MNI EUROPEAN OPEN: Japan GDP Growth Firmer Than Forecast

EXECUTIVE SUMMARY

• UKRAINE, EUROPE WILL BE PART OF ‘REAL’ PEACE TALKS, SAYS RUBIO, AS US WEIGHS PUTIN’S MOTIVES - RTRS 
• TRUMP'S TOP ECONOMIC AIDE PLANS REGULAR TALKS WITH FED's POWELL - BBG
• JAPAN GOVERNMENT VIGILANT AGAINST WEAKER CONSUMPTION - MNI 
• JAPAN Q4 GDP RISES 0.7% Q/Q, ANNUALIZED 2.8% 
• XI JINPING ATTENDS MEETING WITH CHINESE PRIVATE SECTOR LEADERS - BBG 

Fig 1:  Japan Q4 GDP Printed Better Than Forecast 

Source: MNI - Market News/Bloomberg

UK

HOUSING (BBG): “London faces the biggest bottlenecks of house sales in the UK as buyers and sellers rush to complete deals before a property tax increase comes into force, Rightmove said.”

UKRAINE (BBC): “Sir Keir Starmer has said he is "ready and willing" to put UK troops on the ground in Ukraine as part of a possible peace process.”

UKRAINE (BBC): “There can be "no durable peace" in Ukraine without European nations, particularly Ukraine, taking part in talks to end the war with Russia, the UK business secretary has told the BBC.”

DEFENCE (BBC): “The UK military is "so run down" it could not lead any future peacekeeping mission in Ukraine, the former head of the Army has said. Lord Dannatt told the BBC that up to 40,000 UK troops would be needed for such a mission and "we just haven't got that number available".”

DEFENCE (BBC): “The UK and EU countries must spend more on defence, with Europe facing an "existential question" even in the event of a negotiated peace in Ukraine, David Lammy has said.”

POLITICS (BBC): “Sir John Major has warned that democracy is under threat as the United States steps back from its leading role in the world. The former prime minister told the BBC that US President Donald Trump's policy of American "isolation" was creating a power vacuum that would embolden nations like Russia and China.”

TRADE (BBC): “Jonathan Reynolds told the BBC the UK and US have a "mutual interest" in negotiating an exemption from President Donald Trump's plans for the 25% import tax, which could come into force in March.”

EU 

EU/UKRAINE (BBG): “European officials are working on a major new package to ramp up defense spending and support Kyiv as President Donald Trump pushes for a quick end to the war in Ukraine.”

EUROPE (BBC): “European leaders are set to gather next week for an emergency summit on the war in Ukraine, in response to concerns the US is moving ahead with Russia on peace talks that will lock out the continent.”

EUROPE (POLITICO): “U.K. Prime Minister Keir Starmer is expected to attend an emergency summit of European leaders that is being organized for Monday in Paris. French Foreign Minister Jean-Noël Barrot confirmed on Sunday that the "main European countries" would meet on Monday in the French capital to discuss European security.”

EUROPE (BBC): “Ukraine's President Volodymyr Zelensky has called for the creation of an "army of Europe" amid rising concern the US may no longer come to the continent's aid.”

UKRAINE (BBC): “Kyiv has not been invited to talks between the US and Russia aimed at ending the war in Ukraine, a senior Ukrainian government source has told the BBC. The US special envoy to Ukraine Keith Kellogg had said Kyiv would be involved in Monday's talks in Saudi Arabia, but the source said no delegation would be present.”

UKRAINE (POLITICO): “United States Senator Lindsey Graham on Saturday proposed a conditional path for Ukraine’s NATO membership, suggesting automatic entry if Russia invades again.”

EUROPE/US (BBC): “US Vice-President JD Vance has launched a scalding attack on European democracies, saying the greatest threat facing the continent was not from Russia and China, but "from within". Instead, he spent the majority accusing European governments - including the UK's - of retreating from their values, and ignoring voter concerns on migration and free speech.”

DEFENCE (POLITICO): “NATO members will have to boost their defense spending by “considerably more than 3 percent” of GDP, NATO Secretary General Mark Rutte said Saturday during an interview at the POLITICO Pub on the sidelines of the Munich Security Conference.”

TRADE (POLITICO): “EU trade boss Maroš Šefčovič will travel to Washington next week for high-level meetings as Europe braces for a potential trade war with the United States, three officials confirmed to POLITICO.”

GERMANY (POLITICO): “German chancellor Olaf Scholz reiterated his call for the country to relax its strict spending rules, pushing for Germany's constitutional debt brake to be reformed immediately after national elections later this month.”

GERMANY (POLITICO): “German Chancellor Olaf Scholz on Saturday strongly rejected U.S. Vice President JD Vance’s demand that mainstream parties not impose “firewalls” against far-right groupings.”

GERMANY (BBG): “Germany’s plodding election campaign flared into life Sunday when the four main candidates clashed on live television, exchanging barbs a week before the ballot on topics ranging from irregular migration to the war on Ukraine and the country’s economic woes.” 

GEOPOLITICS (RTRS): “U.S. Secretary of State Marco Rubio on Sunday said Ukraine and Europe would be part of any "real negotiations" to end Moscow's war, signaling that U.S. talks with Russia this week were a chance to see how serious Russian President Vladimir Putin is about peace.” 

US 

FED (BBG): “President Donald Trump’s top economic adviser said he’ll meet regularly with Federal Reserve Chair Jay Powell to exchange views about the US economy, giving the president a channel to convey his opinions to the central bank.” 

GOVERNMENT (RTRS): “Echoing France's Napoleon Bonaparte, U.S. President Donald Trump on Saturday took to social media to signal continued resistance to limits on his executive authority in the face of multiple legal challenges.” 

OTHER 

JAPAN (MNI BRIEF): Japan's economy for the October-December period rose 0.7% q/q, or an annualised 2.8%, thanks to strong capital investment and net exports, posting the third straight quarterly growth, preliminary GDP data released by the Cabinet Office Monday showed.

JAPAN (MNI): The Japanese government is vigilant against the outlook for private consumption in the first quarter as continued high prices are set to affect consumer sentiment and private consumption adversely, a senior official at Cabinet Office said on Monday.

JAPAN (BBG): "The Bank of Japan is on course to finish offloading millions of dollars of stocks that it bought from beleaguered banks during the financial crisis two decades ago sooner than scheduled, a development that throws into focus the fate of its considerably larger holdings of exchange-traded funds." 

AUSTRALIA (BBG): "Australia’s opposition Liberal-National Coalition leads the Labor government in new opinion polls with an election due within three months, in the latest sign of mounting dissatisfaction with Prime Minister Anthony Albanese’s administration." 

CHINA 

PRIVATE SECTOR (XINHUA/BBG): "Chinese President Xi Jinping attended a meeting with prominent entrepreneurs on Monday, a potentially momentous show of support for the private sector after years of turmoil. Xi delivered a speech after listening to representatives of private firms, the official Xinhua News Agency reported. Premier Li Qiang also showed up at the meeting, Xinhua said. It didn’t elaborate on which firms were represented." 

CREDIT (YICAI): "Residents’ credit demand remained weak in January despite corporate activity driving new yuan loans to a record high of CNY5.13 trillion, Yicai.com reported, citing analysts." 

CHINA MARKETS 

MARKET DATA

NEW ZEALAND BNZ JAN. SERVICES PSI 50.4; DEC. 48.1

NEW ZEALAND DEC. NET MIGRATION ESTIMATE +3,810; NOV. 2140

JAPAN Q4 GDP 2.8% Q/Q ANNUALIZED; EST. 1.1%; Q3 +1.7%
JAPAN Q4 GDP +0.7% Q/Q; EST. 0.3%; Q3 +0.4%
JAPAN Q4 NOMINAL GDP +1.3% Q/Q; EST. 1.2%; Q3 +0.7%
JAPAN Q4 PRIVATE CONSUMPTION +0.1% Q/Q; EST. -0.3%; Q3 +0.7%
JAPAN Q4 BUSINESS SPENDING +0.5% Q/Q; EST. 0.9%; Q3 -0.1%
JAPAN Q4 INVENTORY -0.2 PPTS Q/Q GDP CONTRIBUTION; EST. -0.2 PPTS; Q3 +0.2 PPTS
JAPAN Q4 NET EXPORTS +0.7 PPTS Q/Q GDP CONTRIBUTION; EST. 0.4 PPTS; Q3 -0.1 PPTS

MARKETS

US TSYS: Tsys Futures Slightly Lower, Volumes Below Average, Cash Trading Closed

• Tsys futures are trading slightly lower today, largely just seen as profit taking after a rally on Friday, while there is no cash trading today with the US out for President's Day. Volumes are not surprisingly well below recent averages, while we remain trading within Friday's ranges. TU is -00⅝ at 102-23¾, TY is -03+ at 109-06+
• 10yr Treasury futures have recovered from Wednesday's low, rising back above the 50-day EMA in the process. Recent weakness resulted in a break of 108-20+, the Feb 4 low. The breach highlights a stronger reversal and most likely the end of the corrective cycle between Jan 13 - Feb 7. A continuation lower would open 108-00, the Jan 16 low, and expose 107-06, the Jan 13 low and bear trigger. Key resistance and the bull trigger is 110-00, Feb 7 high.
• Following the few busy sessions for key economic data last week, fed funds futures are still only pricing in a single 25bps cut this year, currently expected at the September meeting, although pricing has firmed throughout the past week with about a 60% chance the cut will come in June.

JGBS: Futures At Cheaps, Curve Twist-Flattening, 20Y Supply Tomorrow

JGB futures are weaker, -24 compared to the settlement levels, and at session lows.

• Japan's preliminary Q4 GDP was above market expectations. Q3 also saw positive revisions. The q/q annualized outcome was +2.8% versus 1.1% forecast. In q/q terms, this was 0.7% (0.3% was forecast, while Q3 was revised up to 0.4% from 0.3% originally reported).
• December industrial production was revised down to -0.2% in the final report, while the operating ratio fell to 102.4 in December compared to 102.6 in the previous month. December’s Tertiary Industry Index rose 0.1% m/m.
• “Morgan Stanley MUFG Securities revises its forecasts higher on Japanese bond yields to reflect recent market moves, strategists including Koichi Sugisaki write in a note.” (see BBG link)
• Cash US tsys are closed for the Presidents Day holiday.  TYH4 is slightly weaker.
• Cash JGBs are 2bps cheaper to 1bp richer, with a flattening bias. The benchmark 10-year yield is 1.2bps higher at 1.374% versus the cycle high of 1.377%.
• Swap rates are 1-2bps higher. Swap spreads are wider.
• Tomorrow, the local calendar will see Tokyo Condominiums for Sale data alongside 20-year supply.

AUSSIE BONDS: Cheaper Ahead Of RBA Policy Decision Tomorrow, 25bp Cut 83% Priced

ACGBs (YM -3.0 & XM -3.0) are weaker with US tsy futures (TYH5 at 109-06+, -0-03+ compared to closing levels) ahead of tomorrow’s RBA Policy Decision. Cash US tsys are closed today for the Presidents Day holiday.  

• Tomorrow’s RBA decision takes centre stage, with economists widely anticipating a 25bp rate cut.
• The RBA statement and updated forecasts will be released at 1430 AEDT, with Governor Bullock’s press conference at 1530 AEDT.
• There are also Q4 wages on Wednesday and January jobs data on Thursday.
• The Q4 WPI is forecast to post another 0.8% q/q rise bringing the annual rate down to 3.2% from 3.5% in Q3. January employment is projected at +20k, with the unemployment rate rising 0.1pp to 4.1%.
• Cash ACGBs are 3bps cheaper.
• Swap rates are 3-4bps higher.
• The bills strip is flat to -4, with a steepening bias.
• RBA-dated OIS pricing is flat to 4bps firmer across 2025 meetings today, with Dec-25 leading.
• A 25bp rate cut in April remains fully priced (117%), while the probability of a cut tomorrow stands at 83%.
• AOFM plans to sell A$800mn of the 2.75% 21 June 2035 bond on Wednesday and A$700mn of the 2.50% 21 May 2030 bond on Friday. 

BONDS: NZGBS: Closed Cheaper & At Worst Levels, RBNZ Decision On Wednesday

NZGBs closed 2-3bps cheaper but at the session’s worst levels. 

• Outside of the previously outlined NZ PSI and Migration data, there hasn't been much by way of domestic drivers to flag.
• The NZ-AU 10-year yield differential closed unchanged at +9bps. It has traded in a -10bps to +20bps since October.
• Cash US tsys are closed for the Presidents Day holiday.  TYH4 is slightly weaker.
• Swap rates closed 3-4bps higher.
• RBNZ dated OIS pricing is flat to 5bps firmer across meetings today, ahead of the RBNZ Policy Decision on Wednesday.
• The RBNZ decision is widely expected to cut rates 50bp again to 3.75%. Revised staff forecasts will also be published.
• All 22 analysts surveyed by Bloomberg are forecasting a 50bp rate cut and the RBNZ shadow board is recommending 50bp of easing.
• Notably, OIS pricing is 2–19bps firmer than pre-Q4 Labour Market data levels from February 4.
• Nevertheless, 49bps of easing is priced for Wednesday, with a cumulative 111bps by November 2025.
• Tomorrow, the local calendar is empty.
• On Thursday, the NZ Treasury plans to sell NZ$250mn of the 4.50% Apr-27 bond, NZ$200mn of the 4.25% May-34 bond and NZ$50mn of the 1.75% May-41 bond.

FOREX: USD Weakness Continues, Yen Up With Q4 GDP Beat, NZD & A$ Firm

The USD is weaker in the first part of Monday trade. The BBDXY index was last near 1287, close to session lows, but above intra-session lows form Friday, near 1286. Yen has outperformed so far today, aided by the Q4 GDP beat. 

• USD/JPY got to lows of 151.51, but sits slightly higher in latest dealings, last near 151.65, still up close to 0.45% in yen terms versus end Friday levels from NY.
• The Q4 GDP print showed better than expected GDP growth and positive growth in nominal terms as well. Consumption was slower than the Q3 pace but at 0.1% remained positive (and above market expectations). Business investment also rose, but at +0.5%q/q was sub market forecasts.
• The data should keep the bias for the BOJ skewed towards further tightenings. For USD/JPY, earlier Feb lows at 150.93 are likely to be a downside focus point.
• NZD and AUD have also ticked higher, ahead of key central bank meetings this week. The NZ services PMI moved back into expansion territory, after a long period of contraction. NZD/USD got to highs of 0.5750, but sits back at 0.5740 in latest dealings. Key levels to watch include, resistance is 0.5763 (Dec 18 highs), while 0.5790 (100-Day EMA) could become a target.
• AUD/USD is up close to 0.6370, up by a similar amount to NZD. 0.6383 is the Dec 13 in terms of upside target. The RBA is set to begin an easing cycle with a 25bp rate cut on February 18 bringing the OCR to 4.10%. However, the decision is unlikely to be clear cut and as a result, the statement and press conference are likely to sound cautious.
• Hong Kong and China equities were higher at the lunch time break, but away from best levels. China President Xi Jinping is meeting with various private sector business leaders. This is fueling optimism of greater traction between the government and the private sector. Tech related optimism is also running in the background.
• Looking ahead, the Fed’s Harker, Bowman and Waller speak, while there isn’t any US data due to the Presidents Day holiday. Euro area December trade data print and the Eurogroup meeting takes place.

ASIA STOCKS: Asian Equities Higher, As Tech Stocks Lead The Way

Asian equities advanced, with the MSCI Asia Pacific Index rising 0.8%, marking a fourth consecutive session of gains. Tech stocks led the rally, driven by Tencent, which surged to its highest level since 2021 after integrating DeepSeek’s AI model into WeChat search. Optimism around AI adoption and potential private-sector support from Chinese President Xi’s expected meeting with entrepreneurs further boosted sentiment.

• In Japan, the Topix gained 0.4% as strong earnings from Sony and Sanrio lifted sentiment, though automakers struggled after Donald Trump warned of potential US auto tariffs. Taiwan’s Taiex jumped 1.3%, with TSMC contributing to gains, while South Korea’s Kospi climbed 0.7%.
• China’s CSI 300 up 0.10% and Hong Kong’s HSI up 0.20%  posted modest gains, while Chinese brokerage stocks rose on news of a government stake transfer to Central Huijin Investment.
• Meanwhile, Australian equities underperformed, with the ASX 200 falling 0.4%, pressured by insurance stocks on reports of potential political intervention. There has been a flurry of earnings out in Australia today with notable movers included a2 Milk (+18%) on strong earnings, Bluescope Steel (+9.3%) on better-than-expected results, and Bendigo & Adelaide Bank (-19%) after a revenue miss.
• Investors are also watching upcoming earnings from Alibaba, Baidu, and Rio Tinto, along with rate decisions from Australia and Indonesia.

ASIA STOCKS: China & HK Equities Pare Earlier Gains Ahead Of Xi & Ma Meeting

Chinese and Hong Kong stocks are trading mixed today, there was early strength in tech stocks, however we have since seen the move higher been completely erased, the move came after headlines came out earlier stating President Xi will meet with Jack Ma, with traders now awaiting details. The earlier move higher in tech came following DeepSeek’s breakthroughs in AI have fueled bullish sentiment, with major players like Tencent, Alibaba Health, and Ping An Healthcare surging. Earlier, Tencent jumped 7.8% as its Weixin app began beta testing with DeepSeek, while healthcare AI stocks soared on expectations of improved margins and efficiency.

• Strategists at Goldman Sachs, Morgan Stanley, and JPMorgan have turned increasingly bullish on Chinese equities, forecasting further gains. Hong Kong’s options market is seeing record trading volumes, as investors pile into tech and EV bets, pushing the Hang Seng Tech Index to its highest level since 2022, with the Index up 0.40% today.
• Key Chinese entrepreneurs including Ma have been invited to meet the nation’s top leaders this week, which is seen as the next catalyst to extend the rally in China’s stocks.
• Meanwhile, geopolitical concerns remain a headwind, with US tariffs and trade tensions in focus. The HSI Volatility Index has jumped 5pts in February, reflecting renewed market swings. However, the shift in sentiment post-DeepSeek suggests China’s tech sector is now viewed as a legitimate competitor in the AI race, attracting fresh investor flows.
• Key benchmarks in the region are currently: HSI -0.25%, HS China Enterprise -0.45%, HS Property, +0.40%, CSI 300 +0.05%, CSI 2000 +1.45%, while the Nasdaq Golden Dragon Index rose 2.27% on Friday.

OIL: Crude Makes Up Earlier Losses To Be Little Changed Today

Oil prices are off their intraday lows to be little changed today. Brent is up 0.1% to $74.81/bbl after a low of $74.19, while WTI is flat at $70.73 following a trough of $70.12. Brent held above support at $74.10 but WTI traded below it at $70.43 but has since recovered. Oil prices have struggled on developments suggesting greater supply. The USD index is down 0.1%. 

• There has been increased talk of negotiations for a truce to bring peace to Ukraine which may ease sanctions on Russia and allow it to export more fossil fuels. Currently, a deal is a long way off though, with concerns that Ukraine is being excluded from talks between the US and Russia.
• There have also been positive developments in Iraq with the president of its Kurdistan region saying that the area should be able to export crude from the end of March after a two year dispute. This could add up to 300kbd to global supplies.
• Later the Fed’s Harker, Bowman and Waller speak, while there isn’t any US data due to the Presidents Day holiday. Euro area December trade data print and the Eurogroup meeting takes place.  

UP TODAY (TIMES GMT/LOCAL) 

Date	GMT/Local	Impact	Country	Event
17/02/2025	0700/0800	**	SE	Unemployment
17/02/2025	0800/0900		CH	Flash GDP
17/02/2025	1000/1100	*	EU	Trade Balance
17/02/2025	-		EU	ECB's Lagarde and Cipolllone in Eurogroup meeting
17/02/2025	1315/0815	**	CA	CMHC Housing Starts
17/02/2025	1330/0830	*	CA	International Canadian Transaction in Securities
17/02/2025	1430/0930		US	Philadelphia Fed's Pat Harker
17/02/2025	1520/1020		US	Fed Governor Michelle Bowman
17/02/2025	2300/1800		US	Fed Governor Christopher Waller
18/02/2025	0330/1430	***	AU	RBA Rate Decision
18/02/2025	0700/0700	***	GB	Labour Market Survey
18/02/2025	0700/0800	***	SE	Inflation Report
18/02/2025	0745/0845	***	FR	HICP (f)
18/02/2025	0930/0930		GB	BOE's Bailey fireside chat on open financial markets
18/02/2025	1000/1000	**	GB	Gilt Outright Auction Result
18/02/2025	1000/1100	***	DE	ZEW Current Expectations Index
18/02/2025	-		EU	ECB's De Guindos in ECOFIN meeting
18/02/2025	1330/0830	***	CA	CPI
18/02/2025	1330/0830	**	US	Empire State Manufacturing Survey