8-month high.
• HCOB Germany Manufacturing PMI Output Index at 46.3 (Dec: 41.7). 8-month high.
• Prices charged fall at slower rate as costs come close to stabilising

Comment:

Commenting on the PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:

“Fear of US tariffs, snap elections, and rising insolvencies are not exactly the recipe to end the recession in the manufacturing sector. With such a tough environment, it is no surprise that the HCOB PMI for manufacturing is still in the red, signalling a continuation of the downturn that has been going on since mid-2022. Even though the HCOB PMI has risen, we would only expect a sustained stabilisation if it exceeds the 50 mark or shows at least three consecutive increases.”

“The drop in production in January was not as severe as in the previous seven months. Calling it a ray of hope might be an overstatement, but several indicators show that the dramatic deterioration has slowed a bit. This applies to new orders, order backlogs, and purchased quantities.”

“In a genuinely positive sign companies are looking to the future with much more confidence, believing they might be producing significantly more a year from now. The Future Output Index reached its highest level since February 2022. Some companies justify this optimism with the prospect of lower interest rates and hopes that the economy will pick up after the parliamentary elections with a new government.”

“The destocking of purchased goods signals that an economic recovery will take some time. The rate of destocking remains high and the inventory retrenchment phase is unusually long. Interestingly, Germany seems to have decoupled from the global inventory cycle, as global stocks of purchases have hardly changed recently. This supports the idea that the recession in German industry is more structural than cyclical.”

“The unchecked decline in manufacturing seems to have stopped. This applies to production and new orders, which had been falling at a fast rate in the second half of 2024. The January figures suggest that the order backlog might be stabilising, as this was the smallest decline since August 2022. The situation remains critical, but companies are far from capitulating.”

France January final manufacturing PMI 45.0 vs 45.3 prelim

• Latest data released by HCOB – 3 February 2025
• Prior 41.9

HCOB notes that:

“France’s manufacturing industry remains in a deep recession. The HCOB PMI for manufacturing rose significantly to 45.0 in January, but it remains below the growth threshold of 50. Output has now been shrinking for 32 consecutive months. Anecdotal reports suggest that the political climate in France is particularly concerning for the industry. Although the new government under François Bayrou survived a no-confidence vote in mid-January, the passage of a budget for 2025 in midFebruary is far from certain. Long-term planning security and an end to political infighting in Paris could help the country and the manufacturing sector emerge from the crisis.

“Competitive pressures were reflected in prices. Input prices are still growing, but at a relatively weak pace in a historical context. According to surveyed industrial companies, costs for transport and materials such as wood and cardboard were up. However, weak demand in the sector forced industrial companies to lower their output prices as competition intensified.

“The outlook remains pessimistic. Order intakes, both domestically and internationally, remain in contraction. Geopolitical tensions are weighing on international orders, although some companies reported lower sales in Africa. Expectations for output for the next twelve months remain negative, although sentiment saw a significant improvement compared to December. Due to this uncertainty, French industrial companies remain cautious about employment, primarily laying off temporary workers.”

Spain January manufacturing PMI 50.9 vs 53.3 expected

• Latest data released by HCOB – 3 February 2025
• Prior 53.3

HCOB notes that:

“The new year is off to a weak start. The momentum in Spain’s manufacturing sector has significantly slowed at the beginning of 2025. This is due to production heading toward stagnation, and order levels rising at a much slower rate, following solid growth in both areas in previous months. Foreign orders also broadly stagnated in January. The surveyed companies partly attribute this to the weakness in major Eurozone countries like Germany and France. However, this has not dampened business expectations for the coming year. Companies remain hopeful as new projects were initiated at the start of the new year, aiming to improve trade and output.

“Developments on the price front are causing concern. Input price inflation has accelerated for several consecutive months, as indicated by the HCOB PMI. Nevertheless, we are still far from the high levels of input inflation observed following the supply bottlenecks after the pandemic and the Russian invasion of Ukraine. Input price inflation is now close to its long-term average. For the first time in several months, output prices have also risen. The higher prices can indeed be interpreted as passing on the increased input costs to consumers.

“Concerning consumer goods, the HCOB PMI signalled a slight weakening compared to the previous month, yet growth remains solid overall, in line with recent trends. In contrast, the intermediate and investment good sectors are both stagnating at the beginning of the year. The general weaknesses in Europe’s key industries, such as the automotive and machinery sectors, may now also be affecting Spain’s manufacturing industry, leading to weaker performance, particularly in these sectors.

“After several months of substantial growth, manufacturing employment was little changed in January. Where additional staff were needed, companies did not refuse to hire but cost pressures and restructuring efforts strained employment growth. However, backlogs of work have been increasing for a year now. Combined with positive business sentiment, this creates a stable environment for Spanish manufacturing employees.”

Italy January manufacturing PMI 46.3 vs 46.8 expected

• Latest data released by HCOB – 3 February 2025
• Prior was 46.4

Key findings:

• Decline in production volumes loses momentum
• Sharp and accelerated decrease in order book volumes
• Firms continue to reduce charges despite rise in cost pressures

Comment:

Commenting on the PMI data, Jonas Feldhusen, Junior Economist at Hamburg Commercial Bank, said:

“Operating conditions at Italy’s manufacturing companies remain bleak. The manufacturing Output Index remained below the 50 threshold. The start of the year was disappointing yet predictable. Structural issues such as elevated energy costs and weak economic activity in key trade partners like Germany, France, and China are contributing to the ongoing economic downturn.”

“Italian factories produced less at the beginning of the year. With the sustained fall in new orders, production has been reduced to manage manufacturing costs. Signs of improvement are scarce, as both domestic and foreign order books are plummeting. Incoming orders from abroad are particularly challenged, as Germany and France are grappling with political uncertainty.”

“Uncertainty also hangs over future US trade. Will the tariffs be imposed, and at what level? The US was Italy’s second most important export destination in 2023, with a share of 10.7% of total exports, making Italy one of the most exposed countries to potential US tariffs in the eurozone.”

“Opposing mechanisms are at work when it comes to pricing. Manufacturing input costs have risen, mainly due to another increase in volatile raw materials and transportation costs. Conversely, output charges continued to shrink for the fifth consecutive month, reflecting the weak demand situation faced by manufacturers who are trying to stimulate demand to maintain sales.”

“The situation is becoming increasingly uncomfortable for employees in the manufacturing sector. The corresponding Employment Index has signalled job cuts for four consecutive months, due to a number of expiring contracts not being renewed. Despite this, manufacturers are looking to the future with increased optimism. They hope that the new year will bring political stability among trade partners and create opportunities to attract new customers.”

Italy January preliminary CPI +1.5% vs +1.3% y/y prior

• Latest data released by Istat – 3 February 2025
• HICP Y/Y +1.7% vs 1.4% y/y prior

In January 2025, core inflation (excluding energy and unprocessed food) was stable at +1.8% and inflation excluding energy was +1.8% (from +1.7%).

As for Goods, the year on year growth rate was +0.7% (from +0.2% in December) and for Services the annual rate of change was +2.6% (the same as the previous month). As a consequence, the inflationary gap between Services and Goods decreased (from +2.4 percentage points in December to +1.9).

The increase of the growth on annual basis of All-item index was mainly due to the prices of Regulated energy products (from +12.7% to +27.8%), of Non-regulated energy products (from -4.2% to -3.0%) and, to a lesser extent, of Processed food including alcohol (from +1.7% to +2.0%).

UK January final manufacturing PMI 48.3 vs 48.2 prelim

• Final data released by S&P Global – 3 February 2025
• Prior was 47.0

Key Findings:

• Output, new orders and employment all contract further
• Input price inflation hits two-year high

Comment:

Rob Dobson, Director at S&P Global Market Intelligence:

“The start of 2025 has seen the downturn in the UK manufacturing sector continue. Factory output, new orders and employment all fell further in January as companies faced weak market demand, rising costs and a deteriorating outlook.”

“The latest survey also suggests that this retrenchment is being hardest felt among small companies. Large- sized manufacturers fared better, seeing output and new orders recover during January.”

“There nevertheless seems little scope for any imminent improvement in performance across the board. Demand conditions remain weak in both domestic and overseas markets, cost pressures are rising and will likely continue to do so as changes to the minimum wage and employer NI announced in last year’s Budget feed through.”

“Business optimism consequently remains close to December’s two-year low, while input price inflation has spiked to a two-year high. A stagnant economy and rising cost burdens leave policy makers with a real dilemma, balancing the need for rate cuts to support flagging growth and a declining labour market against the need to contain inflationary pressures.”

SNB total sight deposits w.e. 31 January CHF 441.9 bn vs CHF 441.3 bn prior

• Latest data released by the SNB – 3 February 2025
• Domestic sight deposits CHF 432.9 bn vs CHF 433.3 bn prior

Switzerland January manufacturing PMI 47.5 vs 48.4 prior

• Latest data released by Procure – 3 February 2025

The softer reading mostly stems from a drop in orders, though there is still pessimism surrounding the general outlook. Procure says that “expectations in the industrial sector with regard to protectionism remain largely unchanged”. The detailed breakdown:

ECB’s Villeroy: Trump tariffs is a very worrying development

• Remarks by ECB policymaker, Francois Villeroy de Galhau

• Trump tariffs will increase economic uncertainty
• There will likely be further rate cuts

ECB’s Kažimír: Latest rate cut moves us closer to our destination

• Remarks by ECB policymaker, Peter Kažimír

• But we are not quite there yet
• Forecasts, services inflation, wage developments will navigate what will happen in April and beyond

ECB’s Šimkus backs another 25 bps rate cut in March

• Remarks by ECB policymaker, Gediminas Šimkus

• Sees a couple more rate cuts after March as well
• We can allow for looser monetary policy
• We still have space left before reaching neutral rate
• Trump tariffs increase uncertainty

Asia-Pacific & World News

China UN Envoy: No winner in a trade war

• No winner in a trade war
• US should look at its own problem with fentanyl rather than shifting the blame onto others. Beijing may be forced to take countermeasures against US
• China firmly opposed to unwarranted increase in tariffs by Trump administration

China’s UN envoy says will be filing a WTO complaint against US

• Comments from China’s UN envoy

• China firmly opposed to ‘unwarranted increase’ in tariffs by Trump
• Beijing may be forced to take counter measures
• US should look at its own problem with fentanyl rather than shifting the blame to others
• Smear campaign on the US on belt-and-road is totally groundless
• US and China can work together on many things

Caixin China Manufacturing PMI (January 2025) 50.1 vs. expected 50.5

• December was 50.5

Caixin China Manufacturing PMI for January 2025:

A weak 50.1, but keeps its nose in expansion, fourth consecutive month of growth

• expected 50.5
• prior 50.5

From the report, in summary:

Supply & Demand:

• Both expanded slightly; domestic demand drove growth while export orders declined for the second month.

Employment:

• Fell sharply, with the lowest levels since February 2020; companies focused on cost control and limited new hiring.

Prices:

• Weak priceng environment; output prices fell for the second straight month despite rising raw material costs.

Logistics:

• Delivery times improved, reaching the fastest pace since May 2023; strong demand led to inventory restocking.

Business Optimism:

• Future output expectations grew, though below historical averages; concerns linger over China-U.S. trade relations.

Challenges:

• Declining employment, weak external demand, and sluggish price levels remain key issues.

Policy Impact:

• 2024 stimulus measures showed results, but their effectiveness may fade in 2025 amid global uncertainties.

Wall Street Journal reports China promises not to devalue the yuan

• And other proposals

The Wall Street Journal (gated) report on:

• Beijing Prepares Its Opening Bid to Talk Trade With Trump

Some ideas China has to negotiate with Trump, the Journal cites (according to unnamed sources), include:

• Going back to a previous trade deal from 2020
  • Phase One deal required China to increase purchases of American goods and services by $200 billion over a two-year period. Analyst estimates say China bought only 58% of the U.S. goods it had committed to purchase.
• Offer to make more investment in the US
• Not to devalue the yuan to find competitive advantage

Australia S&P Global PMI Manufacturing January, final read 50.2 (flash 49.8 prior 47.8)

• S&P Global Australian Final Manufacturing PMIs for January 2025

Australia S&P Global PMI Manufacturing January, final read 50.2

prior 47.8

Australian building permits for December 2024: +0.7% m/m (expected +1.0%)

• Australian retail sales data for December was out at the same time, the main focus

Australian building permits for December 2024:

+0.7% m/m

• expected +1.0%, prior +0.8%

+12.2% y/y

• prior +3.2%

Australia retail sales December 2024 -0.1%% m/m (expected -0.7%)

Australian retail sales data for December 2024 and also Q4 2024

We also had ANZ job data, from that report:

• ANZ-Indeed Australian Job Ads has risen 0.5% in the past two months, and the series is up 1.3% from its August low.
• The stabilisation at a level 15.0% above the pre-pandemic average points to the labour market’s resilience

Australian private survey of inflation, January 2025: +0.1% m/m (prior +0.6%)

• Melbourne Institute of Applied Economic & Social Research at the University of Melbourne Inflation Gauge

Melbourne Institute of Applied Economic & Social Research at the University of Melbourne.

Privately surveyed inflation measure, lower in January than in December:

+0.1% m/m

• prior +0.6%

+ 2.3% y/y

• prior +2.6%

Trimmed mean

• +0.1% m/m (prior 0.4%, which was the highest since March 2024) and +2.3% y/y (prior: 2.8%)

Japan economy minister says underlying inflation is approaching 2%

• Remarks by Japan economy minister, Ryosei Akazawa

• Japan aims to push underlying inflation to 2% target
• At the same time, taking measures to cushion blow from rising living costs
• What households face on a daily basis is driven more by cost-push factors, such as rising import prices

BoJ January meeting summary – one member cited upside inflation risk

• Summary of Opinions at the Monetary Policy Meeting on January 23 and 24, 2025

Summarising the main points of internset, on inflation and policy:

• Inflation Trends:
  • Underlying CPI inflation expected to rise steadily, approaching the 2% target.
  • Labour shortages contribute to persistent inflation through a positive output gap.
  • Balanced upside and downside risks to prices, with potential stagflation if global trade frictions intensify.

Monetary Policy

• Policy Adjustments:
  • Support for raising the policy interest rate to 0.5% to ensure stable achievement of the 2% inflation target.
  • Interest rate hike considered neutral relative to market expectations.
  • Real interest rates to remain negative post-hike, with potential for further increases if conditions persist.
• Risks and Considerations:
  • Concerns over yen depreciation and potential overheating of financial activities.
  • Need to monitor small and medium-sized firms’ wage-raising capacity.
  • High uncertainties warrant cautious communication on future interest rate hikes.

Japan Manufacturing PMI January (final) 48.7 (prior 49.6)

• Jibun / S&P Global Manufacturing PMI for Japan in January 2025

Jibun / S&P Global Manufacturing PMI for Japan in January 2025, the final reading

48.7

December was 49.6

Crypto Market Pulse

Bitcoin Recoups $100K as Market Sentiment Shifts

Overview of Bitcoin’s Recent Price Activity

In recent days, Bitcoin has experienced notable fluctuations in its price, drawing significant attention from investors and analysts alike. The cryptocurrency witnessed a sharp decline, plummeting to a low of $91,441, which raised concerns about market stability and potential bearish trends. This dip occurred amid a backdrop of fluctuating market dynamics, including regulatory uncertainties and macroeconomic factors that urged traders to reassess their positions. Factors such as global economic developments, investor sentiment, and competing cryptocurrencies likely played a role in this volatility.

However, the narrative soon shifted as Bitcoin staged an impressive recovery, successfully regaining its position above the critical $100,000 threshold. This rebound not only signifies a restoration of market confidence but also indicates the resilience of Bitcoin amid external pressures. As the price rebounded, multiple factors were responsible for this resurgence, including renewed institutional interest, positive regulatory news, and a growing demand for cryptocurrencies as a hedge against inflation. Investors appeared to have regained their optimism, supporting buying activity that contributed to the ascent.

This recent price activity of Bitcoin is significant in the broader context of the cryptocurrency market. Specifically, the dynamics surrounding Bitcoin often have a ripple effect on altcoins, influencing their price trajectories. The stability of Bitcoin at or near the $100,000 mark serves as an essential benchmark for many investors, and its performance is closely monitored by the wider crypto community. Understanding the implications of these price movements is crucial for assessing potential future trends and opportunities within the cryptocurrency landscape. As market conditions continue to evolve, the interplay between Bitcoin’s price fluctuations and investor sentiment remains a focal point for market observers.

Market Sentiment: A Shift Towards Risk Appetite

The cryptocurrency market has experienced a noticeable shift in sentiment, marked by an increasing appetite for risk among investors and traders. This changing mentality suggests a growing confidence in market recovery, particularly with Bitcoin recently recouping the $100K mark. The underlying factors contributing to this transition include macroeconomic dynamics, geopolitical developments, and evolving trading relationships, all of which play a crucial role in shaping investor psychology.

One significant factor fueling this positive transformation is the broader economic environment. Following periods of uncertainty, investors are often inclined to reassess their portfolios, leading to purchases of riskier assets, such as cryptocurrencies. Improved economic indicators, including employment rates and inflation stabilization, can create a favorable backdrop, encouraging speculative investment in Bitcoin and other digital currencies. As market participants absorb these signals, their willingness to engage in higher-risk opportunities increases, propelling the overall sentiment upward.

Geopolitical events also contribute to the fluctuations in market sentiment. For instance, political stability in key regions can bolster investor confidence, significantly impacting risk tolerance. Conversely, unpredictability or conflicts can either deter investment or spur a rush towards more stable assets. However, as positive developments unfold across various geopolitical landscapes, the mood can rapidly shift, prompting increased participation in the cryptocurrency markets.

The intricate relationship between countries concerning trade can also influence market sentiment. As nations navigate through changing alliances and trade deals, cryptocurrency serves as an alternative investment avenue. Therefore, a favorable global trading environment can amplify risk appetite, leading to a surge in cryptocurrency investments. This interconnectivity highlights how macro factors can materially impact individual investor behavior, transforming the overall landscape of the crypto market.

Impact of U.S. and Mexico Tariff Pauses

The recent tariff pauses between the United States and Mexico have stirred considerable discussions about their potential influence on the cryptocurrency market, particularly Bitcoin. Tariffs have historically been a source of volatility in financial markets, and their suspension can lead to a more favorable trading environment. The easing of trade tensions can cultivate a sense of stability, which typically enhances market confidence. As such, cryptocurrency investors may respond positively to the news, potentially leading to increased trading volumes and an upward price trajectory for Bitcoin.

Furthermore, improved trade relations often signal economic stability, which can drive institutional and individual investments into assets perceived as alternative stores of value—such as Bitcoin. Investors may see cryptocurrencies as a hedge against economic uncertainties and a means to diversify their portfolios. The promise from both nations to uphold better trade practices might encourage risk-taking behavior among investors, redirecting capital toward Bitcoin and other digital currencies.

Looking Ahead: Future Trends for Bitcoin and Altcoins

As the cryptocurrency market regains momentum, it is essential to examine potential future trends for Bitcoin and altcoins. Following Bitcoin’s recent surge past the $100,000 mark, market analysts are divided into optimistic and pessimistic scenarios regarding forthcoming price movements and overall market direction. Optimistically, there’s a growing belief that Bitcoin could continue its upward trajectory, fueled by increasing institutional investments, broader adoption, and favorable regulatory developments. The narrative of Bitcoin as a hedge against inflation is gaining traction, which may lead to further capital inflows.

On the other hand, pessimistic viewpoints caution that Bitcoin’s volatility could return, particularly if global economic factors shift unfavorably or if regulatory crackdowns on cryptocurrencies intensify. In this context, altcoins may also experience erratic movements. The past few months have shown that many altcoins closely follow Bitcoin’s trends but can also decouple significantly based on their unique utility, market cap, and community support. Therefore, investors should prepare for heightened volatility across the spectrum of cryptocurrencies.

Given the unpredictable nature of the market, investors are advised to adopt a diversified approach. Holding a mix of Bitcoin, established altcoins, and anticipating emerging projects could help mitigate risks. Additionally, it may be prudent to set clear investment goals, employ stop-loss orders, and regularly monitor market developments. As the crypto landscape evolves, following the news regarding key technological upgrades, partnerships, and regulatory changes will be crucial in making informed investment decisions. Collectively, these strategies may aid investors in navigating the complexities of the cryptocurrency market in the coming weeks, positioning themselves favorably against potential risks while capitalizing on opportunities.

Solana Dips Below $200: Key Levels to Watch as Bulls Defend Support

Solana (SOL) has faced a sharp decline, dropping below the $200 mark for the first time in three weeks. On Monday, the cryptocurrency hit a 20-day low of $195, marking an 18% downturn in just three days. As the broader crypto market remains volatile, traders are closely watching key support and resistance levels to gauge SOL’s next move.

Key Support Levels: Bulls Eye $186 Defense

The recent sell-off has brought SOL near critical support zones, with on-chain data highlighting $186 as the strongest support level. This price point holds 68% of the $217 million total leveraged long positions, making it a key battleground for bulls looking to prevent further downside.

Other notable support levels include:

• $192: Holds $94 million in long positions.
• $189: Another key zone with $38 million in leveraged longs.
• $175: If $186 fails, this level could be the next major demand zone.

These clusters of high-leverage positions suggest traders may strongly defend these levels to avoid liquidation, creating a potential price floor.

Path to Recovery: Can SOL Rebound Toward $250?

Despite bearish momentum, technical indicators suggest a possible recovery if market sentiment shifts positively.

• Elliott Wave analysis points to a potential upside toward $250, provided SOL finds strong buying interest at support zones.
• Bollinger Bands indicate that SOL is trading near its lower boundary, suggesting oversold conditions and the possibility of a relief rally.

A successful defense at $186 could trigger a bounce toward $210-$220, with a break above $225 opening the door for a move toward $250. However, failure to hold above support may lead to further losses.

The Day’s Takeaway

Monday’s market action reflected a mix of volatility, uncertainty, and key economic shifts across multiple asset classes.

• Stock Markets: US equities started the week on a weaker note, with the NASDAQ (-1.20%) and Russell 2000 (-1.28%) leading declines. The S&P 500 (-0.76%) fell below the critical 6,000 level, while the Dow Jones (-0.28%) saw a more modest drop. Tech stocks were hit the hardest, but Palantir Technologies stood out, surging 15.12% after posting stronger-than-expected earnings.
• Gold: Safe-haven demand pushed gold to a record high of $2,821 (+0.87%), as investors responded to rising trade tensions and economic uncertainty. While the US Dollar Index initially strengthened, it later retreated on news of a potential US-Mexico tariff delay.
• Crypto Markets: Bitcoin experienced major price swings, dropping to a low of $91,441 before rebounding above $100,000, signaling renewed market confidence. The broader cryptocurrency landscape remains sensitive to regulatory developments, macroeconomic conditions, and geopolitical factors, making it crucial for investors to monitor price dynamics closely.
• Trade War Escalation: Tensions between the US and China intensified, with China’s UN envoy stating that “there is no winner in a trade war” and confirming plans to file a WTO complaint against the US. President Trump labeled China tariffs as an “opening salvo,” indicating that further trade actions could be on the horizon.
• Federal Reserve & Economic Data:
  • The ISM Manufacturing PMI rose to 50.9, signaling improving economic conditions.
  • Fed officials remain cautious on rate cuts, with Boston Fed President Susan Collins emphasizing patience amid tariff uncertainty.
  • Money market futures now price in 44 basis points of Fed rate cuts in 2025, with the first move expected in June.

Overall, global markets remain in flux as investors weigh trade tensions, economic data, and shifting monetary policies. Gold’s record-breaking rally, Bitcoin’s volatility, and stock market declines highlight the complexity of the current investment landscape. As uncertainty persists, traders and investors will continue watching developments in US-China relations, Federal Reserve policy, and crypto market trends to guide their next moves.