MNI EUROPEAN OPEN: EU Assets Rally Post German Election

EXECUTIVE SUMMARY

• GERMAN CONSERVATIVES SEAL ELECTION, SEEKING COALITION TALKS - BBG 
• OFFICIAL INTERIM ELECTION RESULTS TILT TOWARDS MISSING BSW & FDP - MNI 
• BOC SEE MILDER REACTION TO TARIFFS THAN TO COVID - MNI BRIEF 
• ECONOMISTS SEE CHINA GDP GROWTH TARGET AT 5%; CPI AT 2%: PAPER - BBG 
• NEW ZEALAND RETAIL SALES REBOUND IN SIGN RECESSION HAS ENDED - BGB 

Fig 1: EUR/USD And EU Equity Futures  

Source: MNI - Market News/Bloomberg/Refinitiv. 

UK

UK/RUSSIA (BBG): “The UK will announce a fresh set of sanctions against Russia on Monday, aimed at reducing revenues for Moscow three years after it invaded Ukraine. The measures will be the “largest package” against Russia since the early days of the war, Foreign Secretary David Lammy said in a statement.” 

EU 

GERMANY (MNI): Official interim results on the German parliamentary election closely tilt towards the possibility of a two-party coalition of Union (CDU/CSU) and SPD, as they see both FDP and BSW to not secure enough votes for parliamentary representation.

GERMANY (BBG): “Germany’s conservative opposition leader Friedrich Merz said he’ll move quickly to form a new government after he won Sunday’s federal election with a result that will require him to form a coalition.” 

UKRAINE (BBG): “Ukrainian President Volodymyr Zelenskiy said the US dropped its demand for Kyiv to commit to paying $500 billion as part of talks to give Washington a cut of the country’s mineral wealth.”  

US 

UKRAINE/RUSSIA (BBG): “Two of President Donald Trump’s top advisers declined to describe Russia as the aggressor in the war in Ukraine, as the administration seeks Vladimir Putin’s support for a peace deal.” 

GOVERNMENT (RTRS): “Multiple U.S. agencies have told employees not to respond immediately to a demand by President Donald Trump's adviser Elon Musk to list their accomplishments in the past week or be fired, as a chaotic campaign to cull the federal workforce pushes forward.” 

TARIFFS (BBG): “The Trump administration told Mexican officials that they should put their own duties on Chinese imports as part of their efforts to avoid tariffs threatened by President Donald Trump, according to people familiar with the matter.” 

HOUSING (MNI BRIEF): U.S. sales of existing homes fell 4.9% to a seasonally adjusted annual rate of 4.08 million in January, the National Association of Realtors said Friday, below market expectations and the slowest since October. Sales year-over-year are up 2.0%. 

OTHER 

CANADA (MNI): Canada's central bank said its has some room to lower interest rates in a U.S. trade war that would stall economic growth for two years, with officials mindful of ensuring that a boost of inflation above the target remains temporary. 

CANADA (MNI BRIEF): Bank of Canada Governor Tiff Macklem said Friday the country's dollar may see further weakness in any U.S. trade war, saying those tensions have driven its recent "material depreciation" more than the gap between policy rates in the two countries. 

CANADA (MNI BRIEF): The BOC's response to any trade war will be milder than emergency measures taken during the pandemic because this time weaker growth comes with competing inflation pressure, Governor Tiff Macklem said Friday. 

NEW ZEALAND (BBG): “New Zealand retail spending rebounded in the final three months of 2024, adding to signs that lower interest rates are helping the economy emerge from recession.” 

CHINA 

SHIPPING (BBG): “The Trump administration is proposing fees on the use of China’s commercial ships it says could help counter the country’s maritime dominance. The Office of the US Trade Representative outlined a plan for fees on Chinese-built ships that transport traded goods as well as mandates requiring a portion of US products to be moved on American vessels.” 

US/CHINA (BBG): “China called on the US to stop politicizing and weaponizing economic and trade issues, as Washington tries to limit overseas investments by Beijing in line with President Donald Trump’s “America First” policy.” 

RRR (YICAI): “China is expected to reduce the required reserve ratio by between 0.5 to 1.0 percentage points throughout 2025, according to Lian Ping, chairman at the China Chief Economist Forum.” 

CPI/GDP TARGETS (SECURITIES TIMES): “China’s economic growth target is expected to be set at about 5% for 2025, while CPI will probably be lowered to 2% from 3% for previous years, according to a report in Securities Times on Monday, citing economists.” 

TECH (BBG): “Alibaba Group Holding Ltd. has pledged to invest more than 380 billion yuan ($53 billion) on AI infrastructure such as data centers over the next three years, a major commitment that underscores the e-commerce pioneer’s ambitions of becoming a leader in artificial intelligence.” 

CHINA MARKETS 

MNI: PBOC Net Injects CNY102 Bln via OMO Monday

MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY292.5 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net injection of CNY102 billion after offsetting the maturity of CNY190.5 billion today, according to Wind Information. 

• The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.8224% at 09:52 am local time from the close of 2.2156% on Friday.
• The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 44 on Friday, compared with the close of 58 on Thursday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.

MNI: PBOC Sets Yuan Parity Higher At 7.1717 Mon; -0.78% Y/Y

MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate higher at 7.1717 on Monday, compared with 7.1696 set on Friday. The fixing was estimated at 7.2532 by Bloomberg survey today.

MNI: China CFETS Yuan Index Down 0.43% In Week of Feb 21

The CFETS Weekly RMB Index was 99.63 on Feb 21, down 0.43% compared with 100.06 as of Feb 14.

The gauge, which compares the yuan to a basket of currencies from China's 24 major trading partners, has decreased 1.81% this year, when compares with 101.47 on Dec. 31, 2024.

MARKET DATA

NEW ZEALAND Q4 RETAIL SALES EX INFLATION Q/Q 0.9%; MEDIAN 0.5%; PRIOR 0.0% 

MARKETS

US TSYS: Tsys Futures Edge Lower, Cash Trading Closed

• Tsys futures are trading slightly lower today, however remain trading within Friday's ranges. Cash tsys trading has been closed with Japan out and with a lack of major data or headlines out during the session there isn't much to mention. Futures volumes has been largely tied with rolls. TU is -01⅜ at 102-27, while TY is -04 at 109-18
• TY recovered well off the intraday low of 108-21+ posted Wednesday, keeping the price clear of any test on 108-04 support. As such, markets are narrowing the gap with last week’s highs and may post a strong weekly candle at the close. Any further gains here would expose key resistance and the bull trigger at 110-00, the Feb 7 high. For bears, recent weakness resulted in a break of 108-20+, the Feb 4 low, signalling the end of the correction between Jan 13 - Feb 7. Moving average studies highlight a dominant downtrend. A resumption of weakness would open 108-00, Jan 16 low, and expose 107-06, Jan 13 low and bear trigger.
• Last week saw the short-end outperform, with the 1-3yr tenors ending -6bps richer, while the 10yr closed 4.5bps richer at 4.431%, we have only traded below here once this year, back on Feb 5th when we reached a yield of 4.418%. The 2s10s closed the week little changed at 23.5bps, although this is10bps flatter ytd.
• Fed-dated OIS saw a dovish trading following the risk-off move, bringing forward the first full 25bp of easing to the July meeting from the September meeting, while the market is now pricing in 45bp of easing is vs 37bp priced on Thursday.
• There isn't much on the calendar tonight, with just Chicago Fed Nat Activity Index & Dallas Fed Manf. Activity

AUSSIE BONDS: Holding Richer, Narrow Ranges On A Data-Light Day

ACGBs (YM +6.0 & XM +7.5) are holding stronger on a data-light session with narrow ranges.

• There is no cash US tsy trading in the Asia-Pac session today with Japan closed for the Emperor’s Birthday holiday.  TYH5 is dealing -0-04 compared to closing levels at 109-18.
• (AFR) “Time for a Bex and good lie down after RBA rate call” by Stephen Miller (see BBG link)
• Cash ACGBs are 7bps richer.
• Swap rates are 7bps lower.
• The bills strip has bull-flattened, with pricing +1 to +7.
• RBA-dated OIS pricing is flat to 6bps softer across 2025 meetings today but remains 1-3bps firmer than last Tuesday’s pre-RBA levels. A cumulative 48bps of easing priced by year-end (based on an effective cash rate of 4.09%).
• Tomorrow, the local calendar is empty, ahead of January's CPI Monthly on Wednesday.
• The AOFM plans to sell A$800mn of the 3.75% 21 April 2037 bond on Wednesday and A$700mn of the 1.75% 21 November 2032 bond on Friday.

BONDS: NZGBS: Closed Mid-Range With A Bull Flattener

NZGBs closed showing a bull-flattener, with benchmark yields 2-5bps lower. Nevertheless, NZGBs finished mid-range, with the 10-year underperforming its Australian counterpart. 

• The AU-NZ 10-year differential finished at -9bps compared to the recent high of +10bps in early November, which marked the highest level since August 2022. However, a simple regression analysis of the AU-NZ 10-year yield differential against the AU-NZ 1Y3M spread over the past 18 months shows that the 10-year differential is around 14bps above fair value based on the regression model.
• NZ Q4 2024 retail sales (ex inflation) were stronger than forecast, rising 0.9% q/q, against a 0.5% market expectation. This was the firmest q/q print since the end of 2021. This shows the impact of RBNZ easing beginning to benefit parts of consumer spending.
• Swap rates closed 3-6bps lower, with the 2s10s curve flatter.
• RBNZ dated OIS pricing closed little changed out to August but 3-5bps firmer beyond. 27 bps of easing is priced for April, with a cumulative 58 bps by November 2025.
• Tomorrow, the local calendar is empty.
• On Thursday, the NZ Treasury plans to sell NZ$225mn of the 3.00% Apr-29 bond, NZ$225mn of the 3.50% Apr-33 bond and NZ$50mn of the 1.75% May-41 bond.

FOREX: EUR Rebound Falls Short Of Jan High, But Broad USD Weakness Evident

The USD BBDXY index sits at in the low 1282 region dealings, just up from session lows of 1281.2. These levels were last seen back in mid Dec last year. EUR/USD has been the best performer in the G10 space, rising back through 1.0500, as market digested the Sunday German election results. 

• The German election saw the conservative CDU/CSU win the most votes, which was in line with expectations. Focus now shifts to what type of coalition government will be formed. German equity futures opened down a touch before rallying over 1%, aiding EUR gains.
• For EUR/USD, the pair tracked equity futures higher, and moved through option expiries at the 1.0500 level. We reached highs of 1.0528, which was very close to the Jan highs of 1.0533, but we sit back lower now (last 1.0510/15, still +0.50% for the session).
• Other EU bloc currencies are also higher, up 0.35% for NOK, and 0.40% for SEK,
• Yen has lagged broader EU bloc currencies gains. We were last 149.20/25, little changed for the session. We did to fresh lows of 148.85, but we this move was short lived. Japan markets are out today, while the equity mood is better from a US futures standpoint, up around 0.50%. A number of regional equity markets are down, but not as much as implied by Friday session losses in the US.
• Some medical experts looked to play down fears of a fresh pandemic, after it was reported a new covid like virus that can reportedly transmit from bats to humans weighed on broader risk appetite on Friday (including US equities).
• AUD/USD and NZD/USD are both up by around 0.30-0.35%. AUD/USD at 0.6380 is still short of recent highs above 0.6400. NZD/USD is at 0.5760 is just under recent highs at 0.5773. Earlier data showed stronger than expected NZ retail sales volumes for Q4 last year, led by better discretionary spending.
• Looking ahead, we have the German IFO, final EU inflation, as well as BoE speak. We hear from the BoC as well. In the US we have the Dallas Fed survey.      

ASIA STOCKS: China & Hong Kong Equities Mostly Lower, Property Finds Support

It has been a rather quiet session for Asian equities this morning, with both Hong Kong & China equities outperforming the sell-off we saw in US equities on Friday night, those moves came after there were reports of a new bat coronavirus study. While tension remain somewhat elevated as Trump moved to restrict Chinese investment in some strategic US industries, while also considering further restrictions on outbound investment to Beijing in sectors including semiconductors and AI.  

• The Hang Seng Index is 0.50% lower, with the Hang Seng Tech Index dropping 1.5%, following Friday’s sharp rally. US-China trade tensions weighed on sentiment, with Wuxi Biologics (-8.9%) and Wuxi AppTec (-8.7%) hit after the U.S. moved to restrict Chinese investment in healthcare. Lenovo (-5.2%) and Kuaishou (-6%) also declined. However, travel stocks outperformed, with Trip.com (+4.4%) and Tongcheng Travel (+3.1%) rising.
• Mainland equities are also lower, with the CSI 300 and Shanghai Composite both down 0.1%. Property stocks gained on expectations of policy support at the upcoming National People’s Congress, with Sunac China (+12%) and China Vanke (+8.2%) leading gains, the BBG China Property Developer Gauge is 2.50% higher. Robotics stocks advanced on reports that Shenzhen will establish a ¥10b industry fund to support AI and robotics, lifting Shengtong Printing (+10%) and Shenzhen Invt Electric (+8.4%). Meanwhile, Chinese shipping stocks declined after the U.S. proposed fees on Chinese-built vessels.
• There isn't anything major on the data front this week for China, while Hong Kong has trade balance data out tomorrow, followed by GDP numbers on Wednesday

ASIA STOCKS: Asian Equities Mixed Following US Sell-Off On Friday

Asian stocks have traded mixed at the start of the week, with investors staying cautious following a Wall Street selloff triggered by weak economic data. The Hang Seng and mainland Chinese benchmarks remained range-bound, while a broad gauge of Asian equities edged lower after hitting a four-month high on Friday. The dollar weakened, with the euro gaining 0.5% after Germany’s conservative party secured an election victory.

• Chinese tech stocks, which have rallied this year on AI optimism and policy support, remained a key focus. Allianz Global Investors noted that China remains under-owned by foreign investors despite its innovation potential. Meanwhile, trade tensions persisted, with China’s Vice Premier He Lifeng raising concerns over new U.S. tariffs, and President Trump directing further restrictions on Chinese investment in strategic sectors. The HSI is -0.70%, while CSI 300 is -0.20%
• Japan is out today for a publica holiday, however Warren Buffett’s Berkshire Hathaway signaled plans to increase its stake in Japan’s five largest trading houses.
• South Korea's KOSPI dropped 0.60% as auto and chip stocks led declines. Samsung Electronics fell 1.37%, SK hynix lost 3.34%, and Hyundai Motor slipped 0.50%. However, POSCO Holdings rose 0.18%, and HMM surged 13.82%.
• Taiwan's TAIEX is 0.6% lower as global semiconductor stocks struggle, TSMC is down 1.40%, following the SOX dropping 3.28% on Friday.
• Australia's ASX 200 is flat with as mining and tech stocks struggle. Wisetech Global plummeted as much as 23% after director resignations over disagreements with its founder. New Zealand's The NZX 50 dropped 1.7%, with Summerset Group dropping 6.5%. 

Looking ahead, Nvidia’s earnings on Wednesday will be a key risk event, as traders anticipate higher market volatility, given the company’s central role in the AI-driven rally. Other notable events include central bank decisions in South Korea and Thailand, along with U.S. consumer confidence data.

Oil Continues to Fluctuate As Trump Aims at China.  

• China’s ailing economic growth has at different times, driven oil prices lower on concerns of their demand dropping.
• As President Trump takes new aim at China with curbs on spending on tech, energy and fees on the use of China’s commercial ships, oil prices have dipped fearing this could challenge China’s growth further.
• Oil had rallied early on with WTI reaching $70.49, before declining below Friday’s close to reach $70.18.
• Brent had seen early gains reaching $74.62 before it declined also to $74.30 marginally above the US close on Friday
• The move lower in oil likely increases the probability of OPEC+ sticking to the postponement of an increase in supply, a subject that draws the attention of President Trump and his demands to lower prices
• News of supply from Iraq could see a resumption of exports from Kurdistan via a pipeline to Turkey.  Kurdistan is a semi-autonomous region that historically had supplied oil via Turkish pipeline.  Due to a dispute with the Central Government, shipments had stopped.
• This will pose an interesting dynamic to the supply constraints from OPEC+ that oversee Iraq’s output, given Kurdistan’s desire to start shipments again.
• The US’s Interior Secretary Burgum has suggested that an opportunity exists for the US to map all deposits of oil and gas on US Federal land to further cement the US’s production capabilities.
• News of the US President using sanction relief as a bargaining chip with Russia, appear to have the desired effect with the Kremlin as it sees China and India as a more reliable partner (according to BBG)

Gold’s Fortunes Fluctuate in Asia Trading Day.

• Gold sold off in early trading in Asia today, before staging a comeback.
• Opening at US$2,935.45, gold sold off to a low of $2,921.48 before rebounding back above opening levels to be at $2,941.95.
• Year to date Gold is up over 10% in 2025, delivering positive returns in every trading week of the year.
• The much-mooted revaluation of US Gold reserves touted by the US President’s team could actually be good for prices, according to BofA Head of Commodities Research (per BBG).
• In a further bullish sign for gold yet another Central Bank has increased their gold purchases with data from Iran showing imports of 100 tonnes during their financial year, up from 30 tonnes prior (according IRNA). 

UP TODAY (TIMES GMT/LOCAL) 

Date	GMT/Local	Impact	Country	Event
24/02/2025	0900/1000	***	DE	IFO Business Climate Index
24/02/2025	0900/0900		GB	BOE's Lombardelli remarks at BOE BEAR Conference
24/02/2025	1000/1100	***	EU	HICP (f)
24/02/2025	1315/0815		CA	BOC Deputy Gravelle speaks on BOE panel at "The Future of the Central Bank Balance Sheet" conference
24/02/2025	1315/1315		GB	BOE's Ramsden and Saporta panellist on CB Balance sheet during QT
24/02/2025	1330/0830	*	CA	Quarterly financial statistics for enterprises
24/02/2025	1400/1500	**	BE	BNB Business Confidence
24/02/2025	1530/1030	**	US	Dallas Fed manufacturing survey
24/02/2025	1630/1130	*	US	US Treasury Auction Result for 13 Week Bill
24/02/2025	1630/1130	*	US	US Treasury Auction Result for 26 Week Bill
24/02/2025	1800/1800		GB	BOE's Dhingra speech on state of the UK monetary policies
24/02/2025	1800/1300	*	US	US Treasury Auction Result for 2 Year Note
25/02/2025	0700/0800	***	DE	GDP (f)
25/02/2025	0920/0420		US	Dallas Fed's Lorie Logan
25/02/2025	1000/1000	*	GB	Index Linked Gilt Outright Auction Result
25/02/2025	1100/1100	**	GB	CBI Distributive Trades
25/02/2025	1300/1400		EU	ECB's Schnabel at BOE's Annual Conference on Balance Sheet
25/02/2025	1330/0830	**	US	Philadelphia Fed Nonmanufacturing Index
25/02/2025	1355/0855	**	US	Redbook Retail Sales Index