February 14 – Bloomberg (Shawn Donnan): “President Donald Trump is embarking on what may be his most disruptive action yet for the global economy by broadening his grievances to how other countries choose to tax and regulate. Trump… ordered top economic officials to calculate new US tariffs based on the total tariffs and tax, regulatory, currency and any other barriers that US exports face. The new ‘reciprocal’ duties would be calculated country by country. They will be laid out in a series of reports due by April 1 that officials said would first examine the economies with which the US has the largest trade deficits. ‘The numbers are going to be very fair but staggering. They’re going to be large,’ Trump told reporters in the Oval Office as he signed a memorandum ordering up the new tariffs.”
February 14 – Reuters (Susan Heavey): “The Trump administration is looking beyond tariffs and non-tariff barriers to examine currency manipulation as it studies the issue ahead of an April deadline. U.S. Treasury Secretary Scott Bessent said… ‘We’re also looking at currency manipulation,’ Bessent said… ‘The U.S. has a strong dollar policy, but because we have a strong dollar policy, it doesn't mean that other countries get to have a weak currency policy.’”
A few relevant headlines: “Fearless Wall Street Traders Refuse to Panic as Tariff War Rages.” “Tariff Man Strikes Again – And Markets Ignore Him.” “Markets Shrug Off Tariffs Threat. Tariffs, Schmariffs.” “Mexico Peso Gains as Trump Tariffs Seen as Bluff.”
Bloomberg’s John Authers: “This was the day many around the world had feared, when President Donald Trump summoned the media to the Oval Office and declared all-out trade war. Then markets responded with relief and made clear they didn’t believe a word of it.”
New York Times Dealbook: “‘Markets had to decide whether the president was being a protectionist or a pushover, and for now are erring toward pushover,’ Paul Donovan, the chief economist at UBS Global Wealth Management, wrote in an investor note... ‘The delay is seen as an opportunity to do ‘deals’.”
I’d believe him on this one. Wouldn’t bet on President Trump being a pushover. Of course, there will be deals, but there will be no negotiating away the President’s expansive reciprocal tariff regime.
Oval Office reporter question: “Have you spoken to any CEOs directly about this (reciprocal tariff announcement)?”
President Trump: “I’ve spoken to many. Many love it. And they say this is going to be the thing that makes our country really prosperous again. And this is going to be what pays down the $36 trillion in debt and all the other things. This is an amazing day. I think this is going to be a very big day in a very positive way for our country.”
Question: “On tariffs, are you concerned that the countries that would be most affected, like India, would shift their trading to China?”
President Trump: “No. I’m not concerned about anything. I’m just doing what’s fair. This is a very fair thing. This should have been done a long time ago. I would have done it, but then Covid hit. I was getting ready to do this years ago. First term we had the most successful economy in history, and then Covid hit. This was going to be the thing that I was waiting to do. It was awfully hard to do this with Italy, France and Spain – all those people were dying, and then we put tariffs on. I have a big heart.”
Question: “How much money do you think you’ll raise from tariffs on an annual basis?”
President Trump: “That’s the most interesting question. I think it will be a staggering amount. I call it the external revenue service… I think it’s going to be a staggering amount.”
Question: “We’ve heard the number one trillion floated with meetings with senators. Is that a number you’ve thought of?”
President Trump: “I don’t know. Already the Senate is saying, wait a minute, they’re looking at some of the numbers and they’re saying, ‘whoa.’ I say America first; I say make America great again. That’s what we’re doing. I think this is the most important thing I’ve signed. I’ve signed very important things… A lot of important things. Space force. The biggest tax cuts in history. This could be one of the most important things we’ve ever signed.”
Question: “There’s been some nervousness on Wall Street about the impact (of tariffs).”
President Trump: “I don’t think so. There hasn’t been very much. It’s going to make the United States stronger. And in many ways, it could make other countries stronger too. Other countries want to have a stronger United States. They want to have a strong America. I think it’s going to make us very, very strong. Much stronger.”
Thursday from the Oval Office, President Trump introduced a broad outline of a monumental change in the U.S. trading relationship with the world. He’s ready to abandon the existing global trade framework, finish off the World Trade Organization and long-accepted trade practices.
Speculative market Bubbles are notorious for a short-term fixation and propensity to disregard less than pressing negative developments and risks. Yes, markets are uniquely complacent at this point. There is now a deeply ingrained view that the world’s most powerful leader shudders at just the thought of an unsettled stock market. “Art of the Deal” bluff and bluster dovetails so nicely with today’s bullish narrative.
But I view Thursday’s reaction to reciprocal tariffs as consistent with trading dynamics in an acutely speculative marketplace. The lack of immediate tariff implementation pushed out a potential major market catalyst a couple months. This triggered an unwind of hedges and a decent short squeeze across global risk markets. In general, those hedging and shorting these days have “weak hands,” quick to reverse bets for fear of having their faces ripped off. Millions of presumptuous day traders are obsessed with buying the dip.
It's difficult for me to see a scenario where the administration’s new tariff regime is not highly disruptive. But it’s unlikely to be immediate. For now, a somewhat weaker dollar has taken pressure off the weak-link global “periphery.” In one of the more noteworthy moves this week, emerging market CDS sank seven to 150 bps, the low back to June 2021.
European equities have been on fire. Germany’s DAX index jumped 3.3% this week, increasing 2025 gains to 13.1%. France’s CAC 40 rose 2.6% (up 10.8% y-t-d), and Italy’s MIB gained 2.5% (up 11.1%). Curiously, European high yield (“crossover”) CDS sank 14 to 279 bps, second only to September 19th (275bps) for the lowest level in two years. European Bank (subordinated debt) CDS sank to the low since February 2020 – and is only about a basis point from a seven-year low.
When I see such market inflation and risk embracement in the face of deteriorating fundamentals, my focus turns to identifying the underlying dynamics fueling the rally.
After trading up to 4.79% on January 14th, 10-year Treasury yields were down to 4.42% on February 2nd. Yields surged 10 bps to an intraday high of 4.63% after Wednesday’s stronger-than-expected January CPI report. Yields then reversed 9.5 bps on reciprocal tariff Thursday (disregarding higher PPI) - and then were down another five bps on Friday’s weak retail sales data, for the fifth straight week of lower yields.
The bond market’s recent rally, especially this week’s resilience in the face of unfriendly CPI, PPI, and tariff news, has been instrumental in underpinning “risk on.” If the bond market had reacted harshly to the reciprocal tariff regime, a retreating stock market would have elicited a more discerning Trump tariffs discussion.
Probabilities are high that the world is now moving toward major trade confrontations. There are clear inflationary risks, especially with the overheating U.S. economy already demonstrating elevated price pressures (i.e., CPI, PPI, wage growth). The bond market is vulnerable.
In contrast to equities, the bond market tends to be more forward-looking. There’s a scenario where a highly disruptive trade war slams global growth. And with runaway speculative Bubbles (i.e., equities, AI, crypto, leverage lending) susceptible to destabilizing reversals, Treasuries might look beyond the horizon and find solace in waning growth, inflation, and policy rate prospects. Perhaps a hopeful Treasury market is also discounting Elon cost-cutting and more forceful Republican budget hawks.
It's not unreasonable that bonds rallied on dramatic tariff regime news. But it's arguably highly problematic. Bonds have their own serious Bubble issue. Historic speculative leverage is running wild, generating the liquidity excess fueling asset inflation and speculation around the world. And its liquidity-fueled excess in the face of trade wars, massive deficit spending, and myriad risks that is stoking late-cycle speculation and leverage, and resulting acute market vulnerability. A system inviting vigilantism.
While this week’s growth ($5.5bn) was moderate, money market fund assets have expanded $789 billon, or 23% annualized, over the past 29 weeks to a record $6.923 TN. This is indicative of a historic expansion of “repo” market borrowings used to finance leveraged speculation, with reports of massive ongoing growth in the highly levered Treasury “basis trade.” It has become increasingly apparent that amped up speculative leverage is a global phenomenon.
February 13 – Bloomberg (Laura Noonan): “Hedge funds active in Europe are running $219 billion of bets with just €12 billion of client assets, the European Securities and Markets Authority said as it warned about increasing leverage across alternative investments. ‘Hedge funds especially continue to be particularly leveraged,’ ESMA said in its semi-annual risk report. ESMA said a group of hedge funds making ‘substantial’ use of leverage now had a total exposure ‘which represents a multiple of 18’… In a more detailed report last year, ESMA said it was closely monitoring a cohort of hedge funds that employed leverage of more than 2,000% in their bets on mortgage bonds.”
February 11 – Bloomberg (Greg Ritchie): “The rise of multi-manager hedge funds poses a threat to financial stability, according to Bank of England Governor Andrew Bailey. Bailey said there are signs of correlated activity, which combined with often ruthless risk-management policies could see these funds rush to the exits during market shocks. Multi-manager funds… have taken the lion’s share of investment flows in hedge funds in recent years. That’s with the promise of steady and diversified returns from traders organized into distinct strategies, or pods. ‘Multi-manager funds can make individual ‘pods’ deleverage rapidly in stress conditions, which can exaggerate market moves,’ Bailey said… ‘There could be circumstances in which the means by which multi-manager funds protect themselves in this respect can create risks to the system.’”
February 10 – Bloomberg: “Bond traders in China, desperate to boost their returns, are turning to a strategy that exploits small differences between spot and futures prices… The lending volume of a bond maturing in September 2054 hit 177 billion yuan ($24bn) in January, more than triple the amount lent in November…”
February 11 – Bloomberg (Wenjin Lv): “Chinese traders are the latest to embrace basis trades now bond yields there have sunk to epic lows. That may underscore concerns that the relentless bull market in the country’s debt is getting overstretched, and that there’s the potential for investors to inadvertently take on excessive risks. Remember that the proliferation of such trades -- leveraged positions to milk the arbitrage between cash bond and futures pricing -- have been pointed to as potential systemic risks in the US and Japanese markets.”
Under the headline, “The Secretive Hedge Fund Rewriting the Rules of $4.5 Trillion Industry,” Bloomberg Thursday profiled the quantitative multi-strategy QRT hedge fund that “has grown quietly into a $23 billion trading powerhouse, all from modest origins as an $800 million spinoff from the Swiss bank just seven years ago.”
“Multistrats are notorious for leaning on vast amounts of borrowed money to juice their bets. QRT takes it to a whole new level. As a firm, Millennium’s total amount of regulatory assets, which includes leverage, was 7.5 times its investor cash at the end of 2023; Citadel’s was roughly 7.2 times. At Morlat and Laizet’s outfit, it’s been at least twice that.”
Of QRT’s two major funds, “Torus had regulatory assets of $191 billion, according to a US filing in March. Qube traded $121 billion.”
That’s $312 billion of assets for a highly levered “$23 billion trading powerhouse.” It’s reasonable to assume that assets and leverage have continued to balloon over the past 10 months. The dominant “basis trade” players operate with more egregious leverage (40 to 75 times). So, with a hedge fund industry at $4.5 TN, along with scores of “family offices” and international operators, how many tens of Trillions of assets are controlled today by the global leveraged speculating community? QRT is a good illustration of the proliferation of levered speculation, which is behind rampant market liquidity excess – operating at the epicenter of market fragility.
I saw evidence this week of both ongoing liquidity overabundance and latent fragilities. I’m not the only analyst arguing that markets are broken. Markets again this week demonstrated a precarious inability to discount and adjust to negative developments. Moreover, there were unusual trading dynamics indicative of urgent position liquidations. The Nasdaq100 had a 3.2% swing from Wednesday’s lows to Friday’s close. Nvidia swung almost 8%. From Monday’s high to Tuesday’s close, the Goldman Sachs Short Index sank 4.62%, only to then spike 6.5% from Wednesday’s low to Friday’s intraday high.
The dollar/yen traded at 151.2 early Monday, jumped to as high as 158.80 on Wednesday, before trading back down to 152 intraday Friday. From Wednesday’s low to Thursday’s close, Germany’s DAX equities index surged 3.0%.
The highly synchronized drop in global CDS prices is indicative of a hasty unwind of trades – a powerful “squeeze” dynamic. Is a major player unwinding positions, or is more systemic? The week’s drop in EM CDS prices was the largest since November, while the decline in European Bank CDS was the second biggest back to August. More extraordinary, the almost 11 bps collapse in China sovereign CDS was the most dramatic decline since September 2023. China’s major bank CDS prices collapsed double digits to lows back to 2021.
Hong Kong’s Hang Seng Index surged 7.0% this week, South Korea’s Kospi 2.7%, Brazil’s Ibovespa 2.9%, and Mexico’s IPC 2.4%. Major equities indices were up 3.8% in Poland, 3.3% in Hungary, 3.0% in the Czech Republic, and 3.6% in Romania.
Global market liquidity has turned highly unstable. For a while, leveraged speculation has fueled destabilizing global liquidity excess. More recently, rising Treasury and global yields were spurring deleveraging and waning liquidity at the “periphery.” But the reversal in Treasury and global yields triggered short covering, the unwind of hedges, and resurgent levered speculation, all working to ensure the swift reemergence of liquidity overabundance.
Liquidity excess poses significant Treasury market risk. For one, lower yields fuel ongoing manic stock and Credit market excesses, further elevating system overheating risks. Months of excessively loose financial conditions have fueled stronger pricing pressures throughout the U.S. economy. And it appears loose global financial conditions risk resurgent price pressures globally. It’s worth noting that the Bloomberg Commodity Index’s 1.6% rise this week boosted y-t-d gains to 7.2%. Gold traded to a record high of $2,943 this week, before closing Friday up 9.8% y-t-d at $2,883. A record $972 billion of monthly Chinese Credit growth didn’t hurt inflation prospects.
February 14 – Bloomberg: “China’s credit expansion picked up far more than expected in January from a year ago, even as a record jump in new bank loans failed to reverse an entrenched slowdown in demand for financing. Financial institutions extended 5.1 trillion yuan ($702bn) of new loans, the most for the month of January in data going back to 1992. The start of the year is traditionally a peak season for lending activity, as banks rush to tap their abundant loan quota… Aggregate financing, a broad measure of credit, increased by 7.06 trillion yuan. That was higher than every forecast… Credit growth also benefited from a surge in government bond sales, which reached 693 billion yuan — marking the strongest start to the year since 2020.”
My thoughts this week returned to a former Fed chairman. Ben Bernanke had a radical theory, one he was convinced was supported by history. He had strong conviction and hubris. His theoretical premise was shaped by a simplistic, myopic view of the nature of inflation. Bernanke viewed $1 trillion of QE – vehemently arguing it was not “money printing” – as a temporary expedient to resolve a pressing national predicament. But the actions of the world’s dominant central bank carried profound global ramifications. When we ponder the introduction of the Trump administration’s radical protectionist regime, it’s important to appreciate that monumental policy experimentation is replete with great uncertainty and myriad unexpected consequences.
Importantly, Bernanke’s 2008 crisis response turned traditional central banking on its head, at home and abroad. There was literally no turning back. The course of history was altered. For starters, any and all central banks could resort to monetary inflation on a whim, unleashing momentous global inflationary forces, certainly including historic asset Bubbles, wealth inequality, and resulting social, political, and geopolitical instability. And each round of monetary inflation fueled more precarious Bubbles, followed by more outrageous monetary inflation. It spiraled so out of control that a small group of unelected officials in Washington thought it was responsible to “print” a quick $5 TN. There were no legal constraints to restrict such a consequential act, because it was never contemplated that the Federal Reserve would ever consider doing such a thing. Traditional norms had been long abandoned. No protest, only thumbs up.
Bernanke’s theory was deeply flawed: thinking he was rectifying a U.S. Bubble problem, he instead unleashed history’s greatest global monetary inflation and Bubble excess, along with attendant instability and mayhem. It might have been twisting, uneven and murky, but the path from Bernanke’s 2008 experimentation to this week’s Trump experimentation is clear-cut.
Inflationism doesn’t create wealth; it destroys it – though these days at peak (Credit, financial, speculative leverage) Bubbles and manias (i.e., equities, AI/tech, crypto), the delusion is more all-encompassing than ever. Who actually believes tariffs and protectionism will make our nation wealthier?
We shouldn’t downplay the enduring consequences of antagonizing our allies. I don’t expect our Canadian neighbors to go out of their way to buy American products. And it was a week that left European leaders livid and befuddled. Along with reciprocal tariffs that will hit the EU (with large value-added taxes) especially hard, there was the specter of President Trump seemingly excluding Ukraine and Europe from his Putin war negotiation plans. Providing an extra kick of sand in the face, vice president Vance’s lecture at the Munich Security Summit was heavy on MAGA and alarmingly light on alliance collaboration in a fraught environment that demands plenty. There was a quote in a Friday article that included a phrase I fear we’ll hear a lot more: “Make America hated again.”
It's been less than four weeks. The existing world order is being disrupted in record time. But at least most tariffs aren’t to go into effect until April 2nd. The stock market seems to believe this date was picked to allow ample time for a string of perfect trade deals. Instead, this looks like the bare minimum needed to structure an incredibly complex tariff structure with thousands of products across our many trade partners, factoring in a host of national tariff and non-tariff levies and considerations.
I don’t see our emboldened President in a backing down mood. He’s a believer, and he needs the “staggering” tariff receipts to offset his tax cuts. He’s The Man – a disrupter reveling in his element. And, amazingly, his grandiose tariff experiment has received a big thumbs up from a dysfunctional stock market. Reality, whenever it sinks in, will hit hard.
For the Week:
The S&P500 gained 1.5% (up 4.0% y-t-d), and the Dow increased 0.5% (up 4.7%). The Utilities added 0.9% (up 4.7%). The Banks slipped 0.4% (up 9.0%), while the Broker/Dealers were unchanged (up 13.8%). The Transports jumped 2.8% (up 4.5%). The S&P 400 Midcaps dipped 0.2% (up 2.5%), while the small cap Russell 2000 was unchanged (up 2.2%). The Nasdaq100 rallied 2.9% (up 5.2%). The Semiconductors recovered 3.0% (up 3.6%). The Biotechs declined 0.4% (up 6.0%). While bullion gained $21, the HUI gold index declined 0.4% (up 18.3%).
Three-month Treasury bill rates ended the week at 4.21%. Two-year government yields declined three bps to 4.26% (up 2bps y-t-d). Five-year T-note yields slipped two bps to 4.33% (down 5bps). Ten-year Treasury yields dipped two bps to 4.47% (down 9bps). Long bond yields were little changed at 4.70% (down 9bps). Benchmark Fannie Mae MBS yields fell five bps to 5.73% (down 12bps).
Italian 10-year yields rose six bps to 3.52% (unchanged y-t-d). Greek 10-year yields were unchanged at 3.23% (up 1bp). Spain's 10-year yields gained six bps to 3.06% (unchanged). German bund yields rose six bps to 2.43% (up 6bps). French yields jumped eight bps to 3.17% (down 2bps). The French to German 10-year bond spread widened two to 74 bps. U.K. 10-year gilt yields increased two bps to 4.50% (down 7bps). U.K.'s FTSE equities index increased 0.4% (up 6.8% y-t-d).
Japan's Nikkei 225 Equities Index rallied 0.9% (down 1.9% y-t-d). Japanese 10-year "JGB" yields jumped six bps to 1.36% (up 2bps y-t-d). France's CAC40 rose 2.6% (up 10.8%). The German DAX equities index jumped 3.3% (up 13.1%). Spain's IBEX 35 equities index rose 2.1% (up 11.7%). Italy's FTSE MIB index gained 2.5% (up 11.1%). EM equities were mixed. Brazil's Bovespa index rallied 2.9% (up 6.6%), and Mexico's Bolsa index rose 2.4% (up 9.2%). South Korea's Kospi advanced 2.7% (up 8.0%). India's Sensex equities index dropped 2.5% (down 3.3%). China's Shanghai Exchange Index gained 1.3% (down 0.2%). Turkey's Borsa Istanbul National 100 index dipped 0.7% (up 0.5%).
Federal Reserve Credit increased $1.6 billion last week to $6.767 TN. Fed Credit was down $2.123 TN from the June 22, 2022, peak. Over the past 283 weeks, Fed Credit expanded $3.040 TN, or 82%. Fed Credit inflated $3.956 TN, or 141%, over the past 640 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt jumped $21.9 billion last week to $3.301 TN. "Custody holdings" were down $65.6 billion y-o-y, or 1.9%.
Total money market fund assets increased $5.5 billion to a record $6.923 TN. Money funds were up $789 billion over 29 weeks (23% annualized) and $905 billion y-o-y (15%).
Total Commercial Paper surged $39.3 billion to a six-month high $1.259 TN. CP was about unchanged over the past year.
Freddie Mac 30-year fixed mortgage rates dipped two bps this week to a six-week low 6.87% (up 10bps y-o-y). Fifteen-year rates rose four bps to 6.09% (down 3bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates down two bps to 6.97% (down 39bps).
Currency Watch:
For the week, the U.S. Dollar Index fell 1.2% to 106.71 (down 1.6% y-t-d). For the week on the upside, the Swedish krona increased 2.4%, the Brazilian real 1.9%, the euro 1.6%, the British pound 1.5%, the Australian dollar 1.2%, the Mexican peso 1.2%, the New Zealand dollar 1.2%, the Swiss franc 1.1%, the Norwegian krone 1.1%, the Singapore dollar 1.1%, the Canadian dollar 0.8%, the South Korean won 0.5%, and the South African rand 0.1%. On the downside, the Japanese yen declined 0.6%. The Chinese (onshore) renminbi increased 0.52% versus the dollar (up 0.58% y-t-d).
Commodities Watch:
The Bloomberg Commodities Index gained 1.6% (up 7.2% y-t-d). Spot Gold increased 0.8% to $2,883 (up 9.8%). Silver added 0.9% to $32.103 (up 11.1%). WTI crude slipped 26 cents, or 0.4%, to $70.74 (down 1%). Gasoline dipped 0.7% (up 3%), while Natural Gas surged 12.6% to $3.725 (up 3%). Copper jumped 2.7% (up 17%). Wheat rose 3.0% (up 9%), and Corn gained 1.8% (up 8%). Bitcoin increased $1,300 or 1.3%, to $97,450 (up 4%).
Trump Administration Watch:
February 10 – Wall Street Journal (Editorial Board): “Elon Musk has a bigger job than even he is advertising with his Department of Government Efficiency (DOGE). The Congressional Budget Office reported… that federal spending rose 15% in the first four months of fiscal 2025. Outlays in the first months rose $317 billion to $2.43 trillion from September through January. Discounting for some timing shifts in outlays from 2024 and 2025, spending rose $157 billion, or 7%... The usual spending suspects were to blame: Social Security up 7%, Medicare up 5%, and Medicaid up 9% because of rising costs per enrollee.”
February 10 – Bloomberg (Laura Davison and Hadriana Lowenkron): “President Donald Trump said he wants to increase the amount of money for the US military, a goal that runs counter to efforts from his top ally — Elon Musk — to slash trillions of dollars of federal spending. ‘We want to raise defense spending. I think we have to have it,’ Trump said in an interview with Fox News’ Bret Baier… Trump added that he might seek to pull back on military budgets in the future, saying that he plans to talk to Chinese President Xi Jinping and Russian President Vladimir Putin about curbing defense spending. ‘One of the things I’ll be doing with President Xi and with Putin and everybody else is saying, let’s ease up on all this, you know, building all of this, you know, the bombs,’ he said, calling it ‘crazy’ to spend large amounts of money on weapons that may not be used.”
February 10 – Wall Street Journal (Tarini Parti): “President Trump said Palestinians wouldn’t have the right to return to Gaza under his new plan to rebuild the territory, adding that they would get ‘much better housing’ instead in neighboring countries. ‘In other words, I’m talking about building a permanent place for them because if they have to return now, it’ll be years before you could ever—it’s not habitable,’ Trump said in an interview with Fox News’s Bret Baier… ‘It would be years before it could happen’… Asked by Baier if displaced Palestinians would have the right to return to Gaza, Trump said, ‘No, they wouldn’t.’”
February 9 – Associated Press (Jill Colvin): “President Donald Trump said he is serious about wanting Canada to become the 51st state in an interview that aired Sunday during the Super Bowl preshow. ‘Yeah it is,’ Trump told Fox News Channel’s Bret Baier when asked whether his talk of annexing Canada is ‘a real thing’ — as Canadian Prime Minister Justin Trudeau recently warned. ‘I think Canada would be much better off being the 51st state because we lose $200 billion a year with Canada. And I’m not going to let that happen,’ he said. ‘Why are we paying $200 billion a year, essentially a subsidy to Canada?’”
February 11 – Bloomberg (Alexandra Harris): “The US Treasury Department cut the size of some benchmark bill auctions, the start of what’s likely to be a series of reductions as the government preserves its borrowing authority under the statutory debt ceiling. Treasury said it plans to sell $90 billion of four-week bills Thursday, $5 billion smaller than the previous offering at that tenor.”
February 12 – Reuters (David Morgan): “Barely a month after predicting a new ‘golden age’ under President Donald Trump, congressional Republicans are struggling to move forward on the president's tax-cut agenda, despite their control of both the Senate and House of Representatives. House Republicans on Wednesday unveiled a plan that would cut taxes by about $4.5 trillion over a decade, raise the federal government's debt ceiling by $4 trillion - clearing the way for the nation's liabilities to exceed $40 trillion - and find $2 trillion in cost cuts over a decade in mandatory spending programs. While the plan did not specify which programs would be targeted, they could include the Medicaid health program for low-income Americans and Social Security and Medicare for the elderly.”
February 14 – Wall Street Journal (Richard Rubin): “The right flank of the Republican Party pulled the House in their direction this week, locking in commitments for deeper spending cuts and potentially complicating the path forward for some of President Trump’s tax priorities. Party leaders struck a deal with House Freedom Caucus members that ties the spending cuts and tax cuts together more firmly. The more money that gets pulled from Medicaid, food stamps and other programs, the more space Republicans will make for extending expiring tax cuts and removing taxes on tips, overtime pay and Social Security benefits. That intraparty agreement propelled a budget blueprint forward this week and kept open a path for the ‘one big, beautiful bill’ that Trump and House Speaker Mike Johnson (R., La.) are trying to craft.”
February 12 – Bloomberg (Axios): “Elon Musk's slash-and-burn approach is giving the White House genuine street cred with House conservatives. But it might not be enough to compensate for the outrage he’s provoked among House Democrats. If Democrats hold the line — and withhold their votes to fund the government — it will be exceedingly difficult for House Speaker Mike Johnson to avoid a government shutdown. Musk is flipping the traditional equation, in which Democrats vote to fund the government and Republicans feel compelled to do so under duress... ‘It helps,’ said Rep. Ralph Norman (R-S.C.). ‘However, the baseline needs to be intact at $2 trillion,’ he added, referring to how much spending he wants to cut in the (separate) reconciliation bill. ‘That’s just additional,’ said Rep. Scott Perry (R-Pa.). ‘We appreciate it, but that’s not enough.’”
February 11 – Axios (Stef W. Kight and Hans Nichols): “The GOP's Hill leaders are signaling their eagerness to back up Elon Musk by turning DOGE spending cuts into real legislation. Musk’s slash-and-burn cuts may be undone by the courts. But he’s given congressional Republicans a blueprint for what’s possible to cut. ‘I think that anything that DOGE does will be factored into what we do up here,’ Senate Majority Leader John Thune (R-S.D.) told Axios. ‘We are going to be codifying a lot of these changes,’ House Speaker Mike Johnson (R-La.) told reporters…, ‘and what they've uncovered is, frankly, shocking.’”
February 12 – New York Times (Maya C. Miller and Catie Edmondson): “Republicans in Congress have responded to President Trump’s unilateral moves to freeze federal spending, dismantle programs and fire civil servants with a collective shrug, staying mostly silent and even praising him as he circumvents the legislative branch. But in recent days, as his slash-and-burn campaign to remake the government has begun to affect their states and districts, some Republicans have tried to push back in subtle ways. They have sought carve outs and special consideration for agriculture programs, scientific research and more, even as they cheered on Mr. Trump’s overall approach. Their swift and quiet moves to protect their own pieces of the federal spending pie without critiquing Mr. Trump are an early indication of the political realities that could pose obstacles to the president’s push.”
February 13 – Associated Press (John Gambrell): “Elon Musk called… for the United States to ‘delete entire agencies’ from the federal government as part of his push under President Donald Trump to radically cut spending and restructure its priorities. Musk offered a wide-ranging survey via a videocall to the World Governments Summit in Dubai, United Arab Emirates, of what he described as the priorities of the Trump administration interspersed with multiple references to ‘thermonuclear warfare’ and the possible dangers of artificial intelligence. ‘We really have here rule of the bureaucracy as opposed to rule of the people — democracy,’ Musk said, wearing a black T-shirt that read: ‘Tech Support.’ He also joked that he was the ‘White House’s tech support,’ borrowing from his profile on the social platform X…”
February 9 – CNBC (Lora Kolodny): “Elon Musk has called to impeach a federal judge in New York, Paul Engelmayer, over an order that temporarily restricts the tech centi-billionaire and his DOGE team from accessing U.S. Department of the Treasury payment systems and sensitive data. Over the weekend an outraged Musk posted on X, the social network he owns, calling Engelmayer, ‘A corrupt judge protecting corruption,’ adding, ‘he needs to be impeached NOW!’”
February 12 – Bloomberg (Dana Hull and Emily Birnbaum): “Elon Musk called on the US House to impeach multiple judges who have blocked his government cost-cutting crusade, an extraordinary statement that threatens to create a chilling effect on the federal bench. ‘There needs to be an immediate wave of judicial impeachments, not just one,’ Musk said on his social media platform X.”
February 9 – Wall Street Journal (Brian Schwartz and Dylan Tokar): “President Trump’s newly installed Consumer Financial Protection Bureau chief Russell Vought is closing the bureau’s headquarters and has ordered staff to halt all of their supervisory efforts, ramping up the administration’s attempt to revoke the financial regulator’s authority. Vought, the head of the Office of Management and Budget who also became the acting director of the CFPB on Friday, issued a notice to staff on Saturday demanding they ‘cease all supervision and examination activity,’ according to an email…”
Trade War Watch:
February 11 – Bloomberg (Jennifer A. Dlouhy, Jenny Leonard and Josh Wingrove): “President Donald Trump ordered a 25% tariff on steel and aluminum imports, escalating his efforts to protect politically important US industries with levies hitting some of the country’s closest allies. The tariffs will apply widely to all US imports of steel and aluminum, including from Canada and Mexico, among the country’s top foreign suppliers of the metals. The levies, which also include finished metal products, are meant to crack down on what administration officials said were efforts by countries like Russia and China to circumvent existing duties. Trump cast the effort as one that would help bolster domestic production and bring more jobs to the US, and warned that the rate on metal tariffs ‘may go higher.’”
February 11 – Wall Street Journal (Gavin Bade and Alex Leary): “President Trump… announced 25% tariffs on imports of steel and aluminum to the U.S., reinstating global duties without exceptions for allies such as Canada, Mexico, Japan and South Korea that were relaxed by the Biden administration. ‘It’s a big deal. This is the beginning of making America rich again,’ Trump said…, as he signed dual executive orders for steel and aluminum tariffs. “No exceptions, no nothing,’ Trump added. The tariffs will go into effect on March 12, a White House official said, after initially indicating they would be imposed on March 4.”
February 11 – Reuters (Jarrett Renshaw, Jasper Ward and Philip Blenkinsop): “U.S. President Donald Trump's planned 25% tariffs on steel and aluminum imports would pile on top of other levies on Canadian goods, resulting in a total 50% tariff if threatened duties on all imports from Canada are enacted in March, a White House official said... Canada has not been told about the additive nature of the tariffs, a Canadian government source told Reuters, adding that it ‘sounds plausible.’ Mexico, Canada and the European Union condemned Trump's metals tariffs on Tuesday and governments around the world braced for even more levies from the new administration amid fears of an escalating global trade war.”
February 12 – Financial Times (Claire Bushey, Amanda Chu and Gregory Meyer): “Donald Trump’s threat to impose big tariffs on steel and aluminium is rippling across US industry, with companies ranging from manufacturers to oil and gas drillers facing increasing costs for the metals. Many executives are rushing to find ways to mitigate the political tumult and fallout from rising prices, even though the 25% tariffs will not come into effect for another month. ‘So far what we’re seeing is a lot of cost and a lot of chaos,’ said Ford chief Jim Farley… He added that he would return to Washington… to lobby policymakers for the second time in three weeks. ‘They need to understand that there’s a lot of policy uncertainty here,’ he said. ‘But in the meantime we’re scrambling to manage the company as professionals.’”
February 14 – Bloomberg (Edith Hancock): “President Trump’s plan to target countries with so-called reciprocal tariffs is ‘a step in the wrong direction,’ the European Commission said… The European Union’s executive arm said the bloc has some of the lowest tariffs in the world and sees no justification for increased U.S. tariffs on its exports. Such measures amount to a tax on U.S. citizens, increase business costs, hamper growth and drive inflation, it said, adding that the Trump administration is undermining years of work to reduce tariffs and other barriers globally through trade agreements… ‘The EU will react firmly and immediately against unjustified barriers to free and fair trade, including when tariffs are used to challenge legal and non-discriminatory policies,’ the commission said.”
February 9 – Financial Times (Joe Leahy, William Langley and Demetri Sevastopulo): “China has imposed retaliatory tariffs on the US… — hitting about $14bn worth of goods and dashing hopes that a trade war between the world’s two largest economies could be avoided. Beijing announced the tariffs last week in response to a US decision to impose an additional 10% levy on Chinese products, which US President Donald Trump called an ‘opening salvo’ in a renewed trade offensive against China.”
February 9 – Wall Street Journal (Liza Lin and Raffaele Huang): “Chinese officials are building a list of U.S. technology companies that can be targeted with antitrust probes and other tools… Beijing has already said it is investigating Nvidia and Google over alleged antitrust issues. Other American companies in its sights include Apple, Silicon Valley tech company Broadcom and semiconductor-design software vendor Synopsys, said people familiar... Synopsys has a $35 billion acquisition awaiting approval by Beijing.”
February 10 – Bloomberg (Katia Dmitrieva): “Economists are warning the next stage of Donald Trump’s trade war would open new fronts across Asia, with India and Thailand among the nations most exposed to risks from the US president’s vow to impose reciprocal tariffs on partners. The two Asian countries stand out because the tariffs they impose on the US are, on average, far above the rate charged on them by the US, according to a range of estimates from analysts who considered scenarios of like-for-like levies. The caveat is that Trump has yet to clarify the potential policy, including which countries would be targeted and on what basis. ‘Emerging Asian economies have higher relative tariff rates on US exports and are thus at risk of higher reciprocal tariffs,’ Nomura Holdings Inc. analysts led by Sonal Varma said… ‘We expect Asian economies to step up their negotiations with Trump.’”
February 12 – Bloomberg (Frances Schwartzkopff): “The US may use ‘trade tools’ to retaliate against European ESG regulations that affect American companies, said Howard Lutnick, US President Donald Trump’s pick to become commerce secretary. Lutnick was referring specifically to the Corporate Sustainability Due Diligence Directive. He told Republican senators last month that he’s concerned by the extent to which environmental, social and governance regulations formulated in Brussels are impacting US businesses.”
February 11 – Bloomberg: “The global aluminum market is entering a fresh period of upheaval as traders rush to assess the potential impact of renewed US protectionism under President Donald Trump. The US leader ordered tariffs of 25% on all imports of aluminum and steel on Monday… The measures threaten to increase costs for US buyers, and at least some rerouting of international trade flows. ‘We expect any tariff would lead to higher prices for US manufacturers’ via a rise in regional premiums, ANZ Group Holdings Ltd. Analysts… wrote... More Canadian supply will likely be exported to Europe, with the US increasing its purchases from the Middle East, they said.”
Ukraine War Watch:
February 14 – Bloomberg (Daryna Krasnolutska): “Volodymyr Zelenskiy said he doesn’t want to be remembered as the president who handed Ukrainian land to Russia. Speaking on a panel… Zelenskiy said that he’s prepared to engage with Donald Trump’s initiative to end the war in Ukraine but he wants to agree on an approach with allies before confronting Vladimir Putin. ‘I don’t want to be the person in history who helped Putin to occupy my country,’ Zelenskiy told the audience at the Munich Security Conference.”
February 13 – Bloomberg (Aliaksandr Kudrytski): “President Volodymyr Zelenskiy said that Russia’s Vladimir Putin simply can’t be trusted, which is why Ukraine needs security guarantees, particularly from the US. This was the message Zelenskiy gave to US President Donald Trump…Trump held a call with Putin earlier this week, sweeping aside long-standing US policy that nothing should be decided about Ukraine without Kyiv at the table. The move underscores the US president’s intent to follow through quickly with his campaign pledges to negotiation a peace. Trump told Zelenskiy that ‘Putin wants peace,’ the Ukrainian leader said. But Zelenskiy said that he sees it ‘more realistically’ and ‘that is why I don’t trust” Putin.’”
February 13 – Bloomberg (Max Seddon and Christopher Miller): “Vladimir Putin’s initial plan to capture Ukraine in a few days ended in disaster. But after Donald Trump set up direct peace talks with Moscow, bypassing Kyiv and European allies, the Russian president is now closer than ever to getting what he wanted from his three-year-long invasion. Putin’s main ambition… is to establish a new security architecture that gives Russia a sphere of influence in Europe — much as the Yalta conference did for the Soviet Union at the end of the second world war. Now, the US may be open to letting him have it... ‘The situation looks much more favourable for Putin than at any point during the entire war over the last three years,’ said Alexander Gabuev, director of the Carnegie Russia Eurasia Center... ‘If the US just unilaterally ends its military and diplomatic support, as well as intelligence sharing, then Ukraine will be in a very tough position. And it’ll be hard to get out of it even if the Europeans get more involved.’ In Moscow, there was palpable joy following Wednesday’s call between Trump and Putin.”
February 14 – Bloomberg: “Vladimir Putin is assembling a heavyweight team with decades of experience in high-stakes negotiations to face off against US President Donald Trump’s representatives for a deal to end Russia’s war in Ukraine. They include Yuri Ushakov, his chief Kremlin foreign-policy adviser who has more than half a century of involvement in diplomacy, and his top spymaster, Sergei Naryshkin, who served with Putin in the Soviet KGB… Kirill Dmitriev, a financier educated at Stanford and Harvard with ties to the Russian president’s own family, may play a key role as an unofficial back-channel with Trump’s negotiators, people familiar… said.”
Middle East Watch:
February 11 – Reuters (Jeff Mason and Simon Lewis): “Donald Trump… pressed Jordan’s King Abdullah to take in Palestinians who would be permanently displaced under the president's plan for the U.S. to take over the Gaza Strip, even as the king said his country was firmly opposed to the move. Speaking alongside the Arab country’s ruler in the White House, Trump signaled he would not budge on his idea that involves moving the Gaza Strip’s shell-shocked residents and transforming the war-ravaged territory into what he billed a ‘Riviera of the Middle East.’ Trump has infuriated the Arab world by saying that Palestinians would not be able to return to their homes under his proposal to redevelop the enclave…‘We’re going to take it. We’re going to hold it, we’re going to cherish it. We’re going to get it going eventually, where a lot of jobs are going to be created for the people in the Middle East,’ Trump said…, saying his plan would ‘bring peace’ to the region.”
February 12 – Reuters (Ahmed Mohamed Hassan, Nafisa Eltahir, Mohamed Waly and Steve Holland): “Egypt’s President Abdel Fattah al-Sisi will not travel to Washington for talks at the White House as long as the agenda includes U.S. President Donald Trump’s plan to displace Palestinians from Gaza, two Egyptian security sources said. Trump has infuriated the Arab world with a plan to permanently displace the population of more than 2 million Palestinians from the Gaza Strip… Egypt’s close cooperation with the United States has been a bedrock of Washington’s Middle East policy for decades. Since a U.S.-brokered peace treaty between Israel and Egypt more than four decades ago, Egypt has consistently been one of the biggest recipients of U.S. military aid, alongside Israel.”
February 13 – Washington Post (John Hudson, Michael Birnbaum and Ellen Nakashim): “Israel is likely to attempt a strike on Iran's nuclear program in the coming months in a preemptive attack that would set back Tehran's program by weeks or perhaps months but escalate tensions across the Middle East and renew the prospect of a wider regional conflagration, according to U.S. intelligence. The warnings about a potential Israeli strike are included in multiple intelligence reports spanning the end of the Biden administration and the beginning of the Trump administration…”
February 11 – Financial Times (Neri Zilber, Andrew England and Felicia Schwartz): “Israel’s Prime Minister Benjamin Netanyahu ordered his military to mass around the Gaza Strip and threatened to resume ‘intensive fighting’ against Hamas if the Palestinian militant group failed to release Israeli hostages by midday on Saturday. Netanyahu’s ultimatum… came after Hamas’s announcement that it was delaying ‘until further notice’ the planned release of three hostages this weekend in protest at alleged Israeli violations of the US-brokered ceasefire agreement between the two sides. Israel’s threat comes after US President Donald Trump this week warned Hamas to release ‘all’ hostages by Saturday or he would let ‘hell break out’.”
Taiwan Watch:
February 12 – Wall Street Journal (Austin Ramzy): “Two U.S. Navy ships completed a passage through the waters between Taiwan and mainland China on Wednesday, drawing criticism from Beijing and reviving a question that has nagged at supporters of the island’s democracy: Is the U.S., under the leadership of President Trump, fully committed to Taiwan’s survival? …Trump’s statements critical of Taiwan, along with his tariff threats and the diverging views within his administration about the island, have increased uncertainty about the direction of the island’s relationship with the U.S., its most important partner.”
February 9 – Bloomberg (Karishma Vaswani): “After squeezing Taiwan in the skies and the seas, China is using tactics that Russia has employed to great effect in the Ukraine war and is now intensifying its sabotage of undersea cables around the self-ruled island. Beijing has reportedly targeted the vital communications network, cutting off equipment and leaving Taipei economically vulnerable and potentially isolated in the event of an all-out attack. It’s a reminder of the mainland’s ability to control what it sees as its own territory, and a warning to other countries — in particular the US — not to get involved.”
Market Instability Watch:
February 13 – Bloomberg (Natalia Kniazhevich): “Rising instability among some of the biggest US stocks is driving a measure of single-stock ‘fragility’ to record levels, with the market increasingly vulnerable to whipsaw patterns among clusters of shares such as occurred in the dot-com bubble of the late 1990s. Stock fragility, a measure of a company’s daily share-price move relative to its recent volatility, is on track to reach its highest in more than 30 years among the largest 50 stocks in the S&P 500 Index, based on the average magnitude and frequency of such individual shocks so far in 2025, according to Bank of America Corp. strategists.”
February 8 – Financial Times (Leo Lewis and Ian Smith): “Japan’s borrowing costs have soared to a 14-year high as rising interest rates, sustained inflation and a potential wave of wage increases this spring fuel a relentless sell-off in its government debt. Benchmark 10-year Japanese government bond yields, which move inversely to prices, touched 1.31% on Friday, having risen another 0.21 percentage points already this year following a big jump in 2024.”
Global Credit and Financial Bubble Watch:
February 12 – Bloomberg (Ronan Martin): “Blue-chip US companies are raising euro debt at breakneck speed in a bid to lock in significantly lower borrowing costs across the pond. So-called reverse Yankee issuance reached €23.4 billion ($24.3bn) so far this year, the highest for this period since 2007… US companies are attracted by the European Central Bank’s deposit rate, which is 175 basis points lower than the Federal Reserve’s key rate.”
February 11 – Bloomberg (Scott Carpenter): “CMO issuance was the highest in four years last month, according to Bank of America, driven by a 79% surge in sales of conventional deals from December’s level. With Ginnie Mae issuance jumping 40%, overall CMO issuance was $36.2 billion, the most since February 2021…”
AI Bubble Watch:
February 10 – Bloomberg (Shirin Ghaffary, Kate Clark and Rachel Metz): “A group of investors led by Elon Musk has offered to buy the nonprofit that controls OpenAI for $97.4 billion, escalating a clash between the Tesla chief executive and the artificial intelligence company he co-founded. With the unsolicited bid, Musk said he hopes to return OpenAI to being ‘the open-source, safety-focused force for good it once was,’ according to a statement. In response, OpenAI Chief Executive Officer Sam Altman posted on Musk’s X social-media platform: ‘No thank you but we will buy twitter for $9.74 billion if you want.’”
February 12 – Reuters (Liam Mo and Brenda Goh): “The rise of DeepSeek's artificial intelligence (AI) models is seen providing some Chinese chipmakers such as Huawei a better chance to compete in the domestic market against more powerful U.S. processors. Huawei and its Chinese peers have for years struggled to match Nvidia in building top-end chips that could compete with the U.S. firm’s products for training models, a process where data is fed to algorithms to help them learn to make accurate decisions. However, DeepSeek's models, which focus on ‘inference,’ or when an AI model produces conclusions, optimise computational efficiency rather than relying solely on raw processing power.”
Bubble and Mania Watch:
February 13 – Bloomberg (Paige Smith and Georgia Hall): “Robinhood Markets Inc. reported revenue that more than doubled as the online trading firm was buoyed by crypto-market transactions around the US presidential election. Revenue grew to $1.01 billion in the fourth quarter… Cryptocurrency revenue also exceeded expectations, increasing more than 700% to $358 million.”
February 10 – Bloomberg (Isabelle Lee): “Retail daredevils — undeterred by recent Wall Street jitters over AI and crypto — are going long, pumping up leveraged funds to nearly $100 billion while pessimistic market wagers languish. Speculators are buying the dip in exchange-traded funds that invest in what have been some of the hottest stock strategies. This breed of ETF is designed to profit at two or even three times an asset’s gain. Bets on technology companies, including Tesla Inc. and Microsoft Corp., have drawn particular attention… Last week, dip buyers flocked to products that offer to amp up returns in semiconductors in the wake of the sector’s worst single-session drop in nearly five years.”
February 8 – Financial Times (Sun Yu): “US foundations and university endowments are ramping up their exposure to cryptocurrencies to join the digital assets rush prompted by President Donald Trump’s promise to make the nation the world’s ‘bitcoin superpower’. Crypto has far outperformed other asset classes over the past five years despite its high volatility, with many who have stood on the sidelines now jumping in for fear of missing out on the runaway price jumps. The one-year-old University of Austin is raising a $5mn bitcoin fund, the first of its kind among the country’s endowments and foundations, for its $200mn endowment.”
February 13 – Bloomberg: “A BlackRock Inc. fund forfeited a Shanghai office complex to Standard Chartered Plc after it didn’t make a loan payment for the property… A fund unit of the New York-based asset manager opted not to make a payment for a syndicated loan led by Standard Chartered due at the end of September…”
U.S./Russia/China/Europe Watch:
February 12 – Bloomberg (Andrea Palasciano, Katharina Rosskopf and Milda Seputyte): “European leaders blindsided by Donald Trump’s call with Vladimir Putin insisted they shouldn’t be sidelined after the US president said he’d agreed to negotiate an end to the war in Ukraine with his Russian counterpart. In talking to Putin, Trump swept aside long-standing US policy that nothing should be decided about Ukraine without Kyiv at the table, while cutting out allies with an existential stake in the resolution of a conflict raging on their borders. Many European NATO partners now fear the more conciliatory American stance amounts to a giveaway to the Russian leader. ‘It’s clear that any deal behind our backs will not work,’ the European Union’s foreign policy chief, Kaja Kallas, said... ‘Any agreement will need also Ukraine and Europe being part of it.’”
February 12 – Financial Times (John Paul Rathbone): “Military spending in Russia, whose economy President Vladimir Putin has put on a war footing, now outstrips all of Europe’s defence budgets combined, according to a study. Total Russian defence spending soared last year by 42% in real terms to Rbs13.1tn. That is equivalent to $462bn… European defence budgets by comparison, including the UK and EU member states, rose almost 12% last year to $457bn — slightly less than Moscow’s spending, the International Institute for Strategic Studies think-tank said…”
De-globalization Watch:
February 11 – Wall Street Journal (Brian Spegele, Jason Douglas and Yoko Kubota): “A day in China could easily start like this: Roll out of bed and swipe through WeChat messages on your Huawei smartphone. Hop into a BYD electric car and drive to the railroad station, where a high-speed train from a state-run factory whisks you to your destination. Chinese-designed nuclear plants, solar farms and wind turbines power the city’s lights. China is racing to make itself less reliant on the outside world’s products and technology—part of a yearslong effort by leader Xi Jinping to make China more self-sufficient and impervious to Western pressure as tensions with the U.S. rise. Beijing has poured hundreds of billions of dollars into favored industries, especially in high-end manufacturing, while exhorting business leaders to fall in line with the government’s priorities. In many ways, the effort is succeeding.”
Inflation Watch:
February 12 – CNBC (Jeff Cox): “Inflation perked up more than anticipated in January… The consumer price index… accelerated a seasonally adjusted 0.5% for the month, putting the annual inflation rate at 3%... They were higher than… estimates for 0.3% and 2.9%. The annual rate was 0.1 percentage point higher than December. Excluding volatile food and energy prices, the CPI rose 0.4% on the month, putting the 12-month inflation rate at 3.3%. That compared with respective estimates for 0.3% and 3.1%.”
February 12 – Bloomberg (Alexandre Tanzi): “Inflation data came in higher than expected in January, driven by price gains across a broad range of goods and services. Some items, like prescription drugs and parking fees, experienced the largest monthly gains on record in Bureau of Labor Statistics data. Insurance and eggs saw the biggest price increases in about a decade.
February 13 – Associated Press (Paul Wiseman): “U.S. wholesale prices came in hotter than expected last month at a time when progress against inflation appears to have stalled… The… producer price index… rose 0.4% from December and 3.5% from January 2024. Forecasters had expected a 0.2% change… and 3.2% year over year. Excluding volatile food and energy prices, so-called core producer prices rose 0.3% last month from December and 3.6% from a year earlier. Wholesale services prices rose 0.3%, pushed higher by increasing hotel costs. Goods services climbed 0.6% on higher energy prices.”
February 12 – Bloomberg (Miranda Davis, Augusta Saraiva and Michael Hirtzer): “The great American egg shortage is getting worse. With bird flu killing millions of egg-laying chickens, prices surged more than 15% in January from a month earlier — the biggest advance since 2015 — and 55% from a year before…The jump helped push overall US inflation up by the most since August 2023. That’s bad news for American consumers already contending with higher costs of everything from food to gas. Grocery stores from New York to Chicago and Los Angeles have already limited purchases, while Waffle House added a temporary egg surcharge of 50 cents per unit.”
February 13 – Bloomberg (Ines Ferré): “Coffee futures have ripped more than 30% year to date, hovering near all-time high levels. The surge is starting to pass through to consumer wallets. The Consumer Price Index report… showed that the prices consumers paid for roasted coffee rose 2.5% in January over the previous year. Meanwhile, instant coffee jumped a whopping 7.1%.”
February 12 – Wall Street Journal (Telis Demos): “Most drivers wouldn’t realize it, but car-insurance prices are particularly sensitive to tariffs. That’s because of the impact those levies can have on car parts and used vehicles. This, in turn, is bad news for the inflation outlook. In the surprisingly high inflation reading for January…, auto-related costs were particularly elevated. Besides threatening tariffs against North America trading partners, President Trump also has announced tariffs on steel and aluminum, and said he is planning levies on imported semiconductors. Last week, he said he would soon implement ‘reciprocal tariffs’… If these tariffs were to drive up the cost of imported auto parts, they can in turn affect what it costs to repair a car.”
February 12 – Bloomberg (Erin Hudson): “The cost to attend private schools in the US has hit all-time highs as inflationary pressures prompt institutions to boost fees. The annual tuition for a day school rose about 7.4% to $49,284 on average and for a boarding school it climbed roughly 5.3% to $73,080, according to… S&P Global Ratings.”
Federal Reserve Watch:
February 12 – Reuters (Brendan O'Brien): “President Donald Trump… said that interest rates should be lowered and that would go ‘hand in hand’ with his upcoming tariffs, despite economists’ expectations that tariffs would fuel inflation and postpone rate cuts.”
February 11 – Financial Times (Claire Jones): “Jay Powell has defended the Federal Reserve’s authority over US monetary policy, as he vowed to ‘focus on the data’ and avoid wading into politics…The Fed is facing the fiercest challenge to its independence to set interest rates since the 1980s… Fed chair Powell told lawmakers on the Senate’s banking committee… that the central bank stood a better chance of keeping prices under control if it remained above the fray… ‘We’ll make better policy, we’ll keep inflation lower, if we just focus on doing our job and stay out of politics, stay out of elections and don’t try to favour or hurt any political party, or any political filter and just try to focus on the data,’ Powell said... ‘If we start putting up political filters, we’ll be less effective at our already quite difficult job.’”
February 12 – Bloomberg (Craig Torres): “Federal Reserve Chair Jerome Powell said the latest consumer price data show that while the central bank has made substantial progress toward taming inflation, there is still more work to do. ‘I would say we’re close, but not there on inflation,’ Powell told the House Financial Services Committee… in response to a question on the second day of his semi-annual testimony to Congress. ‘Last year, inflation was 2.6% — so great progress — but we’re not quite there yet,’ Powell said, referencing a different inflation gauge than the consumer price index…”
February 12 – Bloomberg (Liz Capo McCormick): “Bond traders pushed out bets for the next Federal Reserve interest-rate cut to December as US inflation exceeded expectations. Swap contracts linked to future Fed decisions, which previously anticipated a rate cut by September, repriced after January consumer prices rose more than economists estimated. The new levels imply just one quarter-point cut this year. Treasury debt prices slumped, sending yields higher by at least eight basis points across maturities.”
February 11 – Bloomberg (Reade Pickert): “Federal Reserve Bank of Cleveland President Beth Hammack said it’s appropriate to keep interest rates steady for ‘some time’ while policymakers await further downward progress on inflation and analyze the economic effects of new government policies. ‘We have made good progress, but 2% inflation is not in sight just yet,’ Hammack said... ‘As long as the labor market remains healthy, I am looking for broad-based evidence that inflation is sustainably returning to 2% before adjusting policy further.’”
U.S. Economic Bubble Watch:
February 11 – Bloomberg (Vince Golle): “US small-business optimism declined in January from a more than six-year high and a gauge of uncertainty climbed as companies weighed Trump administration policies and the Federal Reserve’s pause on interest-rate cuts. The National Federation of Independent Business optimism index fell 2.3 points to 102.8 last month. Seven of the 10 index components decreased, led by the steepest monthly decline in capital spending plans since 1995. The group’s uncertainty indicator jumped 14 points, the most in monthly data back to 1986.”
February 14 – Bloomberg (Augusta Saraiva): “US retail sales slumped in January by the most in nearly two years, indicating an abrupt pullback by consumers after a spending spree in the closing months of 2024. The value of retail purchases… decreased 0.9% after an upwardly revised 0.7% gain in December… Nine of the report’s 13 categories posted decreases, most notably motor vehicles, sporting goods and furniture stores. The data encompassed a period marked by devastating wildfires in Los Angeles — the second-largest metropolitan area in the US — and severe winter weather in other parts of the country, which could have depressed brick-and-mortar shopping activity.”
February 13 – Associated Press (Matt Ott): “U.S. applications for unemployment benefits fell last week as employers continue to retain workers despite resurgent inflation and elevated interest rates. The number of Americans filing for jobless benefits fell by 7,000 to 213,000 for the week ending February 8… The total number of Americans receiving unemployment benefits for the week of February 1 fell to 1.85 million, a decrease of 36,000 from the previous week.”
February 13 – Bloomberg (Alex Tanzi): “The share of outstanding US consumer debt that’s in delinquency rose in the fourth quarter to the highest in almost five years, according to a Federal Reserve Bank of New York report. Some 3.6% of debt was delinquent in the final three months of 2024, the most since the second quarter of 2020… Total household debt — which is primarily composed of mortgages, student loans, auto loans and credit-card balances — rose 0.5% to a record $18 trillion.”
February 11 – New York Times (Christopher Flavelle): “California’s home insurance plan of last resort, designed for people who can’t get coverage on the private market, does not have enough money to pay claims from the Los Angeles wildfires and is getting an infusion of cash from regular insurers. State regulators said… they will allow the program, known as the FAIR Plan, to collect $1 billion from private insurance companies doing business in California to pay its claims. That is likely to drive up insurance costs for homeowners across the state. The situation marks a perilous new stage for California’s home insurance market, which had already been reeling from wildfires made more frequent and intense by climate change. Facing growing losses, major insurers like State Farm were already pulling back from the state, making it harder for homeowners to find coverage. Now the pressure to leave will be even greater. The $1 billion assessment is the largest since the FAIR Plan was created in 1968, and the first time since the 1994 Northridge earthquake near Los Angeles that the FAIR Plan has faced claims it can’t pay on its own.”
February 11 – Associated Press (Tran Nguyen): “California’s plan that provides insurance to homeowners who can’t get private coverage needs $1 billion more to pay out claims related to the Los Angeles wildfires, the state Insurance Department said… There were more than 452,000 policies on the Fair Plan in 2024, more than double the number in 2020. The plan says it’s expecting a loss of roughly $4 billion from the Eaton and Palisades Fires… Roughly 4,700 claims have been filed as of this week, and the plan has already paid out more than $914 million.”
February 11 – Wall Street Journal (Colin Kellaher): “Travelers said it expects pretax catastrophe losses of $1.7 billion from the devastating wildfires that struck southern California in January. The… insurer… said the estimate, equal to $1.3 billion on an after-tax basis, includes losses from its personal and commercial segments, along with estimated assessments from the California FAIR Plan and recoveries from reinsurance. Analysts have estimated that the wildfires could cost the insurance industry around $30 billion.”
February 13 – Bloomberg (John Gittelsohn and Eliyahu Kamisher): “California’s housing market is already one of the most expensive in the country. A San Francisco condo can cost as much as a four-bedroom house in Texas and families drive hours inland just to find a starter home. Now, the Los Angeles wildfires are likely to add another financial burden to households across the state. A $1 billion assessment… for California’s FAIR Plan, the state-mandated insurer of last resort, is expected to drive up premiums as companies will likely pass some of the costs onto homeowners. The charge, meant to help cover wildfire losses, underscores a broader crisis in California’s housing market, in which rising risks from natural disasters, dwindling insurance options and intractable shortages are colliding to make homeownership even more expensive.”
China Watch:
February 12 – Bloomberg: “It was the moment China’s leaders finally blinked. After four years of standing by as property developers like China Evergrande Group spiraled into default, Communist Party officials decided in late January that China Vanke Co. — one of the country’s last surviving real-estate giants — was, for now at least, too big to fail. Faced with a collapse in Vanke’s bond prices and the company’s warning of a record $6.2 billion loss, officials from the developer’s hometown in Shenzhen stepped in to take operational control. Authorities are working on a proposal to help Vanke plug a funding gap of about $6.8 billion this year. The unprecedented intervention has triggered a sigh of relief in markets, but it also underscores a somber reality: The property crisis that hobbled China’s economy and created a nearly $160 billion pile of distressed debt — the world’s largest — is getting worse. Signs of trouble are now popping up everywhere. A brief revival in home sales has fizzled despite multiple rounds of stimulus… Chinese bankers have mostly stopped lending to real-estate projects outside major cities such as Shanghai, according to people familiar... And international creditors are losing patience: More debt restructuring deals are unraveling and at least a dozen developers face petitions to liquidate…”
February 9 – Bloomberg: “China’s consumer inflation accelerated for the first time since August, caused by a burst of household spending around the Lunar New Year holiday even as deflationary pressures persist. The consumer price index rose 0.5% in January from a year earlier…, compared with a 0.1% gain in the previous month… The price of services increased 0.9%, accounting for more than 50% of the total rise in CPI…”
February 13 – Bloomberg: “China’s central bank said it will consider foreign factors and tweak its policy if necessary, in a possible recognition of external constraints on monetary easing. The People’s Bank of China will ‘choose the opportunity to adjust and optimize the intensity and pace of policies based on domestic and foreign economic and financial conditions,’ it said in a quarterly monetary policy report... The publication provides a rare glimpse into the PBOC’s outlook and policy plans. The new phrasing could be a veiled acknowledgment of adverse factors weighing on the yuan — from sticky US inflation to Donald Trump’s tariffs — that have led China to delay monetary stimulus.”
Central Bank Watch:
February 7 – Reuters (Marc Jones and Sumanta Sen): “The first central bank interest rate moves of 2025 suggest it will be a year where some important heavyweights, in both the developed and emerging parts of the world, travel in different directions for a while… Among the G10 central banks which oversee the world’s most heavily-traded currencies, three of the four that met last month - Sweden, the ECB and Canada - continued their cutting cycles, while Japan, where rates hardly ever go up, hiked for the second time in less than a year. The U.S. Federal Reserve and Norway's Norges Bank both sat on their hands, while Australia, New Zealand and Switzerland didn’t hold meetings. The Bank of England has just cut rates this week.”
Europe Watch:
February 14 – Bloomberg (Mark Schroers): “The euro-area economy managed to eke out growth at the end of last year after all, with Eurostat revising up its initial estimate. Gross domestic product increased 0.1% in the three months through December from the previous quarter…”
February 9 – Bloomberg (Priscila Azevedo Rocha and Elena Mazneva): “Europe is teetering on the edge of its next energy crisis after natural gas prices soared to the highest in two years. After a long fight with surging bills, stubbornly high inflation and fading industrial activity because of the 2022 crunch, the continent again faces the threat of another prolonged rally that may trigger more economic pain. The region’s gas inventories are depleting rapidly this winter, and the lower reserves drop, the bigger the task to refill.”
Japan Watch:
February 13 – Bloomberg (Eddy Duan): “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…”
Emerging Markets Watch:
February 9 – Bloomberg (Anthony Esposito): “Mexico’s inflationary environment is expected to allow policymakers to keep cutting the benchmark interest rate, the head of the Bank of Mexico told Reuters, as the fight to bring down inflation has entered a new phase. Banxico… cut the key rate by 50 bps to 9.50% on Thursday, double the 25-bps cuts it had made since it began lowering borrowing costs from a record high of 11.25% in March 2024. ‘Our work is not over. The fight against inflation is now in a new phase,’ Banxico Governor Victoria Rodriguez said…”
Geopolitical Watch:
February 14 – Financial Times (Roula Khalaf, Leila Abboud and Ben Hall): “Emmanuel Macron has described Donald Trump’s return as an ‘electroshock’ that should force Europe to secure its own future as well as Ukraine’s. In an interview at the Élysée Palace shortly after Trump agreed with Vladimir Putin of Russia to hold imminent peace talks, the French president championed the need for Europe to ‘muscle up’ on defence and the economy. He insisted that only Ukraine’s President Volodymyr Zelenskyy could negotiate on behalf of his country, warning that allowing ‘peace that is a capitulation’ would be ‘bad news for everyone’, including the US. ‘The only question at this stage is whether President Putin is genuinely, sustainably, and credibly willing to agree to a ceasefire on this basis. After that, it’s up to the Ukrainians to negotiate with Russia,’ Macron said, adding: ‘We all need to stay collectively vigilant.’”
February 9 – Financial Times (Gideon Rachman): “You have heard of neoliberalism and neoconservatism. Now welcome to the age of neoimperialism. The most striking moment in Donald Trump’s inaugural address last month was his pledge that the US ‘will once again consider itself a growing nation — one that increases our wealth, expands our territory’. Hopes that Trump’s talk of territorial expansion was an empty rhetorical flourish have faded. The president’s references to foreign territories that he would like to acquire are too frequent to be ignored or dismissed. Trump has confidently asserted that America will ‘get Greenland’. He has vowed to ‘take back’ the Panama Canal. He frequently says that Canada should become America’s 51st state. Last week, he even laid claim to Gaza. His fascination with acquiring territory has startled even some of his supporters. But Trump’s expansionist ambitions are easier to understand, if seen as part of a global trend.”
The S&P500 gained 1.5% (up 4.0% y-t-d), and the Dow increased 0.5% (up 4.7%). The Utilities added 0.9% (up 4.7%). The Banks slipped 0.4% (up 9.0%), while the Broker/Dealers were unchanged (up 13.8%). The Transports jumped 2.8% (up 4.5%). The S&P 400 Midcaps dipped 0.2% (up 2.5%), while the small cap Russell 2000 was unchanged (up 2.2%). The Nasdaq100 rallied 2.9% (up 5.2%). The Semiconductors recovered 3.0% (up 3.6%). The Biotechs declined 0.4% (up 6.0%). While bullion gained $21, the HUI gold index declined 0.4% (up 18.3%).
Three-month Treasury bill rates ended the week at 4.21%. Two-year government yields declined three bps to 4.26% (up 2bps y-t-d). Five-year T-note yields slipped two bps to 4.33% (down 5bps). Ten-year Treasury yields dipped two bps to 4.47% (down 9bps). Long bond yields were little changed at 4.70% (down 9bps). Benchmark Fannie Mae MBS yields fell five bps to 5.73% (down 12bps).
Italian 10-year yields rose six bps to 3.52% (unchanged y-t-d). Greek 10-year yields were unchanged at 3.23% (up 1bp). Spain's 10-year yields gained six bps to 3.06% (unchanged). German bund yields rose six bps to 2.43% (up 6bps). French yields jumped eight bps to 3.17% (down 2bps). The French to German 10-year bond spread widened two to 74 bps. U.K. 10-year gilt yields increased two bps to 4.50% (down 7bps). U.K.'s FTSE equities index increased 0.4% (up 6.8% y-t-d).
Japan's Nikkei 225 Equities Index rallied 0.9% (down 1.9% y-t-d). Japanese 10-year "JGB" yields jumped six bps to 1.36% (up 2bps y-t-d). France's CAC40 rose 2.6% (up 10.8%). The German DAX equities index jumped 3.3% (up 13.1%). Spain's IBEX 35 equities index rose 2.1% (up 11.7%). Italy's FTSE MIB index gained 2.5% (up 11.1%). EM equities were mixed. Brazil's Bovespa index rallied 2.9% (up 6.6%), and Mexico's Bolsa index rose 2.4% (up 9.2%). South Korea's Kospi advanced 2.7% (up 8.0%). India's Sensex equities index dropped 2.5% (down 3.3%). China's Shanghai Exchange Index gained 1.3% (down 0.2%). Turkey's Borsa Istanbul National 100 index dipped 0.7% (up 0.5%).
Federal Reserve Credit increased $1.6 billion last week to $6.767 TN. Fed Credit was down $2.123 TN from the June 22, 2022, peak. Over the past 283 weeks, Fed Credit expanded $3.040 TN, or 82%. Fed Credit inflated $3.956 TN, or 141%, over the past 640 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt jumped $21.9 billion last week to $3.301 TN. "Custody holdings" were down $65.6 billion y-o-y, or 1.9%.
Total money market fund assets increased $5.5 billion to a record $6.923 TN. Money funds were up $789 billion over 29 weeks (23% annualized) and $905 billion y-o-y (15%).
Total Commercial Paper surged $39.3 billion to a six-month high $1.259 TN. CP was about unchanged over the past year.
Freddie Mac 30-year fixed mortgage rates dipped two bps this week to a six-week low 6.87% (up 10bps y-o-y). Fifteen-year rates rose four bps to 6.09% (down 3bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates down two bps to 6.97% (down 39bps).
Currency Watch:
For the week, the U.S. Dollar Index fell 1.2% to 106.71 (down 1.6% y-t-d). For the week on the upside, the Swedish krona increased 2.4%, the Brazilian real 1.9%, the euro 1.6%, the British pound 1.5%, the Australian dollar 1.2%, the Mexican peso 1.2%, the New Zealand dollar 1.2%, the Swiss franc 1.1%, the Norwegian krone 1.1%, the Singapore dollar 1.1%, the Canadian dollar 0.8%, the South Korean won 0.5%, and the South African rand 0.1%. On the downside, the Japanese yen declined 0.6%. The Chinese (onshore) renminbi increased 0.52% versus the dollar (up 0.58% y-t-d).
Commodities Watch:
The Bloomberg Commodities Index gained 1.6% (up 7.2% y-t-d). Spot Gold increased 0.8% to $2,883 (up 9.8%). Silver added 0.9% to $32.103 (up 11.1%). WTI crude slipped 26 cents, or 0.4%, to $70.74 (down 1%). Gasoline dipped 0.7% (up 3%), while Natural Gas surged 12.6% to $3.725 (up 3%). Copper jumped 2.7% (up 17%). Wheat rose 3.0% (up 9%), and Corn gained 1.8% (up 8%). Bitcoin increased $1,300 or 1.3%, to $97,450 (up 4%).
Trump Administration Watch:
February 10 – Wall Street Journal (Editorial Board): “Elon Musk has a bigger job than even he is advertising with his Department of Government Efficiency (DOGE). The Congressional Budget Office reported… that federal spending rose 15% in the first four months of fiscal 2025. Outlays in the first months rose $317 billion to $2.43 trillion from September through January. Discounting for some timing shifts in outlays from 2024 and 2025, spending rose $157 billion, or 7%... The usual spending suspects were to blame: Social Security up 7%, Medicare up 5%, and Medicaid up 9% because of rising costs per enrollee.”
February 10 – Bloomberg (Laura Davison and Hadriana Lowenkron): “President Donald Trump said he wants to increase the amount of money for the US military, a goal that runs counter to efforts from his top ally — Elon Musk — to slash trillions of dollars of federal spending. ‘We want to raise defense spending. I think we have to have it,’ Trump said in an interview with Fox News’ Bret Baier… Trump added that he might seek to pull back on military budgets in the future, saying that he plans to talk to Chinese President Xi Jinping and Russian President Vladimir Putin about curbing defense spending. ‘One of the things I’ll be doing with President Xi and with Putin and everybody else is saying, let’s ease up on all this, you know, building all of this, you know, the bombs,’ he said, calling it ‘crazy’ to spend large amounts of money on weapons that may not be used.”
February 10 – Wall Street Journal (Tarini Parti): “President Trump said Palestinians wouldn’t have the right to return to Gaza under his new plan to rebuild the territory, adding that they would get ‘much better housing’ instead in neighboring countries. ‘In other words, I’m talking about building a permanent place for them because if they have to return now, it’ll be years before you could ever—it’s not habitable,’ Trump said in an interview with Fox News’s Bret Baier… ‘It would be years before it could happen’… Asked by Baier if displaced Palestinians would have the right to return to Gaza, Trump said, ‘No, they wouldn’t.’”
February 9 – Associated Press (Jill Colvin): “President Donald Trump said he is serious about wanting Canada to become the 51st state in an interview that aired Sunday during the Super Bowl preshow. ‘Yeah it is,’ Trump told Fox News Channel’s Bret Baier when asked whether his talk of annexing Canada is ‘a real thing’ — as Canadian Prime Minister Justin Trudeau recently warned. ‘I think Canada would be much better off being the 51st state because we lose $200 billion a year with Canada. And I’m not going to let that happen,’ he said. ‘Why are we paying $200 billion a year, essentially a subsidy to Canada?’”
February 11 – Bloomberg (Alexandra Harris): “The US Treasury Department cut the size of some benchmark bill auctions, the start of what’s likely to be a series of reductions as the government preserves its borrowing authority under the statutory debt ceiling. Treasury said it plans to sell $90 billion of four-week bills Thursday, $5 billion smaller than the previous offering at that tenor.”
February 12 – Reuters (David Morgan): “Barely a month after predicting a new ‘golden age’ under President Donald Trump, congressional Republicans are struggling to move forward on the president's tax-cut agenda, despite their control of both the Senate and House of Representatives. House Republicans on Wednesday unveiled a plan that would cut taxes by about $4.5 trillion over a decade, raise the federal government's debt ceiling by $4 trillion - clearing the way for the nation's liabilities to exceed $40 trillion - and find $2 trillion in cost cuts over a decade in mandatory spending programs. While the plan did not specify which programs would be targeted, they could include the Medicaid health program for low-income Americans and Social Security and Medicare for the elderly.”
February 14 – Wall Street Journal (Richard Rubin): “The right flank of the Republican Party pulled the House in their direction this week, locking in commitments for deeper spending cuts and potentially complicating the path forward for some of President Trump’s tax priorities. Party leaders struck a deal with House Freedom Caucus members that ties the spending cuts and tax cuts together more firmly. The more money that gets pulled from Medicaid, food stamps and other programs, the more space Republicans will make for extending expiring tax cuts and removing taxes on tips, overtime pay and Social Security benefits. That intraparty agreement propelled a budget blueprint forward this week and kept open a path for the ‘one big, beautiful bill’ that Trump and House Speaker Mike Johnson (R., La.) are trying to craft.”
February 12 – Bloomberg (Axios): “Elon Musk's slash-and-burn approach is giving the White House genuine street cred with House conservatives. But it might not be enough to compensate for the outrage he’s provoked among House Democrats. If Democrats hold the line — and withhold their votes to fund the government — it will be exceedingly difficult for House Speaker Mike Johnson to avoid a government shutdown. Musk is flipping the traditional equation, in which Democrats vote to fund the government and Republicans feel compelled to do so under duress... ‘It helps,’ said Rep. Ralph Norman (R-S.C.). ‘However, the baseline needs to be intact at $2 trillion,’ he added, referring to how much spending he wants to cut in the (separate) reconciliation bill. ‘That’s just additional,’ said Rep. Scott Perry (R-Pa.). ‘We appreciate it, but that’s not enough.’”
February 11 – Axios (Stef W. Kight and Hans Nichols): “The GOP's Hill leaders are signaling their eagerness to back up Elon Musk by turning DOGE spending cuts into real legislation. Musk’s slash-and-burn cuts may be undone by the courts. But he’s given congressional Republicans a blueprint for what’s possible to cut. ‘I think that anything that DOGE does will be factored into what we do up here,’ Senate Majority Leader John Thune (R-S.D.) told Axios. ‘We are going to be codifying a lot of these changes,’ House Speaker Mike Johnson (R-La.) told reporters…, ‘and what they've uncovered is, frankly, shocking.’”
February 12 – New York Times (Maya C. Miller and Catie Edmondson): “Republicans in Congress have responded to President Trump’s unilateral moves to freeze federal spending, dismantle programs and fire civil servants with a collective shrug, staying mostly silent and even praising him as he circumvents the legislative branch. But in recent days, as his slash-and-burn campaign to remake the government has begun to affect their states and districts, some Republicans have tried to push back in subtle ways. They have sought carve outs and special consideration for agriculture programs, scientific research and more, even as they cheered on Mr. Trump’s overall approach. Their swift and quiet moves to protect their own pieces of the federal spending pie without critiquing Mr. Trump are an early indication of the political realities that could pose obstacles to the president’s push.”
February 13 – Associated Press (John Gambrell): “Elon Musk called… for the United States to ‘delete entire agencies’ from the federal government as part of his push under President Donald Trump to radically cut spending and restructure its priorities. Musk offered a wide-ranging survey via a videocall to the World Governments Summit in Dubai, United Arab Emirates, of what he described as the priorities of the Trump administration interspersed with multiple references to ‘thermonuclear warfare’ and the possible dangers of artificial intelligence. ‘We really have here rule of the bureaucracy as opposed to rule of the people — democracy,’ Musk said, wearing a black T-shirt that read: ‘Tech Support.’ He also joked that he was the ‘White House’s tech support,’ borrowing from his profile on the social platform X…”
February 9 – CNBC (Lora Kolodny): “Elon Musk has called to impeach a federal judge in New York, Paul Engelmayer, over an order that temporarily restricts the tech centi-billionaire and his DOGE team from accessing U.S. Department of the Treasury payment systems and sensitive data. Over the weekend an outraged Musk posted on X, the social network he owns, calling Engelmayer, ‘A corrupt judge protecting corruption,’ adding, ‘he needs to be impeached NOW!’”
February 12 – Bloomberg (Dana Hull and Emily Birnbaum): “Elon Musk called on the US House to impeach multiple judges who have blocked his government cost-cutting crusade, an extraordinary statement that threatens to create a chilling effect on the federal bench. ‘There needs to be an immediate wave of judicial impeachments, not just one,’ Musk said on his social media platform X.”
February 9 – Wall Street Journal (Brian Schwartz and Dylan Tokar): “President Trump’s newly installed Consumer Financial Protection Bureau chief Russell Vought is closing the bureau’s headquarters and has ordered staff to halt all of their supervisory efforts, ramping up the administration’s attempt to revoke the financial regulator’s authority. Vought, the head of the Office of Management and Budget who also became the acting director of the CFPB on Friday, issued a notice to staff on Saturday demanding they ‘cease all supervision and examination activity,’ according to an email…”
Trade War Watch:
February 11 – Bloomberg (Jennifer A. Dlouhy, Jenny Leonard and Josh Wingrove): “President Donald Trump ordered a 25% tariff on steel and aluminum imports, escalating his efforts to protect politically important US industries with levies hitting some of the country’s closest allies. The tariffs will apply widely to all US imports of steel and aluminum, including from Canada and Mexico, among the country’s top foreign suppliers of the metals. The levies, which also include finished metal products, are meant to crack down on what administration officials said were efforts by countries like Russia and China to circumvent existing duties. Trump cast the effort as one that would help bolster domestic production and bring more jobs to the US, and warned that the rate on metal tariffs ‘may go higher.’”
February 11 – Wall Street Journal (Gavin Bade and Alex Leary): “President Trump… announced 25% tariffs on imports of steel and aluminum to the U.S., reinstating global duties without exceptions for allies such as Canada, Mexico, Japan and South Korea that were relaxed by the Biden administration. ‘It’s a big deal. This is the beginning of making America rich again,’ Trump said…, as he signed dual executive orders for steel and aluminum tariffs. “No exceptions, no nothing,’ Trump added. The tariffs will go into effect on March 12, a White House official said, after initially indicating they would be imposed on March 4.”
February 11 – Reuters (Jarrett Renshaw, Jasper Ward and Philip Blenkinsop): “U.S. President Donald Trump's planned 25% tariffs on steel and aluminum imports would pile on top of other levies on Canadian goods, resulting in a total 50% tariff if threatened duties on all imports from Canada are enacted in March, a White House official said... Canada has not been told about the additive nature of the tariffs, a Canadian government source told Reuters, adding that it ‘sounds plausible.’ Mexico, Canada and the European Union condemned Trump's metals tariffs on Tuesday and governments around the world braced for even more levies from the new administration amid fears of an escalating global trade war.”
February 12 – Financial Times (Claire Bushey, Amanda Chu and Gregory Meyer): “Donald Trump’s threat to impose big tariffs on steel and aluminium is rippling across US industry, with companies ranging from manufacturers to oil and gas drillers facing increasing costs for the metals. Many executives are rushing to find ways to mitigate the political tumult and fallout from rising prices, even though the 25% tariffs will not come into effect for another month. ‘So far what we’re seeing is a lot of cost and a lot of chaos,’ said Ford chief Jim Farley… He added that he would return to Washington… to lobby policymakers for the second time in three weeks. ‘They need to understand that there’s a lot of policy uncertainty here,’ he said. ‘But in the meantime we’re scrambling to manage the company as professionals.’”
February 14 – Bloomberg (Edith Hancock): “President Trump’s plan to target countries with so-called reciprocal tariffs is ‘a step in the wrong direction,’ the European Commission said… The European Union’s executive arm said the bloc has some of the lowest tariffs in the world and sees no justification for increased U.S. tariffs on its exports. Such measures amount to a tax on U.S. citizens, increase business costs, hamper growth and drive inflation, it said, adding that the Trump administration is undermining years of work to reduce tariffs and other barriers globally through trade agreements… ‘The EU will react firmly and immediately against unjustified barriers to free and fair trade, including when tariffs are used to challenge legal and non-discriminatory policies,’ the commission said.”
February 9 – Financial Times (Joe Leahy, William Langley and Demetri Sevastopulo): “China has imposed retaliatory tariffs on the US… — hitting about $14bn worth of goods and dashing hopes that a trade war between the world’s two largest economies could be avoided. Beijing announced the tariffs last week in response to a US decision to impose an additional 10% levy on Chinese products, which US President Donald Trump called an ‘opening salvo’ in a renewed trade offensive against China.”
February 9 – Wall Street Journal (Liza Lin and Raffaele Huang): “Chinese officials are building a list of U.S. technology companies that can be targeted with antitrust probes and other tools… Beijing has already said it is investigating Nvidia and Google over alleged antitrust issues. Other American companies in its sights include Apple, Silicon Valley tech company Broadcom and semiconductor-design software vendor Synopsys, said people familiar... Synopsys has a $35 billion acquisition awaiting approval by Beijing.”
February 10 – Bloomberg (Katia Dmitrieva): “Economists are warning the next stage of Donald Trump’s trade war would open new fronts across Asia, with India and Thailand among the nations most exposed to risks from the US president’s vow to impose reciprocal tariffs on partners. The two Asian countries stand out because the tariffs they impose on the US are, on average, far above the rate charged on them by the US, according to a range of estimates from analysts who considered scenarios of like-for-like levies. The caveat is that Trump has yet to clarify the potential policy, including which countries would be targeted and on what basis. ‘Emerging Asian economies have higher relative tariff rates on US exports and are thus at risk of higher reciprocal tariffs,’ Nomura Holdings Inc. analysts led by Sonal Varma said… ‘We expect Asian economies to step up their negotiations with Trump.’”
February 12 – Bloomberg (Frances Schwartzkopff): “The US may use ‘trade tools’ to retaliate against European ESG regulations that affect American companies, said Howard Lutnick, US President Donald Trump’s pick to become commerce secretary. Lutnick was referring specifically to the Corporate Sustainability Due Diligence Directive. He told Republican senators last month that he’s concerned by the extent to which environmental, social and governance regulations formulated in Brussels are impacting US businesses.”
February 11 – Bloomberg: “The global aluminum market is entering a fresh period of upheaval as traders rush to assess the potential impact of renewed US protectionism under President Donald Trump. The US leader ordered tariffs of 25% on all imports of aluminum and steel on Monday… The measures threaten to increase costs for US buyers, and at least some rerouting of international trade flows. ‘We expect any tariff would lead to higher prices for US manufacturers’ via a rise in regional premiums, ANZ Group Holdings Ltd. Analysts… wrote... More Canadian supply will likely be exported to Europe, with the US increasing its purchases from the Middle East, they said.”
Ukraine War Watch:
February 14 – Bloomberg (Daryna Krasnolutska): “Volodymyr Zelenskiy said he doesn’t want to be remembered as the president who handed Ukrainian land to Russia. Speaking on a panel… Zelenskiy said that he’s prepared to engage with Donald Trump’s initiative to end the war in Ukraine but he wants to agree on an approach with allies before confronting Vladimir Putin. ‘I don’t want to be the person in history who helped Putin to occupy my country,’ Zelenskiy told the audience at the Munich Security Conference.”
February 13 – Bloomberg (Aliaksandr Kudrytski): “President Volodymyr Zelenskiy said that Russia’s Vladimir Putin simply can’t be trusted, which is why Ukraine needs security guarantees, particularly from the US. This was the message Zelenskiy gave to US President Donald Trump…Trump held a call with Putin earlier this week, sweeping aside long-standing US policy that nothing should be decided about Ukraine without Kyiv at the table. The move underscores the US president’s intent to follow through quickly with his campaign pledges to negotiation a peace. Trump told Zelenskiy that ‘Putin wants peace,’ the Ukrainian leader said. But Zelenskiy said that he sees it ‘more realistically’ and ‘that is why I don’t trust” Putin.’”
February 13 – Bloomberg (Max Seddon and Christopher Miller): “Vladimir Putin’s initial plan to capture Ukraine in a few days ended in disaster. But after Donald Trump set up direct peace talks with Moscow, bypassing Kyiv and European allies, the Russian president is now closer than ever to getting what he wanted from his three-year-long invasion. Putin’s main ambition… is to establish a new security architecture that gives Russia a sphere of influence in Europe — much as the Yalta conference did for the Soviet Union at the end of the second world war. Now, the US may be open to letting him have it... ‘The situation looks much more favourable for Putin than at any point during the entire war over the last three years,’ said Alexander Gabuev, director of the Carnegie Russia Eurasia Center... ‘If the US just unilaterally ends its military and diplomatic support, as well as intelligence sharing, then Ukraine will be in a very tough position. And it’ll be hard to get out of it even if the Europeans get more involved.’ In Moscow, there was palpable joy following Wednesday’s call between Trump and Putin.”
February 14 – Bloomberg: “Vladimir Putin is assembling a heavyweight team with decades of experience in high-stakes negotiations to face off against US President Donald Trump’s representatives for a deal to end Russia’s war in Ukraine. They include Yuri Ushakov, his chief Kremlin foreign-policy adviser who has more than half a century of involvement in diplomacy, and his top spymaster, Sergei Naryshkin, who served with Putin in the Soviet KGB… Kirill Dmitriev, a financier educated at Stanford and Harvard with ties to the Russian president’s own family, may play a key role as an unofficial back-channel with Trump’s negotiators, people familiar… said.”
Middle East Watch:
February 11 – Reuters (Jeff Mason and Simon Lewis): “Donald Trump… pressed Jordan’s King Abdullah to take in Palestinians who would be permanently displaced under the president's plan for the U.S. to take over the Gaza Strip, even as the king said his country was firmly opposed to the move. Speaking alongside the Arab country’s ruler in the White House, Trump signaled he would not budge on his idea that involves moving the Gaza Strip’s shell-shocked residents and transforming the war-ravaged territory into what he billed a ‘Riviera of the Middle East.’ Trump has infuriated the Arab world by saying that Palestinians would not be able to return to their homes under his proposal to redevelop the enclave…‘We’re going to take it. We’re going to hold it, we’re going to cherish it. We’re going to get it going eventually, where a lot of jobs are going to be created for the people in the Middle East,’ Trump said…, saying his plan would ‘bring peace’ to the region.”
February 12 – Reuters (Ahmed Mohamed Hassan, Nafisa Eltahir, Mohamed Waly and Steve Holland): “Egypt’s President Abdel Fattah al-Sisi will not travel to Washington for talks at the White House as long as the agenda includes U.S. President Donald Trump’s plan to displace Palestinians from Gaza, two Egyptian security sources said. Trump has infuriated the Arab world with a plan to permanently displace the population of more than 2 million Palestinians from the Gaza Strip… Egypt’s close cooperation with the United States has been a bedrock of Washington’s Middle East policy for decades. Since a U.S.-brokered peace treaty between Israel and Egypt more than four decades ago, Egypt has consistently been one of the biggest recipients of U.S. military aid, alongside Israel.”
February 13 – Washington Post (John Hudson, Michael Birnbaum and Ellen Nakashim): “Israel is likely to attempt a strike on Iran's nuclear program in the coming months in a preemptive attack that would set back Tehran's program by weeks or perhaps months but escalate tensions across the Middle East and renew the prospect of a wider regional conflagration, according to U.S. intelligence. The warnings about a potential Israeli strike are included in multiple intelligence reports spanning the end of the Biden administration and the beginning of the Trump administration…”
February 11 – Financial Times (Neri Zilber, Andrew England and Felicia Schwartz): “Israel’s Prime Minister Benjamin Netanyahu ordered his military to mass around the Gaza Strip and threatened to resume ‘intensive fighting’ against Hamas if the Palestinian militant group failed to release Israeli hostages by midday on Saturday. Netanyahu’s ultimatum… came after Hamas’s announcement that it was delaying ‘until further notice’ the planned release of three hostages this weekend in protest at alleged Israeli violations of the US-brokered ceasefire agreement between the two sides. Israel’s threat comes after US President Donald Trump this week warned Hamas to release ‘all’ hostages by Saturday or he would let ‘hell break out’.”
Taiwan Watch:
February 12 – Wall Street Journal (Austin Ramzy): “Two U.S. Navy ships completed a passage through the waters between Taiwan and mainland China on Wednesday, drawing criticism from Beijing and reviving a question that has nagged at supporters of the island’s democracy: Is the U.S., under the leadership of President Trump, fully committed to Taiwan’s survival? …Trump’s statements critical of Taiwan, along with his tariff threats and the diverging views within his administration about the island, have increased uncertainty about the direction of the island’s relationship with the U.S., its most important partner.”
February 9 – Bloomberg (Karishma Vaswani): “After squeezing Taiwan in the skies and the seas, China is using tactics that Russia has employed to great effect in the Ukraine war and is now intensifying its sabotage of undersea cables around the self-ruled island. Beijing has reportedly targeted the vital communications network, cutting off equipment and leaving Taipei economically vulnerable and potentially isolated in the event of an all-out attack. It’s a reminder of the mainland’s ability to control what it sees as its own territory, and a warning to other countries — in particular the US — not to get involved.”
Market Instability Watch:
February 13 – Bloomberg (Natalia Kniazhevich): “Rising instability among some of the biggest US stocks is driving a measure of single-stock ‘fragility’ to record levels, with the market increasingly vulnerable to whipsaw patterns among clusters of shares such as occurred in the dot-com bubble of the late 1990s. Stock fragility, a measure of a company’s daily share-price move relative to its recent volatility, is on track to reach its highest in more than 30 years among the largest 50 stocks in the S&P 500 Index, based on the average magnitude and frequency of such individual shocks so far in 2025, according to Bank of America Corp. strategists.”
February 8 – Financial Times (Leo Lewis and Ian Smith): “Japan’s borrowing costs have soared to a 14-year high as rising interest rates, sustained inflation and a potential wave of wage increases this spring fuel a relentless sell-off in its government debt. Benchmark 10-year Japanese government bond yields, which move inversely to prices, touched 1.31% on Friday, having risen another 0.21 percentage points already this year following a big jump in 2024.”
Global Credit and Financial Bubble Watch:
February 12 – Bloomberg (Ronan Martin): “Blue-chip US companies are raising euro debt at breakneck speed in a bid to lock in significantly lower borrowing costs across the pond. So-called reverse Yankee issuance reached €23.4 billion ($24.3bn) so far this year, the highest for this period since 2007… US companies are attracted by the European Central Bank’s deposit rate, which is 175 basis points lower than the Federal Reserve’s key rate.”
February 11 – Bloomberg (Scott Carpenter): “CMO issuance was the highest in four years last month, according to Bank of America, driven by a 79% surge in sales of conventional deals from December’s level. With Ginnie Mae issuance jumping 40%, overall CMO issuance was $36.2 billion, the most since February 2021…”
AI Bubble Watch:
February 10 – Bloomberg (Shirin Ghaffary, Kate Clark and Rachel Metz): “A group of investors led by Elon Musk has offered to buy the nonprofit that controls OpenAI for $97.4 billion, escalating a clash between the Tesla chief executive and the artificial intelligence company he co-founded. With the unsolicited bid, Musk said he hopes to return OpenAI to being ‘the open-source, safety-focused force for good it once was,’ according to a statement. In response, OpenAI Chief Executive Officer Sam Altman posted on Musk’s X social-media platform: ‘No thank you but we will buy twitter for $9.74 billion if you want.’”
February 12 – Reuters (Liam Mo and Brenda Goh): “The rise of DeepSeek's artificial intelligence (AI) models is seen providing some Chinese chipmakers such as Huawei a better chance to compete in the domestic market against more powerful U.S. processors. Huawei and its Chinese peers have for years struggled to match Nvidia in building top-end chips that could compete with the U.S. firm’s products for training models, a process where data is fed to algorithms to help them learn to make accurate decisions. However, DeepSeek's models, which focus on ‘inference,’ or when an AI model produces conclusions, optimise computational efficiency rather than relying solely on raw processing power.”
Bubble and Mania Watch:
February 13 – Bloomberg (Paige Smith and Georgia Hall): “Robinhood Markets Inc. reported revenue that more than doubled as the online trading firm was buoyed by crypto-market transactions around the US presidential election. Revenue grew to $1.01 billion in the fourth quarter… Cryptocurrency revenue also exceeded expectations, increasing more than 700% to $358 million.”
February 10 – Bloomberg (Isabelle Lee): “Retail daredevils — undeterred by recent Wall Street jitters over AI and crypto — are going long, pumping up leveraged funds to nearly $100 billion while pessimistic market wagers languish. Speculators are buying the dip in exchange-traded funds that invest in what have been some of the hottest stock strategies. This breed of ETF is designed to profit at two or even three times an asset’s gain. Bets on technology companies, including Tesla Inc. and Microsoft Corp., have drawn particular attention… Last week, dip buyers flocked to products that offer to amp up returns in semiconductors in the wake of the sector’s worst single-session drop in nearly five years.”
February 8 – Financial Times (Sun Yu): “US foundations and university endowments are ramping up their exposure to cryptocurrencies to join the digital assets rush prompted by President Donald Trump’s promise to make the nation the world’s ‘bitcoin superpower’. Crypto has far outperformed other asset classes over the past five years despite its high volatility, with many who have stood on the sidelines now jumping in for fear of missing out on the runaway price jumps. The one-year-old University of Austin is raising a $5mn bitcoin fund, the first of its kind among the country’s endowments and foundations, for its $200mn endowment.”
February 13 – Bloomberg: “A BlackRock Inc. fund forfeited a Shanghai office complex to Standard Chartered Plc after it didn’t make a loan payment for the property… A fund unit of the New York-based asset manager opted not to make a payment for a syndicated loan led by Standard Chartered due at the end of September…”
U.S./Russia/China/Europe Watch:
February 12 – Bloomberg (Andrea Palasciano, Katharina Rosskopf and Milda Seputyte): “European leaders blindsided by Donald Trump’s call with Vladimir Putin insisted they shouldn’t be sidelined after the US president said he’d agreed to negotiate an end to the war in Ukraine with his Russian counterpart. In talking to Putin, Trump swept aside long-standing US policy that nothing should be decided about Ukraine without Kyiv at the table, while cutting out allies with an existential stake in the resolution of a conflict raging on their borders. Many European NATO partners now fear the more conciliatory American stance amounts to a giveaway to the Russian leader. ‘It’s clear that any deal behind our backs will not work,’ the European Union’s foreign policy chief, Kaja Kallas, said... ‘Any agreement will need also Ukraine and Europe being part of it.’”
February 12 – Financial Times (John Paul Rathbone): “Military spending in Russia, whose economy President Vladimir Putin has put on a war footing, now outstrips all of Europe’s defence budgets combined, according to a study. Total Russian defence spending soared last year by 42% in real terms to Rbs13.1tn. That is equivalent to $462bn… European defence budgets by comparison, including the UK and EU member states, rose almost 12% last year to $457bn — slightly less than Moscow’s spending, the International Institute for Strategic Studies think-tank said…”
De-globalization Watch:
February 11 – Wall Street Journal (Brian Spegele, Jason Douglas and Yoko Kubota): “A day in China could easily start like this: Roll out of bed and swipe through WeChat messages on your Huawei smartphone. Hop into a BYD electric car and drive to the railroad station, where a high-speed train from a state-run factory whisks you to your destination. Chinese-designed nuclear plants, solar farms and wind turbines power the city’s lights. China is racing to make itself less reliant on the outside world’s products and technology—part of a yearslong effort by leader Xi Jinping to make China more self-sufficient and impervious to Western pressure as tensions with the U.S. rise. Beijing has poured hundreds of billions of dollars into favored industries, especially in high-end manufacturing, while exhorting business leaders to fall in line with the government’s priorities. In many ways, the effort is succeeding.”
Inflation Watch:
February 12 – CNBC (Jeff Cox): “Inflation perked up more than anticipated in January… The consumer price index… accelerated a seasonally adjusted 0.5% for the month, putting the annual inflation rate at 3%... They were higher than… estimates for 0.3% and 2.9%. The annual rate was 0.1 percentage point higher than December. Excluding volatile food and energy prices, the CPI rose 0.4% on the month, putting the 12-month inflation rate at 3.3%. That compared with respective estimates for 0.3% and 3.1%.”
February 12 – Bloomberg (Alexandre Tanzi): “Inflation data came in higher than expected in January, driven by price gains across a broad range of goods and services. Some items, like prescription drugs and parking fees, experienced the largest monthly gains on record in Bureau of Labor Statistics data. Insurance and eggs saw the biggest price increases in about a decade.
February 13 – Associated Press (Paul Wiseman): “U.S. wholesale prices came in hotter than expected last month at a time when progress against inflation appears to have stalled… The… producer price index… rose 0.4% from December and 3.5% from January 2024. Forecasters had expected a 0.2% change… and 3.2% year over year. Excluding volatile food and energy prices, so-called core producer prices rose 0.3% last month from December and 3.6% from a year earlier. Wholesale services prices rose 0.3%, pushed higher by increasing hotel costs. Goods services climbed 0.6% on higher energy prices.”
February 12 – Bloomberg (Miranda Davis, Augusta Saraiva and Michael Hirtzer): “The great American egg shortage is getting worse. With bird flu killing millions of egg-laying chickens, prices surged more than 15% in January from a month earlier — the biggest advance since 2015 — and 55% from a year before…The jump helped push overall US inflation up by the most since August 2023. That’s bad news for American consumers already contending with higher costs of everything from food to gas. Grocery stores from New York to Chicago and Los Angeles have already limited purchases, while Waffle House added a temporary egg surcharge of 50 cents per unit.”
February 13 – Bloomberg (Ines Ferré): “Coffee futures have ripped more than 30% year to date, hovering near all-time high levels. The surge is starting to pass through to consumer wallets. The Consumer Price Index report… showed that the prices consumers paid for roasted coffee rose 2.5% in January over the previous year. Meanwhile, instant coffee jumped a whopping 7.1%.”
February 12 – Wall Street Journal (Telis Demos): “Most drivers wouldn’t realize it, but car-insurance prices are particularly sensitive to tariffs. That’s because of the impact those levies can have on car parts and used vehicles. This, in turn, is bad news for the inflation outlook. In the surprisingly high inflation reading for January…, auto-related costs were particularly elevated. Besides threatening tariffs against North America trading partners, President Trump also has announced tariffs on steel and aluminum, and said he is planning levies on imported semiconductors. Last week, he said he would soon implement ‘reciprocal tariffs’… If these tariffs were to drive up the cost of imported auto parts, they can in turn affect what it costs to repair a car.”
February 12 – Bloomberg (Erin Hudson): “The cost to attend private schools in the US has hit all-time highs as inflationary pressures prompt institutions to boost fees. The annual tuition for a day school rose about 7.4% to $49,284 on average and for a boarding school it climbed roughly 5.3% to $73,080, according to… S&P Global Ratings.”
Federal Reserve Watch:
February 12 – Reuters (Brendan O'Brien): “President Donald Trump… said that interest rates should be lowered and that would go ‘hand in hand’ with his upcoming tariffs, despite economists’ expectations that tariffs would fuel inflation and postpone rate cuts.”
February 11 – Financial Times (Claire Jones): “Jay Powell has defended the Federal Reserve’s authority over US monetary policy, as he vowed to ‘focus on the data’ and avoid wading into politics…The Fed is facing the fiercest challenge to its independence to set interest rates since the 1980s… Fed chair Powell told lawmakers on the Senate’s banking committee… that the central bank stood a better chance of keeping prices under control if it remained above the fray… ‘We’ll make better policy, we’ll keep inflation lower, if we just focus on doing our job and stay out of politics, stay out of elections and don’t try to favour or hurt any political party, or any political filter and just try to focus on the data,’ Powell said... ‘If we start putting up political filters, we’ll be less effective at our already quite difficult job.’”
February 12 – Bloomberg (Craig Torres): “Federal Reserve Chair Jerome Powell said the latest consumer price data show that while the central bank has made substantial progress toward taming inflation, there is still more work to do. ‘I would say we’re close, but not there on inflation,’ Powell told the House Financial Services Committee… in response to a question on the second day of his semi-annual testimony to Congress. ‘Last year, inflation was 2.6% — so great progress — but we’re not quite there yet,’ Powell said, referencing a different inflation gauge than the consumer price index…”
February 12 – Bloomberg (Liz Capo McCormick): “Bond traders pushed out bets for the next Federal Reserve interest-rate cut to December as US inflation exceeded expectations. Swap contracts linked to future Fed decisions, which previously anticipated a rate cut by September, repriced after January consumer prices rose more than economists estimated. The new levels imply just one quarter-point cut this year. Treasury debt prices slumped, sending yields higher by at least eight basis points across maturities.”
February 11 – Bloomberg (Reade Pickert): “Federal Reserve Bank of Cleveland President Beth Hammack said it’s appropriate to keep interest rates steady for ‘some time’ while policymakers await further downward progress on inflation and analyze the economic effects of new government policies. ‘We have made good progress, but 2% inflation is not in sight just yet,’ Hammack said... ‘As long as the labor market remains healthy, I am looking for broad-based evidence that inflation is sustainably returning to 2% before adjusting policy further.’”
U.S. Economic Bubble Watch:
February 11 – Bloomberg (Vince Golle): “US small-business optimism declined in January from a more than six-year high and a gauge of uncertainty climbed as companies weighed Trump administration policies and the Federal Reserve’s pause on interest-rate cuts. The National Federation of Independent Business optimism index fell 2.3 points to 102.8 last month. Seven of the 10 index components decreased, led by the steepest monthly decline in capital spending plans since 1995. The group’s uncertainty indicator jumped 14 points, the most in monthly data back to 1986.”
February 14 – Bloomberg (Augusta Saraiva): “US retail sales slumped in January by the most in nearly two years, indicating an abrupt pullback by consumers after a spending spree in the closing months of 2024. The value of retail purchases… decreased 0.9% after an upwardly revised 0.7% gain in December… Nine of the report’s 13 categories posted decreases, most notably motor vehicles, sporting goods and furniture stores. The data encompassed a period marked by devastating wildfires in Los Angeles — the second-largest metropolitan area in the US — and severe winter weather in other parts of the country, which could have depressed brick-and-mortar shopping activity.”
February 13 – Associated Press (Matt Ott): “U.S. applications for unemployment benefits fell last week as employers continue to retain workers despite resurgent inflation and elevated interest rates. The number of Americans filing for jobless benefits fell by 7,000 to 213,000 for the week ending February 8… The total number of Americans receiving unemployment benefits for the week of February 1 fell to 1.85 million, a decrease of 36,000 from the previous week.”
February 13 – Bloomberg (Alex Tanzi): “The share of outstanding US consumer debt that’s in delinquency rose in the fourth quarter to the highest in almost five years, according to a Federal Reserve Bank of New York report. Some 3.6% of debt was delinquent in the final three months of 2024, the most since the second quarter of 2020… Total household debt — which is primarily composed of mortgages, student loans, auto loans and credit-card balances — rose 0.5% to a record $18 trillion.”
February 11 – New York Times (Christopher Flavelle): “California’s home insurance plan of last resort, designed for people who can’t get coverage on the private market, does not have enough money to pay claims from the Los Angeles wildfires and is getting an infusion of cash from regular insurers. State regulators said… they will allow the program, known as the FAIR Plan, to collect $1 billion from private insurance companies doing business in California to pay its claims. That is likely to drive up insurance costs for homeowners across the state. The situation marks a perilous new stage for California’s home insurance market, which had already been reeling from wildfires made more frequent and intense by climate change. Facing growing losses, major insurers like State Farm were already pulling back from the state, making it harder for homeowners to find coverage. Now the pressure to leave will be even greater. The $1 billion assessment is the largest since the FAIR Plan was created in 1968, and the first time since the 1994 Northridge earthquake near Los Angeles that the FAIR Plan has faced claims it can’t pay on its own.”
February 11 – Associated Press (Tran Nguyen): “California’s plan that provides insurance to homeowners who can’t get private coverage needs $1 billion more to pay out claims related to the Los Angeles wildfires, the state Insurance Department said… There were more than 452,000 policies on the Fair Plan in 2024, more than double the number in 2020. The plan says it’s expecting a loss of roughly $4 billion from the Eaton and Palisades Fires… Roughly 4,700 claims have been filed as of this week, and the plan has already paid out more than $914 million.”
February 11 – Wall Street Journal (Colin Kellaher): “Travelers said it expects pretax catastrophe losses of $1.7 billion from the devastating wildfires that struck southern California in January. The… insurer… said the estimate, equal to $1.3 billion on an after-tax basis, includes losses from its personal and commercial segments, along with estimated assessments from the California FAIR Plan and recoveries from reinsurance. Analysts have estimated that the wildfires could cost the insurance industry around $30 billion.”
February 13 – Bloomberg (John Gittelsohn and Eliyahu Kamisher): “California’s housing market is already one of the most expensive in the country. A San Francisco condo can cost as much as a four-bedroom house in Texas and families drive hours inland just to find a starter home. Now, the Los Angeles wildfires are likely to add another financial burden to households across the state. A $1 billion assessment… for California’s FAIR Plan, the state-mandated insurer of last resort, is expected to drive up premiums as companies will likely pass some of the costs onto homeowners. The charge, meant to help cover wildfire losses, underscores a broader crisis in California’s housing market, in which rising risks from natural disasters, dwindling insurance options and intractable shortages are colliding to make homeownership even more expensive.”
China Watch:
February 12 – Bloomberg: “It was the moment China’s leaders finally blinked. After four years of standing by as property developers like China Evergrande Group spiraled into default, Communist Party officials decided in late January that China Vanke Co. — one of the country’s last surviving real-estate giants — was, for now at least, too big to fail. Faced with a collapse in Vanke’s bond prices and the company’s warning of a record $6.2 billion loss, officials from the developer’s hometown in Shenzhen stepped in to take operational control. Authorities are working on a proposal to help Vanke plug a funding gap of about $6.8 billion this year. The unprecedented intervention has triggered a sigh of relief in markets, but it also underscores a somber reality: The property crisis that hobbled China’s economy and created a nearly $160 billion pile of distressed debt — the world’s largest — is getting worse. Signs of trouble are now popping up everywhere. A brief revival in home sales has fizzled despite multiple rounds of stimulus… Chinese bankers have mostly stopped lending to real-estate projects outside major cities such as Shanghai, according to people familiar... And international creditors are losing patience: More debt restructuring deals are unraveling and at least a dozen developers face petitions to liquidate…”
February 9 – Bloomberg: “China’s consumer inflation accelerated for the first time since August, caused by a burst of household spending around the Lunar New Year holiday even as deflationary pressures persist. The consumer price index rose 0.5% in January from a year earlier…, compared with a 0.1% gain in the previous month… The price of services increased 0.9%, accounting for more than 50% of the total rise in CPI…”
February 13 – Bloomberg: “China’s central bank said it will consider foreign factors and tweak its policy if necessary, in a possible recognition of external constraints on monetary easing. The People’s Bank of China will ‘choose the opportunity to adjust and optimize the intensity and pace of policies based on domestic and foreign economic and financial conditions,’ it said in a quarterly monetary policy report... The publication provides a rare glimpse into the PBOC’s outlook and policy plans. The new phrasing could be a veiled acknowledgment of adverse factors weighing on the yuan — from sticky US inflation to Donald Trump’s tariffs — that have led China to delay monetary stimulus.”
Central Bank Watch:
February 7 – Reuters (Marc Jones and Sumanta Sen): “The first central bank interest rate moves of 2025 suggest it will be a year where some important heavyweights, in both the developed and emerging parts of the world, travel in different directions for a while… Among the G10 central banks which oversee the world’s most heavily-traded currencies, three of the four that met last month - Sweden, the ECB and Canada - continued their cutting cycles, while Japan, where rates hardly ever go up, hiked for the second time in less than a year. The U.S. Federal Reserve and Norway's Norges Bank both sat on their hands, while Australia, New Zealand and Switzerland didn’t hold meetings. The Bank of England has just cut rates this week.”
Europe Watch:
February 14 – Bloomberg (Mark Schroers): “The euro-area economy managed to eke out growth at the end of last year after all, with Eurostat revising up its initial estimate. Gross domestic product increased 0.1% in the three months through December from the previous quarter…”
February 9 – Bloomberg (Priscila Azevedo Rocha and Elena Mazneva): “Europe is teetering on the edge of its next energy crisis after natural gas prices soared to the highest in two years. After a long fight with surging bills, stubbornly high inflation and fading industrial activity because of the 2022 crunch, the continent again faces the threat of another prolonged rally that may trigger more economic pain. The region’s gas inventories are depleting rapidly this winter, and the lower reserves drop, the bigger the task to refill.”
Japan Watch:
February 13 – Bloomberg (Eddy Duan): “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…”
Emerging Markets Watch:
February 9 – Bloomberg (Anthony Esposito): “Mexico’s inflationary environment is expected to allow policymakers to keep cutting the benchmark interest rate, the head of the Bank of Mexico told Reuters, as the fight to bring down inflation has entered a new phase. Banxico… cut the key rate by 50 bps to 9.50% on Thursday, double the 25-bps cuts it had made since it began lowering borrowing costs from a record high of 11.25% in March 2024. ‘Our work is not over. The fight against inflation is now in a new phase,’ Banxico Governor Victoria Rodriguez said…”
Geopolitical Watch:
February 14 – Financial Times (Roula Khalaf, Leila Abboud and Ben Hall): “Emmanuel Macron has described Donald Trump’s return as an ‘electroshock’ that should force Europe to secure its own future as well as Ukraine’s. In an interview at the Élysée Palace shortly after Trump agreed with Vladimir Putin of Russia to hold imminent peace talks, the French president championed the need for Europe to ‘muscle up’ on defence and the economy. He insisted that only Ukraine’s President Volodymyr Zelenskyy could negotiate on behalf of his country, warning that allowing ‘peace that is a capitulation’ would be ‘bad news for everyone’, including the US. ‘The only question at this stage is whether President Putin is genuinely, sustainably, and credibly willing to agree to a ceasefire on this basis. After that, it’s up to the Ukrainians to negotiate with Russia,’ Macron said, adding: ‘We all need to stay collectively vigilant.’”
February 9 – Financial Times (Gideon Rachman): “You have heard of neoliberalism and neoconservatism. Now welcome to the age of neoimperialism. The most striking moment in Donald Trump’s inaugural address last month was his pledge that the US ‘will once again consider itself a growing nation — one that increases our wealth, expands our territory’. Hopes that Trump’s talk of territorial expansion was an empty rhetorical flourish have faded. The president’s references to foreign territories that he would like to acquire are too frequent to be ignored or dismissed. Trump has confidently asserted that America will ‘get Greenland’. He has vowed to ‘take back’ the Panama Canal. He frequently says that Canada should become America’s 51st state. Last week, he even laid claim to Gaza. His fascination with acquiring territory has startled even some of his supporters. But Trump’s expansionist ambitions are easier to understand, if seen as part of a global trend.”
