BUND TECHS: (M5) Trend Needle Points South

• According to CCTV News, the China Association of Small and Medium Enterprises announced today (11th) that China's SME Development Index in January was 89.0, up 0.1 points from December last year. Data from the China Association of Small and Medium Enterprises showed that the market demand for small and medium-sized enterprises improved steadily in January. The data also showed that the macroeconomic perception and industry situation perception index of small and medium-sized enterprises in January both rose by 0.3 points compared with December last year, showing that small and medium-sized enterprises have a positive outlook for future development.  (source: Yicai.com).
• Confidence in China's economic prospects remained upbeat this month, as chief economists surveyed by Yicai expect the effects of government stimulus policies to become more apparent as they are gradually implemented.  The Yicai Chief Economists Confidence Index came in at 50.62 for February, down from 50.66 in January and 50.72 in December but remaining above the contraction-expansion threshold of 50 for the fifth straight month. Yicai polled 11 leading China-based chief economists. (source: Yicai.com)
• China’s major bourses were lower today as President Trump signing tariffs on steel and aluminium imports as he indicated that autos, chips and pharmaceuticals were next in his sights.
• The Hang Seng lead the way lower down -0.59%, with the CSI 300 down -0.36%, Shanghai Comp down -0.16% and Shenzhen down -0.31%
• Taiwan’s TAIEX bucked the trend rising +0.20% today.
• CNY:  Yuan Reference Rate at 7.1716 Per USD; Estimate 7.3072
• Bonds:  yesterday’s selloff was short lived with the grind lower in yield resuming, CGB 10YR 1.62% (-1bp today). 

• China’s major bourses were lower today as President Trump signing tariffs on steel and aluminium imports as he indicated that autos, chips and pharmaceuticals were next in his sights.
• The Hang Seng lead the way lower down -0.59%, with the CSI 300 down -0.36%, Shanghai Comp down -0.16% and Shenzhen down -0.31%
• Taiwan’s TAIEX bucked the trend rising +0.20% today.
• The Jakarta Composite continued its poor run down -1.50%, to be down for a fifth successive day of trading.
• As Indian markets get going on their trading day the NIFTY 50 is opening very weak, down -0.45% in what could be a fifth successive day of declines.
• Korea however is bucking this trend as discussions in parliament centre around a special budget to stimulate growth in the ailing economy.  Yesterday the opposition proposed the idea of an additional budget and the ruling People’s Party said today, it does not oppose the idea. 
• The KOSPI is a regional bright spot today up +0.83%

Q4 GDP data showed that growth remained weak in the euro area at the end of 2024 and rising natural gas prices from a cold winter and the end to Russian pipeline flows through Ukraine are likely to weigh on already disappointing growth. Despite falling German activity, our January estimate of the recession probability 6-months ahead remained close to zero. The euro area remains vulnerable to trade and energy shocks though, which aren’t modelled.

• The euro area was flat on the quarter in Q4 to be up 0.9% y/y, while Germany continues alternating between positive and negative falling 0.2% q/q in Q4 to be down 0.2% y/y.
• The region is yet to face a universal tariff from the US, but President Trump has said it won’t escape. The US had a $235.6bn visible trade deficit with the EU in 2024 and 18.6% of its imports came from the group.
• Our estimate from 1985, which includes four recessionary episodes, has had no probability of a euro area recession 6-months ahead for over a year. The one from 1998 with three recessions has dropped to around 9% in January from 31% in June, the 2024 peak, and 64% in September 2023. The ECB began easing in June last year.
• Real oil prices, M3 growth and the change in unemployment are adding upward pressure on the recession probability, while the real repo rate, real exchange rate, economic sentiment and the yield curve are providing downward pressure. Real equities have been neutral.
• It is worth noting that econometric calculations are just estimates and not a projection. 

Euro area recession probability 6-months ahead estimate