US President Trump remarked that a new trade deal with China is possible; EU's Sefcovic says they are prepared to talk about reducing the 10% US auto tariff
FOMC Minutes showed various participants believed it might be appropriate to pause/slow balance sheet runoff given debt ceiling dynamics, supporting USTs.
Fed's Jefferson said they can take their time weighing the next move and Goolsbee said inflation is too high, once it comes down rates can follow
FOMC Minutes weighed on the USD, while EUR & GBP were largely rangebound & USD/JPY hit a fresh YTD low
Commodities await clarity on tariffs and Ukraine; Trump continued critical language on Zelensky though rhetoric from US advisors was more constructive
APAC traded mostly softer aside from China picking up on Trump's trade remarks, European bourses point to a slightly firmer open
Looking ahead, highlights include US Initial Jobless Claims, Philly Fed Index, EU Consumer Confidence, NZ Trade, Australian PMI, Japanese CPI, Speakers including ECB’s Makhlouf, Fed’s Goolsbee, Musalem, Jefferson & Barr, Supply from Spain, France & US.
Earnings from Alibaba, Walmart, Unity, Wayfair, Baxter, Rivian, Zealand Pharma, Airbus, Renault, Zurich Insurance, BE Semiconductor, Schneider Electric, Lloyds, Anglo American, Hargreaves Lansdown & Mercedes Benz.
Click for the Newsquawk Week Ahead.

US TRADE

EQUITIES

US stocks were little changed and finished mixed on Wednesday while T-Notes bull steepened with upside in both assets seen in late trade after the FOMC Minutes which signalled the Fed is in no rush to adjust policy and they should be cautious with future adjustments. However, commentary that various participants suggest it may be appropriate to pause or slow the balance sheet run-off until the debt ceiling issue is resolved, took the limelight and sent T-Notes to session highs with stocks following suit. Elsewhere, the attention also largely centred around geopolitics with more issues surrounding Ukraine and Russia peace talks as President Trump called Ukrainian President Zelensky a dictator and said that he needs to move fast or he is not going to have a country left.
SPX +0.18% at 6,140, NDX +0.05% at 22,175, DJI +0.16% at 44,627, RUT -0.46% at 2,281.
Click here for a detailed summary.

FOMC MINUTES

FOMC Minutes stated all participants said it was appropriate to hold rates and the staff's economic outlook was largely unchanged from the one provided at the December meeting. The Committee was well positioned to take time to assess the evolving outlook for economic activity, the labour market, and inflation, with the vast majority pointing to a still-restrictive policy stance. Participants indicated that provided the economy remained near maximum employment, they would want to see further progress on inflation before making additional adjustments to the target range for the federal funds rate. A majority of participants also observed that the current high degree of uncertainty made it appropriate for the Committee to take a careful approach in considering additional adjustments to the stance of monetary policy. Furthermore, a few noted that the current target range for the federal funds rate may not be far above its neutral level and various participants noted it may be appropriate to consider pausing or slowing the balance sheet runoff until there is a resolution of debt ceiling dynamics.

TARIFFS/TRADE

US President Trump said he will announce tariffs on cars, semiconductors, chips, pharma and probably lumber over the next month or sooner, while he is looking at a 25% tariff on lumber and forest products. Trump also said he is speaking to China on TikTok and later commented that a new trade deal with China is possible.
EU Trade Commissioner Sefcovic said there is nothing unfair about trade with the US and sees no justification for sudden unilateral tariff increases by the US, according to Bloomberg. It was separately reported Sefcovic said the EU is prepared to talk with the US about reducing its 10% tariff on cars as part of a broader negotiation aimed at avoiding a transatlantic trade war, according to POLITICO.

NOTABLE HEADLINES

Fed Vice Chair Jefferson (voter) said the Fed can take time when weighing the next monetary policy move and US economic performance has been quite strong, while he added that US monetary policy remains restrictive, the US labour market is solid and inflation has eased but is still elevated. Jefferson also said the best thing the Fed can do is to achieve its dual mandates on inflation and employment, as well as noted that they are fully committed to getting inflation back to target and will do what it takes. Furthermore, he said the Fed is in a watch-and-wait mode about the state of government policy.
Fed's Goolsbee (2025 voter) said inflation has come down but it is still too high and once inflation has come down, rates can come down more.
Fed's Bostic (2027 voter) said he did not expect progress on inflation would go in a straight line and bumpiness in inflation is not super surprising, while the question is whether Jan. CPI was a bump in the road or a new trend. Bostic also stated that the Fed did not cut too much last year and policy remains restrictive, as well as noting he is comfortable with taking a pause to see how the economy evolves and does not know what the future holds but noted everything is on the table at every meeting, according to Yahoo Finance.
US President Trump said the golden age of the US is back and it is open for business, while he will be working with Congress to pass the largest tax cuts in US history and will dramatically cut taxes with no taxes on tips and hopefully no taxes on social security. Furthermore, Trump said they are considering a new concept where they will give 20% of the DOGE savings to American citizens and with 20% to go to paying down debt.
US President Trump said he is not happy with Boeing (BA) about Air Force One and could buy a used plane or a plane from another country, but also commented that he would not consider buying a plane from Airbus (AIR FP).
US President Trump's administration may use public health order to cut immigration, according to CNN. It was later reported that President Trump signed an executive order to ensure taxpayer resources are not used to incentivise or support illegal immigration, according to the White House.
US President Trump’s administration reportedly ordered the Pentagon to plan for 8% budget cuts, according to the Washington Post. US Pentagon later commented that the budget review aims to save about USD 50bln which will be spent on programs aligned with US President Trump's priorities.
US Commerce Secretary Lutnick said President Trump's goal is to abolish the Internal Revenue Service, according to a Fox interview cited by Reuters.
US Senate Majority Leader Thune said the US Senate will proceed with its budget resolution, which will take place on Thursday.

APAC TRADE

EQUITIES

APAC stocks mostly declined with sentiment dampened by ongoing geopolitical uncertainty and after US President Trump's latest comments in which he repeated criticism against Ukrainian President Zelensky and said he will announce tariffs on cars, semiconductors, chips, pharma and probably lumber over the next month or sooner.
ASX 200 was pressured with mining, materials and financials among the worst performing sectors, while participants digested a slew of earnings releases including from the likes of Rio Tinto and Fortescue.
Nikkei 225 suffered from the ill effects of a firmer currency and slipped beneath the 39,000 level as Japan's 10yr yield initially climbed to its highest since November 2009.
Hang Seng and Shanghai Comp conformed to the downbeat mood amid trade frictions and US tariff threats, while China unsurprisingly maintained the Loan Prime Rates. However, the mainland index eventually returned to flat territory and there were recent reports that US President Trump is eying a bigger and better trade deal with China that would include substantial investment and commitments for China to buy more US products.
US equity futures were lacklustre after yesterday's choppy price action and following the latest FOMC Minutes which stated all participants said it was appropriate to hold rates although various participants noted it may be appropriate to consider pausing or slowing the balance sheet runoff until there is a resolution of debt ceiling dyn...