CREDIT OPEN: Headlines continue to come thick and fast
European stock futures are indicating a cautious start to the trading day, with markets still digesting the recent headlines concerning a ceasefire agreement in Ukraine and ongoing/escalating trade tensions between the US and Canada, setting a tentative tone.
Trump's new tariffs on steel and aluminium imports came into force today, expanding his trade wars to encompass more of the United States' top trading partners. The move has sent shockwaves through global markets, with particular focus on the US-Canada relationship.
In a volatile 24-hour period, President Trump initially announced plans to double tariffs on Canadian steel and aluminium to a staggering 50%. This decision sent the Canadian dollar on a rollercoaster ride in overnight trading. However, in a characteristic reversal, Trump later retracted the planned increase, leaving markets and policymakers scrambling to keep up with the rapidly changing situation.
In response to the US' imposition of 25% tariffs on steel and aluminium imports, the European Union has announced plans to implement countermeasures on April 1, 2025, targeting EUR26bn worth of American goods, including steel, aluminium, textiles, agricultural products, and home appliances, despite previous attempts at diplomatic resolution.
Despite the tariff turbulence, the stock market selloff has shown signs of easing. Trump's subsequent comments have helped lift the mood, suggesting that investors are becoming somewhat desensitized to the erratic tempo of the administration's trade policies. Nevertheless, risk assets remain cautious, with many traders wary of attempting to front-run market fluctuations in this unpredictable environment.
All eyes are now turning to the imminent release of US CPI data for February, due later in New York trading hours. This critical indicator comes at a time when markets have been recalibrating their expectations for Federal Reserve rate cuts. Recent days have seen a significant shift in Fed rate cut projections. Current pricing in fed funds futures indicates approximately 76bps of rate cuts through to the December FOMC meeting, down from a peak of about 90bps observed earlier in the week. This adjustment brings expectations back to levels last seen at the start of the week. This recalibration follows a surge in risk-off sentiment triggered by President Trump's refusal to rule out potential economic pain for the US economy, which had initially spurred a sharp repricing of rate cut expectations.
In a potential breakthrough on the geopolitical front, Ukraine has expressed readiness to accept an immediate 30-day ceasefire as proposed by the US, but obviously contingent on Russian acceptance. This development follows eight hours of talks between US and Ukrainian officials in Saudi Arabia. However, Russia's response has been less than encouraging, accusing Ukraine of lacking the political will for peace.
In a significant policy shift, the US has resumed intelligence sharing and military aid to Ukraine. This marks a dramatic turnaround from the recent deterioration in US-Ukraine relations, which had reached a low point during Ukrainian President Zelenskiy's last visit to the White House.
As we head into today's trading session, market participants will need to navigate this complex web of trade tensions, economic data, and geopolitical developments. The interplay between these factors is likely to drive market sentiment and could lead to increased volatility across various asset classes.
In addition, today's economic calendar includes a series of ECB speeches, featuring President Lagarde and other key officials, which could provide crucial insights into the central bank's monetary policy stance. Additionally, significant sovereign debt auctions are scheduled, with the UK selling GBP4bn of 2035 Gilts, Germany offering EUR4.5bn 2035 Bunds, and the US Treasury auctioning USD39bn in 10yr Notes.
For more on latest developments see the European Breakfast Briefing.
Wednesday's supply prospects
Another batch of issuers are lining up a mixture of euro and sterling deals after recent mandates but given the jittery broader market backdrop amid ongoing tariff wars, it will be interesting to see just how many forge ahead. Offering encouragement to those in the pipeline is that all of Tuesday’s trades got their deals over the line, albeit after a sedate opening which then deteriorated as the session progressed. As a reminder and in the single currency a combined EUR14.55bn of IG paper priced (alongside a couple of HY trades) Tuesday, spearhead by SSA borrowers with EUR12.25bn and in particular the European Union which took EUR9bn out of the market via a Jan 2035 line. Sterling issuance came in at GBP5.85bn on the day, again dominated by one issuer, as the United Kingdom printed a GBP5bn Sep 2049 linker. Full recap here.
** UNEDIC EUR Nov 2033 social
** Berlin EUR 10yr LSA
** NIB EUR 7yr green
** BADEA EUR 3yr
** Manchester Airport Group debut EUR500m (exp) 10yr secured
** SIG Group EUR 5yr
** Wessex Water GBP sustainability dual-tranche 9.5yr and 15.5yr
** Spuerkeess EUR500m no grow 6NC5 green snr pref
** Danish Ship Finance EUR500m no grow 6yr Ship covered bond
Eleven borrowers made up for lost time in the US Tuesday despite a shaky tone, raising USD18.6bn. They brought ex-SSA issuance for the week to USD23.2bn, still not enough to reach the lowest weekly estimate of USD25bn, let alone the average weekly guess of USD38bn, with Feb CPI looming large today. Still, with a lot of help from the fourteenth M&A-related transaction of the year, issuance bounced back from what one could consider a disappointing outing Monday, though market conditions were less than ideal for tapping the primary market. See THE ENDGAME.
What to watch today - US CPI & lots of ECB speak
** Key Data: SP Jan Retail Sales (08:00), US Weekly MBA Mortgage Applications (11:00) and US Feb CPI (12:30)
** Key Events: ECB’s Simkus (08:00), Lagarde (08:45), Villeroy (09:15), Escriva (12:00), Centeno (12:45), Nagel (13:45), Lane (15:15) and Panetta (16:30) speak
** Auctions: UK to sell GBP4bn 2035 Gilts (10:00), GE to sell EUR4.5bn 2035 Bunds (10:30) and US to sell USD39bn 10yr Notes (17:00)
** Earnings: 9 Stoxx600 & 2 S&P500 companies release results
All times GMT
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