“Everyone has a plan, until they get punched in the mouth” (Mike Tyson). The Trump administration definitely has some grandiose plans. Dressed in baggy attire and too often projecting a pacifist temperament - but when pushed too far, the bond market can reveal the inner brute force of a prizefighter. Global bond markets have been agitated over recent months. The resurrected bond vigilantes have been circling.
But global bonds have enjoyed a nice rally of late. After trading at 4.80% on January 14th, 10-year Treasury yields touched a seven-week low 4.40% during Wednesday trading. UK gilt yields dropped from a 4.92% trading high to 4.37%; French yields 3.49% to 3.05%; German yields 2.65% to 2.34%; Italian yields 3.85% to 3.43%; Canadian yields 3.56% to 2.88%; and Australian yields 4.66% to 4.29%.
Sinking Treasury yields were especially pacifying for distressed EM bonds. Brazil’s dollar bond yields sank from 7.11% to 6.49%, with Mexico’s yields falling from 6.80% to 6.38%. Local currency yields swung from 10.46% to 9.71% in Mexico and from 15.44% to 14.31% in Brazil.
Importantly, sinking yields lessened the intense pressure on EM currencies, pressure which had forced “doom loop” EM currency intervention and associated liquidation of international holdings (chiefly Treasuries). And with significant hedging in Treasuries and the currencies, the reversal in global yields spurred the unwind of hedges – providing additional trading support for lower yields and a weaker dollar.
Lower global yields have been instrumental in restraining crisis dynamics at the “periphery” that were increasingly transmitting contagion effects to the vulnerable “core.” Surging Treasury yields were approaching the pain point of aggressive hedging, de-risking, deleveraging and waning liquidity - an especially problematic dynamic for such a highly speculative equities market. The manically Crowded Mag7/AI/tech trade is especially vulnerable.
In the grand scheme of things, the pullback in global yields has been shallow and about what one would expect in an unsettled backdrop. It’s worth noting that after trading to 4.22% in October 2022, 10-year Treasury yields were back below 3.40% in April 2023, only to reverse sharply higher to 5.0% in October 2023, back down to 3.80% to end ‘23, up to 4.71% last April, down to 3.65% in September, before surging back to 4.79% by the middle of last month.
Our President and Treasury Secretary have reason to be nervous. A break higher in Treasury yields would be destabilizing. Yields closed the week about 50 bps below the key psychological 5% level. The unfolding Trump agenda is filled with potentially problematic issues for the bond market.
With the recent Treasury rally supporting the bullish narrative, a sanguine view on tariffs has dominated: generally, tariffs are seen as having a more negative impact on growth than on elevated inflation. I expect much more attention (news and analysis) on inflationary tariff impacts with the return to a rising yield environment.
I also expect the bond market to now take a more skeptical view of budget negotiations. The benefit of the doubt has been extended to Republican deficit hawks ready to hold the line. Again, with yields declining, it has been easy to dismiss the litany of President Trump’s campaign tax cut promises.
February 6 – Bloomberg (Akayla Gardner, Billy House and Alicia Diaz): “President Donald Trump outlined his tax priorities in a meeting with Republican lawmakers, including ending the carried interest tax break used by private equity fund managers and expanding the state and local tax deduction… Among the tax cuts he mentioned are his campaign pledges to end levies on tips, Social Security payments and overtime pay. Leavitt also said Trump wants to end what she cast as ‘special tax breaks for billionaire sports team owners’ and create new cuts for made-in-America products.’”
February 7 – Washington Times (Lindsey McPherson): “President Trump laid down a demand Friday for a ‘balanced budget’ while a nonpartisan budget group estimated his tax priorities will cost at least $5 trillion over 10 years and perhaps double that. Both contentions come after Mr. Trump met with House Republicans… to help them work through internal party disagreements on a budget resolution. It’s the first step in advancing his legislative agenda through Congress using the budget reconciliation process that lets Republicans pass their priorities without the threat of a Democratic filibuster in the Senate. “BALANCED BUDGET!!!” the president posted… Friday… The Committee for a Responsible Federal Budget released an estimate of the tax priorities that Mr. Trump laid out during this week’s meeting with House Republicans, finding the proposals would cost $5 trillion to $11.2 trillion over 10 years… The bulk of that cost, $3.9 trillion to 4.8 trillion, comes from extending tax cuts enacted during Mr. Trump’s first term… His plan to cut taxes on income from tips, overtime pay and Social Security benefits would cost $900 billion to $5 trillion.”
The President these days is nothing if not emboldened. It’s not unrealistic to contemplate a scenario where Trump demands Republicans move forward with this litany of tax cuts, to be offset in a budget anticipating a significant boost in receipts from tariffs and taxes on “carried interest.” Markets could have issues. The implementation of a major revenue-generating tariff regime comes with myriad risks and uncertainties, raising the odds of trade wars, supply chain issues, economic dislocation, and higher inflation. Taxing “carried interest” also comes with uncertainties, including the potential to spark hedge fund liquidations.
If I were the bond market, I’d be leery of a budget big on tax cuts offset by indeterminate revenue sources. This becomes a more pressing issue for a bond market facing heightened overheating risks.
Friday data support the overheating risk thesis. A 4.0% unemployment rate on its face should be a bond market concern. And January’s 0.5% surge in weekly hourly earnings suggests upside wage inflation risk. And while January’s payroll increase (143k) was down from December’s booming (upwardly revised) 307,000, other indicators point to strengthening labor market dynamics. The January ISM Services Employment subindex rose to a stronger-than-expected 52.3, the high since September 2023. The Services PMI Employment index surged three points to 54.3, the high back to June 2022. Add recovering manufacturing employment to the booming services economy. The ISM Manufacturing Employment expanded (50.3) for the first time since May, and Manufacturing PMI Employment rose to the high since June.
The University of Michigan’s preliminary February survey of one-year consumer inflation expectations surged to 4.3% (up from December’s 2.8%), the high back to November 2023. This followed Monday’s release of the ISM Manufacturing Prices subindex, which jumped to an eight-month high (54.9), while Services PMI prices rose to the high since last September (ISM Services Priced Paid declined to a still elevated 60.4).
February 7 – Bloomberg (Vince Golle): “US consumer debt outstanding unexpectedly surged by the most on record in December, reflecting massive increases in credit-card balances and non-revolving credit. Total credit jumped $40.8 billion after a revised $5.4 billion decrease a month earlier, according to Federal Reserve data… The figure… topped all estimates... Outstanding credit-card and other revolving debt increased $22.9 billion in December… Non-revolving credit, such as loans for vehicle purchases and school tuition, climbed $18 billion, the most in two years.”
An overheating economy, coupled with tariff and trade war risks, creates a bond market challenge.
February 3 – Wall Street Journal (The Editorial Board): “President Trump never admits a mistake, but he often changes his mind. That’s the best way to read his decision Monday to pause his 25% tariffs against Mexico and Canada after minor concessions from each country. Mr. Trump claimed victory, as he always does. He pointed to Mexican President Claudia Sheinbaum’s decision to deploy 10,000 National Guard troops to the U.S. border to fight drug trafficking, especially in fentanyl. Ms. Sheinbaum... said ‘we had a good conversation with President Trump with great respect for our relationship and sovereignty’… The two sides will continue negotiating on ‘security and trade,’ and Mr. Trump agreed to pause the tariffs for a month. Equity markets responded with relief…”
Bloomberg ran with the headline, “Trump Tariff Reversal Feeds Reputation as Trade Paper Tiger.” Markets took it all in stride, confident that, of course, “Tariff Man” is all bark and no bite. Colombia, Canada, Mexico – bark, bark, bark. A flesh wound or perhaps deeper penetration, but I expect the tariff dog begins making his mark next week.
February 7 – Politico (Victoria Guida): “President Donald Trump on Friday said he would be announcing tariffs next week that match the duties imposed by other countries, in an apparent shift from his previous threat to impose an across-the-board tariff on all imports from across the world. ‘I’ll be announcing that next week, reciprocal trade, so that we’re treated evenly with other countries,’ he told reporters… ‘We don’t want any more, any less.’ Trump, who said the tariffs would apply to every country, added that the announcement would likely come ‘Monday or Tuesday.’ ‘I think that’s the only fair way to do it that way nobody’s hurt,’ the president continued. ‘They charge us, we charge them. It’s the same thing, and I seem to be going in that line as opposed to a flat fee tariff.’”
Reciprocal sounds reasonable and measured. It gets more interesting when the administration commingles tariffs and taxes, value-added taxes (VAT) in particular.
“All we want is a fair deal. And there’s a word reciprocal. I’d go right now, reciprocal tariffs on everybody. Because many of the countries that you feel so horrible about – the way they’re being treated by Trump... They charge us tariffs. The European Union has a VAT (value-added) tax which is through the roof. Similar thing to a tariff. It’s a VAT. And it’s number like you wouldn’t believe.” President Trump speaking Monday.
And Friday, from Kevin Hassett, director of the White House National Economic Council, appearing on Bloomberg Television:
“I had my guys a couple days ago just update the numbers I always look at. And we found that U.S. multinationals had paid foreign governments $370 billion in taxes because of value-added taxes and income taxes in 2023, and foreign multinationals operating in the U.S. paid the U.S. only $57 billion of taxes. And they have three-times the GDP we do globally – and we’re paying $370 billion and they’re paying $57 billion, and that’s not reciprocal. That’s something fundamentally different.”
Also from Mr. Hassett: “The President has stated, as he always does, exactly what he wants. That’s not like just negotiation. That’s (tax cuts) what he wants. And people in the House were able to work with it, and now it looks like there’s a lot of positive momentum after they met with the President.”
My read: President Trump will demand his list of tax cuts be included in “one big, beautiful bill” - to be offset in budget calculations by measures including tariff revenues and tax increases on “carried interest.” After implementing a measured 10% tariff increase on China and providing a month for negotiations with our neighbors Canada and Mexico, tariff man could be unleashed on Europe next week.
The President believes huge tariff receipts can plug big holes in his budget. This view will shape a more obstinate approach to trade negotiations. And I just don’t see a world willing to roll over to his demands. I’ll assume that determination to push back against Trump’s global power grab rapidly gains momentum.
February 5 – Financial Times (Chloe Cornish, Malaika Kanaaneh Tapper and Heba Saleh): “US allies across Europe and the Middle East have condemned Donald Trump’s plans for Washington to ‘take over’ Gaza and any attempt to expel Palestinians from the devastated territory. Countries throughout the region and beyond denounced the proposals within hours of the US president’s shock Tuesday evening announcement that Washington should assume control of Gaza and that its 2.2mn-strong Palestinian population should be resettled. German foreign minister Annalena Baerbock warned the plan for Gaza… would ‘lead to new suffering and new hatred’. She added: ‘There must be no solution over the heads of the Palestinians.’ Arab states, which have long rejected any expulsion of Palestinians, were also quick to attack Trump’s proposals. Saudi Arabia’s foreign ministry said… the country would ‘not establish diplomatic relations with Israel’ without an independent Palestinian state, adding its position was ‘non-negotiable and not subject to compromises’.”
February 7 – Deadline (CBC): “Prime Minister Justin Trudeau told business leaders at the Canada-U.S. Economic Summit in Toronto that U.S. President Donald Trump’s threat to annex Canada ‘is a real thing’ motivated by his desire to tap into the country's critical minerals. ‘Mr. Trump has it in mind that the easiest way to do it is absorbing our country and it is a real thing,’ Trudeau said, before a microphone cut out at the start of the closed-door meeting. The prime minister made the remarks to business leaders after delivering an opening address to the summit Friday morning, outlining the key issues facing the country when it comes to Canada's trading relationship with the U.S.”
February 6 – Telegraph (Joe Barnes): “Nato countries discussed deploying troops to Greenland in response to Donald Trump threatening to use the US military to seize the Danish island. Germany was among dozens of European allies understood to have held informal talks over ‘what Nato troops would do’ if the US president followed through on his threats, diplomatic sources told The Telegraph. Questions were even raised over whether Article 5, the Western military alliance’s mutual defence clause, could be invoked in the event of an American invasion of a fellow Nato member state.”
February 6 – Financial Times (Christine Murray and Michael Stott): “Panama’s president has rejected as ‘lies’ a US statement that the Central American country has agreed to allow American warships to transit the Panama Canal free of charge, escalating a diplomatic battle with the Trump administration. President José Raúl Mulino said… the bilateral relationship with Washington could not be conducted based on ‘lies and falsehoods’. ‘This is intolerable, simply intolerable,’ he said at a weekly news conference. Mulino’s comments came a day after the US State Department said that Panama’s government had agreed to stop charging fees for US government vessels passing through the strategic waterway… ‘This saves the US government millions of dollars a year,’ the department said... ‘Why are they making an important institutional statement from the entity that governs the foreign policy of the United States, under the President of the United States, based on a falsehood?’ Mulino asked…”
That foreboding feeling, I suspect, is here for the duration. I just wonder how this would all be playing throughout the country if the stock market wasn’t right near record highs and the economy wasn't booming. The President’s base is ecstatic. Half the country is in shock, coming to the realization that things are likely to be even worse than feared. Much of the world believes our President is unfit to be the leader of the free world – during a most unsettled and dangerous period. How long will markets remain so sanguine?
There’s so much riding these days on market Bubbles. An exuberant marketplace has been willing to believe the disruptor in chief could do his thing without causing serious disruption. A lot of tariff huffing and puffing, but, in the end, moderation. Constructive negotiations would minimize trade war risk. Some campaign tax cut promises would be quietly abandoned. The isolationist wouldn’t stir up trouble internationally.
And while he would be annoying, Elon with his team of IT nerds surely wouldn’t do anything too crazy. But we’ve never witnessed such crazy. It’s been a whirlwind three weeks, and it feels like crazy is being unleashed everywhere. How long can fragile speculative market Bubbles disregard what’s unfolding?
It’s worth noting that money market fund assets surged another $44 billion last week to a record $6.917 TN, with 28-week growth of $783 billion, or 24% annualized. There was also another notable surge in the weekly report (CFTC) on Treasury futures short positions, suggesting extreme levered “basis trade” positioning.
A report last week from Barclays referenced a $2.1 TN hedge fund long Treasury position as of last September. Amazingly, “basis trade” and other levered Treasury trades now total in the Trillions. And “basis trades” are typically 40- to 75-times levered.
I appreciate that the levered players maintain high confidence that the Fed will ensure Treasury market liquidity. It must be further comforting to have a seasoned hedge fund operator now in charge of the Department of Treasury – specifically underscoring the administration’s focus on Treasury yields.
But this is a unique environment with a unique medley of risks, including runaway deficit spending, economic overheating, inflation, trade wars, possible Fed tightening and erratic Washington and global policymaking. It’s just difficult to believe that players are comfortable operating these days neck deep in speculative leverage. Some seem darn right uncomfortable. Gold surged to record highs, adding another $63 to end the week at $2,861.
For the Week:
The S&P500 slipped 0.2% (up 2.5% y-t-d), and the Dow declined 0.5% (up 4.1%). The Utilities added 0.3% (up 3.8%). The Banks increased 0.8% (up 9.5%), and the Broker/Dealers rose another 1.6% (up 13.8%). The Transports fell 1.0% (up 1.6%). The S&P 400 Midcaps lost 1.0% (up 2.7%), and the small cap Russell 2000 dipped 0.3% (up 2.2%). The Nasdaq100 was little changed (up 2.3%). The Semiconductors were about unchanged (up 0.6%). The Biotechs dropped 2.5% (up 6.4%). With bullion jumping $63, the HUI gold index surged 4.7% (up 18.8%).
Three-month Treasury bill rates ended the week at 4.225%. Two-year government yields jumped nine bps to 4.29% (up 5bps y-t-d). Five-year T-note yields added two bps to 4.35% (down 3bps). Ten-year Treasury yields declined four bps to 4.49% (down 7bps). Long bond yields fell nine bps to 4.69% (down 9bps). Benchmark Fannie Mae MBS yields dipped three bps to 5.77% (down 7bps).
Italian 10-year yields fell nine bps to 3.47% (down 6bps y-t-d). Greek 10-year yields dropped nine bps to 3.23% (up 1bp). Spain's 10-year yields declined seven bps to 3.00% (down 6bps). German bund yields dropped nine bps to 2.37% (unchanged). French yields sank 11 bps to 3.09% (down 10bps). The French to German 10-year bond spread narrowed two to 72 bps. U.K. 10-year gilt yields declined six bps to 4.48% (down 9bps). U.K.'s FTSE equities index added 0.3% (up 6.5% y-t-d).
Japan's Nikkei 225 Equities Index fell 2.0% (down 2.8% y-t-d). Japanese 10-year "JGB" yields jumped six bps to 1.30% (up 20bps y-t-d). France's CAC40 added 0.3% (up 8.0%). The German DAX equities index increased 0.3% (up 9.4%). Spain's IBEX 35 equities index jumped 2.6% (up 9.4%). Italy's FTSE MIB index rose 1.6% (up 8.4%). EM equities were mixed. Brazil's Bovespa index fell 1.2% (up 3.6%), while Mexico's Bolsa index rallied 3.1% (up 6.7%). South Korea's Kospi added 0.2% (up 5.1%). India's Sensex equities index increased 0.5% (down 0.8%). China's Shanghai Exchange Index recovered 1.6% (down 1.4%). Turkey's Borsa Istanbul National 100 index declined 0.5% (up 1.2%).
Federal Reserve Credit declined $15.0 billion last week to $6.765 TN. Fed Credit was down $2.124 TN from the June 22, 2022, peak. Over the past 282 weeks, Fed Credit expanded $3.039 TN, or 82%. Fed Credit inflated $3.954 TN, or 141%, over the past 639 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt increased $11.1 billion last week to $3.279 TN. "Custody holdings" were down $80.5 billion y-o-y, or 2.4%.
Total money market fund assets jumped $44.2 billion to a record $6.917 TN. Money funds were up $783 billion over 28 weeks (24% annualized) and $915 billion y-o-y (15%).
Total Commercial Paper gained $9.0 billion to $1.220 TN. CP was down $33 billion, or 2.6%, over the past year.
Freddie Mac 30-year fixed mortgage rates declined six bps this week to a six-week low 6.89% (up 25bps y-o-y). Fifteen-year rates fell seven bps to 6.05% (up 15bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates down three bps to 6.99% (down 17bps).
Currency Watch:
For the week, the U.S. Dollar Index slipped 0.3% to 108.04 (down 0.4% y-t-d). For the week on the upside, the Japanese yen increased 2.5%, the Canadian dollar 1.7%, the South African rand 1.5%, the Swedish krona 1.4%, the Australian dollar 0.9%, the Norwegian krone 0.9%, the Brazilian real 0.6%, the Mexican peso 0.6%, the New Zealand dollar 0.5%, the South Korean won 0.4%, the Singapore dollar 0.2%, the Swiss franc 0.1%, and the British pound 0.1%. On the downside, the euro declined 0.3%. The Chinese (onshore) renminbi declined 0.69% versus the dollar (up 0.06% y-t-d).
Commodities Watch:
February 2 – Bloomberg (Jack Ryan and Jack Farchy): “JPMorgan... will deliver gold bullion valued at more than $4 billion against futures contracts in New York in February, at a time when surging prices and the threat of import tariffs are fueling a worldwide dash to ship metal to the US. The bank, which is by far the world’s biggest bullion dealer, was one of several institutions to declare plans on Thursday to deliver bullion against contracts traded on CME Group’s Comex that will expire in February. The delivery notices — which total 3 million troy ounces of gold — were the second largest ever in bourse data going back to 1994… Fears of imminent tariffs on imports following the election of US President Donald Trump have caused prices for gold futures on Comex to surge over spot prices in London.”
February 7 – Bloomberg (Yihui Xie): “China’s central bank expanded its gold reserves for a third month in January, even as the precious metal kept rallying to a record high. Bullion held by the People’s Bank of China rose by 0.16 million troy ounces last month… The central bank resumed adding gold reserves in November after a six-month halt that followed an 18-month buying spree.”
February 5 – Bloomberg: “Russians bought a record amount of gold last year as they sought to protect their savings amid sanctions, obtaining the equivalent of about a fourth of the country’s annual output. Consumers purchased 75.6 metric tons (2.7 million ounces) of the yellow metal in bullion, coins and jewelery in 2024, the fifth biggest figure among all nations, according to World Gold Council data... That’s an increase of 6% on the previous year and more than 60% since President Vladimir Putin ordered his troops into Ukraine almost three years ago.”
February 4 – Bloomberg (Maddie Parker): “Coffee is headed for its longest winning streak since 1980, as the market grapples with persistent supply concerns in key growing regions. Futures for the arabica variety… rose as much as 2.4% on Tuesday to another fresh record. The premium bean advanced for a 10th day and is trading just shy of $4 a pound after doubling in the past year. Shortfalls in Brazil… continue to worry traders after record shipments earlier in the season means less supply availability now.”
The Bloomberg Commodities Index rallied 1.9% (up 5.5% y-t-d). Spot Gold jumped 2.2% to $2,861 (up 9.0%). Silver rose 1.6% to $31.8155 (up 10.1%). WTI crude fell $1.53, or 2.1%, to $71.00 (down 1%). Gasoline gained 2.2% (up 4%), and Natural Gas recovered 8.7% to $3.309 (down 8%). Copper surged 7.2% (up 14%). Wheat jumped 4.2% (up 6%), and Corn rose 1.1% (up 6%). Bitcoin sank $6,570 or 6.4%, to $96,160 (up 2.6%).
Trump Administration Watch:
February 4 – Wall Street Journal (Richard Rubin and Olivia Beavers): “House Republicans are sharply divided over how much government spending they should cut, and the dispute is slowing their plans to reduce taxes and increase border enforcement. On one side: Conservatives who see a rare chance to use full Republican government control to scale back programs such as Medicaid… At times, they have been seeking trillions of dollars in spending cuts over the next decade and say they want Republicans’ major fiscal legislation to reduce budget deficits. On the other side: Moderates who are wary about blowback from states, hospitals and the GOP’s emerging working-class base. They are looking for smaller minimum spending cuts attached to the ‘one big beautiful bill’ that President Trump wants to extend expiring tax cuts, pay for his immigration restrictions and boost the military.”
February 5 – Bloomberg (Liz Capo McCormick): “The US Treasury… maintained its guidance on keeping sales of longer-term debt unchanged well into 2025, despite newly installed Secretary Scott Bessent having criticized the issuance strategy of his predecessor before he was picked for the job. At the helm of US debt management policy for the first time, Bessent left broadly intact former Secretary Janet Yellen’s agenda. The Treasury will next week sell $125 billion of debt in its so-called quarterly refunding auctions, which span 3-, 10- and 30-year maturities, the same amount as in the past several quarters. ‘Based on current projected borrowing needs, Treasury anticipates maintaining nominal coupon and FRN auction sizes for at least the next several quarters,’ the department said…”
February 2 – Wall Street Journal (Alexander Ward and Ginger Adams Otis): “Elon Musk’s allies are moving swiftly to exert control over vast swaths of the U.S. government, as they demand access to sensitive information at federal agencies and lay out plans to block spending they deem excessive. Musk… oversaw a successful effort by his representatives to get direct access to a payment system that distributes trillions of dollars to Americans each year. And individuals working for DOGE accessed the U.S. Agency for International Development following a clash with security officials. The moves marked the start of a far-reaching campaign by Musk to upend the federal government agency by agency, according to his allies.”
February 3 – Reuters (David Shepardson and Chris Sanders): “Billionaire Elon Musk… gave an update on the effort…, saying work is underway to shut down the U.S. foreign aid agency USAID. Musk… discussed the Department of Government Efficiency (DOGE) in a social media talk… on X... Trump has assigned Musk to lead a federal cost-cutting panel. The conversation, which included former Republican presidential candidate Vivek Ramaswamy and Republican Senators Joni Ernst and Mike Lee, began with Musk saying they were working to shut down the United States Agency for International Development (USAID). ‘It’s beyond repair,’ Musk said, adding that President Trump agrees it should be shut down.”
February 5 – Bloomberg (Dana Hull): “The White House said Elon Musk… will determine if there are conflicts of interest between his work reviewing federal spending and his overlapping empire of six companies. ‘The president was already asked to answer this question this week,’ said White House Press Secretary Karoline Leavitt... ‘And he said, if Elon Musk comes across a conflict of interest with the contracts and the funding that DOGE is overseeing, that Elon will excuse himself from those contracts, and he has again abided by all applicable laws.’ Musk, as the ‘special government employee’ leading a federal team known as the Department of Government Efficiency, is subject to conflict of interest rules, but those are largely enforced by White House officials.”
February 4 – New York Times (Matthew GoldsteinEric Lipton and David Yaffe-Bellany): “The Securities and Exchange Commission is moving to scale back a special unit of more than 50 lawyers and staff members that had been dedicated to bringing crypto enforcement actions… The move is one of the first concrete steps by President Trump and his administration to pull back on the regulation of cryptocurrencies and other digital assets. One of Mr. Trump’s first executive orders was aimed at promoting the growth of crypto and ‘eliminating regulatory overreach’ on digital assets.”
February 3 – Reuters (Douglas Gillison): “U.S. President Donald Trump… tapped newly confirmed Treasury Secretary Scott Bessent as acting director of the Consumer Financial Protection Bureau, the agency announced. Bessent then halted virtually all CFPB activities…, including investigations, litigation, rulemaking and public communications.”
February 4 – Bloomberg (Ari Natter): “The Trump administration is exploring legal options to cancel loans issued under a $400 billion program to finance clean-energy technology as it considers overhauling the initiative, according to a person familiar… The newly installed director of the Energy Department’s loan program, John Sneed, told agency officials… last week the effort will be retooled to focus on technologies favored by the new administration such as nuclear power and liquefied natural gas…”
February 2 – Associated Press (Matthew Lee and Juan Zamorano): “U.S. Secretary of State Marco Rubio brought a warning to Panamanian leader José Raúl Mulino…: Immediately reduce what President Donald Trump says is Chinese influence over the Panama Canal area or face potential retaliation from the United States. Rubio… held face-to-face talks with Mulino, who has resisted pressure from the new U.S. government over management of a waterway that is vital to global trade. Mulino told reporters after the meeting that Rubio made ‘no real threat of retaking the canal or the use of force.’”
February 2 – Wall Street Journal (Vera Bergengruen): “Secretary of State Marco Rubio arrived Sunday with an ultimatum from the White House for Panamanian President José Raúl Mulino: Either curtail China’s presence around the Panama Canal or face an unspecified U.S. response. On his first overseas stop since taking office, Rubio toured the canal after talks at the country’s presidential palace with Mulino, who has rejected President Trump’s threats to take back the waterway as an affront to Panama’s sovereignty. In a significant concession, Mulino afterward declared Panama wouldn’t be renewing a 2017 infrastructure funding agreement with Beijing and offered ‘technical-level’ talks to clarify Trump’s doubts about Chinese control of the canal… But even before Rubio departed the country, Trump appeared to double down on his threats to seize the canal, which the U.S. relinquished to Panama in 1999. ‘We’re taking it back, or something very powerful is going to happen,’ he said…”
February 5 – Bloomberg (Jennifer A. Dlouhy and Jordan Fabian): “President Donald Trump proposed the US taking over the Gaza Strip and assuming responsibility for reconstructing the war-torn territory during a press conference with Israeli Prime Minister Benjamin Netanyahu. ‘The US will take over the Gaza Strip,’ Trump said… ‘We’ll own it and be responsible for dismantling all of the dangerous unexploded bombs and other weapons on the site. Level the site, and get rid of the destroyed buildings, level it out, create an economic development that will supply unlimited numbers of jobs and housing for the people of the area.’ Trump suggested he would be open to deploying US troops to secure the area, saying he would ‘do what is necessary,’ and added that he saw the US presence in the contested territory as a ‘long-term ownership position.’ The long-time New York real estate developer painted a vision of a ‘Riviera of the Middle East’ with ‘world class’ construction projects.”
February 6 – Reuters (Suleiman Al-Khalidi): “U.S. President Donald Trump’s plan to resettle Palestinians from Gaza in Jordan is a recipe for radicalism that will spread chaos through the Middle East, jeopardize the Kingdom’s peace with Israel and even threaten the country’s very survival. These are the stark warnings Jordan's King Abdullah plans to deliver to Trump when he meets the U.S. President in Washington on February 11…, according to three senior Jordanian officials… ‘This is existential. There is very strong public opposition, and it's not something Jordan can entertain. This is not an economic or a security issue for Jordan, it's an identity issue,’ said Marwan Muasher, a former Jordanian foreign minister who helped negotiate Jordan's 1994 peace treaty with Israel.”
February 3 – Reuters (Trevor Hunnicutt and Pete Schroeder): “U.S. President Donald Trump signed an executive order… ordering the creation of a sovereign wealth fund within the next year, saying it could potentially buy the short video app TikTok. If created, the sovereign wealth fund could place the U.S. alongside numerous other countries, particularly in the Middle East and Asia, that have launched similar funds as a way to make direct investments with government dollars… Typically such funds rely on a country's budget surplus to make investments, but the U.S. operates at a deficit. Its creation also would likely require approval from Congress.”
February 3 – CNBC (Jeff Cox): “President Donald Trump… signed an executive order that outlines plans for a government-run sovereign wealth fund to serve as an economic development tool and perhaps be used to buy TikTok. Among the aims for the fund would be developing infrastructure such as airports and highways, and it could help the U.S. extend its influence in areas such as Panama and Greenland. ‘We’re going to stand this thing up within the next 12 months. We’re going to monetize the asset side of the U.S. balance sheet for the American people,’ U.S. Treasury Secretary Scott Bessent said... ‘There’ll be a combination of liquid assets, assets that we have in this country as we work to bring them out for the American people.’”
Trade War Watch:
February 4 – Axios (Courtenay Brown): “President Trump campaigned on using tariffs to revive domestic industry and fill America’s coffers, but the tariff strategy now looks more muddled than ever. Trump has sent mixed signals about why his administration is slapping tariffs on billions of dollars' worth of imports, sparking confusion about whether the measures are temporary threats or the new economic normal. A trade war is underway with China, though every instance of tariff threats before that — Colombia, Canada and Mexico — has ended with Trump backing off, following concessions on areas of policy unrelated to trade. The economic impact of tariffs might prove minor if they are merely a negotiating tactic to extract non-trade-related concessions. But if they become a permanent feature of U.S. policy, they'll have a more lasting impact on the economy, markets, and business decision-making.”
February 4 – New York Times (Ana Swanson and Chris Buckley): “Beijing responded swiftly… to the tariffs President Trump had promised, announcing a fusillade of countermeasures targeting American companies and imports of critical products. Mr. Trump’s 10% tariff on all Chinese products went into effect at 12:01 a.m. Tuesday… The Chinese government came back with a series of retaliatory steps, including additional tariffs on liquefied natural gas, coal, farm machinery and other products from the United States… It also immediately implemented restrictions on the export of certain critical minerals, many of which are used in the production of high-tech products. In addition, Chinese market regulators said they had launched an antimonopoly investigation into Google.”
February 5 – Telegraph (Connor Stringer, Chris Price, Chanel Zagon, Jack Maidment, and Alex Singleton): “Donald Trump and Xi Jinping cancelled a scheduled phone call on Tuesday after China announced retaliatory tariffs on the US. Mr Trump had been scheduled to speak to Mr Xi on Tuesday, just hours after the US president imposed fresh tariffs on the world’s second largest economy. China retaliated within minutes... President Trump said… he is in ‘no rush’ to speak with his Chinese counterpart Xi Jinping despite expectations of a phone call… Mr Trump said the tariffs on China were merely ‘an opening salvo’. ‘If we can’t make a deal with China, then the tariffs would be very, very substantial,’ he added.”
February 2 – Reuters (Kevin Krolicki and Qiaoyi Li): “China’s government… denounced the Trump administration's imposition of a long-threatened 10% tariff on Chinese imports while leaving the door open for talks with the U.S. that could avoid a deepening conflict… China's sharpest pushback… was over fentanyl, an area where the Biden administration had also been urging Beijing to crack down on shipments of the China-made precursor chemicals needed to manufacture the drug.’ Fentanyl is America's problem,’ China's foreign ministry said. ‘The Chinese side has carried out extensive anti-narcotics cooperation with the United States and achieved remarkable results.’”
February 4 – Bloomberg (Shuli Ren): “President Xi Jinping has a nickname in China. Instead of calling him directly by name, people commonly use Da Da, or Mr. Big. After all, he is the nation’s most powerful politician in decades, serving a precedent-defying third term. He also dares to challenge the world’s biggest economy, and China’s only real rival, promoting a multipolar global order instead of unchallenged US dominance. It should come as no surprise, then, that China is acting differently from Canada or Mexico as President Donald Trump imposes trade tariffs. Not willing to capitulate to what it sees as bullying, Beijing is taking the 10% extra levy in stride.”
February 4 – Bloomberg (Josh Wingrove and Jenny Leonard): “President Donald Trump pledged hundreds of billions in tariffs to remake the global economy and target even his closest neighbors. But so far, it’s been more Art of the Deal than a revolution. Trump on Monday shelved plans for wide-ranging tariffs on Canada and Mexico, after doing the same for Colombia the prior week. In each case, Trump relented despite countries promising only modest changes on border security and immigration. Trump and his allies have held up those concessions as vindication of his approach. But the US president’s willingness - at least for now - to hold off on tariffs has underscored doubts over whether Trump, who famously obsesses over market performance, might once again prove a paper tiger on his more fiery trade threats.”
February 3 – Financial Times (Gideon Rachman): “‘Our strategy on tariffs will be to shoot first and ask questions later.’ That was what one of Donald Trump’s key economic policymakers told me late last year. That kind of macho swagger is currently fashionable in Washington. But the US president’s shoot-from-the-hip tactics are profoundly dangerous — for America itself, as well as the countries that he has targeted with tariffs. The potential economic risks for the US — higher inflation and industrial disruption — are well known. The strategic consequences for America are less immediately obvious — but could be just as serious and even longer lasting. Trump’s tariffs threaten to destroy the unity of the western alliance. He is sowing the seeds of an alternative grouping formed by the many countries that feel newly threatened by America. Co-operation will be informal at first, but will harden the longer the tariff wars go on. The collapse of western unity would be a dream come true for Russia and China.”
February 2 – Financial Times (Ilya Gridneff): “A new wave of economic nationalism swept across Canada after Donald Trump’s threatened tariffs inspired anger but also a patriotic campaign to ‘Buy Canadian’. ‘Made in Canada’ signs have popped up in grocery stores, lists of Canadian alternatives to US products are being circulated and comedians are devoting skits on national television to how best to avoid American consumer goods. Liam Mooney and his partner Emma Cochrane… have noticed a jump in sales for their newly launched fashion statement — a hat emblazoned with ‘Canada Is Not for Sale’. ‘It’s been incredible, we’ve seen a spike in sales since the tariff announcement on Saturday,’ Mooney said. ‘It went from a concept to viral after Ontario Premier Doug Ford wore it to a meeting.’”
February 3 – Associated Press (Rob Gillies): “As Canadians absorb U.S. President Donald Trump’s trade war and his threats to make Canada the 51st state, one thing has become abundantly clear: One of the world’s most durable and amicable alliances — born of geography, heritage and centuries of common interests — is broken. Canadians are feeling an undeniable sense of betrayal after Trump declared a trade war against America’s northern neighbor and longtime ally. Trump keeps threatening Canada’s sovereignty and and vowing to put sweeping 25% tariffs on Canadian products… In Canada, discussion and disapproval are everywhere.”
February 2 – Axios (Felix Salmon): “Cars that are made in America aren’t only made in America — they’re made across North America. As a result, Trump's across-the-board tariffs on all trade with Mexico or Canada risks making U.S. autos much more expensive than foreign imports. The U.S. auto industry could shut down within a week, by some estimates, thanks to these tariffs. Even if it doesn’t, there is no automaker that's set up to operate in a world of high-friction North American border duties. With modern supply chains, a single component in a vehicle can cross the U.S. border between six and eight times before final assembly.”
February 3 – Financial Times (Henry Foy and Andy Bounds): “The EU has said it regrets US President Donald Trump’s decision to hit Canada, Mexico and China with sweeping tariffs, and said it would respond firmly if a threat to expand the trade measures to Europe were fulfilled… The Trump administration has so far refrained from imposing tariffs on the EU despite the US president saying on Friday that he would ‘absolutely’ do so, and repeating at the weekend that he would ‘definitely’ act. ‘They don’t take our cars, they don’t take our farm products, they take almost nothing and we take everything from them,’ Trump told reporters. ‘Millions of cars, tremendous amounts of food and farm products’… A spokesperson for the EU’s executive said the bloc’s trade and investment relationship with the US was the biggest in the world, adding: ‘There is a lot at stake.’”
February 3 – Financial Times (Olaf Storbeck): “The EU must stand its ground in a potential trade war with the US and should retaliate if President Donald Trump imposes punitive tariffs on European goods, said Bank of Finland governor Olli Rehn. ‘The last thing we need is a new trade war between allies but we need to take proportionate policy measures…’ the former European economic commissioner said. He told the Financial Times that ‘we cannot lie down’ in the face of US threats — ‘even if it is friendly fire’. Trump has warned that imports from Europe may be next in line…”
Ukraine War Watch:
February 5 – Wall Street Journal (Thomas Grove): “The Kremlin said contacts between the U.S. and Russia had taken place and recently intensified, the first time Moscow has indicated the two countries are discussing a potential plan to end fighting in Ukraine. ‘There is indeed contact between certain government agencies and they have intensified recently,’ Kremlin spokesman Dmitry Peskov told journalists… Trump said last week that his administration has already had serious discussions with Russia about the conflict, but has provided little detail.”
January 31 – Bloomberg: “Russia’s ability to keep making fuel at the normal pace is looking increasingly precarious following a surge in Ukrainian drone attacks on the nation’s oil refineries… For now, analysts… say that the attacks are manageable for Russia and not enough to cause serious concerns about fuel production, given that the proportion of the country’s refining offline from the incidents is small. However, Ukraine appears set on ramping up attacks at its foe’s energy infrastructure, raising the likelihood of further attempts. In the past eight days alone, swarms of Kyiv’s drones targeted three major refineries in central and southern Russia, as well as a pumping station on an important crude-export line…”
February 1 – Wall Street Journal (Ian Lovett, Nikita Nikolaienko and Jane Lytvynenko): “North Korean troops appear to have been pulled back from the front lines in Russia’s Kursk region after suffering heavy casualties during barely a month of combat, Ukrainian officials said. The North Koreans hadn’t been spotted along the front for more than two weeks, officials said. The troops have been withdrawn ‘due to significant losses,’ one Ukrainian security official said, adding, ‘We expect them to come back.’”
Market Instability Watch:
February 5 – Bloomberg (Liz Capo McCormick): “The US Treasury… maintained its guidance on keeping sales of longer-term debt unchanged well into 2025, despite newly installed Secretary Scott Bessent having criticized the issuance strategy of his predecessor before he was picked for the job. ‘Based on current projected borrowing needs, Treasury anticipates maintaining nominal coupon and FRN auction sizes for at least the next several quarters,’ the department said…”
February 2 – Wall Street Journal (Sam Goldfarb): “The prospect of increased borrowing by a second Trump administration has spooked bond investors in recent months. One major concern: how the government will execute that borrowing. At issue is a strategy pursued by the Treasury Department since late 2023 to lean more on short-term Treasurys to fund the government. Many on Wall Street credit that approach with calming markets buffeted by sticky inflation and a swollen federal budget deficit. Key members of the Trump administration, however, have expressed hostility to the strategy, characterizing it as a risky effort to juice the economy. Those include freshly confirmed Treasury Secretary Scott Bessent and Stephen Miran, the president’s choice to chair his Council of Economic Advisers.”
February 3 – Axios (Zachary Basu and Marc Caputo): “Elon Musk and his cost-slashing allies are taking a hammer to the massive bureaucracy that staffs the U.S. government — and a scalpel to any senior officials who dare put up a fight. Musk isn't the only force driving the Trump administration's escalating purge of civil servants. But his fingerprints are everywhere, and his methods are unlike anything the federal government has ever seen. Musk and his lieutenants — many of them Silicon Valley transplants, some as young as 19 — have been tied to a series of high-profile departures and ousters at the top of key federal agencies. The Treasury Department's highest-ranking career official announced his retirement Friday after a dispute with Musk allies who sought access to a sensitive system for government payments… David Lebryk, who worked at Treasury for more than three decades, was one of a few career officials who control the Bureau of Fiscal Service’s technical checkbook, which disburses trillions of dollars in spending. ‘Truly a shocking move — Dave is a total apolitical professional who’s been trusted by Treasury secretaries from both parties to maintain the critical financial plumbing of the U.S. govt,’ Biden Treasury official Mike Gwin tweeted...”
February 3 – Bloomberg (Sidhartha Shukla): “The unraveling of leveraged bets on Ether placed the token among the hardest-hit cryptocurrencies in a selloff on Monday, as investor sentiment soured after US President Donald Trump’s tariff announcements. Ether, the second-largest digital asset by market value, tumbled as much as 27% to $2,135 on Monday, marking its steepest intraday drop since May 2021. By contrast, Bitcoin managed to limit losses to about 6%, while smaller rival Solana declined by 13%.”
February 3 – Bloomberg (Vildana Hajric): “A leveraged ETF seeking to offer two-times the daily performance of Ether clocked its biggest-ever plunge as the token sold off amid President Donald Trump’s latest trade-war salvo. The 2x Ether ETF was down 46% at one point on Monday, the most since its June inception as the underlying digital asset shed as much as 35% over the weekend. The nearly $1 billion fund had seen inflows every month since its launch last year, hauling in $185 million in January alone…”
Global Credit and Financial Bubble Watch:
February 6 – Bloomberg (Olivia Raimonde): “The lines between assets classes are being blurred like never before as corporations search for new ways to raise cash. With public and private markets converging, says KKR..., a seismic shift is happening that will make 2025 credit’s ‘iPhone moment.’ ‘The launch of the iPhone wasn’t just the debut of a new product; it was the dawn of a new paradigm,’ according to Christopher Sheldon, co-head of credit and markets at KKR and Tal Reback, director of credit and markets at the firm. ‘The global credit markets are undergoing their own transformation.’ Trading volume in the public debt market set an all-time high last year, while the proliferation of private credit is estimated to eventually reach $30 trillion.”
February 7 – Bloomberg (Kat Hidalgo): “The private credit industry is drawing closer to the trillions of dollars in insurance holdings it needs to keep growing. Direct lenders are dipping into these vast pots of cash controlled by insurers using a type of securitization. So-called rated feeders turn stakes of private debt funds into top-rated bonds. And they’re multiplying: Just this week Apollo Global Management Inc. raised $5 billion through a variation of a rated feeder. For conservative and risk-averse insurers, the vehicles are a relatively cheap and safe way to take part in the private credit boom that’s financing mostly unlisted and leveraged companies. They allow insurers to reduce the amount of capital they need to hold against these investments, making it cheaper for them to buy into private credit funds.”
February 5 – Bloomberg (Sridhar Natarajan, Jeannine Amodeo and Gillian Tan): “A group of Morgan Stanley-led banks is selling $5.5 billion of debt tied to Elon Musk’s social-media platform X after receiving stronger-than-expected demand from investors… The banks initially planned to sell about $3 billion worth of the loan but received enough interest to parcel out additional debt. They are now selling the entire remaining slug of the highest-ranking borrowings used to fund Musk’s buyout of the platform formerly known as Twitter…”
AI Bubble Watch:
January 31 – Bloomberg Vlad Savov): “DeepSeek’s AI assistant topped the list of most downloaded mobile apps across 140 markets, with India accounting for the largest percentage of new users. The reasoning artificial intelligence chatbot rose to the No. 1 spot on Apple Inc.’s App Store on Jan. 26 and has held that position globally since, according to Appfigures data that excludes third-party app stores in China. India contributed 15.6% of all downloads across platforms since its launch…”
February 7 – Bloomberg (Dave Lee): “At the start of this week, the question was whether the shock of China’s supercheap AI DeepSeek would compel Silicon Valley’s big artificial-intelligence companies to reduce their spending. Now, we can say the definitive answer is no. Amazon.com Inc., Alphabet Inc., Meta Platforms Inc. and Microsoft Corp., the country’s leading hyperscalers, are embarking on an unprecedented year of spending — a combined $325 billion in projected capital expenditures for 2025. In dollar terms, their clamor for new data centers and energy to power them is unlike anything the technology industry has ever seen. In mood, the scramble is comparable to the dot-com boom.”
February 7 – Wall Street Journal (Dan Gallagher): “There’s stepping on the gas, and then there’s flooring it. When it comes to investing in artificial intelligence, Amazon.com just did the latter. While reporting its fourth-quarter results…, Amazon became the latest tech giant to project a major jump in capital spending for this year—even after a big surge last year. Amazon… said the $26.3 billion of capital spending in the latest quarter was a run rate that will be ‘reasonably representative’ of what the company will spend this year. That would equate to about $105 billion for the year, up 35% from last year’s total and far above the $86 billion analysts were expecting…”
February 4 – Reuters (Kenrick Cai and Deborah Mary Sophia): “Alphabet said… it will spend $75 billion on its AI buildout this year, 29% more than Wall Street expected, and investors signaled disappointment at a missed cloud revenue target and began showing impatience over profitability… Wall Street had been expecting 2025 capital expenditures of about $58 billion…”
February 6 – Bloomberg (Shirin Ghaffary): “A joint venture from OpenAI, SoftBank Group Corp. and Oracle Corp. is close to selecting additional sites for data center campuses in Texas and eyeing more projects in over a dozen other states, as the companies work to fulfill an ambitious plan to invest hundreds of billions in AI infrastructure. OpenAI is far along in the process of picking several locations in Texas for massive data center projects to support artificial intelligence services…”
Bubble and Mania Watch:
February 4 – Financial Times (Nikou Asgari): “Software business-turned-bitcoin hoarder MicroStrategy is inspiring a host of companies to buy the cryptocurrency and hold it in their corporate treasuries, in a manoeuvre aimed at boosting their flagging share prices. Pharmaceutical companies and advertisers are among 78 listed companies around the world that are following the US group’s example in buying the coins to hold in place of cash, according to… crypto security company Coinkite. MicroStrategy’s founder Michael Saylor has made bitcoin his company’s primary treasury reserve with an aggressive buying spree since 2020. Saylor believes bitcoin’s value will keep rising, saying: ‘We are going to Mars.’ Having strapped its share price to the fortunes of bitcoin, MicroStrategy is now the world’s largest corporate holder.”
February 6 – Bloomberg (Annie Massa): “Trump Media & Technology Group Corp. applied to trademark brands for six investment products with themes that closely track President Donald Trump’s priorities in office. The money-losing social media company is looking to debut the ‘Truth.Fi Made in America ETF,’ ‘Truth.Fi U.S. Energy Independence ETF’ and ‘Truth.Fi Bitcoin Plus ETF,’ along with three other vehicles called separately managed accounts with the same themes on its recently announced Truth.Fi financial platform, subject to regulatory approval… The company, which is majority-owned by Trump, also signed an agreement to have a small New Jersey-based firm, Yorkville Advisors, marshal the products through their approval process and oversee them…”
February 6 – Financial Times (Oliver Hawkins, Eade Hemingway and Nikou Asgari): “Donald Trump’s new cryptocurrency has sparked a flood of imitators, leading to warnings that investors risk being duped. More than 700 copycat and spam coins have been sent to Trump’s digital wallet by people apparently seeking to suggest their creations have his endorsement… It comes after the president and his wife Melania launched memecoins, which lack practical use and whose value is entirely underpinned by speculation, days ahead of his return to the White House last month. The FT found that 736 different memecoins have been deposited in the official Trump coin wallet over the past three weeks. Among them, nearly 200 — including “OFFICIAL TRUMP” and “OFFICIAL MELANIA” — are named after Trump or members of his family but have no connection to the president.”
February 6 – Wall Street Journal (Katherine Clarke and E.B. Solomont): “Billionaire William Lauder has struck a deal to sell two oceanfront lots in Palm Beach, Fla., for close to his original $200 million asking price, according to people familiar with the situation. If the deal records for more than $170 million, it would set a record for Palm Beach.”
U.S./Russia/China/Europe Watch:
February 6 – Financial Times (Najmeh Bozorgmehr): “Iran’s Supreme Leader Ayatollah Ali Khamenei has ruled out negotiations with Donald Trump’s administration, citing past experiences dealing with the US president and vowing to respond forcefully to any threats against the Islamic republic. ‘With such a government there should not be any negotiations as it is neither wise, nor prudent, nor dignified,’ Khamenei, the country’s ultimate decision maker, told Iranian military forces… He referred to the 2015 nuclear deal between Iran and world powers, which Trump withdrew from in 2018 before imposing the toughest sanctions on the Islamic republic to date. ‘This is our experience with them,’ Khamenei said. ‘We have to use it.’ ‘If they threaten us, we will threaten them. If they act on their threats, we will act on ours,’ he warned. ‘If they violate our nation’s security, we will violate theirs… This is our duty, as required by Islam.’”
De-globalization Watch:
February 6 – Bloomberg (Annie Lee): “The phone has been ringing off the hook for Lewis Black after China imposed export controls on tungsten, a niche metal mined by his firm that’s crucial to weapons manufacturing. The chief executive officer of North America’s Almonty Industries Inc. said his customers are in a ‘state of disbelief’ following Beijing’s move on Tuesday, one of a suite of measures announced as a riposte to tariffs placed on Chinese goods by the Trump administration. China accounts for about 80% of the world’s tungsten output, and there are concerns the government could add measures around tungsten scrap that would further constrict its availability... ‘It’s the warning shot, because we cannot exist without it,’ Black said… ‘Our economy, manufacturing, defense, everything, is so dependent on it. And yet, Russia, China and North Korea have about 90% of the output.’”
February 4 – Bloomberg (Annie Lee): “China put export controls on tungsten and other niche metals used in the electronics, aviation and defense industries as it retaliated in a targeted way to US tariffs. As well as tungsten — which is known for its remarkable density and high melting point and is most commonly used in armor-piercing missiles — Beijing imposed export curbs on molybdenum, tellurium, bismuth and indium... China produces around 80% of the world’s tungsten and bismuth, and is also the No. 1 supplier of the other metals. Its response suggests it will take a more calibrated approach in dealing with Washington, targeting materials with military applications and seeking to maximize its impact by focusing on commodities where it has the most leverage.”
February 4 – Bloomberg: “Liquefied natural gas and tungsten — a metal used in the defense and energy industries — are the commodities on the front lines of the opening salvo of the US-China trade war. President Donald Trump pulled the trigger on a blanket 10% tariff on all Chinese imports on Tuesday, prompting Beijing to hit back, albeit with relatively targeted measures. In the raw materials space, that included export controls on tungsten, as well as other minor metals such as molybdenum and tellurium, a 15% import levy on LNG and coal and a 10% duty on oil and agricultural equipment.”
Inflation Watch:
February 4 – Bloomberg (Ilena Peng): “President Donald Trump’s tariff plans threaten to raise US home construction costs, making it even more difficult for Americans already facing a tight housing market. Trump’s proposed 25% tariffs on goods from Canada and Mexico, which have been delayed until at least March, along with a 10% levy now in effect on products from China, could make building a typical home as much as $29,000 pricier, said David Belman, a second-generation homebuilder in Wisconsin. A large portion of that increase — as much as $14,000 — would come from the tariff on Canada, said Belman, whose supplier receives 80% of its lumber from the country. Canada, which is the US’s biggest foreign lumber supplier, has already been dealing with higher duties on its shipments that started last summer.”
February 3 – Reuters (Kanjyik Ghosh, Bipasha Dey and Rishabh Jaiswal): “California’s largest private insurer, State Farm, …urged the state's insurance regulator to approve an emergency hike in rates to help offset the hefty payouts the company is making after devastating wildfires in Los Angeles last month. The company is seeking rate increases of up to 22% for non-tenant homeowners, 15% for renters and condominium owners, and up to 38% for rental dwellings.”
February 4 – Wall Street Journal (Bob Tita): “Steel prices started rising for some U.S. companies even before President Trump announced tariffs on Canada and Mexico. Executives said they are bracing for more to come. Trump on Saturday announced 25% tariffs on all imports from Mexico and Canada starting Tuesday. On Monday, he said he would hold off for a month… If implemented, the duties are expected to strengthen U.S. steelmakers’ pricing power by effectively raising prices for foreign steel. It could also enable domestic companies to raise their prices, too.”
February 6 – Wall Street Journal (Richard Vanderford): “Americans don’t import insurance from Canada, Mexico or China, but it could nonetheless get more expensive for consumers and businesses amid U.S. tariff uncertainty. Insurers are warning that tariffs on various goods could increase the overall costs that insurers pay, which could force them to pass on the costs in the form of higher premiums. Automobiles… could go up in cost by $3,000 each per car on average, the American Property Casualty Insurance Association, a trade group, said.”
February 4 – Financial Times (Gregory Meyer): “The toy company Mattel may raise US prices to offset the cost of Donald Trump’s tariffs on goods made in Mexico and China, its chief executive has warned. Ynon Kreiz told the Financial Times that less than 40% of Mattel’s production was in China while Mexico accounted for less than 10%... ‘We believe we are very well positioned to leverage the strength of our supply chain to mitigate for tariffs,’ Kreiz said… ‘And we are also considering potential pricing actions to mitigate for the tariffs.’”
February 4 – Bloomberg (Michael Hirtzer, Daniela Sirtori and Jaewon Kang): “American restaurants are falling victim to a national egg shortage that has already plagued grocery stores from New York City to San Francisco and sent prices to $7 a carton… Egg prices have broken record after record as bird flu spreads across the country, killing millions of chickens. A dozen large eggs in the Midwest now cost an average of $7.08 wholesale, about seven times the price just two years ago…”
February 3 – Financial Times (Amanda Chu and Jamie Smyth): “Donald Trump’s restrictions on renewable energy risk sparking an electricity crisis in the US, driving up costs for consumers and handing China an edge in the global artificial intelligence race, industry executives have warned… The US president ordered a moratorium on offshore wind approvals and reviews of existing wind leases and paused hundreds of billions of dollars of incentives for green energy. The actions have sent shockwaves across an industry that is the cheapest and fastest-growing source of new capacity on the US grid at a time of rising power demand.”
Federal Reserve Watch:
February 6 – Bloomberg (Catarina Saraiva): “Federal Reserve Bank of Dallas President Lorie Logan said interest rates may already be near a neutral level, potentially obviating the need for further cuts even if inflation continues to cool. ‘What if inflation comes in close to 2% in coming months?’ Logan asked in prepared remarks… ‘While that would be good news, it wouldn’t necessarily allow the FOMC to cut rates soon, in my view,’ she said… “Government policy changes in this space are ongoing, and the resulting changes in trade patterns could leave a substantial imprint on economic activity… Central bankers will need to parse what these shifts mean for the inflation and employment outlooks and for capital flows.’”
February 3 – Bloomberg (Catarina Saraiva): “Federal Reserve Bank of Boston President Susan Collins said the US central bank is unlikely to react to the impact of tariffs on prices so long as officials don’t see signals of higher, persistent inflation. ‘If expectations remain well-anchored, the Federal Reserve would try to look through’ the rise in prices driven by tariffs, Collins said...”
February 3 – Bloomberg (Catarina Saraiva): “Federal Reserve Bank of Chicago President Austan Goolsbee said the central bank should proceed more cautiously in lowering borrowing costs amid mounting uncertainty introduced by the Trump administration. ‘Now we’ve got to be a little more careful and more prudent of how fast rates can come down because there are risks that inflation is about to start kicking back up again,’ Goolsbee said…”
February 6 – Bloomberg (Alastair Marsh and Katanga Johnson): “The Federal Reserve has told Wall Street banks that they won’t need to submit data for climate stress tests, according to people familiar... JPMorgan…, Citigroup Inc., Goldman Sachs... and three other lenders won’t be required to make any submissions for the Fed’s Climate Scenario Analysis Exercise this year because the program has been shut down…”
U.S. Economic Bubble Watch:
February 5 – Bloomberg (Vince Golle): “Growth at US service providers softened at the start of the year as a measure of orders fell to a seven-month low, indicating a slight loss of momentum in the largest part of the economy. The Institute for Supply Management’s gauge of services slipped to 52.8 in January from 54 at the end of the 2024… A gauge of new orders placed with service providers declined to the lowest level since June… An index of prices paid by service providers for materials and services settled back in January after jumping a month earlier to the highest since 2023… Employment at service providers grew at the fastest pace since September 2023.”
February 5 – Bloomberg (Mark Niquette): “The US trade deficit widened sharply at the end of 2024 on a surge in imports prior to the start of Donald Trump’s second term as president and his follow-through on the promise of sweeping tariffs. The December shortfall in goods and services trade grew nearly 25% from the prior month to $98.4 billion… That culminated in a full-year deficit of $918.4 billion, the second-largest in data back to 1960.”
February 5 – Bloomberg (Lucia Mutikani): “U.S. private payrolls growth picked up in January, the ADP National Employment Report showed… Private payrolls increased by 183,000 jobs last month after an upwardly revised 176,000 rise in December. Economists… had forecast private employment advancing by 150,000 following a previously reported 122,000 gain in December.”
February 4 – Associated Press (Paul Wiseman): “U.S. job openings fell in December, a sign that the labor market is cooling but still healthy. Openings fell to 7.6 million, from 8.2 million in November… They were down from 8.9 million a year earlier and a peak of 12.2 million in March 2022… The number of layoffs fell, suggesting that Americans enjoy unusual job security. The number of people quitting their jobs rose modestly but stayed below pre-pandemic levels. After surging in 2021 and 2022, quits have come down as workers lose confidence in their ability to find better pay or working conditions elsewhere.”
February 3 – Bloomberg (Vince Golle and Mark Niquette): “US factory activity expanded last month for the first time since 2022 as orders ramped up and production quickened, pointing to a brighter manufacturing outlook. The Institute for Supply Management’s manufacturing gauge rose 1.7 points in January to 50.9, the highest since September 2022… A measure of new orders rose 3 points to 55.1, the strongest growth since May 2022… The ISM production gauge moved solidly into expansion territory, climbing 2.6 points to 52.5 — the best reading since March. That in turn encouraged manufacturers to bolster headcounts somewhat.”
February 7 – Bloomberg (Ann Choi, Yizhu Wang, and John Gittelsohn): “In the affluent Los Angeles neighborhoods scorched by wildfires, jumbo mortgages on multimillion-dollar homes are commonplace, making the loans a potential pain point for the banks left holding them. More than 72% of mortgage debt fell into the category of nonconforming — also known as jumbo loans — in the parts of Los Angeles devastated by the fires. That’s nearly five times the nationwide average, and almost triple California’s 26% rate… More than $11 billion of jumbo loans were issued in the affected areas and kept on bank books from 2018 through 2023.”
China Watch:
February 2 – Reuters (Ellen Zhang and Ryan Woo): “China’s factory activity grew at a slower pace in January, while staffing levels fell at the quickest pace in nearly five years as trade uncertainties increased… The Caixin/S&P Global manufacturing PMI slipped to 50.1 in January from 50.5 the previous month, missing analysts’ forecasts in a Reuters poll of 50.5 and easing to a four-month low.”
February 4 – Bloomberg (Ellen Zhang and Ryan Woo): “China’s services activity expanded at a slower pace in January, with the Lunar New Year holidays worsening employment, but business sentiment improved… The Caixin/S&P Global services purchasing managers' index (PMI), slipped to 51.0 from 52.2 in December… The Caixin survey showed that new business growth eased to a four-month low, while employment fell to the weakest since April 2024.”
February 6 – Wall Street Journal (Hannah Miao): “Xinte Energy, a Chinese green-energy firm, says… it is ‘delivering light and warmth to every corner of the world.’ It is also losing tons of money. The maker of polysilicon, a building block for solar panels, recently told shareholders it expects to report losses of around 4 billion yuan, equivalent to more than $500 million, for 2024. Intense pressure by the government to build up key industries has led to fierce competition and price wars while demand has stalled, hitting the company’s bottom line. Unfortunately for China, it isn’t just the solar power industry. Companies across the country are bleeding cash as they struggle with overcapacity and weak spending in a slumping economy.”
Europe Watch:
February 3 – Bloomberg (Alexander Weber): “Euro-area inflation unexpectedly accelerated… Consumer prices advanced 2.5% from a year ago in January, up from 2.4% in December and more than the stable reading predicted by economists… Core inflation… stayed higher than anticipated at 2.7%, while price gains in the closely-watched services sector dipped a touch.”
Japan Watch:
February 6 – Bloomberg (Toru Fujioka and Erica Yokoyama): “Japan must act immediately to improve its fiscal health as the risks of natural disasters mount and social security costs continue to increase, according to the International Monetary Fund’s mission chief for the nation. ‘There is limited space today in Japan to address shocks,’ warned Nada Choueiri, the IMF’s Japan mission chief… ‘Japan needs to plan today for where to find the space to accommodate’ fiscal spending needs without increasing its deficits, she added. The IMF’s warning comes as Japan ramps up spending to address a broad spectrum of needs ranging from bolstering national defense to efforts to raise the birthrate.”
February 6 – Bloomberg (Yoshiaki Nohara): “Japan’s households boosted consumption at the fastest pace since August 2022, as strong wage gains led by bonuses helped loosen consumers’ purse strings. Outlays adjusted for inflation gained 2.7% in December from a year earlier… The result was much better than the median estimate, boosting the three-month moving average to 0.5%...”
February 4 – Bloomberg (Erica Yokoyama and Keiko Ujikane): “Japanese nominal wages rose at the fastest pace in nearly three decades… Nominal cash earnings for workers climbed 4.8% in December from a year earlier, up from a revised 3.9% gain in November… The reading exceeded economists’ consensus forecast and marked the largest jump since 1997.”
Emerging Markets Watch:
February 4 – Bloomberg (Maria Eloisa Capurro): “Brazil’s central bank said annual inflation will run above the tolerance range for the next six months, as food prices rise significantly and services costs remain elevated despite aggressive interest rate hikes… Short-term inflation, a weaker currency and economic resilience ‘still require’ more restrictive rates, they wrote… ‘Beyond the next meeting, the total magnitude of the tightening cycle will be determined by the firm commitment of reaching the inflation target,’ they added.”
February 4 – Bloomberg (Chiranjivi Chakraborty and Ashutosh Joshi): “A deepening slowdown in corporate earnings is fueling fresh concern over India’s $4.1 trillion stock market, and threatening to undermine Prime Minister Narendra Modi’s latest efforts to revive growth… To make matters worse, the global backdrop is becoming more challenging as US President Donald Trump’s tariff policies spur uncertainty and raise the odds of further dollar strengthening.”
Leveraged Speculation Watch:
February 6 – Bloomberg (Siddharth Vikram Philip, Katherine Burton, and Michael Gambale): “Citadel offered a rare glimpse under the hood of its multistrategy funds during a lucrative period for the most profitable hedge fund firm ever. The firm’s $1 billion bond offering this week required Ken Griffin’s secretive hedge fund to produce a prospectus… While it doesn’t give a full picture of Citadel, it offers financial results for its largest funds for almost four years… The three funds, which started 2021 with $23.6 billion, produced $56.8 billion of gains in the period. Investors netted $30 billion, even after paying $7.5 billion in management and performance fees and $17 billion in so-called pass-through expenses — roughly 90% of which was employee compensation.”
February 6 – Bloomberg (Norah Mulinda): “Fannie Mae and Freddie Mac shares are leaping for double-digit gains Thursday after the Wall Street Journal reported that Scott Turner, head of the Department of Housing and Urban Development, said an effort to privatize the companies will be a priority… Fannie shares climb as much as 21%, while Freddie shares gain as much as 22%. Both stocks have jumped more than 400% since the presidential election on Nov. 5.”
Social, Political, Environmental, Cybersecurity Instability Watch:
February 4 – Bloomberg (Joe Wertz and Brian K Sullivan): “Last month was the hottest January on record, with global average temperatures climbing 1.75C above pre-industrial levels. The temperature in January averaged 13.2C (55.8F), according to… the European Centre for Medium-Range Weather Forecasts… Climate scientist Zeke Hausfather said he was surprised to see another all-time high, given expectations that La Niña would make 2025 cooler than a record-hot 2024. ‘This means that January 2025 stands out as anomalous, even by the standards of the last two years,’ he wrote.”
February 3 – Axios (Andrew Freedman): “A novel new report combining several strands of research finds that human-driven climate change could result in $1.47 trillion in net property value losses from rising insurance costs and shifting consumer demand. Insurance costs are increasing faster than mortgage payments. That's squeezing homeowners and leading to climate change-driven migration away from high-risk areas in the Sun Belt and the West. The report from First Street…, identifies the five largest metro areas likely to see the biggest spikes in insurance premiums: Miami, Jacksonville, Tampa, New Orleans and Sacramento. The report is based on peer-reviewed models of how climate change may affect insurance prices, migration and economic patterns, among other factors.”
February 3 – Wall Street Journal (Nicole Friedman and Deborah Acosta): “Climate change will cause a $1.47 trillion decline in U.S. home values by 2055, according to a new study from climate-research company First Street. Rising home-insurance costs and more homeowners spurning some risky neighborhoods will drive these declines… The study is an attempt to quantify the economic risk that weather events such as hurricanes, drought and heat waves pose to many Americans’ biggest financial asset—their homes… The relationship between climate change and home values has become a more urgent question as losses from storms, wildfires and other natural disasters are hitting new records.”
Geopolitical Watch:
February 4 – Associated Press (Michelle L. Price, Aamer Madhani and Zeke Miller): “President Donald Trump said… that he’s given his advisers instructions to obliterate Iran if it assassinates him. ‘If they did that they would be obliterated,’ Trump said… while signing an executive order calling for the U.S. government to impose maximum pressure on Tehran. ‘I’ve left instructions if they do it, they get obliterated, there won’t be anything left.’ If Trump were assassinated, Vice President JD Vance would become president and would not necessarily be bound by any instructions left by his predecessor.”
February 4 – Reuters (Mikhail Flores and Karen Lema): “The air forces of the Philippines and the United States held joint patrols over the South China Sea…, a move that angered China, which also conducted a ‘routine patrol’ over a disputed shoal. The Philippines and the United States have ramped up security arrangements under President Ferdinand Marcos Jr. against a backdrop of rising tension between Manila and Beijing stemming from overlapping claims in the busy waterway.”
The S&P500 slipped 0.2% (up 2.5% y-t-d), and the Dow declined 0.5% (up 4.1%). The Utilities added 0.3% (up 3.8%). The Banks increased 0.8% (up 9.5%), and the Broker/Dealers rose another 1.6% (up 13.8%). The Transports fell 1.0% (up 1.6%). The S&P 400 Midcaps lost 1.0% (up 2.7%), and the small cap Russell 2000 dipped 0.3% (up 2.2%). The Nasdaq100 was little changed (up 2.3%). The Semiconductors were about unchanged (up 0.6%). The Biotechs dropped 2.5% (up 6.4%). With bullion jumping $63, the HUI gold index surged 4.7% (up 18.8%).
Three-month Treasury bill rates ended the week at 4.225%. Two-year government yields jumped nine bps to 4.29% (up 5bps y-t-d). Five-year T-note yields added two bps to 4.35% (down 3bps). Ten-year Treasury yields declined four bps to 4.49% (down 7bps). Long bond yields fell nine bps to 4.69% (down 9bps). Benchmark Fannie Mae MBS yields dipped three bps to 5.77% (down 7bps).
Italian 10-year yields fell nine bps to 3.47% (down 6bps y-t-d). Greek 10-year yields dropped nine bps to 3.23% (up 1bp). Spain's 10-year yields declined seven bps to 3.00% (down 6bps). German bund yields dropped nine bps to 2.37% (unchanged). French yields sank 11 bps to 3.09% (down 10bps). The French to German 10-year bond spread narrowed two to 72 bps. U.K. 10-year gilt yields declined six bps to 4.48% (down 9bps). U.K.'s FTSE equities index added 0.3% (up 6.5% y-t-d).
Japan's Nikkei 225 Equities Index fell 2.0% (down 2.8% y-t-d). Japanese 10-year "JGB" yields jumped six bps to 1.30% (up 20bps y-t-d). France's CAC40 added 0.3% (up 8.0%). The German DAX equities index increased 0.3% (up 9.4%). Spain's IBEX 35 equities index jumped 2.6% (up 9.4%). Italy's FTSE MIB index rose 1.6% (up 8.4%). EM equities were mixed. Brazil's Bovespa index fell 1.2% (up 3.6%), while Mexico's Bolsa index rallied 3.1% (up 6.7%). South Korea's Kospi added 0.2% (up 5.1%). India's Sensex equities index increased 0.5% (down 0.8%). China's Shanghai Exchange Index recovered 1.6% (down 1.4%). Turkey's Borsa Istanbul National 100 index declined 0.5% (up 1.2%).
Federal Reserve Credit declined $15.0 billion last week to $6.765 TN. Fed Credit was down $2.124 TN from the June 22, 2022, peak. Over the past 282 weeks, Fed Credit expanded $3.039 TN, or 82%. Fed Credit inflated $3.954 TN, or 141%, over the past 639 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt increased $11.1 billion last week to $3.279 TN. "Custody holdings" were down $80.5 billion y-o-y, or 2.4%.
Total money market fund assets jumped $44.2 billion to a record $6.917 TN. Money funds were up $783 billion over 28 weeks (24% annualized) and $915 billion y-o-y (15%).
Total Commercial Paper gained $9.0 billion to $1.220 TN. CP was down $33 billion, or 2.6%, over the past year.
Freddie Mac 30-year fixed mortgage rates declined six bps this week to a six-week low 6.89% (up 25bps y-o-y). Fifteen-year rates fell seven bps to 6.05% (up 15bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates down three bps to 6.99% (down 17bps).
Currency Watch:
For the week, the U.S. Dollar Index slipped 0.3% to 108.04 (down 0.4% y-t-d). For the week on the upside, the Japanese yen increased 2.5%, the Canadian dollar 1.7%, the South African rand 1.5%, the Swedish krona 1.4%, the Australian dollar 0.9%, the Norwegian krone 0.9%, the Brazilian real 0.6%, the Mexican peso 0.6%, the New Zealand dollar 0.5%, the South Korean won 0.4%, the Singapore dollar 0.2%, the Swiss franc 0.1%, and the British pound 0.1%. On the downside, the euro declined 0.3%. The Chinese (onshore) renminbi declined 0.69% versus the dollar (up 0.06% y-t-d).
Commodities Watch:
February 2 – Bloomberg (Jack Ryan and Jack Farchy): “JPMorgan... will deliver gold bullion valued at more than $4 billion against futures contracts in New York in February, at a time when surging prices and the threat of import tariffs are fueling a worldwide dash to ship metal to the US. The bank, which is by far the world’s biggest bullion dealer, was one of several institutions to declare plans on Thursday to deliver bullion against contracts traded on CME Group’s Comex that will expire in February. The delivery notices — which total 3 million troy ounces of gold — were the second largest ever in bourse data going back to 1994… Fears of imminent tariffs on imports following the election of US President Donald Trump have caused prices for gold futures on Comex to surge over spot prices in London.”
February 7 – Bloomberg (Yihui Xie): “China’s central bank expanded its gold reserves for a third month in January, even as the precious metal kept rallying to a record high. Bullion held by the People’s Bank of China rose by 0.16 million troy ounces last month… The central bank resumed adding gold reserves in November after a six-month halt that followed an 18-month buying spree.”
February 5 – Bloomberg: “Russians bought a record amount of gold last year as they sought to protect their savings amid sanctions, obtaining the equivalent of about a fourth of the country’s annual output. Consumers purchased 75.6 metric tons (2.7 million ounces) of the yellow metal in bullion, coins and jewelery in 2024, the fifth biggest figure among all nations, according to World Gold Council data... That’s an increase of 6% on the previous year and more than 60% since President Vladimir Putin ordered his troops into Ukraine almost three years ago.”
February 4 – Bloomberg (Maddie Parker): “Coffee is headed for its longest winning streak since 1980, as the market grapples with persistent supply concerns in key growing regions. Futures for the arabica variety… rose as much as 2.4% on Tuesday to another fresh record. The premium bean advanced for a 10th day and is trading just shy of $4 a pound after doubling in the past year. Shortfalls in Brazil… continue to worry traders after record shipments earlier in the season means less supply availability now.”
The Bloomberg Commodities Index rallied 1.9% (up 5.5% y-t-d). Spot Gold jumped 2.2% to $2,861 (up 9.0%). Silver rose 1.6% to $31.8155 (up 10.1%). WTI crude fell $1.53, or 2.1%, to $71.00 (down 1%). Gasoline gained 2.2% (up 4%), and Natural Gas recovered 8.7% to $3.309 (down 8%). Copper surged 7.2% (up 14%). Wheat jumped 4.2% (up 6%), and Corn rose 1.1% (up 6%). Bitcoin sank $6,570 or 6.4%, to $96,160 (up 2.6%).
Trump Administration Watch:
February 4 – Wall Street Journal (Richard Rubin and Olivia Beavers): “House Republicans are sharply divided over how much government spending they should cut, and the dispute is slowing their plans to reduce taxes and increase border enforcement. On one side: Conservatives who see a rare chance to use full Republican government control to scale back programs such as Medicaid… At times, they have been seeking trillions of dollars in spending cuts over the next decade and say they want Republicans’ major fiscal legislation to reduce budget deficits. On the other side: Moderates who are wary about blowback from states, hospitals and the GOP’s emerging working-class base. They are looking for smaller minimum spending cuts attached to the ‘one big beautiful bill’ that President Trump wants to extend expiring tax cuts, pay for his immigration restrictions and boost the military.”
February 5 – Bloomberg (Liz Capo McCormick): “The US Treasury… maintained its guidance on keeping sales of longer-term debt unchanged well into 2025, despite newly installed Secretary Scott Bessent having criticized the issuance strategy of his predecessor before he was picked for the job. At the helm of US debt management policy for the first time, Bessent left broadly intact former Secretary Janet Yellen’s agenda. The Treasury will next week sell $125 billion of debt in its so-called quarterly refunding auctions, which span 3-, 10- and 30-year maturities, the same amount as in the past several quarters. ‘Based on current projected borrowing needs, Treasury anticipates maintaining nominal coupon and FRN auction sizes for at least the next several quarters,’ the department said…”
February 2 – Wall Street Journal (Alexander Ward and Ginger Adams Otis): “Elon Musk’s allies are moving swiftly to exert control over vast swaths of the U.S. government, as they demand access to sensitive information at federal agencies and lay out plans to block spending they deem excessive. Musk… oversaw a successful effort by his representatives to get direct access to a payment system that distributes trillions of dollars to Americans each year. And individuals working for DOGE accessed the U.S. Agency for International Development following a clash with security officials. The moves marked the start of a far-reaching campaign by Musk to upend the federal government agency by agency, according to his allies.”
February 3 – Reuters (David Shepardson and Chris Sanders): “Billionaire Elon Musk… gave an update on the effort…, saying work is underway to shut down the U.S. foreign aid agency USAID. Musk… discussed the Department of Government Efficiency (DOGE) in a social media talk… on X... Trump has assigned Musk to lead a federal cost-cutting panel. The conversation, which included former Republican presidential candidate Vivek Ramaswamy and Republican Senators Joni Ernst and Mike Lee, began with Musk saying they were working to shut down the United States Agency for International Development (USAID). ‘It’s beyond repair,’ Musk said, adding that President Trump agrees it should be shut down.”
February 5 – Bloomberg (Dana Hull): “The White House said Elon Musk… will determine if there are conflicts of interest between his work reviewing federal spending and his overlapping empire of six companies. ‘The president was already asked to answer this question this week,’ said White House Press Secretary Karoline Leavitt... ‘And he said, if Elon Musk comes across a conflict of interest with the contracts and the funding that DOGE is overseeing, that Elon will excuse himself from those contracts, and he has again abided by all applicable laws.’ Musk, as the ‘special government employee’ leading a federal team known as the Department of Government Efficiency, is subject to conflict of interest rules, but those are largely enforced by White House officials.”
February 4 – New York Times (Matthew GoldsteinEric Lipton and David Yaffe-Bellany): “The Securities and Exchange Commission is moving to scale back a special unit of more than 50 lawyers and staff members that had been dedicated to bringing crypto enforcement actions… The move is one of the first concrete steps by President Trump and his administration to pull back on the regulation of cryptocurrencies and other digital assets. One of Mr. Trump’s first executive orders was aimed at promoting the growth of crypto and ‘eliminating regulatory overreach’ on digital assets.”
February 3 – Reuters (Douglas Gillison): “U.S. President Donald Trump… tapped newly confirmed Treasury Secretary Scott Bessent as acting director of the Consumer Financial Protection Bureau, the agency announced. Bessent then halted virtually all CFPB activities…, including investigations, litigation, rulemaking and public communications.”
February 4 – Bloomberg (Ari Natter): “The Trump administration is exploring legal options to cancel loans issued under a $400 billion program to finance clean-energy technology as it considers overhauling the initiative, according to a person familiar… The newly installed director of the Energy Department’s loan program, John Sneed, told agency officials… last week the effort will be retooled to focus on technologies favored by the new administration such as nuclear power and liquefied natural gas…”
February 2 – Associated Press (Matthew Lee and Juan Zamorano): “U.S. Secretary of State Marco Rubio brought a warning to Panamanian leader José Raúl Mulino…: Immediately reduce what President Donald Trump says is Chinese influence over the Panama Canal area or face potential retaliation from the United States. Rubio… held face-to-face talks with Mulino, who has resisted pressure from the new U.S. government over management of a waterway that is vital to global trade. Mulino told reporters after the meeting that Rubio made ‘no real threat of retaking the canal or the use of force.’”
February 2 – Wall Street Journal (Vera Bergengruen): “Secretary of State Marco Rubio arrived Sunday with an ultimatum from the White House for Panamanian President José Raúl Mulino: Either curtail China’s presence around the Panama Canal or face an unspecified U.S. response. On his first overseas stop since taking office, Rubio toured the canal after talks at the country’s presidential palace with Mulino, who has rejected President Trump’s threats to take back the waterway as an affront to Panama’s sovereignty. In a significant concession, Mulino afterward declared Panama wouldn’t be renewing a 2017 infrastructure funding agreement with Beijing and offered ‘technical-level’ talks to clarify Trump’s doubts about Chinese control of the canal… But even before Rubio departed the country, Trump appeared to double down on his threats to seize the canal, which the U.S. relinquished to Panama in 1999. ‘We’re taking it back, or something very powerful is going to happen,’ he said…”
February 5 – Bloomberg (Jennifer A. Dlouhy and Jordan Fabian): “President Donald Trump proposed the US taking over the Gaza Strip and assuming responsibility for reconstructing the war-torn territory during a press conference with Israeli Prime Minister Benjamin Netanyahu. ‘The US will take over the Gaza Strip,’ Trump said… ‘We’ll own it and be responsible for dismantling all of the dangerous unexploded bombs and other weapons on the site. Level the site, and get rid of the destroyed buildings, level it out, create an economic development that will supply unlimited numbers of jobs and housing for the people of the area.’ Trump suggested he would be open to deploying US troops to secure the area, saying he would ‘do what is necessary,’ and added that he saw the US presence in the contested territory as a ‘long-term ownership position.’ The long-time New York real estate developer painted a vision of a ‘Riviera of the Middle East’ with ‘world class’ construction projects.”
February 6 – Reuters (Suleiman Al-Khalidi): “U.S. President Donald Trump’s plan to resettle Palestinians from Gaza in Jordan is a recipe for radicalism that will spread chaos through the Middle East, jeopardize the Kingdom’s peace with Israel and even threaten the country’s very survival. These are the stark warnings Jordan's King Abdullah plans to deliver to Trump when he meets the U.S. President in Washington on February 11…, according to three senior Jordanian officials… ‘This is existential. There is very strong public opposition, and it's not something Jordan can entertain. This is not an economic or a security issue for Jordan, it's an identity issue,’ said Marwan Muasher, a former Jordanian foreign minister who helped negotiate Jordan's 1994 peace treaty with Israel.”
February 3 – Reuters (Trevor Hunnicutt and Pete Schroeder): “U.S. President Donald Trump signed an executive order… ordering the creation of a sovereign wealth fund within the next year, saying it could potentially buy the short video app TikTok. If created, the sovereign wealth fund could place the U.S. alongside numerous other countries, particularly in the Middle East and Asia, that have launched similar funds as a way to make direct investments with government dollars… Typically such funds rely on a country's budget surplus to make investments, but the U.S. operates at a deficit. Its creation also would likely require approval from Congress.”
February 3 – CNBC (Jeff Cox): “President Donald Trump… signed an executive order that outlines plans for a government-run sovereign wealth fund to serve as an economic development tool and perhaps be used to buy TikTok. Among the aims for the fund would be developing infrastructure such as airports and highways, and it could help the U.S. extend its influence in areas such as Panama and Greenland. ‘We’re going to stand this thing up within the next 12 months. We’re going to monetize the asset side of the U.S. balance sheet for the American people,’ U.S. Treasury Secretary Scott Bessent said... ‘There’ll be a combination of liquid assets, assets that we have in this country as we work to bring them out for the American people.’”
Trade War Watch:
February 4 – Axios (Courtenay Brown): “President Trump campaigned on using tariffs to revive domestic industry and fill America’s coffers, but the tariff strategy now looks more muddled than ever. Trump has sent mixed signals about why his administration is slapping tariffs on billions of dollars' worth of imports, sparking confusion about whether the measures are temporary threats or the new economic normal. A trade war is underway with China, though every instance of tariff threats before that — Colombia, Canada and Mexico — has ended with Trump backing off, following concessions on areas of policy unrelated to trade. The economic impact of tariffs might prove minor if they are merely a negotiating tactic to extract non-trade-related concessions. But if they become a permanent feature of U.S. policy, they'll have a more lasting impact on the economy, markets, and business decision-making.”
February 4 – New York Times (Ana Swanson and Chris Buckley): “Beijing responded swiftly… to the tariffs President Trump had promised, announcing a fusillade of countermeasures targeting American companies and imports of critical products. Mr. Trump’s 10% tariff on all Chinese products went into effect at 12:01 a.m. Tuesday… The Chinese government came back with a series of retaliatory steps, including additional tariffs on liquefied natural gas, coal, farm machinery and other products from the United States… It also immediately implemented restrictions on the export of certain critical minerals, many of which are used in the production of high-tech products. In addition, Chinese market regulators said they had launched an antimonopoly investigation into Google.”
February 5 – Telegraph (Connor Stringer, Chris Price, Chanel Zagon, Jack Maidment, and Alex Singleton): “Donald Trump and Xi Jinping cancelled a scheduled phone call on Tuesday after China announced retaliatory tariffs on the US. Mr Trump had been scheduled to speak to Mr Xi on Tuesday, just hours after the US president imposed fresh tariffs on the world’s second largest economy. China retaliated within minutes... President Trump said… he is in ‘no rush’ to speak with his Chinese counterpart Xi Jinping despite expectations of a phone call… Mr Trump said the tariffs on China were merely ‘an opening salvo’. ‘If we can’t make a deal with China, then the tariffs would be very, very substantial,’ he added.”
February 2 – Reuters (Kevin Krolicki and Qiaoyi Li): “China’s government… denounced the Trump administration's imposition of a long-threatened 10% tariff on Chinese imports while leaving the door open for talks with the U.S. that could avoid a deepening conflict… China's sharpest pushback… was over fentanyl, an area where the Biden administration had also been urging Beijing to crack down on shipments of the China-made precursor chemicals needed to manufacture the drug.’ Fentanyl is America's problem,’ China's foreign ministry said. ‘The Chinese side has carried out extensive anti-narcotics cooperation with the United States and achieved remarkable results.’”
February 4 – Bloomberg (Shuli Ren): “President Xi Jinping has a nickname in China. Instead of calling him directly by name, people commonly use Da Da, or Mr. Big. After all, he is the nation’s most powerful politician in decades, serving a precedent-defying third term. He also dares to challenge the world’s biggest economy, and China’s only real rival, promoting a multipolar global order instead of unchallenged US dominance. It should come as no surprise, then, that China is acting differently from Canada or Mexico as President Donald Trump imposes trade tariffs. Not willing to capitulate to what it sees as bullying, Beijing is taking the 10% extra levy in stride.”
February 4 – Bloomberg (Josh Wingrove and Jenny Leonard): “President Donald Trump pledged hundreds of billions in tariffs to remake the global economy and target even his closest neighbors. But so far, it’s been more Art of the Deal than a revolution. Trump on Monday shelved plans for wide-ranging tariffs on Canada and Mexico, after doing the same for Colombia the prior week. In each case, Trump relented despite countries promising only modest changes on border security and immigration. Trump and his allies have held up those concessions as vindication of his approach. But the US president’s willingness - at least for now - to hold off on tariffs has underscored doubts over whether Trump, who famously obsesses over market performance, might once again prove a paper tiger on his more fiery trade threats.”
February 3 – Financial Times (Gideon Rachman): “‘Our strategy on tariffs will be to shoot first and ask questions later.’ That was what one of Donald Trump’s key economic policymakers told me late last year. That kind of macho swagger is currently fashionable in Washington. But the US president’s shoot-from-the-hip tactics are profoundly dangerous — for America itself, as well as the countries that he has targeted with tariffs. The potential economic risks for the US — higher inflation and industrial disruption — are well known. The strategic consequences for America are less immediately obvious — but could be just as serious and even longer lasting. Trump’s tariffs threaten to destroy the unity of the western alliance. He is sowing the seeds of an alternative grouping formed by the many countries that feel newly threatened by America. Co-operation will be informal at first, but will harden the longer the tariff wars go on. The collapse of western unity would be a dream come true for Russia and China.”
February 2 – Financial Times (Ilya Gridneff): “A new wave of economic nationalism swept across Canada after Donald Trump’s threatened tariffs inspired anger but also a patriotic campaign to ‘Buy Canadian’. ‘Made in Canada’ signs have popped up in grocery stores, lists of Canadian alternatives to US products are being circulated and comedians are devoting skits on national television to how best to avoid American consumer goods. Liam Mooney and his partner Emma Cochrane… have noticed a jump in sales for their newly launched fashion statement — a hat emblazoned with ‘Canada Is Not for Sale’. ‘It’s been incredible, we’ve seen a spike in sales since the tariff announcement on Saturday,’ Mooney said. ‘It went from a concept to viral after Ontario Premier Doug Ford wore it to a meeting.’”
February 3 – Associated Press (Rob Gillies): “As Canadians absorb U.S. President Donald Trump’s trade war and his threats to make Canada the 51st state, one thing has become abundantly clear: One of the world’s most durable and amicable alliances — born of geography, heritage and centuries of common interests — is broken. Canadians are feeling an undeniable sense of betrayal after Trump declared a trade war against America’s northern neighbor and longtime ally. Trump keeps threatening Canada’s sovereignty and and vowing to put sweeping 25% tariffs on Canadian products… In Canada, discussion and disapproval are everywhere.”
February 2 – Axios (Felix Salmon): “Cars that are made in America aren’t only made in America — they’re made across North America. As a result, Trump's across-the-board tariffs on all trade with Mexico or Canada risks making U.S. autos much more expensive than foreign imports. The U.S. auto industry could shut down within a week, by some estimates, thanks to these tariffs. Even if it doesn’t, there is no automaker that's set up to operate in a world of high-friction North American border duties. With modern supply chains, a single component in a vehicle can cross the U.S. border between six and eight times before final assembly.”
February 3 – Financial Times (Henry Foy and Andy Bounds): “The EU has said it regrets US President Donald Trump’s decision to hit Canada, Mexico and China with sweeping tariffs, and said it would respond firmly if a threat to expand the trade measures to Europe were fulfilled… The Trump administration has so far refrained from imposing tariffs on the EU despite the US president saying on Friday that he would ‘absolutely’ do so, and repeating at the weekend that he would ‘definitely’ act. ‘They don’t take our cars, they don’t take our farm products, they take almost nothing and we take everything from them,’ Trump told reporters. ‘Millions of cars, tremendous amounts of food and farm products’… A spokesperson for the EU’s executive said the bloc’s trade and investment relationship with the US was the biggest in the world, adding: ‘There is a lot at stake.’”
February 3 – Financial Times (Olaf Storbeck): “The EU must stand its ground in a potential trade war with the US and should retaliate if President Donald Trump imposes punitive tariffs on European goods, said Bank of Finland governor Olli Rehn. ‘The last thing we need is a new trade war between allies but we need to take proportionate policy measures…’ the former European economic commissioner said. He told the Financial Times that ‘we cannot lie down’ in the face of US threats — ‘even if it is friendly fire’. Trump has warned that imports from Europe may be next in line…”
Ukraine War Watch:
February 5 – Wall Street Journal (Thomas Grove): “The Kremlin said contacts between the U.S. and Russia had taken place and recently intensified, the first time Moscow has indicated the two countries are discussing a potential plan to end fighting in Ukraine. ‘There is indeed contact between certain government agencies and they have intensified recently,’ Kremlin spokesman Dmitry Peskov told journalists… Trump said last week that his administration has already had serious discussions with Russia about the conflict, but has provided little detail.”
January 31 – Bloomberg: “Russia’s ability to keep making fuel at the normal pace is looking increasingly precarious following a surge in Ukrainian drone attacks on the nation’s oil refineries… For now, analysts… say that the attacks are manageable for Russia and not enough to cause serious concerns about fuel production, given that the proportion of the country’s refining offline from the incidents is small. However, Ukraine appears set on ramping up attacks at its foe’s energy infrastructure, raising the likelihood of further attempts. In the past eight days alone, swarms of Kyiv’s drones targeted three major refineries in central and southern Russia, as well as a pumping station on an important crude-export line…”
February 1 – Wall Street Journal (Ian Lovett, Nikita Nikolaienko and Jane Lytvynenko): “North Korean troops appear to have been pulled back from the front lines in Russia’s Kursk region after suffering heavy casualties during barely a month of combat, Ukrainian officials said. The North Koreans hadn’t been spotted along the front for more than two weeks, officials said. The troops have been withdrawn ‘due to significant losses,’ one Ukrainian security official said, adding, ‘We expect them to come back.’”
Market Instability Watch:
February 5 – Bloomberg (Liz Capo McCormick): “The US Treasury… maintained its guidance on keeping sales of longer-term debt unchanged well into 2025, despite newly installed Secretary Scott Bessent having criticized the issuance strategy of his predecessor before he was picked for the job. ‘Based on current projected borrowing needs, Treasury anticipates maintaining nominal coupon and FRN auction sizes for at least the next several quarters,’ the department said…”
February 2 – Wall Street Journal (Sam Goldfarb): “The prospect of increased borrowing by a second Trump administration has spooked bond investors in recent months. One major concern: how the government will execute that borrowing. At issue is a strategy pursued by the Treasury Department since late 2023 to lean more on short-term Treasurys to fund the government. Many on Wall Street credit that approach with calming markets buffeted by sticky inflation and a swollen federal budget deficit. Key members of the Trump administration, however, have expressed hostility to the strategy, characterizing it as a risky effort to juice the economy. Those include freshly confirmed Treasury Secretary Scott Bessent and Stephen Miran, the president’s choice to chair his Council of Economic Advisers.”
February 3 – Axios (Zachary Basu and Marc Caputo): “Elon Musk and his cost-slashing allies are taking a hammer to the massive bureaucracy that staffs the U.S. government — and a scalpel to any senior officials who dare put up a fight. Musk isn't the only force driving the Trump administration's escalating purge of civil servants. But his fingerprints are everywhere, and his methods are unlike anything the federal government has ever seen. Musk and his lieutenants — many of them Silicon Valley transplants, some as young as 19 — have been tied to a series of high-profile departures and ousters at the top of key federal agencies. The Treasury Department's highest-ranking career official announced his retirement Friday after a dispute with Musk allies who sought access to a sensitive system for government payments… David Lebryk, who worked at Treasury for more than three decades, was one of a few career officials who control the Bureau of Fiscal Service’s technical checkbook, which disburses trillions of dollars in spending. ‘Truly a shocking move — Dave is a total apolitical professional who’s been trusted by Treasury secretaries from both parties to maintain the critical financial plumbing of the U.S. govt,’ Biden Treasury official Mike Gwin tweeted...”
February 3 – Bloomberg (Sidhartha Shukla): “The unraveling of leveraged bets on Ether placed the token among the hardest-hit cryptocurrencies in a selloff on Monday, as investor sentiment soured after US President Donald Trump’s tariff announcements. Ether, the second-largest digital asset by market value, tumbled as much as 27% to $2,135 on Monday, marking its steepest intraday drop since May 2021. By contrast, Bitcoin managed to limit losses to about 6%, while smaller rival Solana declined by 13%.”
February 3 – Bloomberg (Vildana Hajric): “A leveraged ETF seeking to offer two-times the daily performance of Ether clocked its biggest-ever plunge as the token sold off amid President Donald Trump’s latest trade-war salvo. The 2x Ether ETF was down 46% at one point on Monday, the most since its June inception as the underlying digital asset shed as much as 35% over the weekend. The nearly $1 billion fund had seen inflows every month since its launch last year, hauling in $185 million in January alone…”
Global Credit and Financial Bubble Watch:
February 6 – Bloomberg (Olivia Raimonde): “The lines between assets classes are being blurred like never before as corporations search for new ways to raise cash. With public and private markets converging, says KKR..., a seismic shift is happening that will make 2025 credit’s ‘iPhone moment.’ ‘The launch of the iPhone wasn’t just the debut of a new product; it was the dawn of a new paradigm,’ according to Christopher Sheldon, co-head of credit and markets at KKR and Tal Reback, director of credit and markets at the firm. ‘The global credit markets are undergoing their own transformation.’ Trading volume in the public debt market set an all-time high last year, while the proliferation of private credit is estimated to eventually reach $30 trillion.”
February 7 – Bloomberg (Kat Hidalgo): “The private credit industry is drawing closer to the trillions of dollars in insurance holdings it needs to keep growing. Direct lenders are dipping into these vast pots of cash controlled by insurers using a type of securitization. So-called rated feeders turn stakes of private debt funds into top-rated bonds. And they’re multiplying: Just this week Apollo Global Management Inc. raised $5 billion through a variation of a rated feeder. For conservative and risk-averse insurers, the vehicles are a relatively cheap and safe way to take part in the private credit boom that’s financing mostly unlisted and leveraged companies. They allow insurers to reduce the amount of capital they need to hold against these investments, making it cheaper for them to buy into private credit funds.”
February 5 – Bloomberg (Sridhar Natarajan, Jeannine Amodeo and Gillian Tan): “A group of Morgan Stanley-led banks is selling $5.5 billion of debt tied to Elon Musk’s social-media platform X after receiving stronger-than-expected demand from investors… The banks initially planned to sell about $3 billion worth of the loan but received enough interest to parcel out additional debt. They are now selling the entire remaining slug of the highest-ranking borrowings used to fund Musk’s buyout of the platform formerly known as Twitter…”
AI Bubble Watch:
January 31 – Bloomberg Vlad Savov): “DeepSeek’s AI assistant topped the list of most downloaded mobile apps across 140 markets, with India accounting for the largest percentage of new users. The reasoning artificial intelligence chatbot rose to the No. 1 spot on Apple Inc.’s App Store on Jan. 26 and has held that position globally since, according to Appfigures data that excludes third-party app stores in China. India contributed 15.6% of all downloads across platforms since its launch…”
February 7 – Bloomberg (Dave Lee): “At the start of this week, the question was whether the shock of China’s supercheap AI DeepSeek would compel Silicon Valley’s big artificial-intelligence companies to reduce their spending. Now, we can say the definitive answer is no. Amazon.com Inc., Alphabet Inc., Meta Platforms Inc. and Microsoft Corp., the country’s leading hyperscalers, are embarking on an unprecedented year of spending — a combined $325 billion in projected capital expenditures for 2025. In dollar terms, their clamor for new data centers and energy to power them is unlike anything the technology industry has ever seen. In mood, the scramble is comparable to the dot-com boom.”
February 7 – Wall Street Journal (Dan Gallagher): “There’s stepping on the gas, and then there’s flooring it. When it comes to investing in artificial intelligence, Amazon.com just did the latter. While reporting its fourth-quarter results…, Amazon became the latest tech giant to project a major jump in capital spending for this year—even after a big surge last year. Amazon… said the $26.3 billion of capital spending in the latest quarter was a run rate that will be ‘reasonably representative’ of what the company will spend this year. That would equate to about $105 billion for the year, up 35% from last year’s total and far above the $86 billion analysts were expecting…”
February 4 – Reuters (Kenrick Cai and Deborah Mary Sophia): “Alphabet said… it will spend $75 billion on its AI buildout this year, 29% more than Wall Street expected, and investors signaled disappointment at a missed cloud revenue target and began showing impatience over profitability… Wall Street had been expecting 2025 capital expenditures of about $58 billion…”
February 6 – Bloomberg (Shirin Ghaffary): “A joint venture from OpenAI, SoftBank Group Corp. and Oracle Corp. is close to selecting additional sites for data center campuses in Texas and eyeing more projects in over a dozen other states, as the companies work to fulfill an ambitious plan to invest hundreds of billions in AI infrastructure. OpenAI is far along in the process of picking several locations in Texas for massive data center projects to support artificial intelligence services…”
Bubble and Mania Watch:
February 4 – Financial Times (Nikou Asgari): “Software business-turned-bitcoin hoarder MicroStrategy is inspiring a host of companies to buy the cryptocurrency and hold it in their corporate treasuries, in a manoeuvre aimed at boosting their flagging share prices. Pharmaceutical companies and advertisers are among 78 listed companies around the world that are following the US group’s example in buying the coins to hold in place of cash, according to… crypto security company Coinkite. MicroStrategy’s founder Michael Saylor has made bitcoin his company’s primary treasury reserve with an aggressive buying spree since 2020. Saylor believes bitcoin’s value will keep rising, saying: ‘We are going to Mars.’ Having strapped its share price to the fortunes of bitcoin, MicroStrategy is now the world’s largest corporate holder.”
February 6 – Bloomberg (Annie Massa): “Trump Media & Technology Group Corp. applied to trademark brands for six investment products with themes that closely track President Donald Trump’s priorities in office. The money-losing social media company is looking to debut the ‘Truth.Fi Made in America ETF,’ ‘Truth.Fi U.S. Energy Independence ETF’ and ‘Truth.Fi Bitcoin Plus ETF,’ along with three other vehicles called separately managed accounts with the same themes on its recently announced Truth.Fi financial platform, subject to regulatory approval… The company, which is majority-owned by Trump, also signed an agreement to have a small New Jersey-based firm, Yorkville Advisors, marshal the products through their approval process and oversee them…”
February 6 – Financial Times (Oliver Hawkins, Eade Hemingway and Nikou Asgari): “Donald Trump’s new cryptocurrency has sparked a flood of imitators, leading to warnings that investors risk being duped. More than 700 copycat and spam coins have been sent to Trump’s digital wallet by people apparently seeking to suggest their creations have his endorsement… It comes after the president and his wife Melania launched memecoins, which lack practical use and whose value is entirely underpinned by speculation, days ahead of his return to the White House last month. The FT found that 736 different memecoins have been deposited in the official Trump coin wallet over the past three weeks. Among them, nearly 200 — including “OFFICIAL TRUMP” and “OFFICIAL MELANIA” — are named after Trump or members of his family but have no connection to the president.”
February 6 – Wall Street Journal (Katherine Clarke and E.B. Solomont): “Billionaire William Lauder has struck a deal to sell two oceanfront lots in Palm Beach, Fla., for close to his original $200 million asking price, according to people familiar with the situation. If the deal records for more than $170 million, it would set a record for Palm Beach.”
U.S./Russia/China/Europe Watch:
February 6 – Financial Times (Najmeh Bozorgmehr): “Iran’s Supreme Leader Ayatollah Ali Khamenei has ruled out negotiations with Donald Trump’s administration, citing past experiences dealing with the US president and vowing to respond forcefully to any threats against the Islamic republic. ‘With such a government there should not be any negotiations as it is neither wise, nor prudent, nor dignified,’ Khamenei, the country’s ultimate decision maker, told Iranian military forces… He referred to the 2015 nuclear deal between Iran and world powers, which Trump withdrew from in 2018 before imposing the toughest sanctions on the Islamic republic to date. ‘This is our experience with them,’ Khamenei said. ‘We have to use it.’ ‘If they threaten us, we will threaten them. If they act on their threats, we will act on ours,’ he warned. ‘If they violate our nation’s security, we will violate theirs… This is our duty, as required by Islam.’”
De-globalization Watch:
February 6 – Bloomberg (Annie Lee): “The phone has been ringing off the hook for Lewis Black after China imposed export controls on tungsten, a niche metal mined by his firm that’s crucial to weapons manufacturing. The chief executive officer of North America’s Almonty Industries Inc. said his customers are in a ‘state of disbelief’ following Beijing’s move on Tuesday, one of a suite of measures announced as a riposte to tariffs placed on Chinese goods by the Trump administration. China accounts for about 80% of the world’s tungsten output, and there are concerns the government could add measures around tungsten scrap that would further constrict its availability... ‘It’s the warning shot, because we cannot exist without it,’ Black said… ‘Our economy, manufacturing, defense, everything, is so dependent on it. And yet, Russia, China and North Korea have about 90% of the output.’”
February 4 – Bloomberg (Annie Lee): “China put export controls on tungsten and other niche metals used in the electronics, aviation and defense industries as it retaliated in a targeted way to US tariffs. As well as tungsten — which is known for its remarkable density and high melting point and is most commonly used in armor-piercing missiles — Beijing imposed export curbs on molybdenum, tellurium, bismuth and indium... China produces around 80% of the world’s tungsten and bismuth, and is also the No. 1 supplier of the other metals. Its response suggests it will take a more calibrated approach in dealing with Washington, targeting materials with military applications and seeking to maximize its impact by focusing on commodities where it has the most leverage.”
February 4 – Bloomberg: “Liquefied natural gas and tungsten — a metal used in the defense and energy industries — are the commodities on the front lines of the opening salvo of the US-China trade war. President Donald Trump pulled the trigger on a blanket 10% tariff on all Chinese imports on Tuesday, prompting Beijing to hit back, albeit with relatively targeted measures. In the raw materials space, that included export controls on tungsten, as well as other minor metals such as molybdenum and tellurium, a 15% import levy on LNG and coal and a 10% duty on oil and agricultural equipment.”
Inflation Watch:
February 4 – Bloomberg (Ilena Peng): “President Donald Trump’s tariff plans threaten to raise US home construction costs, making it even more difficult for Americans already facing a tight housing market. Trump’s proposed 25% tariffs on goods from Canada and Mexico, which have been delayed until at least March, along with a 10% levy now in effect on products from China, could make building a typical home as much as $29,000 pricier, said David Belman, a second-generation homebuilder in Wisconsin. A large portion of that increase — as much as $14,000 — would come from the tariff on Canada, said Belman, whose supplier receives 80% of its lumber from the country. Canada, which is the US’s biggest foreign lumber supplier, has already been dealing with higher duties on its shipments that started last summer.”
February 3 – Reuters (Kanjyik Ghosh, Bipasha Dey and Rishabh Jaiswal): “California’s largest private insurer, State Farm, …urged the state's insurance regulator to approve an emergency hike in rates to help offset the hefty payouts the company is making after devastating wildfires in Los Angeles last month. The company is seeking rate increases of up to 22% for non-tenant homeowners, 15% for renters and condominium owners, and up to 38% for rental dwellings.”
February 4 – Wall Street Journal (Bob Tita): “Steel prices started rising for some U.S. companies even before President Trump announced tariffs on Canada and Mexico. Executives said they are bracing for more to come. Trump on Saturday announced 25% tariffs on all imports from Mexico and Canada starting Tuesday. On Monday, he said he would hold off for a month… If implemented, the duties are expected to strengthen U.S. steelmakers’ pricing power by effectively raising prices for foreign steel. It could also enable domestic companies to raise their prices, too.”
February 6 – Wall Street Journal (Richard Vanderford): “Americans don’t import insurance from Canada, Mexico or China, but it could nonetheless get more expensive for consumers and businesses amid U.S. tariff uncertainty. Insurers are warning that tariffs on various goods could increase the overall costs that insurers pay, which could force them to pass on the costs in the form of higher premiums. Automobiles… could go up in cost by $3,000 each per car on average, the American Property Casualty Insurance Association, a trade group, said.”
February 4 – Financial Times (Gregory Meyer): “The toy company Mattel may raise US prices to offset the cost of Donald Trump’s tariffs on goods made in Mexico and China, its chief executive has warned. Ynon Kreiz told the Financial Times that less than 40% of Mattel’s production was in China while Mexico accounted for less than 10%... ‘We believe we are very well positioned to leverage the strength of our supply chain to mitigate for tariffs,’ Kreiz said… ‘And we are also considering potential pricing actions to mitigate for the tariffs.’”
February 4 – Bloomberg (Michael Hirtzer, Daniela Sirtori and Jaewon Kang): “American restaurants are falling victim to a national egg shortage that has already plagued grocery stores from New York City to San Francisco and sent prices to $7 a carton… Egg prices have broken record after record as bird flu spreads across the country, killing millions of chickens. A dozen large eggs in the Midwest now cost an average of $7.08 wholesale, about seven times the price just two years ago…”
February 3 – Financial Times (Amanda Chu and Jamie Smyth): “Donald Trump’s restrictions on renewable energy risk sparking an electricity crisis in the US, driving up costs for consumers and handing China an edge in the global artificial intelligence race, industry executives have warned… The US president ordered a moratorium on offshore wind approvals and reviews of existing wind leases and paused hundreds of billions of dollars of incentives for green energy. The actions have sent shockwaves across an industry that is the cheapest and fastest-growing source of new capacity on the US grid at a time of rising power demand.”
Federal Reserve Watch:
February 6 – Bloomberg (Catarina Saraiva): “Federal Reserve Bank of Dallas President Lorie Logan said interest rates may already be near a neutral level, potentially obviating the need for further cuts even if inflation continues to cool. ‘What if inflation comes in close to 2% in coming months?’ Logan asked in prepared remarks… ‘While that would be good news, it wouldn’t necessarily allow the FOMC to cut rates soon, in my view,’ she said… “Government policy changes in this space are ongoing, and the resulting changes in trade patterns could leave a substantial imprint on economic activity… Central bankers will need to parse what these shifts mean for the inflation and employment outlooks and for capital flows.’”
February 3 – Bloomberg (Catarina Saraiva): “Federal Reserve Bank of Boston President Susan Collins said the US central bank is unlikely to react to the impact of tariffs on prices so long as officials don’t see signals of higher, persistent inflation. ‘If expectations remain well-anchored, the Federal Reserve would try to look through’ the rise in prices driven by tariffs, Collins said...”
February 3 – Bloomberg (Catarina Saraiva): “Federal Reserve Bank of Chicago President Austan Goolsbee said the central bank should proceed more cautiously in lowering borrowing costs amid mounting uncertainty introduced by the Trump administration. ‘Now we’ve got to be a little more careful and more prudent of how fast rates can come down because there are risks that inflation is about to start kicking back up again,’ Goolsbee said…”
February 6 – Bloomberg (Alastair Marsh and Katanga Johnson): “The Federal Reserve has told Wall Street banks that they won’t need to submit data for climate stress tests, according to people familiar... JPMorgan…, Citigroup Inc., Goldman Sachs... and three other lenders won’t be required to make any submissions for the Fed’s Climate Scenario Analysis Exercise this year because the program has been shut down…”
U.S. Economic Bubble Watch:
February 5 – Bloomberg (Vince Golle): “Growth at US service providers softened at the start of the year as a measure of orders fell to a seven-month low, indicating a slight loss of momentum in the largest part of the economy. The Institute for Supply Management’s gauge of services slipped to 52.8 in January from 54 at the end of the 2024… A gauge of new orders placed with service providers declined to the lowest level since June… An index of prices paid by service providers for materials and services settled back in January after jumping a month earlier to the highest since 2023… Employment at service providers grew at the fastest pace since September 2023.”
February 5 – Bloomberg (Mark Niquette): “The US trade deficit widened sharply at the end of 2024 on a surge in imports prior to the start of Donald Trump’s second term as president and his follow-through on the promise of sweeping tariffs. The December shortfall in goods and services trade grew nearly 25% from the prior month to $98.4 billion… That culminated in a full-year deficit of $918.4 billion, the second-largest in data back to 1960.”
February 5 – Bloomberg (Lucia Mutikani): “U.S. private payrolls growth picked up in January, the ADP National Employment Report showed… Private payrolls increased by 183,000 jobs last month after an upwardly revised 176,000 rise in December. Economists… had forecast private employment advancing by 150,000 following a previously reported 122,000 gain in December.”
February 4 – Associated Press (Paul Wiseman): “U.S. job openings fell in December, a sign that the labor market is cooling but still healthy. Openings fell to 7.6 million, from 8.2 million in November… They were down from 8.9 million a year earlier and a peak of 12.2 million in March 2022… The number of layoffs fell, suggesting that Americans enjoy unusual job security. The number of people quitting their jobs rose modestly but stayed below pre-pandemic levels. After surging in 2021 and 2022, quits have come down as workers lose confidence in their ability to find better pay or working conditions elsewhere.”
February 3 – Bloomberg (Vince Golle and Mark Niquette): “US factory activity expanded last month for the first time since 2022 as orders ramped up and production quickened, pointing to a brighter manufacturing outlook. The Institute for Supply Management’s manufacturing gauge rose 1.7 points in January to 50.9, the highest since September 2022… A measure of new orders rose 3 points to 55.1, the strongest growth since May 2022… The ISM production gauge moved solidly into expansion territory, climbing 2.6 points to 52.5 — the best reading since March. That in turn encouraged manufacturers to bolster headcounts somewhat.”
February 7 – Bloomberg (Ann Choi, Yizhu Wang, and John Gittelsohn): “In the affluent Los Angeles neighborhoods scorched by wildfires, jumbo mortgages on multimillion-dollar homes are commonplace, making the loans a potential pain point for the banks left holding them. More than 72% of mortgage debt fell into the category of nonconforming — also known as jumbo loans — in the parts of Los Angeles devastated by the fires. That’s nearly five times the nationwide average, and almost triple California’s 26% rate… More than $11 billion of jumbo loans were issued in the affected areas and kept on bank books from 2018 through 2023.”
China Watch:
February 2 – Reuters (Ellen Zhang and Ryan Woo): “China’s factory activity grew at a slower pace in January, while staffing levels fell at the quickest pace in nearly five years as trade uncertainties increased… The Caixin/S&P Global manufacturing PMI slipped to 50.1 in January from 50.5 the previous month, missing analysts’ forecasts in a Reuters poll of 50.5 and easing to a four-month low.”
February 4 – Bloomberg (Ellen Zhang and Ryan Woo): “China’s services activity expanded at a slower pace in January, with the Lunar New Year holidays worsening employment, but business sentiment improved… The Caixin/S&P Global services purchasing managers' index (PMI), slipped to 51.0 from 52.2 in December… The Caixin survey showed that new business growth eased to a four-month low, while employment fell to the weakest since April 2024.”
February 6 – Wall Street Journal (Hannah Miao): “Xinte Energy, a Chinese green-energy firm, says… it is ‘delivering light and warmth to every corner of the world.’ It is also losing tons of money. The maker of polysilicon, a building block for solar panels, recently told shareholders it expects to report losses of around 4 billion yuan, equivalent to more than $500 million, for 2024. Intense pressure by the government to build up key industries has led to fierce competition and price wars while demand has stalled, hitting the company’s bottom line. Unfortunately for China, it isn’t just the solar power industry. Companies across the country are bleeding cash as they struggle with overcapacity and weak spending in a slumping economy.”
Europe Watch:
February 3 – Bloomberg (Alexander Weber): “Euro-area inflation unexpectedly accelerated… Consumer prices advanced 2.5% from a year ago in January, up from 2.4% in December and more than the stable reading predicted by economists… Core inflation… stayed higher than anticipated at 2.7%, while price gains in the closely-watched services sector dipped a touch.”
Japan Watch:
February 6 – Bloomberg (Toru Fujioka and Erica Yokoyama): “Japan must act immediately to improve its fiscal health as the risks of natural disasters mount and social security costs continue to increase, according to the International Monetary Fund’s mission chief for the nation. ‘There is limited space today in Japan to address shocks,’ warned Nada Choueiri, the IMF’s Japan mission chief… ‘Japan needs to plan today for where to find the space to accommodate’ fiscal spending needs without increasing its deficits, she added. The IMF’s warning comes as Japan ramps up spending to address a broad spectrum of needs ranging from bolstering national defense to efforts to raise the birthrate.”
February 6 – Bloomberg (Yoshiaki Nohara): “Japan’s households boosted consumption at the fastest pace since August 2022, as strong wage gains led by bonuses helped loosen consumers’ purse strings. Outlays adjusted for inflation gained 2.7% in December from a year earlier… The result was much better than the median estimate, boosting the three-month moving average to 0.5%...”
February 4 – Bloomberg (Erica Yokoyama and Keiko Ujikane): “Japanese nominal wages rose at the fastest pace in nearly three decades… Nominal cash earnings for workers climbed 4.8% in December from a year earlier, up from a revised 3.9% gain in November… The reading exceeded economists’ consensus forecast and marked the largest jump since 1997.”
Emerging Markets Watch:
February 4 – Bloomberg (Maria Eloisa Capurro): “Brazil’s central bank said annual inflation will run above the tolerance range for the next six months, as food prices rise significantly and services costs remain elevated despite aggressive interest rate hikes… Short-term inflation, a weaker currency and economic resilience ‘still require’ more restrictive rates, they wrote… ‘Beyond the next meeting, the total magnitude of the tightening cycle will be determined by the firm commitment of reaching the inflation target,’ they added.”
February 4 – Bloomberg (Chiranjivi Chakraborty and Ashutosh Joshi): “A deepening slowdown in corporate earnings is fueling fresh concern over India’s $4.1 trillion stock market, and threatening to undermine Prime Minister Narendra Modi’s latest efforts to revive growth… To make matters worse, the global backdrop is becoming more challenging as US President Donald Trump’s tariff policies spur uncertainty and raise the odds of further dollar strengthening.”
Leveraged Speculation Watch:
February 6 – Bloomberg (Siddharth Vikram Philip, Katherine Burton, and Michael Gambale): “Citadel offered a rare glimpse under the hood of its multistrategy funds during a lucrative period for the most profitable hedge fund firm ever. The firm’s $1 billion bond offering this week required Ken Griffin’s secretive hedge fund to produce a prospectus… While it doesn’t give a full picture of Citadel, it offers financial results for its largest funds for almost four years… The three funds, which started 2021 with $23.6 billion, produced $56.8 billion of gains in the period. Investors netted $30 billion, even after paying $7.5 billion in management and performance fees and $17 billion in so-called pass-through expenses — roughly 90% of which was employee compensation.”
February 6 – Bloomberg (Norah Mulinda): “Fannie Mae and Freddie Mac shares are leaping for double-digit gains Thursday after the Wall Street Journal reported that Scott Turner, head of the Department of Housing and Urban Development, said an effort to privatize the companies will be a priority… Fannie shares climb as much as 21%, while Freddie shares gain as much as 22%. Both stocks have jumped more than 400% since the presidential election on Nov. 5.”
Social, Political, Environmental, Cybersecurity Instability Watch:
February 4 – Bloomberg (Joe Wertz and Brian K Sullivan): “Last month was the hottest January on record, with global average temperatures climbing 1.75C above pre-industrial levels. The temperature in January averaged 13.2C (55.8F), according to… the European Centre for Medium-Range Weather Forecasts… Climate scientist Zeke Hausfather said he was surprised to see another all-time high, given expectations that La Niña would make 2025 cooler than a record-hot 2024. ‘This means that January 2025 stands out as anomalous, even by the standards of the last two years,’ he wrote.”
February 3 – Axios (Andrew Freedman): “A novel new report combining several strands of research finds that human-driven climate change could result in $1.47 trillion in net property value losses from rising insurance costs and shifting consumer demand. Insurance costs are increasing faster than mortgage payments. That's squeezing homeowners and leading to climate change-driven migration away from high-risk areas in the Sun Belt and the West. The report from First Street…, identifies the five largest metro areas likely to see the biggest spikes in insurance premiums: Miami, Jacksonville, Tampa, New Orleans and Sacramento. The report is based on peer-reviewed models of how climate change may affect insurance prices, migration and economic patterns, among other factors.”
February 3 – Wall Street Journal (Nicole Friedman and Deborah Acosta): “Climate change will cause a $1.47 trillion decline in U.S. home values by 2055, according to a new study from climate-research company First Street. Rising home-insurance costs and more homeowners spurning some risky neighborhoods will drive these declines… The study is an attempt to quantify the economic risk that weather events such as hurricanes, drought and heat waves pose to many Americans’ biggest financial asset—their homes… The relationship between climate change and home values has become a more urgent question as losses from storms, wildfires and other natural disasters are hitting new records.”
Geopolitical Watch:
February 4 – Associated Press (Michelle L. Price, Aamer Madhani and Zeke Miller): “President Donald Trump said… that he’s given his advisers instructions to obliterate Iran if it assassinates him. ‘If they did that they would be obliterated,’ Trump said… while signing an executive order calling for the U.S. government to impose maximum pressure on Tehran. ‘I’ve left instructions if they do it, they get obliterated, there won’t be anything left.’ If Trump were assassinated, Vice President JD Vance would become president and would not necessarily be bound by any instructions left by his predecessor.”
February 4 – Reuters (Mikhail Flores and Karen Lema): “The air forces of the Philippines and the United States held joint patrols over the South China Sea…, a move that angered China, which also conducted a ‘routine patrol’ over a disputed shoal. The Philippines and the United States have ramped up security arrangements under President Ferdinand Marcos Jr. against a backdrop of rising tension between Manila and Beijing stemming from overlapping claims in the busy waterway.”
