21st February 2025

MACRO:

• JGBs and Nikkei are bid, with Yen offered, after BoJ Governor Ueda said the central bank stands ready to increase government bond buying if long-term interest rates rise sharply. Said if markets make abnormal moves, the bank stands ready to respond nimbly, such as through market operations, to smooth market moves. (Newswires)
• Japan's Finance Minister Kato said that long-term interest rates fluctuate due to various factors and highlighted that higher rates could put pressure on the country's fiscal situation. (RTRS)
• Japan’s consumer inflation picked up further in January because of higher energy and food costs, likely adding fuel to speculation that an interest-rate hike is coming soon. (WSJ)
• Japanese officials and executives say China’s escalation of export controls on semiconductor raw materials, particularly gallium, is threatening global electronics supply chains. Japanese suppliers for western giants such as Tesla, Broadcom, and Apple may need to gain export licenses from Beijing. (FT)
• Traders note macro hedge funds have continued to buy yen call options this week against a range of currencies including the dollar, euro and Swiss franc. (BBG)
• Former BoJ member Sayuri Shirai said the bank may raise interest rates in March if Trump pushes through on his tariff threats and adds to already mounting domestic inflationary pressures. (RTRS)
• Fed's Kugler said she believes the bank should leave rates unchanged "for some time, given the balance of risks that we face right now." (RTRS)
• Elon Musk, when asked if he plans to audit the Federal Reserve, said yes without offering elaboration. He also added fuel to the possibility of giving payouts to the public from some of the budget savings that DOGE identifies, something which GOP lawmakers are showing opposition to. (WSJ)
• Trump plans to disband the Postal Service's governing board and absorb the agency into his administration, officials say, putting its quasigovernmental status into doubt. (WSJ)
• China's Foreign Ministry said Vice Premier He Lifeng will speak with US Treasury Secretary Bessent, "will communicate important issues in the economic field between China and US over video call". (RTRS)
• Yuan hits 3-month high on US trade deal optimism, eyes on Bessent's call. (RTRS)
• The Hang Seng index surpassed the October peak amid Alibaba's 15% gains on the back of its earnings.
• China’s finance ministry will implement more proactive fiscal policies this year to support economic development, Finance Minister Lan Fo’an wrote in the People’s Daily. Said China will increase its fiscal deficit ratio and accelerate spending, will also expand issuance of government bonds to help stabilize economic growth. (People's Daily)
• China’s ramp-up in liquidity injections has failed to alleviate a squeeze in the money market, keeping borrowing costs elevated. The PBoC added the largest single-day infusion so far in February on Friday, but repo rates remain elevated. (BBG)
• GBP strengthened after UK retail sales grew more strongly than expected at the start of the year, as robust demand for food offset weaker consumer confidence. (BBG)
• Britain delivered a smaller-than-expected budget surplus in January, leaving Chancellor of the Exchequer Rachel Reeves on track to overshoot official borrowing forecasts. (BBG)
• U.K. consumers were slightly less gloomy this month about expectations for their personal finances after the BoE cut its key interest rate, although the outlook for the economy continued to be a source of pessimism, according to the latest GfK survey. (WSJ)
• The UK needs to relax planning rules to ensure its choked electricity grid can cope with higher demand and a massive build-out of renewable power, a government adviser said. (BBG)
• Euro saw downside, and Bunds upside, after French business activity slumped much more than expected in February, according to the HCOB PMIs, as new business and backlogs in the dominant services sector sharply declined. (RTRS)
• Pollsters in Germany are still nervous there might be a surprise in Sunday's election. (BBG)
• German conservative frontrunner Friedrich Merz pledged that a government under his leadership wouldn’t raise taxes to fund the hundreds of billions of euros of investment needed in areas like defense and infrastructure. (BBG)
• RBA Governor Bullock told parliament on Friday the bank is not committed to any course of action on interest rates in the coming months, saying that easing policy too quickly may stoke a fresh wave of inflationary pressures. She highlighted the hot jobs report as potentially derailing the disinflationary process. (WSJ)
• RBNZ's chief economist Conway said the high-frequency data is consistent with the central bank's view that New Zealand's economy bottomed out in the middle of 2024 and started to slowly pick up in December. Conway said the bank is welcoming a weaker exchange rate. (RTRS/BBG)
• Javier Milei’s prospects at legislative elections have been boosted after Argentina’s senate approved an electoral reform even as a cryptocurrency scandal raged around the libertarian leader. (FT)
• Taiwan’s financial regulator is considering lifting a cap that a single stock can take up in the market capitalization of local exchange-traded funds that track indexes. (BBG)

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GEOPOLITICAL:

• Ukrainian President Zelenskiy said his talks with U.S. envoy Keith Kellogg "restore hope" in terms of achieving an agreement with Washington.
• U.S. Secretary of State Rubio said a possible meeting between U.S. President Trump and Russian President Putin "will largely depend on whether we can make any progress on ending the war in Ukraine". (RTRS)
• The EU wants to replace at least some of the fertiliser it imports from Russia with products processed from “homegrown” animal dung and urine to reduce revenues going to Moscow’s war machine. (FT)
• Chinese military vessels have held live-fire exercises off the coast of Australia, with local media reporting commercial airlines have been told to avoid the area. (BBG)

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EQUITIES:

• Japan is drawing up plans for Tesla to invest in the struggling carmaker Nissan, following the collapse of its merger talks with rival Honda. The group is hopeful Tesla will become a strategic investor since they believe Tesla is keen to acquire Nissan’s plants in the US to help it boost domestic manufacturing in response to Donald Trump’s tariff threats. (FT)
• Meta has cut back on its yearly distribution of stock options by about 10% for tens of thousands of employees despite the social media giant trading at record highs this month. (FT)
• Rivian projected a surprise drop in EV deliveries for the year but said it expected to post a modest gross profit, as it slashed raw material and supply chain costs in its drive for efficiency. (RTRS)
• Celsius is acquiring Alani Nu, a rival energy-drink brand, for $1.8 billion to boost its growth and gain market share. (WSJ)
• CATL will collaborate with Volkswagen on EV batteries, new materials and other auto parts as the automaker seeks to adapt to the fast-evolving and competitive EV market. (WSJ)
• BYD's off-road brand Fangchengbao on Friday launched smart versions of its plug-in hybrid SUV Bao 5. (RTRS)
• Airbus has been downgraded by Jefferies to "hold" from "buy", due to challenges in production ramp-up, integration of the aerostructures business, and absence of a new share buyback to support shares in the next quarters. (RTRS)
• Air Liquide raised its medium-term operating margin guidance and extended the target period by one year on Friday, after its 2024 sales slightly beat market expectations. (RTRS)
• Standard Chartered reported a drop in fourth-quarter net profit and said it would start a $1.5 billion share buyback. (WSJ)
• Italy's antitrust agency said on Friday it was investigating BYD, Stellantis, Tesla, and Volkswagen for allegedly misleading consumers on the performance of their electric vehicles. (RTRS)
• Nissan Motor’s debt rating was cut to junk status by Moody’s Ratings, days after the Japanese automaker and peer Honda Motor scrapped their planned merger. (WSJ)