Believe me on this: no interest in stirring up discord. I don’t want to be canceled by my paid subscribers (don’t have any). Don’t want to lose all my followers on social media (don’t do social media). Don’t want to defy the party line (fiercely independent). Pleased to have readers of my analysis, but refuse to pander. This is year 26 of chronicling, on a weekly basis, an incredible period in human history. Today only intensified a foreboding feeling that decades of extraordinary history are coming to a perilous head.
This was another week that will be studied, discussed, and debated for generations. I’ll offer a perspective on what transpired today, not because of any great insight. We live in an age of perilous spin, disinformation, and propaganda. I’m simply compelled to share what seems like an atypically unencumbered perspective. For the record:
French President Emmanuel Macron and UK Prime Minister Keir Starmer did President Zelenskyy no favors. The degree of flattery, fawning and pandering that world leaders accept as necessary to be on good terms with President Trump will be an ongoing issue. Especially over time, many leaders will outright refuse to kowtow while others will want to avoid appearing embarrassingly spineless back home.
It seems too much to expect the wartime President of Ukraine – a nation that has suffered the loss of hundreds of thousands of its citizens, total destruction of scores of cities and villages, unspeakable war crimes, and is now in preparation for incredibly fraught negotiations with Putin – not to demonstrate strength and resolve. I listened to the entire Oval Office event, replaying the final toxic exchange. He didn’t kneel. He didn’t succumb to current heads of state protocol of phony charm and flattery. But it is dangerously unfair to claim that President Zelenskyy was disrespectful to the United States.
Fox News’s Sean Hannity: “One thing is perfectly clear, if there was ever any doubt of American strength on the world stage – it is back, it is back big time. President Trump will always stand up for you, the American people. He’s going to put America first. We’re not going to be disrespected. We will not be swindled. We will not be bullied. Today, the Ukrainian President Zelenskyy, frankly, in many ways disgraced himself. Lost an opportunity of a lifetime to stop the death and destruction of his country, and he did it on the world stage.”
There will be abundant White House and Republican spin. Most Americans will probably never see more than short video clips. MAGA is outraged with Zelenskyy. It will be interesting to see how this plays with most Americans. Many will no doubt share my shock. It’s as if we’re witnessing a national transformation right before our eyes. Pulling Ukraine support would be the ultimate tragic, divisive disruption. Might fraying support from pro-Ukrainian Republicans pose risk to Trump's legislative agenda?
To see an intense discussion about Ukraine security guarantees and the Ukrainians’ lack of trust for Putin implode into the President’s rant about “stupid President” Biden,” “the Russian hoax,” and Hunter Biden’s bedroom and laptop could not have been more disturbing. Foreign governments - friends and foes - will carefully analyze President Trump’s Oval Office behavior.
To at least half the country, today’s spectacle is additional evidence that questions the President’s fitness for office. President Trump lost control with minimal provocation. J.D. Vance was petty and a provocateur, demonstrating aggressive behavior aberrant for a vice president. It’s not clear it was the “ambush” that many are calling it, but the two were belittling and bullying to the President of Ukraine that has demonstrated phenomenal courage and leadership in the most atrocious of circumstances.
Our nation today faces great peril. Vulnerable once-in-a-century Credit and speculative Bubbles, precarious wealth disparities, distrust of institutions, festering social instability, and deep economic structural maladjustment - for starters. Major financial and economic crises are likely, yet I view the greatest danger lies with our deeply divided society.
A deeply fractured world faces incredible challenges, including climate change and the potential for major trade and military confrontations. Both as a nation and internationally, it has never been as critical to try to somehow come together to confront myriad issues and cooperate to resolve serious problems before they spiral completely out of control.
My overarching concern with the Trump administration was on full display today. They have a way – seemingly a wanting – to divide and polarize, albeit our nation or the world. An unstable world is even more dangerously fractured after today, and it is unjust to blame President Zelenskyy.
President Trump: “We had a very meaningful meeting in the White House today. Much was learned that could never be understood without conversation under such fire and pressure. It’s amazing what comes out through emotion, and I have determined that President Zelenskyy is not ready for Peace if America is involved, because he feels our involvement gives him a big advantage in negotiations. I don’t want advantage, I want PEACE. He disrespected the United States of America in its cherished Oval Office. He can come back when he is ready for Peace.”
Axios: “Ukrainian President Volodymyr Zelensky said he doesn’t think he needs to apologize for his public spat with President Trump and Vice President Vance at the Oval Office. ‘I am not sure we did something bad,’ he said…”
Newsmax: “WH: Support Rolls in for Trump After Standoff With Zelenskyy”
Secretary of State Marco Rubio: “Thank you @POTUS for standing up for America in a way that no President has ever had the courage to do before. Thank you for putting America First. America is with you!”
Secretary of the Treasury Scott Bessent (on Fox News): “I’ve got to tell you, we were in shock. This has to be one of the greatest diplomatic mishaps of all time by President Zelenskyy. We were having a press conference. We were going in to lunch. And then we were going to sign the economic partnership agreement. This was supposed to be a day where Ukraine and the U.S. intertwined our economic prospects and, instead, President Zelenskyy, and I think he’s probably used to dealing with American leadership that is weak. And he ran into President Trump who didn’t back down, Vice President Vance, who didn’t back down. They were asked to leave the room. Then they had to be asked to leave the building.”
Dan Bongino: “President Trump and VP Vance just put Zelensky in his place at the White House and the world is stunned by what they just witnessed.”
The Hill – February 28 (Julia Manchester): “Top Russian official and former president Dmitry Medvedev celebrated what he called President Trump’s ‘proper slap down’ of Ukrainian President Volodymyr Zelensky in the Oval Office... ‘The insolent pig finally got a proper slap down in the Oval Office,’ Medvedev, the deputy chair of Moscow’s security council and former prime minister of Russia. ‘[Trump] is right: The Kiev regime is ‘gambling with WWIII,’’ the Russian leader added.”
FT: “Hungary’s pro-Russian Prime Minister Viktor Orbán sided with Trump. ‘Strong men make peace, weak men make war,’ Orbán said. ‘Today President Trump stood bravely for peace. Even if it was difficult for many to digest. Thank you, Mr. President.’”
Retired United States Navy admiral NATO and Supreme Allied Commander, James Stavridis (CNN): “I think we are headed, possibly – I don’t want to overstate this – I don’t want to be overly dramatic - but we could be looking at the last days of NATO. This is a gut issue about who are you going to support: a democracy that’s under attack or are you going to support a dictator in Moscow. This is going to drive a wedge deep in the heart of the alliance, and it’s going to bleed over beyond Ukraine… as to whether or not the United States can be trusted as a partner. I think if I’m a European at this point, I’m saying I need bigger defense spending. I need my European defense companies to step up. I need to build a European armed forces – I need a command structure outside of NATO, perhaps embedded in the European Union. We could see the end of NATO and the start of what may be called the European Treaty Organization – ETO.”
David Axelrod (CNN): “What Zelenskyy keeps saying again and again and again, we need security guarantees because we can’t trust Putin who invaded our country repeatedly. And Trump’s answer is ‘I trust him.’ Now that is not a security guarantee. And it does raise the question that even if you accept that, what happens when Trump is gone if Trump is the guarantor.”
Telegraph: “As the Smoke Cleared, Ukrainian-US Relations Lay Bloodied on the Oval Office Carpet.” Axios: “Trump’s ‘Disaster’ Meeting with Zelensky Stuns Republican Hawks in Congress.” Salon: “Time for Europe to Step Up.” Washington Post: “Tears and Shock in Ukraine and Europe After Heated Zelensky-Trump Meeting.” “‘You’re Not Alone.’ EU Leaders Show Support For Zelensky After Trump Clash.” Bloomberg: “Zelenskiy’s Blowup With Trump Leaves Allies Facing Disaster.”
February 28 – Guardian (Nadeem Badshah): “The EU foreign policy chief has declared that ‘the free world needs a new leader’, as European leaders threw their support behind Ukraine’s president, Volodymyr Zelenskyy, after the stunning White House confrontation between him and Donald Trump. Leaders from across Europe expressed their solidarity with the Ukrainian leader… Their comments… laid bare the gaping rift between the US and its traditional allies in Europe over the war in Ukraine. In a social media post Kaja Kallas, the EU high representative for foreign affairs and security policy, wrote: ‘Ukraine is Europe! We stand by Ukraine. We will step up our support to Ukraine so that they can continue to fight back the aggressor. ‘Today, it became clear that the free world needs a new leader. It’s up to us, Europeans, to take this challenge.’ Addressing Zelenskyy directly, Ursula von der Leyen, the president of the EU Commission, wrote: ‘Your dignity honors the bravery of the Ukrainian people. Be strong, be brave, be fearless. You are never alone.’ She added: ‘We will continue working with you for a just and lasting peace.’”
AFP: “UK Prime Minister Keir Starmer… vowed ‘unwavering support’ for Ukraine and spoke to both US President Donald Trump and Ukraine counterpart Volodymyr Zelensky following their angry White House meeting. ‘The prime minister has tonight spoken to both President Trump and President Zelensky. He retains unwavering support for Ukraine, and is doing all he can to find a path forward to a lasting peace based on sovereignty and security for Ukraine,’ said a spokeswoman...”
AFP: “Likely future German chancellor Friedrich Merz assured his support to Ukrainian President Volodymyr Zelensky following a spat with his US counterpart. ‘We must never confuse the aggressor and the victim in this terrible war,’ Merz, whose party recently came top in Germany's elections, said on X. Outgoing Chancellor Olaf Scholz voiced support for Kyiv in a statement.”
FT: “Jonas Gahr Støre, Norway’s prime minister, described the extraordinary scenes in the White House as ‘serious and disheartening’. ‘That Trump accuses Zelenskyy of gambling with World War Three is deeply unreasonable and a statement I distance myself from,’ he said.”
FT: “Dutch Prime Minister Dick Schoof reaffirmed his support for Ukraine as ‘firmly as ever’, as he follows other European leaders in backing Kyiv after a disastrous meeting… ‘The Netherlands supports Ukraine as firmly as ever. Now more than ever,’ Schoof said... ‘We want a lasting peace and an end to the war of aggression started by Russia. For Ukraine and its people, and for Europe.’ ‘Spain stands with you’, Prime Minister Pedro Sánchez wrote... Ireland’s foreign minister Simon Harris wrote ‘Ukraine is not to blame for this war’.”
FT: “The UK’s trade minister called Volodymyr Zelenskyy ‘probably the bravest political leader in Europe since Winston Churchill’, after the Ukrainian president’s tense exchange with Donald Trump during a visit to the White House. ‘We are in dangerous and uncharted waters this evening… every US president since Truman and Eisenhower has stood full square against Soviet expansion towards the east of Europe,” Douglas Alexander said… ‘It places a heavy burden of responsibility on the political leadership of this country, of other European countries, to recognise that we need to step up, acknowledge that the world has changed and act accordingly,’ he added.”
Belgium’s Prime Minister Bart De Wever: “We stand behind Ukraine and the Ukrainian people in their historic fight to defend themselves against an unprovoked Russian aggression. Their fight is our fight. United we are strong.”
Estonia Prime Minister Kristen Michal: “We stand united with @ZelenskyyUa and Ukraine in our fight for freedom. Always. Because it is right, not easy.”
Slovenia President Nataša Pirc Musar: “Slovenia upholds the principles and respect of international law and international relations. What we witnessed in the Oval Office today undermines these values and the foundations of diplomacy. We stand firmly in support of Ukraine’s sovereignty. We repeat, Russia is the aggressor.”
FT: “Justin Trudeau reaffirmed Canada’s support for Ukraine as his country’s foreign minister confirmed she had expressed the same sentiment to her counterpart in Kyiv. ‘Russia illegally and unjustifiably invaded Ukraine,’ Canada’s prime minister said... ‘Canada will continue to stand with Ukraine and Ukrainians in achieving a just and lasting peace,’ Trudeau wrote.”
Financial Times: “Italian Prime Minister Giorgia Meloni has called for an immediate US-EU summit, and said Rome will be proposing this to all its partners in the coming hours. ‘Every division of the west makes us all weaker and favours those who would like to see the decline of our civilisation,’ Meloni said. ‘An immediate summit is needed between the United States, European states and allies to speak frankly about how we intend to face today’s great challenges, starting with Ukraine, which together we have defended in recent years, and those that we will be called to face in the future.’ ‘This is the proposal that Italy intends to make to its partners in the next few hours,” she said, adding that ‘a division would not benefit anyone’.”
The Oval Office meltdown concluded a market week where meltdown suddenly doesn’t appear an unlikely scenario. Despite booming earnings, Nvidia sank 7.1%. Bloomberg’s Mag 7 Index slumped 4.7%, trading Friday at the lowest level since November 6th. The Semiconductors traded to the low back to September 11th. The historic AI/tech Bubble has begun to deflate.
Bitcoin sank 12.7% for the week, trading Thursday at the low since November 10th. Ethereum collapsed almost 16%, trading intraday Thursday at a 14-month low. XRP fell 15%, Binance Coin 9%, and Solana 12%. The historic crypto Bubble has begun to deflate.
De-risking/deleveraging has gained momentum. Ten-year Treasury yields sank 23 bps to 4.20%, the lowest yield since December 9th, and the biggest weekly decline in three months. Market expectations for the year-end Fed funds rate sank 22 bps to 3.64%, the largest weekly drop since early September. High yield spreads to Treasuries rose nine (2-wk gain 20bps) to 280 bps, the high since the first trading session of 2025.
Major equities indices were down 3.9% in Japan, 1.7% in China, 3.4% in India, 1.9% in Taiwan, 4.6% in South Korea, 3.4% in Brazil, and 2.6% in Mexico.
February 24 – Bloomberg: “China’s strategy of defending its currency by choking local liquidity is sending ripples throughout the financial system, squeezing banks and fueling losses at bond funds. The latest sign of a cash crunch at Chinese banks is a sharp drop in their lending through repurchase contracts, or repo. The country’s biggest banks cut their lending in the repo market by around two-thirds in mid-February compared with the daily average last year, according to people familiar... ‘If banks’ cash-borrowing pressure keeps building and the costs further climb, it may limit their ability to issue loans and support the economy,’ Yang Yewei, an analyst at local brokerage Guosheng Securities, wrote…”
President Trump has announced so many tariffs that it’s difficult to keep track. Tariffs on Mexico, Canada and China will go into effect on Tuesday. Scores more are scheduled for early April. The Oval Office fiasco doesn’t brighten what was already a most challenging environment for negotiating trade deals. The reality of tariffs and trade wars began to sink in this week. To be sure, this is an inhospitable environment for speculative leverage. And it is an especially fraught backdrop for a highly destabilizing global de-risking/deleveraging to take hold.
CNN’s Caitlan Collins: “A question that a lot of people have is how are you going to balance the budget without touching Social Security, or Medicare or Medicaid, while also increasing defense spending, which is what the White House laid out today?”
Speaker Mike Johnson: “Part of the equation is all the new revenue that President Trump and the administration are delivering for the American people. Look, the tariffs are estimated – just the tariff on China – the 10% import tax on China – of course they’ve been fleecing us for a long time as an unfair trade partner – that alone is going to yield $600 billion dollars over ten years in new revenue for the government. The DOGE savings. Elon Musk has said that he can find close to a trillion dollars in fraud, waste and abuse. I was with him late last night in his office going through what he is doing. This is very real. We’re going to have new revenue and savings that we have never had before. The ‘gold card’ that President Trump announced yesterday – that can bring in hundreds of billions of dollars. So, we’ll see how all this plays out over the months ahead as the budget and the spending habits of Washington change and the efficiency of Washington changes. I think the American people are going to like what they see.”
For the Week:
The S&P500 declined 1.0% (up 1.2% y-t-d), and the Dow rose 1.0% (up 3.0%). The Utilities slipped 0.6% (up 6.0%). The Banks increased 0.9% (up 6.2%), while the Broker/Dealers were little changed (up 9.0%). The Transports dipped 0.3% (up 0.6%). The S&P 400 Midcaps slipped 0.2% (down 0.8%), and the small cap Russell 2000 fell 1.5% (down 3.0%). The Nasdaq100 slumped 3.4% (down 0.6%). The Semiconductors sank 7.2% (down 4.3%). The Biotechs lost 1.4% (up 5.7%). With bullion reversing $77 lower, the HUI gold index dropped 2.5% (up 13.4%).
Three-month Treasury bill rates ended the week at 4.1925%. Two-year government yields fell 21 bps to 3.99% (down 25bps y-t-d). Five-year T-note yields sank 26 bps to 4.02% (down 37bps). Ten-year Treasury yields dropped 23 bps to 4.20% (down 36bps). Long bond yields fell 19 bps to 4.49% (down 29bps). Benchmark Fannie Mae MBS yields dropped 21 bps to 5.44% (down 41bps).
Italian 10-year yields slipped two bps to 3.54% (up 2bps y-t-d). Greek 10-year yields declined six bps to 3.24% (up 3bps). Spain's 10-year yields declined five bps to 3.05% (down 2bps). German bund yields fell six bps to 2.41% (up 4bps). French yields declined seven bps to 3.15% (down 5bps). The French to German 10-year bond spread narrowed one to 74 bps. U.K. 10-year gilt yields dropped nine bps to 4.48% (down 9bps). U.K.'s FTSE equities index rallied 1.7% (up 7.8% y-t-d).
Japan's Nikkei 225 Equities Index sank 4.2% (down 6.9% y-t-d). Japanese 10-year "JGB" yields reversed five bps lower to 1.38% (up 28bps y-t-d). France's CAC40 dipped 0.5% (up 9.9%). The German DAX equities index rallied 1.2% (up 13.3%). Spain's IBEX 35 equities index surged 3.1% (up 15.1%). Italy's FTSE MIB index gained 0.6% (up 13.1%). EM equities were under notable pressure. Brazil's Bovespa index dropped 3.4% (up 2.1%), and Mexico's Bolsa index fell 2.6% (up 5.7%). South Korea's Kospi sank 4.6% (up 5.6%). India's Sensex equities index lost 2.8% (down 6.8%). China's Shanghai Exchange Index declined 1.7% (down 0.9%). Turkey's Borsa Istanbul National 100 index increased 0.6% (down 1.7%).
Federal Reserve Credit declined $30.6 billion last week to $6.729 TN. Fed Credit was down $2.161 TN from the June 22, 2022, peak. Over the past 285 weeks, Fed Credit expanded $3.002 TN, or 81%. Fed Credit inflated $3.918 TN, or 139%, over the past 642 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt dropped $12.3 billion last week at $3.290 TN. "Custody holdings" were down $64 billion y-o-y, or 1.9%.
Total money market fund assets surged $60.5 billion to a record $6.974 TN. Money funds were up $840 billion over 31 weeks (23% annualized) and $965 billion y-o-y (16.1%).
Total Commercial Paper jumped $25.6 billion to a seven-month high $1.307 TN. CP has increased $219 billion y-t-d and $30 billion, or 2.3%, y-o-y.
Freddie Mac 30-year fixed mortgage rates dropped nine bps this week to a two-month low of 6.76% (down 18bps y-o-y). Fifteen-year rates fell 10 bps to 5.94% (down 32bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates up 10 bps to 7.04% (down 28bps).
Currency Watch:
February 26 – Reuters: “Chinese authorities are rolling out fresh measures to limit capital flight, including increased scrutiny of overseas investments, as the yuan currency comes under mounting pressure. President Donald Trump’s tariffs threats are heightening Sino-U.S. tensions and discouraging inbound foreign investment… China has increased scrutiny of overseas investments by domestic companies and their use of proceeds from Hong Kong share sales… Meanwhile, China's commercial banks sold the most foreign exchange to their clients since July last month… The conversion ratio - a gauge that measures households and corporates' willingness to sell dollars for yuan - fell to the lowest level in seven months. Xinquan Chen, an economist at Goldman Sachs, said the current account showed sizeable currency outflows in January.”
For the week, the U.S. Dollar Index rallied 0.9% to 107.562 (down 0.9% y-t-d). For the week on the downside, the Brazilian real declined 2.6%, the New Zealand dollar 2.5%, the Australian dollar 2.3%, the South Korean won 1.8%, the Canadian dollar 1.6%, the South African rand 1.6%, the Swedish krona 1.2%, the Singapore dollar 1.1%, the Norwegian krone 1.0%, the Japanese yen 0.9%, the euro 0.8%, the Mexican peso 0.6%, the Swiss franc 0.5%, and the British pound 0.4%. The Chinese (onshore) renminbi declined 0.36% versus the dollar (up 0.29% y-t-d).
Commodities Watch:
February 26 – Bloomberg (Alfred Cang, Archie Hunter and Mark Burton): “The world’s top commodity traders are rushing to ship copper to the US from as far afield as Asia as Donald Trump’s threat of import tariffs on the metal creates a huge opportunity for profit. The gap between copper prices in the US and the rest of the world widened sharply after the president… ordered the Commerce Department to examine potential levies on the metal. On Wednesday, prices on New York’s Comex surged as much as 4.9% to trade more than $1,000 a ton above the London Metal Exchange benchmark, which rose 1.2% to about $9,500 a ton.”
The Bloomberg Commodities Index dropped 3.8% (up 4.0% y-t-d). Spot Gold fell 2.6% to $2,859 (up 8.9%). Silver slumped 4.0% to $31.163 (up 7.8%). WTI crude slipped 45 cents, or 0.6%, to $69.95 (down 3%). Gasoline declined 1.9% (up 10%), and Natural Gas dropped 7.1% to $3.834 (up 6%). Copper dipped 1.2% (up 13%). Wheat sank 9.0% (down 3%), and Corn dropped 7.8% (down 1%). Bitcoin sank $12,230, or 12.7%, to $84,230 (down 10.1%).
Trump Administration Watch:
February 26 – Wall Street Journal (Lindsay Ellis, Lindsay Wise and Ken Thomas): “The Trump administration… asked federal agencies to draw up plans to cut staff, review existing contracts and freeze workers’ credit cards, accelerating the president’s efforts to drastically reduce the government’s scope and spending. President Trump signed an executive order Wednesday that requires federal agencies to review their contracting policies and procedures and where appropriate, ‘terminate or modify (including through renegotiation)’ contracts and grants to improve efficiency and reduce spending.”
February 25 – Wall Street Journal (Sadie Gurman): “Late Sunday, a group representing thousands of FBI agents told its members it was optimistic about the agency’s future, in part because its new director, Kash Patel, had assured the group he would choose a deputy from among their ranks. Within an hour, President Trump blew up that promise. The No. 2 at the Federal Bureau of Investigation would instead be Dan Bongino, a former Secret Service agent who had never worked at the FBI and from his perch as a right-wing commentator had described the agency as ‘irredeemably corrupt.’ ‘The FBI is lost, it’s broken,’ Bongino said in 2022 on his Fox News show… ‘It’s way past time to clean this FBI house up,’ he said. ‘They have burned every last shred of faith and trust freedom-loving Americans had in it.’ The role of deputy director had always gone to a career agent.”
February 26 – Reuters (James Oliphant): “The White House… denied reporters from Reuters and other news organizations access to President Donald Trump’s first cabinet meeting in keeping with the administration’s new policy regarding media coverage. The White House denied access to an Associated Press photographer and three reporters from Reuters, HuffPost and Der Tagesspiegel, a German newspaper. TV crews from ABC and Newsmax, along with correspondents from Axios, the Blaze, Bloomberg News and NPR were permitted to cover the event. On Tuesday, the Trump administration announced the White House would determine which media outlets would cover the president in smaller spaces such as the Oval Office.”
February 25 – Financial Times (Demetri Sevastopulo and Ilya Gridneff): “A top White House official has proposed expelling Canada from the Five Eyes intelligence-sharing network as Donald Trump increases pressure on the country he talks about turning into the 51st US state. Peter Navarro, one of the US president’s closest advisers, is pushing for the US to remove Canada from the Five Eyes — which also includes the UK, Australia and New Zealand — according to people familiar... Trump has said he wants to annex Canada and has vowed to press ahead with 25% tariffs on imports from the country when a one-month reprieve elapses on March 4.”
February 26 – Associated Press (Chris Megerian): “Federal agencies must develop plans to eliminate employee positions, according to a memo distributed Wednesday by President Donald Trump ‘s administration that sets in motion what could become a sweeping realignment of American government. The memo expands the Republican president’s effort to downsize the federal workforce... ‘We’re cutting down the size of government. We have to,” Trump said during the first Cabinet meeting... ‘We’re bloated. We’re sloppy. We have a lot of people that aren’t doing their job.’”
February 27 – Associated Press (Fatima Hussein): “The Social Security Administration is preparing to lay off at least 7,000 people from its workforce of 60,000, according to a person familiar… The workforce reduction, according to a second person…, could be as high as 50%. It’s unclear how the layoffs will directly impact the benefits of the 72.5 million Social Security beneficiaries…”
February 26 – Axios (Gerald Imray): “President Trump is setting a new precedent for tight, punitive government control over a free press. Trump and his administration are doing this systematically, gleefully and unmistakably. But as we’ve written before, this unprecedented shift could set the precedent for future Democratic presidents, too. Trump frames this as payback for what he calls incompetent, left-wing coverage, and the White House says it's expanding access to new voices and outlets. The White House Correspondents' Association says he's tearing ‘at the independence of a free press in the United States.’ The end result is twofold: much tighter control over media, and new tools and tactics to punish critics.”
February 22 – Politico (Marianne Gros): “The Trump administration's push for financial and environmental deregulation is ‘dangerous,’ the head of France's central bank said. ‘The current wave of U.S. deregulation is dangerous,’ both for banks and non-bank financial services companies like funds and crypto, Bank of France Governor Francois Villeroy de Galhau told… Alternatives Économiques… This creates a ‘big risk’ for financial stability, said Villeroy de Galhau, who also sits on the European Central Bank's Governing Council.”
February 25 – Bloomberg (Julaiza Alvarez and Lynn Doan): “On Monday, Apple Inc. became the latest company to pledge hundreds of billions of dollars in US investments that President Donald Trump claimed credit for. The company said it’ll spend $500 billion domestically over the next four years, produce AI servers in the US and hire 20,000 new workers. About an hour after the announcement, Trump took to social media to praise the investment, saying Apple was spending in the US because it has ‘faith in what we are doing.’”
Trade War Watch:
February 27 – Associated Press (Josh Boak and Fabiola Sanchez): “President Donald Trump plans to impose tariffs on Canada and Mexico starting Tuesday, in addition to doubling the 10% universal tariff charged on imports from China… Trump said illicit drugs such as fentanyl are being smuggled into the United States at ‘unacceptable levels’ and that import taxes would force other countries to crack down on the trafficking. ‘We cannot allow this scourge to continue to harm the USA, and therefore, until it stops, or is seriously limited, the proposed TARIFFS scheduled to go into effect on MARCH FOURTH will, indeed, go into effect, as scheduled… China will likewise be charged an additional 10% Tariff on that date.’”
February 27 – Reuters (Disha Mishra): “U.S. President Donald Trump will decide on tariff policies for all countries including Mexico and Canada after a study comes out on April 1, White House economic adviser Kevin Hassett told CNBC… Hassett told CNBC that Trump extended the tariffs deadline on Wednesday by saying ‘we are going to deal with Mexico and Canada presumably the same time we deal with everything else.’ ‘The schedule is that there’s a study coming out on April 1 and after that the president is going to decide what to do about tariff policies for all countries,’ he added.”
February 26 – Bloomberg (Bryan Pietsch): “President Trump says tariffs on products from the European Union will be 25%... The tariffs will be on autos and other things, Trump says. Other details are forthcoming, the president adds.”
February 26 – Financial Times (James Politi, Kana Inagaki and Barbara Moens): “Donald Trump has threatened to slap 25% tariffs on imports from the EU, as he lashed out at the bloc, saying it ‘was formed to screw the United States’. The remarks came during the first cabinet meeting… ‘We have made a decision and we’ll be announcing it very soon,’ Trump said… ‘It’ll be 25% generally speaking, and that will be on cars and all other things.’ Trump’s comments raise the prospect of a broad transatlantic trade war that could hurt both the US and European economies and inflict greater damage on frayed diplomatic ties among the western allies.”
February 28 – CNBC (Anniek Bao and Evelyn Cheng): “China’s Ministry of Commerce said… it ‘firmly opposes’ U.S. President Donald Trump’s latest threat to ramp up tariffs on Chinese goods and vowed retaliation, if necessary. ‘If the U.S. insists on its own way, China will take all necessary countermeasures to defend its legitimate rights and interests,’ a Ministry of Commerce spokesperson said… ‘We urge the U.S. side to not repeat its own mistakes, and to return as soon as possible to the right track of properly resolving conflicts through dialogue on equal footing.’”
February 26 – Reuters (Andrew Gray and Richard Lough): “The European Commission said… it will react ‘firmly and immediately against unjustified barriers to free and fair trade’ after U.S. President Donald Trump said his administration would soon announce a 25% tariff on imports from the EU. ‘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,’ a commission spokesperson said…”
February 25 – Bloomberg (Mackenzie Hawkins, Cagan Koc and Jenny Leonard): “Donald Trump’s administration is sketching out tougher versions of US semiconductor curbs and pressuring key allies to escalate their restrictions on China’s chip industry, an early indication the new US president plans to expand efforts that began under Joe Biden to limit Beijing’s technological prowess… The aim, which was also a priority for Biden, is to see key allies match China curbs the US has placed on American chip-gear companies, including Lam Research Corp., KLA Corp. and Applied Materials Inc.”
February 24 – Bloomberg (Andrea Navarro): “Mexico is weighing possible levies on Chinese imports as it pushes for a deal to avoid the 25% tariffs that President Donald Trump has threatened to impose on its goods before a deadline in early March. A group of officials from Mexico’s economy and finance ministries is in Washington examining potential tariffs on goods from China, President Claudia Sheinbaum said… The Mexican leader added that her government is working on different fronts to reach ‘important agreements’ with the US by Friday…”
February 25 – Bloomberg (Hadriana Lowenkron and Josh Wingrove): “President Donald Trump has signed an executive action directing the Commerce Department to examine possible copper tariffs, the latest in a string of measures aimed at imposing sector-specific levies that could reshape global supply chains. Trump said the order would have a ‘big impact’ as he signed it in the Oval Office, joined by Commerce Secretary Howard Lutnick. Senior administration officials earlier on Tuesday cast the step as necessary to address what they said was a national security issue.”
February 27 – Reuters (Karen Freifeld): “U.S. President Donald Trump's nominee to a post overseeing export policy for China… called a report about Taiwan Semiconductor Manufacturing Co producing hundreds of thousands of chips for Huawei ‘a huge concern.’ Jeffrey Kessler, Trump's pick for Under Secretary of Commerce for Industry and Security, was asked at his nomination hearing… about the illegal shipments of chips. ‘It's critical to ensure that we have strong enforcement,’ Kessler said, calling for the Bureau of Industry and Security… to use ‘the full scope of enforcement and penalty authorities that it has.’”
February 26 – New York Times (Peter S. Goodman): “The Trump administration has opened a broad new front in its global trade conflict, proposing to affix levies reaching $1.5 million on Chinese-made ships arriving at American ports. Such fees would apply even on vessels made elsewhere if they are operated by carriers whose fleets include Chinese ships — an approach that risks increasing costs on an array of imported cargo, from raw materials to factory goods.”
February 26 – Bloomberg (Samuel Stolton): “The European Union’s resolve to take on the might of Silicon Valley is set to be tested to the limit after Donald Trump threatened retaliation for fines that hurt some of America’s biggest companies. The US President warned last week that he’d strike back with heavy tariffs following any ‘disproportionate’ penalties and said that the EU’s Digital Markets Act is in his crosshairs. His tough stance threatens to corner new EU competition chief Teresa Ribera, who’s risked her reputation by promising to wrap up investigations into Apple Inc. and Meta Platforms Inc. by the end of March — with potentially eye-watering penalties should they fail to allay her concerns.”
February 27 – Associated Press (Jim Morris): “Ontario Premier Doug Ford won reelection to lead Canada’s most populous province…, giving him the mandate he wanted to fight tariffs threatened by U.S. President Donald Trump. ‘Donald Trump thinks he can break us,’ Ford told a cheering crowd… ‘He thinks he can divide and conquer, pit region against region. Donald Trump doesn’t know what we know. ‘Let me be clear. Canada will never, ever be the 51st state. Canada is not for sale.’”
Budget Watch:
February 26 – Reuters (David Morgan): “The Republican-controlled U.S. House of Representatives late on Tuesday advanced President Donald Trump’s tax-cut and border security agenda, delivering a major boost to his 2025 priorities. The vote on passage was 217-215 with Representative Thomas Massie, a prominent fiscal hawk, as a lone Republican voting in opposition… The measure is a preliminary step to extending Trump’s 2017 tax cuts later this year. Tuesday’s vote sent the budget resolution to the Senate… Both leaders said Trump himself had been contacting reluctant members about the need to advance the $4.5 trillion tax-cut plan, which would also fund the deportation of migrants living in the U.S. illegally, tighten border security, energy deregulation and military spending… The House budget seeks $2 trillion in spending cuts over 10 years to pay for Trump’s agenda.”
February 26 – Axios (Hans Nichols): “House Speaker Mike Johnson won a game of brinksmanship with his own party on budget reconciliation. Now he’s prepared to do the same with Democrats on government funding, lawmakers and aides tell us. House Republicans are increasingly confident they can avoid a government shutdown without any Democratic support. ‘I think it demonstrated we can do things on our own,’ House Appropriations Chair Tom Cole (R-Okla.) told reporters… Going alone would be unprecedented but not impossible. The current funding bill runs through March 14.”
World Disorder Watch:
February 23 – Politico (Tim Ross and Nette Nostlinger): “Friedrich Merz did not even wait for the final results in Germany's election before delivering what could well be a defining verdict on U.S. President Donald Trump, consigning Europe’s 80-year alliance with the United States to the past… Merz’s comments mark a historic watershed: They reveal how deeply Trump has shaken the political foundations of Europe, which has depended on American security guarantees since 1945… ‘My absolute priority will be to strengthen Europe as quickly as possible so that, step by step, we can really achieve independence from the USA… I never thought I would have to say something like this on a television program. But after Donald Trump’s statements last week at the latest, it is clear that the Americans, at least this part of the Americans, this administration, are largely indifferent to the fate of Europe… I am very curious to see how we are heading toward the NATO summit at the end of June… Whether we will still be talking about NATO in its current form or whether we will have to establish an independent European defense capability much more quickly.’”
February 23 – Financial Times (Anne-Sylvaine Chassany, Laura Pitel and Olaf Storbeck): “Germany’s Friedrich Merz promised to move swiftly to unite Europe and ‘achieve independence’ from the US after his centre-right bloc won federal elections… Within hours of polls closing, Merz declared that Germany had to fundamentally remake its security arrangements and end a decades-long reliance on Washington, saying US President Donald Trump was ‘largely indifferent’ to Europe’s fate. ‘I am in close contact with many prime ministers — heads of government of the EU,’ Merz said. ‘And it must be an absolute priority to strengthen Europe as quickly as possible so that, step by step, we actually achieve independence from the USA.’”
February 26 – Associated Press (Gerald Imray): “Finance ministers and central bank chiefs from the Group of 20 developed and developing nations gathered in South Africa… for a two-day meeting marked by the absence of U.S. Treasury Secretary Scott Bessent and several other high-profile figures. Bessent’s absence follows a boycott of a G20 foreign ministers meeting in South Africa last week by U.S. Secretary of State Marco Rubio as the Trump administration has been openly critical of the country and its G20 themes. Bessent said he couldn’t attend because of commitments in Washington.”
February 24 – Financial Times (Henry Foy, Jude Webber and Felicia Schwartz): “The US and Europe are battling in the UN and G7 over whether to blame Russia for its war against Ukraine, as President Donald Trump’s rapid shift on the conflict threatens to tear apart western unity. The Trump administration and the EU put forward rival UN resolutions on Monday, while G7 diplomats spent the weekend haggling over whether a joint statement due to be released by the group of rich nations would refer to Russia’s ‘aggression’ against Ukraine or not. In an extraordinary move, the US voted with Russia against Ukraine and EU nations in the UN General Assembly on Monday… ‘If [we] look at the messages that come from the United States, then it is clear that the Russian narrative is, there, very strongly represented,’ EU chief diplomat Kaja Kallas told reporters…”
February 27 – Associated Press (Raf Casert): “The European Union… pushed back hard against allegations by U.S. President Donald Trump that the 27-nation bloc was out to get the United States, and warned that it would vigorously fight any wholesale tariff of 25% on all EU products. The tit-for-tat dispute following the comments of Trump… further deepened the trans-Atlantic rift that was already widened by Trump’s warnings that Washington would drop security guarantees for its European allies. Thursday’s EU pushback came after Trump told reporters that ‘the European Union was formed in order to screw the United States. That’s the purpose of it, and they’ve done a good job of it,’ adding that it would stop immediately under his presidency. Prime Minister Donald Tusk of Poland, which holds the EU’s rotating presidency, went on a counteroffensive. ‘The EU wasn’t formed to screw anyone… Quite the opposite. It was formed to maintain peace, to build respect among our nations, to create free and fair trade, and to strengthen our transatlantic friendship. As simple as that.’”
February 26 – Politico (Jacopo Barigazzi, Nicholas Vinocur and Elena Giordano): “The EU’s foreign policy chief Kaja Kallas will not meet U.S. Secretary of State Marco Rubio during her visit to Washington ‘due to scheduling issues,’ according to a European Commission spokesperson. ‘High Representative/Vice-President Kaja Kallas is visiting Washington D.C. on 26 and 27 February. She will meet with U.S. senators and congressmen to discuss Russia’s war against Ukraine and the transatlantic relationship,’ the spokesperson said… It ‘seems that the Trump administration doesn’t miss a chance to show that for them the EU is not a player,’ an EU diplomat commented...”
February 24 – Wall Street Journal (Editorial Board): “The United Nations is no great moral arbiter of anything, but at least the United States has tried over the years to have that group of nations recognize the truth about bad actors. That wasn’t the case Monday, as the U.S. voted with Russia against a General Assembly resolution calling out Russia for its invasion of Ukraine three years ago. What a regrettable moment. The resolution, sponsored by Ukraine and European nations, wasn’t even all that strong. It merely noted ‘with concern that the full-scale invasion of Ukraine by the Russian Federation’ has had ‘devastating and long-lasting consequences’ and called for ‘an early cessation of hostilities.’ Apparently even this was too much of a rebuke to Vladimir Putin for President Trump to tolerate…”
February 21 – Politico (Tim Ross, Laura Kayali and Nette Nostlinger): “Europe’s politicians are openly discussing how they could tackle the threat of nuclear attack without American help, in a dramatic sign of the deep crisis engulfing the transatlantic alliance under Donald Trump. In what would be a huge shift in position…, Germany’s next leader said the continent must find new ways to defend itself without the U.S. military underpinning its nuclear protection through NATO. Friedrich Merz… said his country would need to look beyond the U.S. to Britain and France for nuclear safeguards. Under Trump, he said, America could no longer be relied on. ‘We need to have discussions with both the British and the French — the two European nuclear powers — about whether nuclear sharing, or at least nuclear security from the U.K. and France, could also apply to us,’ Merz said.”
February 23 – Wall Street Journal (Gabriele Steinhauser, Joyu Wang and Timothy W. Martin): “The Trump administration’s rush toward peace talks with Russia on the war in Ukraine has rattled some officials in Asia and raised concerns over the U.S. commitment to the region’s security… The news reverberated among U.S. allies in Asia. In public, officials from Taiwan, the Philippines, Japan and South Korea, which rely on the U.S. for their defense, have expressed confidence that Washington will stand by them in case of aggression from China or North Korea… But privately, some officials have expressed concern that Trump could pursue some kind of bargain with Chinese leader Xi Jinping over disputed territories in Asia or allow North Korea’s nuclear program to remain a threat.”
Ukraine War Watch:
February 24 – Associated Press (Justin Spike): “Ukraine… marked the bleakest anniversary yet of its war against the Russia invasion, with the country’s forces under severe pressure on the battlefield and U.S. President Donald Trump’s administration apparently embracing the Kremlin in a reversal of American policy. The three-year milestone drew more than a dozen Western leaders to Kyiv for commemorative events in a conspicuous show of support. They warned of the war’s wider implications for global security and vowed to keep providing billions of dollars in aid to Ukraine as uncertainty deepens over the U.S. commitment to help. Washington did not send any senior official to the occasion.”
February 24 – Bloomberg (Max Hunder): “Ukraine’s President Volodymyr Zelenskiy said on Sunday that Russia launched more than 200 drones in an overnight attack, the largest of the war, as he condemned Russia's ‘aerial terror’ and called for unity among Ukraine’s allies. ‘Every day, our people stand against aerial terror,’ he wrote on X. ‘On the eve of the third anniversary of the full-scale war, Russia launched 267 attack drones against Ukraine — the largest attack since Iranian drones began striking Ukrainian cities and villages.’”
February 26 – Financial Times (Steff Chávez and Christopher Miller): “President Donald Trump has said the US will not give Ukraine security guarantees ‘beyond very much’, as Washington and Kyiv prepare to sign a critical minerals deal on Friday… ‘I’m not going to make security guarantees beyond very much,’ Trump said… ‘We’re going to have Europe do that” because ‘Europe is the next-door neighbour’.”
February 26 – Reuters (Barbara Erling): “European leaders must resist ‘capitulation’ to Russia over Ukraine, Polish Prime Minister Donald Tusk said…, ahead of a virtual meeting of EU leaders to discuss the war following U.S. President Donald Trump's overtures to Moscow. ‘We cannot agree to Ukraine's capitulation to Russia’s, however we call it, impudent demands, including territorial ones,’ said Tusk… on X.”
February 25 – Politico (Lucia Mackenzie, Veronika Melkozerova and Jamie Dettmer): “Donald Trump's attacks on Ukraine are forcing European countries to think the unthinkable: The U.S. may stop arming Kyiv. But both Ukrainian President Volodymyr Zelenskyy and military analysts think that while losing U.S. support will be a major blow and will hit deliveries of key weapons, Ukraine backed by its European allies will be able to keep fighting for many months. Governments are racing to show diplomatic and military support for Ukraine. More than a dozen leaders were in Kyiv on Monday, with many more joining virtually, while the EU is working on a military aid package worth at least €20 billion.”
February 23 – Politico (Elena Giordano): “European Council President António Costa… announced a special meeting of European leaders on March 6. ‘We are living a defining moment for Ukraine and European security,’ Costa said in… announcing his decision to convene the special European Council. ‘In my consultations with European leaders, I’ve heard a shared commitment to meet those challenges at EU level: strengthening European Defence and contributing decisively to peace on our continent and long-term security of Ukraine,’ he added.”
February 25 – Politico (Gregorio Sorgi): “U.S. President Donald Trump is acting like he holds all the cards in talks to end the war in Ukraine. But Brussels has a €200 billion secret weapon up its sleeve. After being left out of discussions with the U.S. and Russia Feb. 18 on ending the war in Ukraine, European governments could go for the nuclear option — seizing the Russian sovereign assets that were immobilized after Moscow launched its full-scale invasion of Ukraine three years ago.”
February 26 – Wall Street Journal (Isabel Coles): “President Trump says the U.S. has spent $350 billion on the war in Ukraine—a figure that is at odds with Ukrainian President Volodymyr Zelensky’s tally, as well as U.S. government agencies and Western think tanks. The cost of the war has been at the center of negotiations over a mineral-rights deal that would compensate the U.S. for its wartime assistance… Congress has voted through five bills appropriating a total of $175 billion for Ukraine in the three years since Russia’s invasion, according to… the Congressional Research Service. The Kiel Institute for the World Economy, a research group in Germany, has calculated that about $120 billion of the appropriated funds have been allocated to programs that directly support Ukraine. Of that amount, the U.S. has provided $67.3 billion in the form of weapons and other military assistance. Budget support… accounts for $49 billion. The remaining $3.6 billion was spent on humanitarian aid. But a substantial portion of the $175 billion doesn’t directly support Ukraine.”
Taiwan Watch:
February 25 – Wall Street Journal (Joyu Wang): “Taiwan detained a cargo ship and its eight Chinese crew members after an undersea fiber-optic cable was severed, in a stepped-up effort to police such incidents, which are often seen as part of China’s pressure campaign targeting the self-ruled island… A string of such episodes has called attention to Taiwan’s vulnerability as it works to ensure that it has secure internet services to keep the island online in the event of an invasion or blockade by China.”
February 26 – Financial Times (Kathrin Hille): “Taiwan has objected to what it says were unannounced Chinese live-fire naval exercises in busy waters near its south-western coast, in a further sign of disruption caused by the People’s Liberation Army’s rapidly expanding operations.”
Market Instability Watch:
February 24 – Reuters (Nell Mackenzie): “Hedge funds exited U.S. tech and media stocks in the two weeks to February 21 at the fastest pace in six months, according to Goldman Sachs… Speculators ‘aggressively’ dumped both long and short positions in AI-related equipment, media, and communications equipment companies, according to a note sent to Goldman Sachs clients…”
February 25 – Bloomberg (Laura Noonan): “The world’s top financial stability watchdog is setting up a dedicated taskforce to unmask areas where shadow banks could spark a broader crisis, the chair of the Financial Stability Board told Bloomberg... The carry trade, used by investors to place leveraged bets on interest rates, and the basis trade, a popular wager using financial gearing to exploit price discrepancies in government-bond markets, are ‘two excellent examples’ of areas the FSB could focus on, said Klaas Knot, who is also governor of the Dutch National Bank. ‘These are areas where there is potential for a lot of leverage to build up and to build up pretty rapidly also,’ he said of the soon-to-be-launched taskforce.”
February 24 – Bloomberg (Marcus Ashworth): “‘Action this Day’ on a red sticker was how Winston Churchill prioritized initiatives during World War II. Bank of England Governor Andrew Bailey might consider channeling his inner Winston to counteract the outsized hedge fund leverage he has repeatedly warned is a growing financial-stability risk. Bailey earlier this month in a speech… reiterated the undeniable fact that the footprint of hedge funds and non-bank market makers has grown substantially in recent years. It’s ‘putting some pressure on what we perceive of the limits of prime brokerage capacity,’ he said…”
February 25 – Bloomberg: “China’s strategy of defending its currency by choking local liquidity is sending ripples throughout the financial system, squeezing banks and fueling losses at bond funds. The People’s Bank of China has drained cash through open market operations most days this month, supporting the yuan by making it more scarce. But that has had unintended consequences: Banks have hoarded cash rather than lend it to rivals, while debt funds have suffered losses as investors sell bonds to raise money. China’s 10-year bond yield hit its highest level since December on Monday. The latest sign of a cash crunch at Chinese banks is a sharp drop in their lending through repurchase contracts, or repo. The country’s biggest banks cut their lending in the repo market by around two-thirds in mid-February compared with the daily average last year…”
Global Credit and Financial Bubble Watch:
February 25 – Bloomberg (Simon Kennedy): “Global debt increased by around $7 trillion in 2024 to reach $318 trillion, a record annual high and a reason for financial markets to be cautious, according to the Institute of International Finance. Total debt as a share of gross domestic product also rose for the first time in four years as economic growth slowed, the group, which represents the global financial industry, said... It predicted borrowing will remain high this year, especially in the US, France, China, India and Brazil. The IIF said rising debt burdens meant governments should be ‘beware of bond vigilantes,’ the term given to investors who push up interest rates in a bid to force policymakers to rein in budget deficits and debt.”
February 27 – Financial Times (Eric Platt and Will Schmitt): “Wall Street’s top securities regulator has raised concerns about a private credit exchange traded fund from State Street and Apollo that began trading on Thursday, in a blow to the two Wall Street groups. The fund is designed to open private credit, an investment class that has largely been the purview of institutional investors, to retail investors. Its success is being closely watched by Wall Street as rivals look to launch competing funds. The Securities and Exchange Commission questioned how the State Street fund — known as the SPDR SSGA Apollo IG Public & Private Credit ETF (PRIV) — would maintain liquidity and value private debt…”
February 28 – Bloomberg (Michael Gambale): “There are no potential borrowers looking to raise capital in the US investment-grade primary market Friday…, after borrowers smashed expectations in selling $51 billion of debt this week. But that doesn’t mean syndicate desks won’t be busy today. Some $60 billion of fresh debt is expected next week… The issuance environment is attractive as funding costs continue to fall — setting up potentially a very busy March. Consensus dealer estimates are centered at $185 billion, which if met would easily top last year’s volume.”
February 24 – Bloomberg (Sonali Basak): “Investors in collateralized loan obligations are forcing more diligence in markets that tend to finance riskier companies and corporate buyouts, as some parts of the market are experiencing a deterioration in credit quality, according to KKR & Co.’s co-head of credit and markets, Christopher Sheldon. ‘We have seen an increase in defaults, modestly, an increase of downgrades… If you push a riskier deal, the incentives to take risk aren’t necessarily there in the syndicated loan market, which is why it’s pushing product to other markets, and those public-private markets will co-exist together.’”
AI Bubble Watch:
February 24 – Yahoo Finance (Laura Bratton): “Microsoft has canceled an unspecified number of data center leases amid the AI spending boom, TD Cowen analysts said in a note… ‘Our initial reaction is that this is tied to Microsoft potentially being in an oversupply position,’ TD Cowen's Michael Elias wrote… Elias had previously written in January that Microsoft is abandoning new leasing deals for data centers that it was previously interested in. ‘[T]he magnitude of both potential data center capacity it walked away from and the decision to pullback on land acquisition (which supports core long term capacity growth) in our view indicates the loss of a major demand signal that Microsoft was originally responding to and that we believed the shift in their appetite for capacity is tied to OpenAI,’ Elias wrote…”
February 24 – Bloomberg (Ryan Vlastelica and Newley Purnell): “Microsoft Corp. has canceled some leases for US data center capacity, according to TD Cowen, raising broader concerns over whether it’s securing more AI computing capacity than it needs in the long term. OpenAI’s biggest backer has voided leases in the US totaling ‘a couple of hundred megawatts’ of capacity — the equivalent of roughly two data centers — canceling agreements with at least a couple of private operators, the US brokerage wrote Friday, citing ‘channel checks’ or inquiries with supply chain providers. TD Cowen said its checks also suggest Microsoft has pulled back on converting so-called statements of qualifications, agreements that usually lead to formal leases.”
February 27 – Bloomberg (Jeran Wittenstein, Carmen Reinicke and Ryan Vlastelica): “Investors hoping that Nvidia Corp.’s earnings would rejuvenate the artificial intelligence trade didn’t exactly get the report they wanted. The chipmaker failed to generate much excitement, with a beat that fell short of the company’s typical blowout numbers and a mixed outlook for next quarter… ‘A couple months ago we were very certain of the growth component of AI,’ said Brian Mulberry, client portfolio manager at Zacks Investment Management Inc. ‘Where we are today, that seems to be a much wider range of outcomes than what it was before. And the volatility in these AI-related names are starting to reflect that.’”
February 26 – Financial Times (Eleanor Olcott and Wenjie Ding): “DeepSeek’s advances have sparked a nationwide push in China to deploy its large language models everywhere from hospitals to local governments as Beijing seeks to consolidate its gains in generative artificial intelligence. Since the… start-up shook global markets with its R1 model in late January there has been lightning adoption of its technology in its home country, with companies and state bodies throwing their weight behind the new national AI champion. All the major cloud service providers, at least six car manufacturers, several local governments, a number of hospitals and a handful of state-owned enterprises (SOEs) have moved to deploy DeepSeek…”
February 25 – Reuters (Eduardo Baptista, Julie Zhu and Fanny Potkin): “DeepSeek is looking to press home its advantage. The Chinese startup triggered a $1 trillion-plus sell-off in global equities markets last month with a cut-price AI reasoning model that outperformed many Western competitors. Now, the Hangzhou-based firm is accelerating the launch of the successor to January's R1 model, according to three people familiar with the company. Deepseek had planned to release R2 in early May but now wants it out as early as possible…”
February 23 – Bloomberg: “Alibaba Group Holding Ltd. pledged to invest more than 380 billion yuan ($53bn) on AI infrastructure such as data centers over the next three years, a major commitment that underscores the e-commerce pioneer’s ambitions of becoming a leader in artificial intelligence. The internet company co-founded by Jack Ma plans to spend more on its AI and cloud computing network than it has over the past decade.”
Bubble and Mania Watch:
February 27 – Bloomberg (Suzanne Woolley): “Membership in the 401(k) millionaire club is growing by leaps and bounds. The number of 401(k) accounts with balances of $1 million or more at Fidelity Investments rose 27% to 537,000 in 2024, driven by a banner year in the stock market...”
February 28 – Bloomberg: “As news started spreading about a massive hack on crypto exchange Bybit last Friday, cybersecurity researchers quickly concluded that the era of giant digital-asset heists had entered a new and potentially ruinous phase. It wasn’t just the size of the exploit, although at close to $1.5 billion, it was the biggest ever by a wide margin. Within hours, it was clear that the attack — which the Federal Bureau of Investigation attributed to North Korea’s Lazarus Group — was far more ambitious, and difficult to prevent, than any that preceded it. Perhaps most disturbing was that the hackers managed to drain a so-called ‘cold’ crypto storage wallet, a piece of hardware used to hold the private key needed to access funds.”
February 26 – Bloomberg (Isabelle Lee): “Investors yanked more than $1 billion from spot Bitcoin exchange-traded funds Tuesday, marking the biggest one-day outflow since the cohort’s debut last January. Fidelity Wise Origin Bitcoin Fund posted the steepest outflows among these funds, followed by the iShares Bitcoin Trust ETF (IBIT)…”
February 26 – Bloomberg (Prashant Gopal, Biz Carson and Alicia Clanton): “In California’s Silicon Valley, it often takes millions of dollars just to score a fixer-upper… Tracy Hsu, an agent in Cupertino, tells her clients that it’s about bidding high enough to win. Last month, Hsu helped a buyer land a dated three-bedroom ranch in Saratoga — a short drive from Apple Inc.’s headquarters — for $4.5 million, with plans to tear it down and start fresh. More recently, a bungalow hit the market in the same town for $3.9 million and a client… offered only $600,000 more. Someone else swooped in and put it under contract for $4.6 million, she said. ‘When we write an offer, we don’t look at the asking price,’ Hsu said. ‘It’s meaningless’… Buyers aren’t worried about overpaying because they expect prices to keep rising… said Skylar Olsen, chief economist at Zillow… ‘Sure they overpaid. But they got a good location, and that’s what matters’… Pickings are extremely slim... At one point in early February, Cupertino had just 16 active single-family listings in a market that would normally see 120… A 1,100-square-foot house on a cul de-sac in the city of Santa Clara recently sold for $2.2 million, drawing 11 offers… It was an average home in a spot that’s not necessarily the most prestigious, but conveniently close to companies like Apple and Nvidia…”
U.S./Russia/China/Europe Watch:
February 24 – Wall Street Journal (Chun Han Wong, Georgi Kantchev and Lingling We): “The leaders of China and Russia sought to project a unified front on the third anniversary of the Russian invasion of Ukraine amid U.S. overtures to Moscow seen as attempts to pry the two powers apart. In a phone call…, Chinese leader Xi Jinping and Russian President Vladimir Putin described the relationship between their countries as robust and immune to interventions from any third country—an apparent reference to the Trump administration’s recent efforts to engage Moscow. China and Russia are immovable neighbors and ‘true friends who share weal and woe, support each other and develop together,’ Xi was quoted as saying…”
February 27 – Bloomberg: “A spate of drills by China’s military in the Indo-Pacific is testing the Trump administration’s commitment to regional security soon after its actions raised doubts about its alliances with European nations. The People’s Liberation Army has conducted shooting drills off the coasts of Australia, Vietnam and Taiwan over the past week. While the Chinese actions took place in international waters off Australia and Taiwan, they raised concerns over Beijing’s intentions... ‘This is China testing the waters to see where the new boundaries are now that we are in the Trump 2.0 era of amorphous and pay-to-play US security guarantees,’ said Wen-Ti Sung, a nonresident fellow at the Atlantic Council’s Global China Hub.”
February 22 – Wall Street Journal (Austin Ramzy): “The militaries of China and Russia, America’s top two global adversaries, are working together as never before in their long partnership, probing the defenses of the U.S. and its allies. The message to America from the growing partnership is that, if drawn into a military conflict, U.S. forces could find themselves confronting both countries. Chinese-Russian joint patrols and military exercises have become more frequent and increasingly assertive… Beijing and Moscow have been displaying close cooperation near Japan, South Korea and the Philippines, nations that the U.S. has pledged to defend, and Taiwan, to which the U.S. sells weapons and provides training.”
February 25 – Bloomberg (Chang Shu and Eric Zhu): “If there was any doubt US President Donald Trump is taking a hard-line stance on China, his ‘American First Investment Policy’ puts it to rest. The sweeping directive — which identifies China as a foreign adversary — will accelerate the decoupling of the two economies… The reference to China as of the US’s ‘foreign adversaries’ alongside Cuba, Iran, North Korea, Russia and Venezuela shows Washington is toughening its stance toward China. The memo sets out to protect strategic sectors including technology, critical infrastructure, healthcare, agriculture, energy, raw materials and others. The restrictions will apply to bilateral direct and portfolio investment.”
February 26 – Bloomberg: “Secretary of State Marco Rubio mapped out a US strategy for managing Russia’s close relationship with China, saying Washington wants to dilute ties without sowing division between the nuclear-armed neighbors. ‘I don’t know if we’ll ever be successful completely at peeling them off of a relationship with the Chinese,’ Rubio told conservative media outlet Breitbart News…”
De-globalization Watch:
February 27 – Bloomberg (Geoffrey Morgan): “In Canadian grocery stores, US-grown produce is wilting on the shelves. Local executives are scouring wine lists over dinner to avoid ordering California pinot. And in Toronto, a 73-pound Great Pyrenees-Poodle mix named Izzy is no longer allowed to eat American dog food. As US President Donald Trump has threatened tariffs, made 51st state jabs and referred to the country’s prime minister as ‘Governor Trudeau,’ furious Canadian consumers have turned into vindictive shoppers: American-made products are out; everything else is in.”
February 26 – Wall Street Journal (Vipal Monga and Paul Vieira): “Canada was set to hold an election this year that was going to be a referendum on the unpopular Prime Minister Justin Trudeau. Now it’s all about President Trump. Before Trudeau resigned in January, Canada’s right-leaning Conservatives were headed for an election-day romp, having led Trudeau’s Liberals by 20 points for more than a year. But since Trudeau stepped aside and President Trump threatened steep tariffs to use what he called ‘economic force’ to make Canada the 51st state, the Liberals have made a dramatic turnaround. In a poll issued by Ipsos on Tuesday, the Liberals held a two-point lead over the Conservatives; they trailed by 26 points only six weeks ago.”
February 24 – Bloomberg (Mark Gurman): “Apple Inc., as it seeks relief from US President Donald Trump’s tariffs on goods imported from China, said that it will hire 20,000 new workers and produce AI servers in the US. The company said… it plans to spend $500 billion domestically over the next four years, which will include work on a new server manufacturing facility in Houston, a supplier academy in Michigan and additional spending with its existing suppliers in the country.”
Inflation Watch:
February 28 – CNBC (Jeff Cox): “Inflation eased slightly in January as worries accelerated over President Donald Trump’s tariff plans… The personal consumption expenditures price index, the Federal Reserve’s preferred inflation measure, increased 0.3% for the month and showed a 2.5% annual rate. Excluding food and energy, the core PCE also rose 0.3% for the month and was at 2.6% annually… Personal income posted a much sharper increase than expected, up 0.9% on the month against expectations for a 0.4% increase. However, the higher incomes did not translate into spending, which decreased 0.2%, versus the forecast for a 0.1% gain. The personal savings rate also spiked higher, rising to 4.6%.”
February 25 – Reuters (Lucia Mutikani): “U.S. single-family house prices increased solidly in December, despite improving supply, which together with elevated mortgage rates will continue to erode affordability. House prices rose 0.4% on a month-on-month basis after an upwardly revised 0.4% increase in November, the Federal Housing Finance Agency said... They increased 4.7% in the 12 months through December, following an upwardly revised 4.5% gain in November, which was previously reported as a 4.2% rise.”
February 27 – Bloomberg (Molly Smith and Augusta Saraiva): “No matter what metric you’re looking at, US inflation is moving in the wrong direction again. Whether it’s a house or a carton of eggs, price growth is once again intensifying across a broad range of indicators. Much of that has to do with the same supply and demand factors and labor-market pressures that led to the initial inflation surge in the pandemic, while planned tariffs from President Donald Trump are heightening concerns that prices will rise even more.”
February 26 – Bloomberg (Lebawit Lily Girma): “It’s never been more expensive to go on vacation during spring break. This year the average trip from March 12-21—determined to be the peak period for school breaks—costs $8,306. That’s more than double what it cost in 2019 and 26% more than it did last year, according to… Squaremouth, a travel insurance comparison engine. To crunch those numbers, Squaremouth examined the value of 6,000 trips from Feb. 20 to April 15, 2025.”
February 27 – Bloomberg (Shawn Donnan and Claire Ballentine): “President Donald Trump’s plan to impose new tariffs on imports to force manufacturers to relocate production to the US is getting a skeptical reaction from one important audience: American consumers. Almost 60% of US adults expect Trump’s tariffs will lead to higher prices, according to a Harris Poll conducted for Bloomberg News. Some 44% say the levies are likely to be bad for the US economy — compared to 31% who say they’d be a boost. Even within the president’s own party, many aren’t sold on his trade agenda. Only half of Republican respondents said the tariffs would be an economic boon.”
February 27 – Bloomberg (Alice Atkins and Lisa Abramowicz): “The move away from globalization toward a more fragmented world is likely to fuel permanently higher inflation across regions, according to Apollo Global Management’s Torsten Slok. The chief economist at the firm said that the rising popularity of restrictive trade and anti-immigration policies indicate a shift in the geopolitical backdrop that is likely to fan global price pressures and weaken growth. ‘We are turning toward a world with more segmentation,’ he said… Concerns around a ‘stagflationary shock’ are the ‘backdrop for the conversation that we are having in markets at the moment,’ he added.”
Federal Reserve Watch:
February 25 – Reuters (Howard Schneider): “The head of a new congressional panel gearing up to strengthen Capitol Hill's oversight of the Federal Reserve plans a broad review of how the U.S. central bank makes its interest rate decisions, including whether controlling inflation should be prioritized over safeguarding employment. ‘A substantial number of my Financial Services Committee colleagues and the chairman want to discuss that issue,’ Representative Frank Lucas, an Oklahoma Republican, told Reuters... ‘Is there really a dual mandate? And how does that affect the primary mandate of price stability?’”
U.S. Economic Bubble Watch:
February 25 – Bloomberg (Dina Katgara): “More than half of Americans are delaying major life plans due to uncertainty over the economy, according to a new study from Wells Fargo. Among that cohort, about a third said they were putting off buying a home, while one in six have postponed education plans and one in eight have pushed back their retirement. Although inflation has moderated since a peak in 2022, Americans are still shocked by high prices. About 90% said they were surprised by the cost of activities like eating out or attending a concert. At the same time, 76% plan to cut back on spending this year, up from 67% in 2024, according to the study, which was conducted in September and October.”
February 23 – Wall Street Journal (Rachel Louise Ensign): “Many Americans are pinching pennies, exhausted by high prices and stubborn inflation. The well-off are spending with abandon. The top 10% of earners—households making about $250,000 a year or more—are splurging on everything from vacations to designer handbags, buoyed by big gains in stocks, real estate and other assets. Those consumers now account for 49.7% of all spending, a record in data going back to 1989, according to… Moody’s Analytics. Three decades ago, they accounted for about 36%. All this means that economic growth is unusually reliant on rich Americans continuing to shell out. Mark Zandi, chief economist at Moody’s Analytics, estimated that spending by the top 10% alone accounted for almost one-third of gross domestic product.”
February 25 – Associated Press (Matt Ott): “U.S. consumer confidence plummeted in February, the biggest monthly decline in more than four years…, with inflation seemingly stuck and a trade war under President Donald Trump seen by a growing number of Americans as inevitable. The Conference Board reported that its consumer confidence index sank this month to 98.3 from 105.3 in January. That’s far below the expectations… The seven-point drop was the biggest month-to-month decline since August of 2021… Respondents to the board’s survey expressed concern over inflation with a significant increase in mentions of trade and tariffs… The… report… said that the measure of Americans’ short-term expectations for income, business and the job market fell 9.3 points to 72.9.”
February 25 – Associated Press (Mae Anderson): “Small business owners felt more uncertain about the future in January, as they continue to deal with labor challenges and lingering inflation. According to a monthly poll of small business owners from the National Federation of Independent Business, the uncertainty index in January rose 14 points to 100 – the third highest recorded reading, after two months of decline. The NFIB said small business owners are feeling less confident about investing in their business due to uncertain business conditions in the coming months.”
February 28 – Reuters (Lucia Mutikani): “The U.S. trade deficit in goods widened sharply in January, most likely as businesses front-loaded imports ahead of tariffs… The goods trade gap surged 25.6% to $153.3 billion last month… Goods imports vaulted 11.9% to $325.4 billion… Exports rose 2.0% to $172.2 billion last month.”
February 27 – CNBC (Jeff Cox): “Initial filings for unemployment benefits hit their highest level of the year last week… Jobless claims for the week ended Feb. 22 totaled a seasonally adjusted 242,000, up 22,000 from the previous week’s revised level and higher than the Dow Jones estimate for 225,000… Continuing claims, which run a week behind, showed a small decrease and stood at 1.86 million.”
February 27 – Reuters (Lucia Mutikani): “New orders for key U.S.-manufactured capital goods surged in January, hinting at a rebound in business spending on equipment in the first quarter. Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, increased 0.8% after a downwardly revised 0.2% advance in December…”
February 26 – CNBC (Diana Olick): “Mortgage interest rates dropped again last week, hitting the lowest level in two months, but demand for mortgages didn’t respond… The average contract interest rate for 30-year fixed-rate mortgages… decreased to 6.88% from 6.93%... Applications for a mortgage to purchase a home were flat for the week and 3% higher than the same week one year ago.”
February 27 – Associated Press (Michelle Chapman): “Pending home sales in the United States slid to an all-time low in January as high mortgage rates, record-high home prices, and possibly the terrible weather last month hindered those seeking to buy. The National Association of Realtors said… its Pending Home Sales Index… declined 4.6% to 70.6 last month. Pending transactions fell 5.2% from the year-ago period.”
February 26 – Financial Times (Eva Xiao): “In the coastal city of Punta Gorda, Florida, builders are putting the last licks of paint on a newly built luxury condo targeting retirees. The project is one of many new homes under construction, just months after the city was struck by back-to-back hurricanes last autumn… Even so, the development of new houses ‘just keeps coming and coming,’ says Sean Seward, a local real estate agent who has been grappling with an ever-growing portfolio of new homes churned out by developers. Demand has weakened since the storms, he admits, but Seward believes that inflation, increasing insurance and taxes are the main culprits for the market downturn — not the hurricanes.”
China Watch:
February 27 – Reuters: “China's banks are cutting the interest rates offered on U.S. dollar deposits after being asked to do so by the central bank, possibly to curtail dollar hoarding and also prop up a weakening yuan, sources said. Mainland retail investors and exporters have built up nearly a trillion dollars worth of deposits because of higher U.S. yields and the yuan's slide.”
February 25 – Bloomberg: “China plans to start re-capitalizing three of its biggest banks in coming months…, following through on a broad stimulus package unveiled last year to shore up the struggling economy. Authorities are looking to inject at least 400 billion yuan ($55bn) of fresh capital into the first batch of Agricultural Bank of China Ltd., Bank of Communications Co. and Postal Savings Bank of China Co., said the people, asking not to be identified discussing private information. The plan, which could be completed as soon as the end of June, is subject to change and the amount for each bank is still being finalized…”
February 25 – Bloomberg: “China needs to vastly step up its efforts to cleanse the balance sheets of the nation’s local governments, giving them the space needed to support consumer spending and strengthen the economy, one of the nation’s most prominent economists said. The central government should take on at least 20 trillion yuan ($2.8 trillion) worth of local sovereign debt, David Li Daokui, an economics professor at Tsinghua University and a regular adviser on policy to Beijing, said…”
February 23 – Bloomberg: “China’s local governments are rushing to issue bonds to refinance hidden debt, further tightening liquidity in the financial system. Regional authorities are set to sell 1.69 trillion yuan ($233bn) of bonds in the first two months of 2025, an unprecedented amount for the period… About half of the issuance… is to replace off-balance sheet debt… The unusually big offering has exacerbated a cash squeeze this year, as banks rush to absorb the securities. Money-market rates have surged recently…”
Europe Watch:
February 24 – Bloomberg (Michael Nienaber, Kamil Kowalcze, and Arne Delfs): “Germany’s chancellor-in-waiting Friedrich Merz has opened talks with the Social Democrats to quickly approve as much as €200 billion ($210bn) in special defense spending… Officials from Merz’s Christian Democrats and the SPD are discussing ways to get around Germany’s tight restrictions on government borrowing to free up resources for the country’s dilapidated military, said people familiar… They are considering pushing a vote on the new package, which would be double the amount of one approved three years ago, through the lame duck parliament…”
February 25 – Financial Times (Olaf Storbeck): “Bundesbank president Joachim Nagel has urged Germany’s next government to embark on sweeping reforms to reinvigorate Europe’s largest economy, as the central bank declared a €19.2bn loss… Nagel said the coalition would need to enact supply-side reforms and cut red tape to boost an economy facing another year of economic stagnation in 2025. ‘A meaningful economic upswing is not in sight for now,’ Nagel said… ‘Germany needs to fight for its competitiveness,’ the central bank president said, adding that it was ‘five [minutes] to 12’.”
Japan Watch:
February 27 – Reuters (Leika Kihara): “Bank of Japan Governor Kazuo Ueda… warned of ‘very strong’ uncertainty on the global economic outlook that required vigilance in setting monetary policy. Speaking after… the Group of 20 finance leaders' meeting in South Africa, Ueda said many members appeared to share the view there was uncertainty over how U.S. tariff policies could unfold, and how such moves could affect their economies. ‘There is very strong uncertainty on the U.S. policy outlook, including on tariffs, and how other countries could respond. As such, we need to scrutinise developments… We then need to take a comprehensive view on how (the U.S. policies) affect the global economy, financial markets and Japan's economic and price outlook’ in setting monetary policy, he said, when asked how global uncertainties could affect the BOJ's interest rate decisions.”
Emerging Markets Watch:
February 23 – Bloomberg (Whanwoong Choi and Catherine Bosley): “South Korea’s bid to tackle a slowing economy via fiscal stimulus will pressure the won and may steepen the yield curve at a time when the bond market is already absorbing a record amount of issuance. Faced with potential US tariffs and fallout from its brush with martial law, the country is looking at stimulus to help the economy. The opposition party, which holds a majority of seats in parliament, recently proposed an outlay of 35 trillion won ($24bn) — and there have been suggestions to sell more debt to help fund the expenditure. Any additional supply stands to drive up bond yields and steepen the curve…”
February 25 – Reuters (Fabian Cambero and Alexander Villegas): “A massive power outage across Chile plunged the country's capital Santiago into darkness on Tuesday and knocked out electricity to major copper mines in the country’s north, buffeting global metal markets. Hours after the outage began and as darkness fell, Chile’s government announced a state of emergency and established a curfew…”
Leveraged Speculation Watch:
February 27 – Bloomberg (Lu Wang and Yiqin Shen): “A diversified investment strategy that seeks to juice returns through leverage is finding new love among big money managers — more than a decade after it blew up during the 2008 financial crisis. The approach, widely known as ‘portable alpha,’ uses derivatives to track returns of long-only indexes and then invests the excess cash in trades beloved by hedge funds, including the likes of trend following or market-neutral equity strategies. Some 22% of institutional investors, private banks and family offices adopted the investing style as a form of asset allocation last year, according to Barclays Plc.’s annual survey tracking 325 investors with $8.6 trillion in total assets. That’s up from 10% the previous year.”
Social, Political, Environmental, Cybersecurity Instability Watch:
February 28 – Bloomberg (Lauren Rosenthal, Brian K. Sullivan and Ari Natter): “The Trump administration fired hundreds of employees at the top US agency overseeing weather prediction and climate research, raising concerns about the nation’s preparedness amid wildfire and tornado warnings.”
February 25 – Bloomberg (Keith Laing): “Federal buildings across the US have been ordered to shut off electric-vehicle chargers, according to a person familiar…, the latest move to rescind pro-EV initiatives in President Donald Trump’s first months in office. The General Services Administration, which oversees properties and vehicle fleets for the government, sent an email to agencies in recent days discussing the plan… Federally owned charging stations, which are used both for government vehicles and workers’ personal cars, will no longer be considered “mission critical,” the GSA said.”
February 23 – Associated Press: “California Gov. Gavin Newsom has asked Congress to approve nearly $40 billion in aid to help the Los Angeles area recover from January’s devastating wildfires, which he said could become the costliest natural disaster in U.S. history. Newsom sent a letter Friday asking for support from lawmakers... ‘Los Angeles is one of the most economically productive places on the globe, but it can only rebound and flourish with support from the federal government as it recovers from this unprecedented disaster’.”
February 25 – Bloomberg (Laurence Darmiento): “State Farm General… estimated… it will cost $7.6 billion to settle its Los Angeles-area fire claims, but it said reinsurance will lower its losses to about $612 million. The company disclosed it has already paid $1.75 billion to cover about 9,500 claims and will be able to handle all of its fire-related expenses because the majority of losses will be absorbed by its parent company, State Farm Mutual Automobile Insurance Co., which also provides it with reinsurance.”
February 26 – Wall Street Journal (Elena Vardon): “Munich Re estimates that devastating wildfires that struck southern California in January will result in 1.2 billion euros ($1.26bn) in claims for the company, it said as it reported fourth-quarter results. ‘They were clearly the most substantial wildfire losses in the history of the insurance industry,’ it said.”
February 24 – Bloomberg (Michael Hirtzer): “America’s flock of egg-laying hens dropped to the lowest since 2016 in January as avian influenza resulted in the death of millions of birds, driving egg prices to record levels. Eggs have been setting new highs every week this year with fewer chickens hatching eggs… The number of layers fell to about 363 million in January, down 3.8% from a year ago…”
Geopolitical Watch:
February 26 – Wall Street Journal (Laurence Norman): “Iran has sharply increased its stockpile of highly enriched uranium in recent weeks, according to a confidential United Nations report… The increase in Iran’s holdings of uranium enriched to 60%, or nearly weapons grade, gives it enough to produce six nuclear weapons. Iran is now producing enough fissile material in a month for one nuclear weapon, according to the report… The Trump administration has said it would return to a policy of ‘maximum pressure’ on Iran but that it also wants to negotiate a nuclear deal.”
February 23 – Bloomberg (Karishma Vaswani): “The Philippines is preparing to build a new arbitration case against China over alleged breaches of international law in the South China Sea. It may seem like a symbolic gesture, but in a world where the rules-based order is increasingly under threat, these gestures matter… Beijing’s recent behavior toward Australia, New Zealand and the Philippines in the Indo-Pacific are good examples of its attempts to assert ownership over parts of the oceans it claims — including the South China Sea.”
The S&P500 declined 1.0% (up 1.2% y-t-d), and the Dow rose 1.0% (up 3.0%). The Utilities slipped 0.6% (up 6.0%). The Banks increased 0.9% (up 6.2%), while the Broker/Dealers were little changed (up 9.0%). The Transports dipped 0.3% (up 0.6%). The S&P 400 Midcaps slipped 0.2% (down 0.8%), and the small cap Russell 2000 fell 1.5% (down 3.0%). The Nasdaq100 slumped 3.4% (down 0.6%). The Semiconductors sank 7.2% (down 4.3%). The Biotechs lost 1.4% (up 5.7%). With bullion reversing $77 lower, the HUI gold index dropped 2.5% (up 13.4%).
Three-month Treasury bill rates ended the week at 4.1925%. Two-year government yields fell 21 bps to 3.99% (down 25bps y-t-d). Five-year T-note yields sank 26 bps to 4.02% (down 37bps). Ten-year Treasury yields dropped 23 bps to 4.20% (down 36bps). Long bond yields fell 19 bps to 4.49% (down 29bps). Benchmark Fannie Mae MBS yields dropped 21 bps to 5.44% (down 41bps).
Italian 10-year yields slipped two bps to 3.54% (up 2bps y-t-d). Greek 10-year yields declined six bps to 3.24% (up 3bps). Spain's 10-year yields declined five bps to 3.05% (down 2bps). German bund yields fell six bps to 2.41% (up 4bps). French yields declined seven bps to 3.15% (down 5bps). The French to German 10-year bond spread narrowed one to 74 bps. U.K. 10-year gilt yields dropped nine bps to 4.48% (down 9bps). U.K.'s FTSE equities index rallied 1.7% (up 7.8% y-t-d).
Japan's Nikkei 225 Equities Index sank 4.2% (down 6.9% y-t-d). Japanese 10-year "JGB" yields reversed five bps lower to 1.38% (up 28bps y-t-d). France's CAC40 dipped 0.5% (up 9.9%). The German DAX equities index rallied 1.2% (up 13.3%). Spain's IBEX 35 equities index surged 3.1% (up 15.1%). Italy's FTSE MIB index gained 0.6% (up 13.1%). EM equities were under notable pressure. Brazil's Bovespa index dropped 3.4% (up 2.1%), and Mexico's Bolsa index fell 2.6% (up 5.7%). South Korea's Kospi sank 4.6% (up 5.6%). India's Sensex equities index lost 2.8% (down 6.8%). China's Shanghai Exchange Index declined 1.7% (down 0.9%). Turkey's Borsa Istanbul National 100 index increased 0.6% (down 1.7%).
Federal Reserve Credit declined $30.6 billion last week to $6.729 TN. Fed Credit was down $2.161 TN from the June 22, 2022, peak. Over the past 285 weeks, Fed Credit expanded $3.002 TN, or 81%. Fed Credit inflated $3.918 TN, or 139%, over the past 642 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt dropped $12.3 billion last week at $3.290 TN. "Custody holdings" were down $64 billion y-o-y, or 1.9%.
Total money market fund assets surged $60.5 billion to a record $6.974 TN. Money funds were up $840 billion over 31 weeks (23% annualized) and $965 billion y-o-y (16.1%).
Total Commercial Paper jumped $25.6 billion to a seven-month high $1.307 TN. CP has increased $219 billion y-t-d and $30 billion, or 2.3%, y-o-y.
Freddie Mac 30-year fixed mortgage rates dropped nine bps this week to a two-month low of 6.76% (down 18bps y-o-y). Fifteen-year rates fell 10 bps to 5.94% (down 32bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates up 10 bps to 7.04% (down 28bps).
Currency Watch:
February 26 – Reuters: “Chinese authorities are rolling out fresh measures to limit capital flight, including increased scrutiny of overseas investments, as the yuan currency comes under mounting pressure. President Donald Trump’s tariffs threats are heightening Sino-U.S. tensions and discouraging inbound foreign investment… China has increased scrutiny of overseas investments by domestic companies and their use of proceeds from Hong Kong share sales… Meanwhile, China's commercial banks sold the most foreign exchange to their clients since July last month… The conversion ratio - a gauge that measures households and corporates' willingness to sell dollars for yuan - fell to the lowest level in seven months. Xinquan Chen, an economist at Goldman Sachs, said the current account showed sizeable currency outflows in January.”
For the week, the U.S. Dollar Index rallied 0.9% to 107.562 (down 0.9% y-t-d). For the week on the downside, the Brazilian real declined 2.6%, the New Zealand dollar 2.5%, the Australian dollar 2.3%, the South Korean won 1.8%, the Canadian dollar 1.6%, the South African rand 1.6%, the Swedish krona 1.2%, the Singapore dollar 1.1%, the Norwegian krone 1.0%, the Japanese yen 0.9%, the euro 0.8%, the Mexican peso 0.6%, the Swiss franc 0.5%, and the British pound 0.4%. The Chinese (onshore) renminbi declined 0.36% versus the dollar (up 0.29% y-t-d).
Commodities Watch:
February 26 – Bloomberg (Alfred Cang, Archie Hunter and Mark Burton): “The world’s top commodity traders are rushing to ship copper to the US from as far afield as Asia as Donald Trump’s threat of import tariffs on the metal creates a huge opportunity for profit. The gap between copper prices in the US and the rest of the world widened sharply after the president… ordered the Commerce Department to examine potential levies on the metal. On Wednesday, prices on New York’s Comex surged as much as 4.9% to trade more than $1,000 a ton above the London Metal Exchange benchmark, which rose 1.2% to about $9,500 a ton.”
The Bloomberg Commodities Index dropped 3.8% (up 4.0% y-t-d). Spot Gold fell 2.6% to $2,859 (up 8.9%). Silver slumped 4.0% to $31.163 (up 7.8%). WTI crude slipped 45 cents, or 0.6%, to $69.95 (down 3%). Gasoline declined 1.9% (up 10%), and Natural Gas dropped 7.1% to $3.834 (up 6%). Copper dipped 1.2% (up 13%). Wheat sank 9.0% (down 3%), and Corn dropped 7.8% (down 1%). Bitcoin sank $12,230, or 12.7%, to $84,230 (down 10.1%).
Trump Administration Watch:
February 26 – Wall Street Journal (Lindsay Ellis, Lindsay Wise and Ken Thomas): “The Trump administration… asked federal agencies to draw up plans to cut staff, review existing contracts and freeze workers’ credit cards, accelerating the president’s efforts to drastically reduce the government’s scope and spending. President Trump signed an executive order Wednesday that requires federal agencies to review their contracting policies and procedures and where appropriate, ‘terminate or modify (including through renegotiation)’ contracts and grants to improve efficiency and reduce spending.”
February 25 – Wall Street Journal (Sadie Gurman): “Late Sunday, a group representing thousands of FBI agents told its members it was optimistic about the agency’s future, in part because its new director, Kash Patel, had assured the group he would choose a deputy from among their ranks. Within an hour, President Trump blew up that promise. The No. 2 at the Federal Bureau of Investigation would instead be Dan Bongino, a former Secret Service agent who had never worked at the FBI and from his perch as a right-wing commentator had described the agency as ‘irredeemably corrupt.’ ‘The FBI is lost, it’s broken,’ Bongino said in 2022 on his Fox News show… ‘It’s way past time to clean this FBI house up,’ he said. ‘They have burned every last shred of faith and trust freedom-loving Americans had in it.’ The role of deputy director had always gone to a career agent.”
February 26 – Reuters (James Oliphant): “The White House… denied reporters from Reuters and other news organizations access to President Donald Trump’s first cabinet meeting in keeping with the administration’s new policy regarding media coverage. The White House denied access to an Associated Press photographer and three reporters from Reuters, HuffPost and Der Tagesspiegel, a German newspaper. TV crews from ABC and Newsmax, along with correspondents from Axios, the Blaze, Bloomberg News and NPR were permitted to cover the event. On Tuesday, the Trump administration announced the White House would determine which media outlets would cover the president in smaller spaces such as the Oval Office.”
February 25 – Financial Times (Demetri Sevastopulo and Ilya Gridneff): “A top White House official has proposed expelling Canada from the Five Eyes intelligence-sharing network as Donald Trump increases pressure on the country he talks about turning into the 51st US state. Peter Navarro, one of the US president’s closest advisers, is pushing for the US to remove Canada from the Five Eyes — which also includes the UK, Australia and New Zealand — according to people familiar... Trump has said he wants to annex Canada and has vowed to press ahead with 25% tariffs on imports from the country when a one-month reprieve elapses on March 4.”
February 26 – Associated Press (Chris Megerian): “Federal agencies must develop plans to eliminate employee positions, according to a memo distributed Wednesday by President Donald Trump ‘s administration that sets in motion what could become a sweeping realignment of American government. The memo expands the Republican president’s effort to downsize the federal workforce... ‘We’re cutting down the size of government. We have to,” Trump said during the first Cabinet meeting... ‘We’re bloated. We’re sloppy. We have a lot of people that aren’t doing their job.’”
February 27 – Associated Press (Fatima Hussein): “The Social Security Administration is preparing to lay off at least 7,000 people from its workforce of 60,000, according to a person familiar… The workforce reduction, according to a second person…, could be as high as 50%. It’s unclear how the layoffs will directly impact the benefits of the 72.5 million Social Security beneficiaries…”
February 26 – Axios (Gerald Imray): “President Trump is setting a new precedent for tight, punitive government control over a free press. Trump and his administration are doing this systematically, gleefully and unmistakably. But as we’ve written before, this unprecedented shift could set the precedent for future Democratic presidents, too. Trump frames this as payback for what he calls incompetent, left-wing coverage, and the White House says it's expanding access to new voices and outlets. The White House Correspondents' Association says he's tearing ‘at the independence of a free press in the United States.’ The end result is twofold: much tighter control over media, and new tools and tactics to punish critics.”
February 22 – Politico (Marianne Gros): “The Trump administration's push for financial and environmental deregulation is ‘dangerous,’ the head of France's central bank said. ‘The current wave of U.S. deregulation is dangerous,’ both for banks and non-bank financial services companies like funds and crypto, Bank of France Governor Francois Villeroy de Galhau told… Alternatives Économiques… This creates a ‘big risk’ for financial stability, said Villeroy de Galhau, who also sits on the European Central Bank's Governing Council.”
February 25 – Bloomberg (Julaiza Alvarez and Lynn Doan): “On Monday, Apple Inc. became the latest company to pledge hundreds of billions of dollars in US investments that President Donald Trump claimed credit for. The company said it’ll spend $500 billion domestically over the next four years, produce AI servers in the US and hire 20,000 new workers. About an hour after the announcement, Trump took to social media to praise the investment, saying Apple was spending in the US because it has ‘faith in what we are doing.’”
Trade War Watch:
February 27 – Associated Press (Josh Boak and Fabiola Sanchez): “President Donald Trump plans to impose tariffs on Canada and Mexico starting Tuesday, in addition to doubling the 10% universal tariff charged on imports from China… Trump said illicit drugs such as fentanyl are being smuggled into the United States at ‘unacceptable levels’ and that import taxes would force other countries to crack down on the trafficking. ‘We cannot allow this scourge to continue to harm the USA, and therefore, until it stops, or is seriously limited, the proposed TARIFFS scheduled to go into effect on MARCH FOURTH will, indeed, go into effect, as scheduled… China will likewise be charged an additional 10% Tariff on that date.’”
February 27 – Reuters (Disha Mishra): “U.S. President Donald Trump will decide on tariff policies for all countries including Mexico and Canada after a study comes out on April 1, White House economic adviser Kevin Hassett told CNBC… Hassett told CNBC that Trump extended the tariffs deadline on Wednesday by saying ‘we are going to deal with Mexico and Canada presumably the same time we deal with everything else.’ ‘The schedule is that there’s a study coming out on April 1 and after that the president is going to decide what to do about tariff policies for all countries,’ he added.”
February 26 – Bloomberg (Bryan Pietsch): “President Trump says tariffs on products from the European Union will be 25%... The tariffs will be on autos and other things, Trump says. Other details are forthcoming, the president adds.”
February 26 – Financial Times (James Politi, Kana Inagaki and Barbara Moens): “Donald Trump has threatened to slap 25% tariffs on imports from the EU, as he lashed out at the bloc, saying it ‘was formed to screw the United States’. The remarks came during the first cabinet meeting… ‘We have made a decision and we’ll be announcing it very soon,’ Trump said… ‘It’ll be 25% generally speaking, and that will be on cars and all other things.’ Trump’s comments raise the prospect of a broad transatlantic trade war that could hurt both the US and European economies and inflict greater damage on frayed diplomatic ties among the western allies.”
February 28 – CNBC (Anniek Bao and Evelyn Cheng): “China’s Ministry of Commerce said… it ‘firmly opposes’ U.S. President Donald Trump’s latest threat to ramp up tariffs on Chinese goods and vowed retaliation, if necessary. ‘If the U.S. insists on its own way, China will take all necessary countermeasures to defend its legitimate rights and interests,’ a Ministry of Commerce spokesperson said… ‘We urge the U.S. side to not repeat its own mistakes, and to return as soon as possible to the right track of properly resolving conflicts through dialogue on equal footing.’”
February 26 – Reuters (Andrew Gray and Richard Lough): “The European Commission said… it will react ‘firmly and immediately against unjustified barriers to free and fair trade’ after U.S. President Donald Trump said his administration would soon announce a 25% tariff on imports from the EU. ‘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,’ a commission spokesperson said…”
February 25 – Bloomberg (Mackenzie Hawkins, Cagan Koc and Jenny Leonard): “Donald Trump’s administration is sketching out tougher versions of US semiconductor curbs and pressuring key allies to escalate their restrictions on China’s chip industry, an early indication the new US president plans to expand efforts that began under Joe Biden to limit Beijing’s technological prowess… The aim, which was also a priority for Biden, is to see key allies match China curbs the US has placed on American chip-gear companies, including Lam Research Corp., KLA Corp. and Applied Materials Inc.”
February 24 – Bloomberg (Andrea Navarro): “Mexico is weighing possible levies on Chinese imports as it pushes for a deal to avoid the 25% tariffs that President Donald Trump has threatened to impose on its goods before a deadline in early March. A group of officials from Mexico’s economy and finance ministries is in Washington examining potential tariffs on goods from China, President Claudia Sheinbaum said… The Mexican leader added that her government is working on different fronts to reach ‘important agreements’ with the US by Friday…”
February 25 – Bloomberg (Hadriana Lowenkron and Josh Wingrove): “President Donald Trump has signed an executive action directing the Commerce Department to examine possible copper tariffs, the latest in a string of measures aimed at imposing sector-specific levies that could reshape global supply chains. Trump said the order would have a ‘big impact’ as he signed it in the Oval Office, joined by Commerce Secretary Howard Lutnick. Senior administration officials earlier on Tuesday cast the step as necessary to address what they said was a national security issue.”
February 27 – Reuters (Karen Freifeld): “U.S. President Donald Trump's nominee to a post overseeing export policy for China… called a report about Taiwan Semiconductor Manufacturing Co producing hundreds of thousands of chips for Huawei ‘a huge concern.’ Jeffrey Kessler, Trump's pick for Under Secretary of Commerce for Industry and Security, was asked at his nomination hearing… about the illegal shipments of chips. ‘It's critical to ensure that we have strong enforcement,’ Kessler said, calling for the Bureau of Industry and Security… to use ‘the full scope of enforcement and penalty authorities that it has.’”
February 26 – New York Times (Peter S. Goodman): “The Trump administration has opened a broad new front in its global trade conflict, proposing to affix levies reaching $1.5 million on Chinese-made ships arriving at American ports. Such fees would apply even on vessels made elsewhere if they are operated by carriers whose fleets include Chinese ships — an approach that risks increasing costs on an array of imported cargo, from raw materials to factory goods.”
February 26 – Bloomberg (Samuel Stolton): “The European Union’s resolve to take on the might of Silicon Valley is set to be tested to the limit after Donald Trump threatened retaliation for fines that hurt some of America’s biggest companies. The US President warned last week that he’d strike back with heavy tariffs following any ‘disproportionate’ penalties and said that the EU’s Digital Markets Act is in his crosshairs. His tough stance threatens to corner new EU competition chief Teresa Ribera, who’s risked her reputation by promising to wrap up investigations into Apple Inc. and Meta Platforms Inc. by the end of March — with potentially eye-watering penalties should they fail to allay her concerns.”
February 27 – Associated Press (Jim Morris): “Ontario Premier Doug Ford won reelection to lead Canada’s most populous province…, giving him the mandate he wanted to fight tariffs threatened by U.S. President Donald Trump. ‘Donald Trump thinks he can break us,’ Ford told a cheering crowd… ‘He thinks he can divide and conquer, pit region against region. Donald Trump doesn’t know what we know. ‘Let me be clear. Canada will never, ever be the 51st state. Canada is not for sale.’”
Budget Watch:
February 26 – Reuters (David Morgan): “The Republican-controlled U.S. House of Representatives late on Tuesday advanced President Donald Trump’s tax-cut and border security agenda, delivering a major boost to his 2025 priorities. The vote on passage was 217-215 with Representative Thomas Massie, a prominent fiscal hawk, as a lone Republican voting in opposition… The measure is a preliminary step to extending Trump’s 2017 tax cuts later this year. Tuesday’s vote sent the budget resolution to the Senate… Both leaders said Trump himself had been contacting reluctant members about the need to advance the $4.5 trillion tax-cut plan, which would also fund the deportation of migrants living in the U.S. illegally, tighten border security, energy deregulation and military spending… The House budget seeks $2 trillion in spending cuts over 10 years to pay for Trump’s agenda.”
February 26 – Axios (Hans Nichols): “House Speaker Mike Johnson won a game of brinksmanship with his own party on budget reconciliation. Now he’s prepared to do the same with Democrats on government funding, lawmakers and aides tell us. House Republicans are increasingly confident they can avoid a government shutdown without any Democratic support. ‘I think it demonstrated we can do things on our own,’ House Appropriations Chair Tom Cole (R-Okla.) told reporters… Going alone would be unprecedented but not impossible. The current funding bill runs through March 14.”
World Disorder Watch:
February 23 – Politico (Tim Ross and Nette Nostlinger): “Friedrich Merz did not even wait for the final results in Germany's election before delivering what could well be a defining verdict on U.S. President Donald Trump, consigning Europe’s 80-year alliance with the United States to the past… Merz’s comments mark a historic watershed: They reveal how deeply Trump has shaken the political foundations of Europe, which has depended on American security guarantees since 1945… ‘My absolute priority will be to strengthen Europe as quickly as possible so that, step by step, we can really achieve independence from the USA… I never thought I would have to say something like this on a television program. But after Donald Trump’s statements last week at the latest, it is clear that the Americans, at least this part of the Americans, this administration, are largely indifferent to the fate of Europe… I am very curious to see how we are heading toward the NATO summit at the end of June… Whether we will still be talking about NATO in its current form or whether we will have to establish an independent European defense capability much more quickly.’”
February 23 – Financial Times (Anne-Sylvaine Chassany, Laura Pitel and Olaf Storbeck): “Germany’s Friedrich Merz promised to move swiftly to unite Europe and ‘achieve independence’ from the US after his centre-right bloc won federal elections… Within hours of polls closing, Merz declared that Germany had to fundamentally remake its security arrangements and end a decades-long reliance on Washington, saying US President Donald Trump was ‘largely indifferent’ to Europe’s fate. ‘I am in close contact with many prime ministers — heads of government of the EU,’ Merz said. ‘And it must be an absolute priority to strengthen Europe as quickly as possible so that, step by step, we actually achieve independence from the USA.’”
February 26 – Associated Press (Gerald Imray): “Finance ministers and central bank chiefs from the Group of 20 developed and developing nations gathered in South Africa… for a two-day meeting marked by the absence of U.S. Treasury Secretary Scott Bessent and several other high-profile figures. Bessent’s absence follows a boycott of a G20 foreign ministers meeting in South Africa last week by U.S. Secretary of State Marco Rubio as the Trump administration has been openly critical of the country and its G20 themes. Bessent said he couldn’t attend because of commitments in Washington.”
February 24 – Financial Times (Henry Foy, Jude Webber and Felicia Schwartz): “The US and Europe are battling in the UN and G7 over whether to blame Russia for its war against Ukraine, as President Donald Trump’s rapid shift on the conflict threatens to tear apart western unity. The Trump administration and the EU put forward rival UN resolutions on Monday, while G7 diplomats spent the weekend haggling over whether a joint statement due to be released by the group of rich nations would refer to Russia’s ‘aggression’ against Ukraine or not. In an extraordinary move, the US voted with Russia against Ukraine and EU nations in the UN General Assembly on Monday… ‘If [we] look at the messages that come from the United States, then it is clear that the Russian narrative is, there, very strongly represented,’ EU chief diplomat Kaja Kallas told reporters…”
February 27 – Associated Press (Raf Casert): “The European Union… pushed back hard against allegations by U.S. President Donald Trump that the 27-nation bloc was out to get the United States, and warned that it would vigorously fight any wholesale tariff of 25% on all EU products. The tit-for-tat dispute following the comments of Trump… further deepened the trans-Atlantic rift that was already widened by Trump’s warnings that Washington would drop security guarantees for its European allies. Thursday’s EU pushback came after Trump told reporters that ‘the European Union was formed in order to screw the United States. That’s the purpose of it, and they’ve done a good job of it,’ adding that it would stop immediately under his presidency. Prime Minister Donald Tusk of Poland, which holds the EU’s rotating presidency, went on a counteroffensive. ‘The EU wasn’t formed to screw anyone… Quite the opposite. It was formed to maintain peace, to build respect among our nations, to create free and fair trade, and to strengthen our transatlantic friendship. As simple as that.’”
February 26 – Politico (Jacopo Barigazzi, Nicholas Vinocur and Elena Giordano): “The EU’s foreign policy chief Kaja Kallas will not meet U.S. Secretary of State Marco Rubio during her visit to Washington ‘due to scheduling issues,’ according to a European Commission spokesperson. ‘High Representative/Vice-President Kaja Kallas is visiting Washington D.C. on 26 and 27 February. She will meet with U.S. senators and congressmen to discuss Russia’s war against Ukraine and the transatlantic relationship,’ the spokesperson said… It ‘seems that the Trump administration doesn’t miss a chance to show that for them the EU is not a player,’ an EU diplomat commented...”
February 24 – Wall Street Journal (Editorial Board): “The United Nations is no great moral arbiter of anything, but at least the United States has tried over the years to have that group of nations recognize the truth about bad actors. That wasn’t the case Monday, as the U.S. voted with Russia against a General Assembly resolution calling out Russia for its invasion of Ukraine three years ago. What a regrettable moment. The resolution, sponsored by Ukraine and European nations, wasn’t even all that strong. It merely noted ‘with concern that the full-scale invasion of Ukraine by the Russian Federation’ has had ‘devastating and long-lasting consequences’ and called for ‘an early cessation of hostilities.’ Apparently even this was too much of a rebuke to Vladimir Putin for President Trump to tolerate…”
February 21 – Politico (Tim Ross, Laura Kayali and Nette Nostlinger): “Europe’s politicians are openly discussing how they could tackle the threat of nuclear attack without American help, in a dramatic sign of the deep crisis engulfing the transatlantic alliance under Donald Trump. In what would be a huge shift in position…, Germany’s next leader said the continent must find new ways to defend itself without the U.S. military underpinning its nuclear protection through NATO. Friedrich Merz… said his country would need to look beyond the U.S. to Britain and France for nuclear safeguards. Under Trump, he said, America could no longer be relied on. ‘We need to have discussions with both the British and the French — the two European nuclear powers — about whether nuclear sharing, or at least nuclear security from the U.K. and France, could also apply to us,’ Merz said.”
February 23 – Wall Street Journal (Gabriele Steinhauser, Joyu Wang and Timothy W. Martin): “The Trump administration’s rush toward peace talks with Russia on the war in Ukraine has rattled some officials in Asia and raised concerns over the U.S. commitment to the region’s security… The news reverberated among U.S. allies in Asia. In public, officials from Taiwan, the Philippines, Japan and South Korea, which rely on the U.S. for their defense, have expressed confidence that Washington will stand by them in case of aggression from China or North Korea… But privately, some officials have expressed concern that Trump could pursue some kind of bargain with Chinese leader Xi Jinping over disputed territories in Asia or allow North Korea’s nuclear program to remain a threat.”
Ukraine War Watch:
February 24 – Associated Press (Justin Spike): “Ukraine… marked the bleakest anniversary yet of its war against the Russia invasion, with the country’s forces under severe pressure on the battlefield and U.S. President Donald Trump’s administration apparently embracing the Kremlin in a reversal of American policy. The three-year milestone drew more than a dozen Western leaders to Kyiv for commemorative events in a conspicuous show of support. They warned of the war’s wider implications for global security and vowed to keep providing billions of dollars in aid to Ukraine as uncertainty deepens over the U.S. commitment to help. Washington did not send any senior official to the occasion.”
February 24 – Bloomberg (Max Hunder): “Ukraine’s President Volodymyr Zelenskiy said on Sunday that Russia launched more than 200 drones in an overnight attack, the largest of the war, as he condemned Russia's ‘aerial terror’ and called for unity among Ukraine’s allies. ‘Every day, our people stand against aerial terror,’ he wrote on X. ‘On the eve of the third anniversary of the full-scale war, Russia launched 267 attack drones against Ukraine — the largest attack since Iranian drones began striking Ukrainian cities and villages.’”
February 26 – Financial Times (Steff Chávez and Christopher Miller): “President Donald Trump has said the US will not give Ukraine security guarantees ‘beyond very much’, as Washington and Kyiv prepare to sign a critical minerals deal on Friday… ‘I’m not going to make security guarantees beyond very much,’ Trump said… ‘We’re going to have Europe do that” because ‘Europe is the next-door neighbour’.”
February 26 – Reuters (Barbara Erling): “European leaders must resist ‘capitulation’ to Russia over Ukraine, Polish Prime Minister Donald Tusk said…, ahead of a virtual meeting of EU leaders to discuss the war following U.S. President Donald Trump's overtures to Moscow. ‘We cannot agree to Ukraine's capitulation to Russia’s, however we call it, impudent demands, including territorial ones,’ said Tusk… on X.”
February 25 – Politico (Lucia Mackenzie, Veronika Melkozerova and Jamie Dettmer): “Donald Trump's attacks on Ukraine are forcing European countries to think the unthinkable: The U.S. may stop arming Kyiv. But both Ukrainian President Volodymyr Zelenskyy and military analysts think that while losing U.S. support will be a major blow and will hit deliveries of key weapons, Ukraine backed by its European allies will be able to keep fighting for many months. Governments are racing to show diplomatic and military support for Ukraine. More than a dozen leaders were in Kyiv on Monday, with many more joining virtually, while the EU is working on a military aid package worth at least €20 billion.”
February 23 – Politico (Elena Giordano): “European Council President António Costa… announced a special meeting of European leaders on March 6. ‘We are living a defining moment for Ukraine and European security,’ Costa said in… announcing his decision to convene the special European Council. ‘In my consultations with European leaders, I’ve heard a shared commitment to meet those challenges at EU level: strengthening European Defence and contributing decisively to peace on our continent and long-term security of Ukraine,’ he added.”
February 25 – Politico (Gregorio Sorgi): “U.S. President Donald Trump is acting like he holds all the cards in talks to end the war in Ukraine. But Brussels has a €200 billion secret weapon up its sleeve. After being left out of discussions with the U.S. and Russia Feb. 18 on ending the war in Ukraine, European governments could go for the nuclear option — seizing the Russian sovereign assets that were immobilized after Moscow launched its full-scale invasion of Ukraine three years ago.”
February 26 – Wall Street Journal (Isabel Coles): “President Trump says the U.S. has spent $350 billion on the war in Ukraine—a figure that is at odds with Ukrainian President Volodymyr Zelensky’s tally, as well as U.S. government agencies and Western think tanks. The cost of the war has been at the center of negotiations over a mineral-rights deal that would compensate the U.S. for its wartime assistance… Congress has voted through five bills appropriating a total of $175 billion for Ukraine in the three years since Russia’s invasion, according to… the Congressional Research Service. The Kiel Institute for the World Economy, a research group in Germany, has calculated that about $120 billion of the appropriated funds have been allocated to programs that directly support Ukraine. Of that amount, the U.S. has provided $67.3 billion in the form of weapons and other military assistance. Budget support… accounts for $49 billion. The remaining $3.6 billion was spent on humanitarian aid. But a substantial portion of the $175 billion doesn’t directly support Ukraine.”
Taiwan Watch:
February 25 – Wall Street Journal (Joyu Wang): “Taiwan detained a cargo ship and its eight Chinese crew members after an undersea fiber-optic cable was severed, in a stepped-up effort to police such incidents, which are often seen as part of China’s pressure campaign targeting the self-ruled island… A string of such episodes has called attention to Taiwan’s vulnerability as it works to ensure that it has secure internet services to keep the island online in the event of an invasion or blockade by China.”
February 26 – Financial Times (Kathrin Hille): “Taiwan has objected to what it says were unannounced Chinese live-fire naval exercises in busy waters near its south-western coast, in a further sign of disruption caused by the People’s Liberation Army’s rapidly expanding operations.”
Market Instability Watch:
February 24 – Reuters (Nell Mackenzie): “Hedge funds exited U.S. tech and media stocks in the two weeks to February 21 at the fastest pace in six months, according to Goldman Sachs… Speculators ‘aggressively’ dumped both long and short positions in AI-related equipment, media, and communications equipment companies, according to a note sent to Goldman Sachs clients…”
February 25 – Bloomberg (Laura Noonan): “The world’s top financial stability watchdog is setting up a dedicated taskforce to unmask areas where shadow banks could spark a broader crisis, the chair of the Financial Stability Board told Bloomberg... The carry trade, used by investors to place leveraged bets on interest rates, and the basis trade, a popular wager using financial gearing to exploit price discrepancies in government-bond markets, are ‘two excellent examples’ of areas the FSB could focus on, said Klaas Knot, who is also governor of the Dutch National Bank. ‘These are areas where there is potential for a lot of leverage to build up and to build up pretty rapidly also,’ he said of the soon-to-be-launched taskforce.”
February 24 – Bloomberg (Marcus Ashworth): “‘Action this Day’ on a red sticker was how Winston Churchill prioritized initiatives during World War II. Bank of England Governor Andrew Bailey might consider channeling his inner Winston to counteract the outsized hedge fund leverage he has repeatedly warned is a growing financial-stability risk. Bailey earlier this month in a speech… reiterated the undeniable fact that the footprint of hedge funds and non-bank market makers has grown substantially in recent years. It’s ‘putting some pressure on what we perceive of the limits of prime brokerage capacity,’ he said…”
February 25 – Bloomberg: “China’s strategy of defending its currency by choking local liquidity is sending ripples throughout the financial system, squeezing banks and fueling losses at bond funds. The People’s Bank of China has drained cash through open market operations most days this month, supporting the yuan by making it more scarce. But that has had unintended consequences: Banks have hoarded cash rather than lend it to rivals, while debt funds have suffered losses as investors sell bonds to raise money. China’s 10-year bond yield hit its highest level since December on Monday. The latest sign of a cash crunch at Chinese banks is a sharp drop in their lending through repurchase contracts, or repo. The country’s biggest banks cut their lending in the repo market by around two-thirds in mid-February compared with the daily average last year…”
Global Credit and Financial Bubble Watch:
February 25 – Bloomberg (Simon Kennedy): “Global debt increased by around $7 trillion in 2024 to reach $318 trillion, a record annual high and a reason for financial markets to be cautious, according to the Institute of International Finance. Total debt as a share of gross domestic product also rose for the first time in four years as economic growth slowed, the group, which represents the global financial industry, said... It predicted borrowing will remain high this year, especially in the US, France, China, India and Brazil. The IIF said rising debt burdens meant governments should be ‘beware of bond vigilantes,’ the term given to investors who push up interest rates in a bid to force policymakers to rein in budget deficits and debt.”
February 27 – Financial Times (Eric Platt and Will Schmitt): “Wall Street’s top securities regulator has raised concerns about a private credit exchange traded fund from State Street and Apollo that began trading on Thursday, in a blow to the two Wall Street groups. The fund is designed to open private credit, an investment class that has largely been the purview of institutional investors, to retail investors. Its success is being closely watched by Wall Street as rivals look to launch competing funds. The Securities and Exchange Commission questioned how the State Street fund — known as the SPDR SSGA Apollo IG Public & Private Credit ETF (PRIV) — would maintain liquidity and value private debt…”
February 28 – Bloomberg (Michael Gambale): “There are no potential borrowers looking to raise capital in the US investment-grade primary market Friday…, after borrowers smashed expectations in selling $51 billion of debt this week. But that doesn’t mean syndicate desks won’t be busy today. Some $60 billion of fresh debt is expected next week… The issuance environment is attractive as funding costs continue to fall — setting up potentially a very busy March. Consensus dealer estimates are centered at $185 billion, which if met would easily top last year’s volume.”
February 24 – Bloomberg (Sonali Basak): “Investors in collateralized loan obligations are forcing more diligence in markets that tend to finance riskier companies and corporate buyouts, as some parts of the market are experiencing a deterioration in credit quality, according to KKR & Co.’s co-head of credit and markets, Christopher Sheldon. ‘We have seen an increase in defaults, modestly, an increase of downgrades… If you push a riskier deal, the incentives to take risk aren’t necessarily there in the syndicated loan market, which is why it’s pushing product to other markets, and those public-private markets will co-exist together.’”
AI Bubble Watch:
February 24 – Yahoo Finance (Laura Bratton): “Microsoft has canceled an unspecified number of data center leases amid the AI spending boom, TD Cowen analysts said in a note… ‘Our initial reaction is that this is tied to Microsoft potentially being in an oversupply position,’ TD Cowen's Michael Elias wrote… Elias had previously written in January that Microsoft is abandoning new leasing deals for data centers that it was previously interested in. ‘[T]he magnitude of both potential data center capacity it walked away from and the decision to pullback on land acquisition (which supports core long term capacity growth) in our view indicates the loss of a major demand signal that Microsoft was originally responding to and that we believed the shift in their appetite for capacity is tied to OpenAI,’ Elias wrote…”
February 24 – Bloomberg (Ryan Vlastelica and Newley Purnell): “Microsoft Corp. has canceled some leases for US data center capacity, according to TD Cowen, raising broader concerns over whether it’s securing more AI computing capacity than it needs in the long term. OpenAI’s biggest backer has voided leases in the US totaling ‘a couple of hundred megawatts’ of capacity — the equivalent of roughly two data centers — canceling agreements with at least a couple of private operators, the US brokerage wrote Friday, citing ‘channel checks’ or inquiries with supply chain providers. TD Cowen said its checks also suggest Microsoft has pulled back on converting so-called statements of qualifications, agreements that usually lead to formal leases.”
February 27 – Bloomberg (Jeran Wittenstein, Carmen Reinicke and Ryan Vlastelica): “Investors hoping that Nvidia Corp.’s earnings would rejuvenate the artificial intelligence trade didn’t exactly get the report they wanted. The chipmaker failed to generate much excitement, with a beat that fell short of the company’s typical blowout numbers and a mixed outlook for next quarter… ‘A couple months ago we were very certain of the growth component of AI,’ said Brian Mulberry, client portfolio manager at Zacks Investment Management Inc. ‘Where we are today, that seems to be a much wider range of outcomes than what it was before. And the volatility in these AI-related names are starting to reflect that.’”
February 26 – Financial Times (Eleanor Olcott and Wenjie Ding): “DeepSeek’s advances have sparked a nationwide push in China to deploy its large language models everywhere from hospitals to local governments as Beijing seeks to consolidate its gains in generative artificial intelligence. Since the… start-up shook global markets with its R1 model in late January there has been lightning adoption of its technology in its home country, with companies and state bodies throwing their weight behind the new national AI champion. All the major cloud service providers, at least six car manufacturers, several local governments, a number of hospitals and a handful of state-owned enterprises (SOEs) have moved to deploy DeepSeek…”
February 25 – Reuters (Eduardo Baptista, Julie Zhu and Fanny Potkin): “DeepSeek is looking to press home its advantage. The Chinese startup triggered a $1 trillion-plus sell-off in global equities markets last month with a cut-price AI reasoning model that outperformed many Western competitors. Now, the Hangzhou-based firm is accelerating the launch of the successor to January's R1 model, according to three people familiar with the company. Deepseek had planned to release R2 in early May but now wants it out as early as possible…”
February 23 – Bloomberg: “Alibaba Group Holding Ltd. pledged to invest more than 380 billion yuan ($53bn) on AI infrastructure such as data centers over the next three years, a major commitment that underscores the e-commerce pioneer’s ambitions of becoming a leader in artificial intelligence. The internet company co-founded by Jack Ma plans to spend more on its AI and cloud computing network than it has over the past decade.”
Bubble and Mania Watch:
February 27 – Bloomberg (Suzanne Woolley): “Membership in the 401(k) millionaire club is growing by leaps and bounds. The number of 401(k) accounts with balances of $1 million or more at Fidelity Investments rose 27% to 537,000 in 2024, driven by a banner year in the stock market...”
February 28 – Bloomberg: “As news started spreading about a massive hack on crypto exchange Bybit last Friday, cybersecurity researchers quickly concluded that the era of giant digital-asset heists had entered a new and potentially ruinous phase. It wasn’t just the size of the exploit, although at close to $1.5 billion, it was the biggest ever by a wide margin. Within hours, it was clear that the attack — which the Federal Bureau of Investigation attributed to North Korea’s Lazarus Group — was far more ambitious, and difficult to prevent, than any that preceded it. Perhaps most disturbing was that the hackers managed to drain a so-called ‘cold’ crypto storage wallet, a piece of hardware used to hold the private key needed to access funds.”
February 26 – Bloomberg (Isabelle Lee): “Investors yanked more than $1 billion from spot Bitcoin exchange-traded funds Tuesday, marking the biggest one-day outflow since the cohort’s debut last January. Fidelity Wise Origin Bitcoin Fund posted the steepest outflows among these funds, followed by the iShares Bitcoin Trust ETF (IBIT)…”
February 26 – Bloomberg (Prashant Gopal, Biz Carson and Alicia Clanton): “In California’s Silicon Valley, it often takes millions of dollars just to score a fixer-upper… Tracy Hsu, an agent in Cupertino, tells her clients that it’s about bidding high enough to win. Last month, Hsu helped a buyer land a dated three-bedroom ranch in Saratoga — a short drive from Apple Inc.’s headquarters — for $4.5 million, with plans to tear it down and start fresh. More recently, a bungalow hit the market in the same town for $3.9 million and a client… offered only $600,000 more. Someone else swooped in and put it under contract for $4.6 million, she said. ‘When we write an offer, we don’t look at the asking price,’ Hsu said. ‘It’s meaningless’… Buyers aren’t worried about overpaying because they expect prices to keep rising… said Skylar Olsen, chief economist at Zillow… ‘Sure they overpaid. But they got a good location, and that’s what matters’… Pickings are extremely slim... At one point in early February, Cupertino had just 16 active single-family listings in a market that would normally see 120… A 1,100-square-foot house on a cul de-sac in the city of Santa Clara recently sold for $2.2 million, drawing 11 offers… It was an average home in a spot that’s not necessarily the most prestigious, but conveniently close to companies like Apple and Nvidia…”
U.S./Russia/China/Europe Watch:
February 24 – Wall Street Journal (Chun Han Wong, Georgi Kantchev and Lingling We): “The leaders of China and Russia sought to project a unified front on the third anniversary of the Russian invasion of Ukraine amid U.S. overtures to Moscow seen as attempts to pry the two powers apart. In a phone call…, Chinese leader Xi Jinping and Russian President Vladimir Putin described the relationship between their countries as robust and immune to interventions from any third country—an apparent reference to the Trump administration’s recent efforts to engage Moscow. China and Russia are immovable neighbors and ‘true friends who share weal and woe, support each other and develop together,’ Xi was quoted as saying…”
February 27 – Bloomberg: “A spate of drills by China’s military in the Indo-Pacific is testing the Trump administration’s commitment to regional security soon after its actions raised doubts about its alliances with European nations. The People’s Liberation Army has conducted shooting drills off the coasts of Australia, Vietnam and Taiwan over the past week. While the Chinese actions took place in international waters off Australia and Taiwan, they raised concerns over Beijing’s intentions... ‘This is China testing the waters to see where the new boundaries are now that we are in the Trump 2.0 era of amorphous and pay-to-play US security guarantees,’ said Wen-Ti Sung, a nonresident fellow at the Atlantic Council’s Global China Hub.”
February 22 – Wall Street Journal (Austin Ramzy): “The militaries of China and Russia, America’s top two global adversaries, are working together as never before in their long partnership, probing the defenses of the U.S. and its allies. The message to America from the growing partnership is that, if drawn into a military conflict, U.S. forces could find themselves confronting both countries. Chinese-Russian joint patrols and military exercises have become more frequent and increasingly assertive… Beijing and Moscow have been displaying close cooperation near Japan, South Korea and the Philippines, nations that the U.S. has pledged to defend, and Taiwan, to which the U.S. sells weapons and provides training.”
February 25 – Bloomberg (Chang Shu and Eric Zhu): “If there was any doubt US President Donald Trump is taking a hard-line stance on China, his ‘American First Investment Policy’ puts it to rest. The sweeping directive — which identifies China as a foreign adversary — will accelerate the decoupling of the two economies… The reference to China as of the US’s ‘foreign adversaries’ alongside Cuba, Iran, North Korea, Russia and Venezuela shows Washington is toughening its stance toward China. The memo sets out to protect strategic sectors including technology, critical infrastructure, healthcare, agriculture, energy, raw materials and others. The restrictions will apply to bilateral direct and portfolio investment.”
February 26 – Bloomberg: “Secretary of State Marco Rubio mapped out a US strategy for managing Russia’s close relationship with China, saying Washington wants to dilute ties without sowing division between the nuclear-armed neighbors. ‘I don’t know if we’ll ever be successful completely at peeling them off of a relationship with the Chinese,’ Rubio told conservative media outlet Breitbart News…”
De-globalization Watch:
February 27 – Bloomberg (Geoffrey Morgan): “In Canadian grocery stores, US-grown produce is wilting on the shelves. Local executives are scouring wine lists over dinner to avoid ordering California pinot. And in Toronto, a 73-pound Great Pyrenees-Poodle mix named Izzy is no longer allowed to eat American dog food. As US President Donald Trump has threatened tariffs, made 51st state jabs and referred to the country’s prime minister as ‘Governor Trudeau,’ furious Canadian consumers have turned into vindictive shoppers: American-made products are out; everything else is in.”
February 26 – Wall Street Journal (Vipal Monga and Paul Vieira): “Canada was set to hold an election this year that was going to be a referendum on the unpopular Prime Minister Justin Trudeau. Now it’s all about President Trump. Before Trudeau resigned in January, Canada’s right-leaning Conservatives were headed for an election-day romp, having led Trudeau’s Liberals by 20 points for more than a year. But since Trudeau stepped aside and President Trump threatened steep tariffs to use what he called ‘economic force’ to make Canada the 51st state, the Liberals have made a dramatic turnaround. In a poll issued by Ipsos on Tuesday, the Liberals held a two-point lead over the Conservatives; they trailed by 26 points only six weeks ago.”
February 24 – Bloomberg (Mark Gurman): “Apple Inc., as it seeks relief from US President Donald Trump’s tariffs on goods imported from China, said that it will hire 20,000 new workers and produce AI servers in the US. The company said… it plans to spend $500 billion domestically over the next four years, which will include work on a new server manufacturing facility in Houston, a supplier academy in Michigan and additional spending with its existing suppliers in the country.”
Inflation Watch:
February 28 – CNBC (Jeff Cox): “Inflation eased slightly in January as worries accelerated over President Donald Trump’s tariff plans… The personal consumption expenditures price index, the Federal Reserve’s preferred inflation measure, increased 0.3% for the month and showed a 2.5% annual rate. Excluding food and energy, the core PCE also rose 0.3% for the month and was at 2.6% annually… Personal income posted a much sharper increase than expected, up 0.9% on the month against expectations for a 0.4% increase. However, the higher incomes did not translate into spending, which decreased 0.2%, versus the forecast for a 0.1% gain. The personal savings rate also spiked higher, rising to 4.6%.”
February 25 – Reuters (Lucia Mutikani): “U.S. single-family house prices increased solidly in December, despite improving supply, which together with elevated mortgage rates will continue to erode affordability. House prices rose 0.4% on a month-on-month basis after an upwardly revised 0.4% increase in November, the Federal Housing Finance Agency said... They increased 4.7% in the 12 months through December, following an upwardly revised 4.5% gain in November, which was previously reported as a 4.2% rise.”
February 27 – Bloomberg (Molly Smith and Augusta Saraiva): “No matter what metric you’re looking at, US inflation is moving in the wrong direction again. Whether it’s a house or a carton of eggs, price growth is once again intensifying across a broad range of indicators. Much of that has to do with the same supply and demand factors and labor-market pressures that led to the initial inflation surge in the pandemic, while planned tariffs from President Donald Trump are heightening concerns that prices will rise even more.”
February 26 – Bloomberg (Lebawit Lily Girma): “It’s never been more expensive to go on vacation during spring break. This year the average trip from March 12-21—determined to be the peak period for school breaks—costs $8,306. That’s more than double what it cost in 2019 and 26% more than it did last year, according to… Squaremouth, a travel insurance comparison engine. To crunch those numbers, Squaremouth examined the value of 6,000 trips from Feb. 20 to April 15, 2025.”
February 27 – Bloomberg (Shawn Donnan and Claire Ballentine): “President Donald Trump’s plan to impose new tariffs on imports to force manufacturers to relocate production to the US is getting a skeptical reaction from one important audience: American consumers. Almost 60% of US adults expect Trump’s tariffs will lead to higher prices, according to a Harris Poll conducted for Bloomberg News. Some 44% say the levies are likely to be bad for the US economy — compared to 31% who say they’d be a boost. Even within the president’s own party, many aren’t sold on his trade agenda. Only half of Republican respondents said the tariffs would be an economic boon.”
February 27 – Bloomberg (Alice Atkins and Lisa Abramowicz): “The move away from globalization toward a more fragmented world is likely to fuel permanently higher inflation across regions, according to Apollo Global Management’s Torsten Slok. The chief economist at the firm said that the rising popularity of restrictive trade and anti-immigration policies indicate a shift in the geopolitical backdrop that is likely to fan global price pressures and weaken growth. ‘We are turning toward a world with more segmentation,’ he said… Concerns around a ‘stagflationary shock’ are the ‘backdrop for the conversation that we are having in markets at the moment,’ he added.”
Federal Reserve Watch:
February 25 – Reuters (Howard Schneider): “The head of a new congressional panel gearing up to strengthen Capitol Hill's oversight of the Federal Reserve plans a broad review of how the U.S. central bank makes its interest rate decisions, including whether controlling inflation should be prioritized over safeguarding employment. ‘A substantial number of my Financial Services Committee colleagues and the chairman want to discuss that issue,’ Representative Frank Lucas, an Oklahoma Republican, told Reuters... ‘Is there really a dual mandate? And how does that affect the primary mandate of price stability?’”
U.S. Economic Bubble Watch:
February 25 – Bloomberg (Dina Katgara): “More than half of Americans are delaying major life plans due to uncertainty over the economy, according to a new study from Wells Fargo. Among that cohort, about a third said they were putting off buying a home, while one in six have postponed education plans and one in eight have pushed back their retirement. Although inflation has moderated since a peak in 2022, Americans are still shocked by high prices. About 90% said they were surprised by the cost of activities like eating out or attending a concert. At the same time, 76% plan to cut back on spending this year, up from 67% in 2024, according to the study, which was conducted in September and October.”
February 23 – Wall Street Journal (Rachel Louise Ensign): “Many Americans are pinching pennies, exhausted by high prices and stubborn inflation. The well-off are spending with abandon. The top 10% of earners—households making about $250,000 a year or more—are splurging on everything from vacations to designer handbags, buoyed by big gains in stocks, real estate and other assets. Those consumers now account for 49.7% of all spending, a record in data going back to 1989, according to… Moody’s Analytics. Three decades ago, they accounted for about 36%. All this means that economic growth is unusually reliant on rich Americans continuing to shell out. Mark Zandi, chief economist at Moody’s Analytics, estimated that spending by the top 10% alone accounted for almost one-third of gross domestic product.”
February 25 – Associated Press (Matt Ott): “U.S. consumer confidence plummeted in February, the biggest monthly decline in more than four years…, with inflation seemingly stuck and a trade war under President Donald Trump seen by a growing number of Americans as inevitable. The Conference Board reported that its consumer confidence index sank this month to 98.3 from 105.3 in January. That’s far below the expectations… The seven-point drop was the biggest month-to-month decline since August of 2021… Respondents to the board’s survey expressed concern over inflation with a significant increase in mentions of trade and tariffs… The… report… said that the measure of Americans’ short-term expectations for income, business and the job market fell 9.3 points to 72.9.”
February 25 – Associated Press (Mae Anderson): “Small business owners felt more uncertain about the future in January, as they continue to deal with labor challenges and lingering inflation. According to a monthly poll of small business owners from the National Federation of Independent Business, the uncertainty index in January rose 14 points to 100 – the third highest recorded reading, after two months of decline. The NFIB said small business owners are feeling less confident about investing in their business due to uncertain business conditions in the coming months.”
February 28 – Reuters (Lucia Mutikani): “The U.S. trade deficit in goods widened sharply in January, most likely as businesses front-loaded imports ahead of tariffs… The goods trade gap surged 25.6% to $153.3 billion last month… Goods imports vaulted 11.9% to $325.4 billion… Exports rose 2.0% to $172.2 billion last month.”
February 27 – CNBC (Jeff Cox): “Initial filings for unemployment benefits hit their highest level of the year last week… Jobless claims for the week ended Feb. 22 totaled a seasonally adjusted 242,000, up 22,000 from the previous week’s revised level and higher than the Dow Jones estimate for 225,000… Continuing claims, which run a week behind, showed a small decrease and stood at 1.86 million.”
February 27 – Reuters (Lucia Mutikani): “New orders for key U.S.-manufactured capital goods surged in January, hinting at a rebound in business spending on equipment in the first quarter. Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, increased 0.8% after a downwardly revised 0.2% advance in December…”
February 26 – CNBC (Diana Olick): “Mortgage interest rates dropped again last week, hitting the lowest level in two months, but demand for mortgages didn’t respond… The average contract interest rate for 30-year fixed-rate mortgages… decreased to 6.88% from 6.93%... Applications for a mortgage to purchase a home were flat for the week and 3% higher than the same week one year ago.”
February 27 – Associated Press (Michelle Chapman): “Pending home sales in the United States slid to an all-time low in January as high mortgage rates, record-high home prices, and possibly the terrible weather last month hindered those seeking to buy. The National Association of Realtors said… its Pending Home Sales Index… declined 4.6% to 70.6 last month. Pending transactions fell 5.2% from the year-ago period.”
February 26 – Financial Times (Eva Xiao): “In the coastal city of Punta Gorda, Florida, builders are putting the last licks of paint on a newly built luxury condo targeting retirees. The project is one of many new homes under construction, just months after the city was struck by back-to-back hurricanes last autumn… Even so, the development of new houses ‘just keeps coming and coming,’ says Sean Seward, a local real estate agent who has been grappling with an ever-growing portfolio of new homes churned out by developers. Demand has weakened since the storms, he admits, but Seward believes that inflation, increasing insurance and taxes are the main culprits for the market downturn — not the hurricanes.”
China Watch:
February 27 – Reuters: “China's banks are cutting the interest rates offered on U.S. dollar deposits after being asked to do so by the central bank, possibly to curtail dollar hoarding and also prop up a weakening yuan, sources said. Mainland retail investors and exporters have built up nearly a trillion dollars worth of deposits because of higher U.S. yields and the yuan's slide.”
February 25 – Bloomberg: “China plans to start re-capitalizing three of its biggest banks in coming months…, following through on a broad stimulus package unveiled last year to shore up the struggling economy. Authorities are looking to inject at least 400 billion yuan ($55bn) of fresh capital into the first batch of Agricultural Bank of China Ltd., Bank of Communications Co. and Postal Savings Bank of China Co., said the people, asking not to be identified discussing private information. The plan, which could be completed as soon as the end of June, is subject to change and the amount for each bank is still being finalized…”
February 25 – Bloomberg: “China needs to vastly step up its efforts to cleanse the balance sheets of the nation’s local governments, giving them the space needed to support consumer spending and strengthen the economy, one of the nation’s most prominent economists said. The central government should take on at least 20 trillion yuan ($2.8 trillion) worth of local sovereign debt, David Li Daokui, an economics professor at Tsinghua University and a regular adviser on policy to Beijing, said…”
February 23 – Bloomberg: “China’s local governments are rushing to issue bonds to refinance hidden debt, further tightening liquidity in the financial system. Regional authorities are set to sell 1.69 trillion yuan ($233bn) of bonds in the first two months of 2025, an unprecedented amount for the period… About half of the issuance… is to replace off-balance sheet debt… The unusually big offering has exacerbated a cash squeeze this year, as banks rush to absorb the securities. Money-market rates have surged recently…”
Europe Watch:
February 24 – Bloomberg (Michael Nienaber, Kamil Kowalcze, and Arne Delfs): “Germany’s chancellor-in-waiting Friedrich Merz has opened talks with the Social Democrats to quickly approve as much as €200 billion ($210bn) in special defense spending… Officials from Merz’s Christian Democrats and the SPD are discussing ways to get around Germany’s tight restrictions on government borrowing to free up resources for the country’s dilapidated military, said people familiar… They are considering pushing a vote on the new package, which would be double the amount of one approved three years ago, through the lame duck parliament…”
February 25 – Financial Times (Olaf Storbeck): “Bundesbank president Joachim Nagel has urged Germany’s next government to embark on sweeping reforms to reinvigorate Europe’s largest economy, as the central bank declared a €19.2bn loss… Nagel said the coalition would need to enact supply-side reforms and cut red tape to boost an economy facing another year of economic stagnation in 2025. ‘A meaningful economic upswing is not in sight for now,’ Nagel said… ‘Germany needs to fight for its competitiveness,’ the central bank president said, adding that it was ‘five [minutes] to 12’.”
Japan Watch:
February 27 – Reuters (Leika Kihara): “Bank of Japan Governor Kazuo Ueda… warned of ‘very strong’ uncertainty on the global economic outlook that required vigilance in setting monetary policy. Speaking after… the Group of 20 finance leaders' meeting in South Africa, Ueda said many members appeared to share the view there was uncertainty over how U.S. tariff policies could unfold, and how such moves could affect their economies. ‘There is very strong uncertainty on the U.S. policy outlook, including on tariffs, and how other countries could respond. As such, we need to scrutinise developments… We then need to take a comprehensive view on how (the U.S. policies) affect the global economy, financial markets and Japan's economic and price outlook’ in setting monetary policy, he said, when asked how global uncertainties could affect the BOJ's interest rate decisions.”
Emerging Markets Watch:
February 23 – Bloomberg (Whanwoong Choi and Catherine Bosley): “South Korea’s bid to tackle a slowing economy via fiscal stimulus will pressure the won and may steepen the yield curve at a time when the bond market is already absorbing a record amount of issuance. Faced with potential US tariffs and fallout from its brush with martial law, the country is looking at stimulus to help the economy. The opposition party, which holds a majority of seats in parliament, recently proposed an outlay of 35 trillion won ($24bn) — and there have been suggestions to sell more debt to help fund the expenditure. Any additional supply stands to drive up bond yields and steepen the curve…”
February 25 – Reuters (Fabian Cambero and Alexander Villegas): “A massive power outage across Chile plunged the country's capital Santiago into darkness on Tuesday and knocked out electricity to major copper mines in the country’s north, buffeting global metal markets. Hours after the outage began and as darkness fell, Chile’s government announced a state of emergency and established a curfew…”
Leveraged Speculation Watch:
February 27 – Bloomberg (Lu Wang and Yiqin Shen): “A diversified investment strategy that seeks to juice returns through leverage is finding new love among big money managers — more than a decade after it blew up during the 2008 financial crisis. The approach, widely known as ‘portable alpha,’ uses derivatives to track returns of long-only indexes and then invests the excess cash in trades beloved by hedge funds, including the likes of trend following or market-neutral equity strategies. Some 22% of institutional investors, private banks and family offices adopted the investing style as a form of asset allocation last year, according to Barclays Plc.’s annual survey tracking 325 investors with $8.6 trillion in total assets. That’s up from 10% the previous year.”
Social, Political, Environmental, Cybersecurity Instability Watch:
February 28 – Bloomberg (Lauren Rosenthal, Brian K. Sullivan and Ari Natter): “The Trump administration fired hundreds of employees at the top US agency overseeing weather prediction and climate research, raising concerns about the nation’s preparedness amid wildfire and tornado warnings.”
February 25 – Bloomberg (Keith Laing): “Federal buildings across the US have been ordered to shut off electric-vehicle chargers, according to a person familiar…, the latest move to rescind pro-EV initiatives in President Donald Trump’s first months in office. The General Services Administration, which oversees properties and vehicle fleets for the government, sent an email to agencies in recent days discussing the plan… Federally owned charging stations, which are used both for government vehicles and workers’ personal cars, will no longer be considered “mission critical,” the GSA said.”
February 23 – Associated Press: “California Gov. Gavin Newsom has asked Congress to approve nearly $40 billion in aid to help the Los Angeles area recover from January’s devastating wildfires, which he said could become the costliest natural disaster in U.S. history. Newsom sent a letter Friday asking for support from lawmakers... ‘Los Angeles is one of the most economically productive places on the globe, but it can only rebound and flourish with support from the federal government as it recovers from this unprecedented disaster’.”
February 25 – Bloomberg (Laurence Darmiento): “State Farm General… estimated… it will cost $7.6 billion to settle its Los Angeles-area fire claims, but it said reinsurance will lower its losses to about $612 million. The company disclosed it has already paid $1.75 billion to cover about 9,500 claims and will be able to handle all of its fire-related expenses because the majority of losses will be absorbed by its parent company, State Farm Mutual Automobile Insurance Co., which also provides it with reinsurance.”
February 26 – Wall Street Journal (Elena Vardon): “Munich Re estimates that devastating wildfires that struck southern California in January will result in 1.2 billion euros ($1.26bn) in claims for the company, it said as it reported fourth-quarter results. ‘They were clearly the most substantial wildfire losses in the history of the insurance industry,’ it said.”
February 24 – Bloomberg (Michael Hirtzer): “America’s flock of egg-laying hens dropped to the lowest since 2016 in January as avian influenza resulted in the death of millions of birds, driving egg prices to record levels. Eggs have been setting new highs every week this year with fewer chickens hatching eggs… The number of layers fell to about 363 million in January, down 3.8% from a year ago…”
Geopolitical Watch:
February 26 – Wall Street Journal (Laurence Norman): “Iran has sharply increased its stockpile of highly enriched uranium in recent weeks, according to a confidential United Nations report… The increase in Iran’s holdings of uranium enriched to 60%, or nearly weapons grade, gives it enough to produce six nuclear weapons. Iran is now producing enough fissile material in a month for one nuclear weapon, according to the report… The Trump administration has said it would return to a policy of ‘maximum pressure’ on Iran but that it also wants to negotiate a nuclear deal.”
February 23 – Bloomberg (Karishma Vaswani): “The Philippines is preparing to build a new arbitration case against China over alleged breaches of international law in the South China Sea. It may seem like a symbolic gesture, but in a world where the rules-based order is increasingly under threat, these gestures matter… Beijing’s recent behavior toward Australia, New Zealand and the Philippines in the Indo-Pacific are good examples of its attempts to assert ownership over parts of the oceans it claims — including the South China Sea.”
