OIL: Iraq Suggest Possible Basra Oil Export Via "Imminent" Ceyhan Restart

• President Donald Trump held last-minute calls with his Mexican and Canadian counterparts to avert a North American trade war.
• No agreement was struck to prevent a 10% baseline tariff on Chinese imports going into effect at midnight. In response, China announced a raft of retaliatory measures.
• Trump is expected to hold a call with Chinese President Xi Jinping in the coming days, leading to optimism a deal can prevent further escalation. However, Trump's administration is populated by China hawks, suggesting China tariffs are likely to be more durable.
• European Commission President Ursula von der Leyen said the bloc is "ready for tough negotiations" with Washington.
• Trump directed officials to create a sovereign wealth fund.
• The Senate confirmed Chris Wright as energy secretary. The Senate Intelligence Committee will vote today to advance DNI nominee, Tulsi Gabbard.
• The House Budget Committee delayed a crucial first step to unlocking budget reconciliation.
• Trump named Treasury Secretary Scott Bessent as acting head of the CFPB.
• Trump’s cryptocurrency and AI czar, David Sacks, will deliver a Capitol Hill press conference on crypto regulation.
• Israeli Prime Minister Benjamin Netanyahu will meet Trump at the White House today amid concerns over phase two of the Gaza ceasefire deal.
• Danish PM Mette Frederiksen hinted the US military could have a larger presence in Greenland.
• Trump suggested a deal with Ukraine to provide rare earth minerals.
• Poll of the Day: Trump's approval rating tracker is live. 

Full article: US DAILY BRIEF

The latest opinion poll from Forsa shows the main opposition centre-right Christian Democratic Union (CDU) and its Bavarian sister party the Christian Social Union (CSU) recording 28% support. This is the lowest backing for the Union in a Forsa poll since September 2023. While generic polling shows the Union is still in pole position to emerge as the largest party in the 23 Feb federal election, the fallout from two high-profile Bundestag votes in late January could yet have an impact on vote shares.

• Forsa: Union: 28% (-2), AfD: 20%, SPD: 16%, Green: 15% (+1), LINKE: 5% (+1), FDP: 4%, BSW: 4% (+1), Others: 8% (-1). 28 Jan-3 Feb, chgs w/21-27 Jan. 2,503 respondents.
• The far-right Alternative for Germany (AfD) voted alongside the CDU (and others) in votes on 28 and 31 Jan that sought to restrict migrant entries into Germany.
• Merz reiterated at a party congress on 3 Feb that he would never countenance going into gov't with the AfD post-election. These comments came as thousands protested in Berlin against the AfD and the CDU for breaching the 'firewall' that has for years seen all other parties avoid voting with the AfD.
• Political betting markets continue to see a Union-Social Democrat 'grand coalition' as the most likely outcome of the election, with data from Polymarket showing a 55% implied probability of that outcome. A Union-SPD-Green 'Kenya' coalition has a 12% implied probability of coming to fruition, with 8.6% for a Union-SPD-FDP 'Germany' coalition, 7% for a Union-Green 'black-green' coalition, and 6.3% for a Union-AfD gov't. 

Chart 1. Federal Election Opinion Polling, % and 6-Poll Moving Average

Source: Forsa, FGW, Allensbach, Infratest dimap, Verian, YouGov, Wahlkreisprognose, Civey, GMS, Democracy Institute, INSA, MNI

Option desks reported mixed SOFR flow overnight (April put flys/condors, June call flys), while Tsy options lean towards better 10Y & 30Y puts/put spds. Underlying futures mostly weaker - extending lows on decent volume (TYH5 near 500k). Late Monday Canada tariff extension followed Mexico's extension earlier in the day - 10% China tariff deadline has passed w/ retaliatory tariffs from China due Feb 10. Projected rate cuts through mid-2025 largely steady vs. late Monday levels (*) as follows: Mar'25 at -3.5bp, May'25 at -9.8bp, Jun'25 at -19.5bp (-19.2), Jul'25 at -24.9bp (-24.4bp).

• SOFR Options:
  • 3,800 0QH5 95.75/95.87/96.00 put trees ref 96.06
  • 4,000 SFRM5 96.00/96.12/96.25 call flys ref 95.87 to -.875
  • over +25,000 SFRJ5 95.62/95.68/95.75 put flys, 1.25
  • 5,000 SFRJ5 95.68/95.75/95.81/95.87 put condors
  • 16,000 SFRM5 95.81/95.93/96.00 broken call flys
  • 2,000 SFRZ5 96.50/96.75/97.00/97.25 call condors ref 96.035
• Treasury Options:
  • over 14,000 TYH5 107 puts, 7 last
  • 2,000 TYH 107.5/108 put spds
  • over 10,200 TYH5 108 puts, 19 last
  • over 13,000 USH5 110 puts, 9-11 ref 113-23
  • over 7,400 USH5 112 puts, 31-32
  • 1,500 TYH5 110.5/111.5 call spds ref 108-25
  • 2,100 FVH5 105/106 put spds ref 106-11.25
  • 2,000 wk2 US 111/112 put spds ref 114-01 (exp Feb 14)