KBC Sunset Market Commentary 10/02/2025 via Trader Talent

KBC Sunset

Monday, February 10, 2025

Daily Market Overview

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Markets

• US President Trump’s latest salvo of tariffs left global markets largely unfazed. It suggests they are either calling his bluff (having Canada and Mexico in mind) or are just tired already of running after each and every POTUS quote that’s hitting the screen. Trump this time targeted steel and aluminum, threatening a 25% levy on all imports but without saying when they would go into force. With Canada being the US’ main steel and aluminum partner, its currency is among the G10 underperformers today. USD/CAD is trading around 1.434. That’s only marginally up from 1.429 at the open, underscoring the aforementioned growing market apathy. Fall-out on the Mexican peso isn’t even worth mentioning. Mexico is the number two steel exporter (n° 3 for aluminum) to the US. There are little to no spillovers in emerging markets either, specifically in Central-Europe. CZK, PLN and HUF are all rising on a net daily basis. The dollar on a trade-weighted basis gapped a tad higher at the open before wiping out most gains again (DXY 108.22). EUR/USD isn’t going anywhere around 1.032.

• What the series of tariff announcements do trigger are increasing concerns for US and by extension global growth, specifically through the rapid countermeasures that are being put in place. Canada, Mexico and China were cases in point while the EU has its anti-coercion instrument in place since Trump’s first term in 2016-2020. It’s what prompted a steady decline in (real) US yields towards their recent lows over the past couple of days & weeks. Friday’s strong payrolls report came to the rescue by lifting rates up to 8 bps at the front but part (around 3 bps) of that is evaporating again today. European rates ease less than 2 bps across the curve in sympathy. Stocks inch higher. Europe’s Stoxx600 hit a new record high. Wall Street opens higher as well.

News & Views

• Statistics Norway today reported January headline CPI in the country printing at 0.2% M/M and 2.3% Y/Y (-0.1% M/M and 2.2% in December). CPI-ATE inflation (adjusted from tax changes and energy produces) reaccelerated to 0.1% M/M and 2.8% Y/Y from respectively -0.1% M/M and 2.7% Y/Y. Both figures were slightly above market expectations (2.2% headline, 2.6% core). In a monthly perspective, prices rose for food and drinks (+2.3%), housing related costs (0.9%), culture and leisure (0.5%) and other miscellaneous good and services (+1.4%). Monthly prices declined for clothing and footwear (-6.7%), household equipment (2.1%) and communications (-1.2%) amongst others. At its January policy meeting, the Norges Bank (NB) left its policy rate unchanged at 4.5%, but signaled a first rate cut for this cycle at the March 27 meeting. Today’s outcome is slightly higher than the projections in the NB monetary policy report of December (expected at 2.3% and 2.6% respectively). The NB anyway indicated that a restrictive policy will still be needed to keep inflation around the target. Markets after today’s CPI still see about a 90% chance of a 25 bps rate cut end March. However, the pace of/room for further rate cuts (seen at 3.8% in Q4 in the December policy report) might be less. February CPI still will be published before the March policy decision. The krone extended its recent rebound today gaining from EUR/NOK 11.63 to 11.57 currently.

• Statistics Sweden reported a series of December activity data today. Orders in industry increased 2.0% M/M and were up by 5.8% Y/Y. A large part of the industrial subsectors recorded a positive M/M development, even as orders mainly increased in the export market while they were nearly unchanged on the domestic market. Export market increased by 6.8% and domestic market decreased by 0.1%. A similar trend was visible in industrial production. Private sector production rose 1.0% M/M and 3.0% Y/Y. However, this concealed industry production raising 5.7% M/M and 9.0% Y/Y. However production value in the services sector decreased 0.2% M/M to be only 1.6% higher Y/Y. Production in construction also rose 1.4% M/M and 3.4% Y/Y. Household consumption showed no strong momentum either, declining 0.3% M/M to be up only 0.7% Y/Y. Divergent signals from different sectors of the economy comes as the Riksbank reduced its policy rate to 2.25% end January. It indicated that the easing cycle might have come to and end depending on the outlook on inflation and activity going forward.