OIL: Oil Summary At European Close: Crude Falls

• Still weaker at midmorning, stocks have bounced off session lows after wires reported positive negotiations between US and Mexico with 25% tariffs that were scheduled to start tomorrow - will be delayed for one month in exchange for exchange for stricter border enforcement by Mexico.
• Currently, the DJIA trades down down 126.17 points (-0.28%) at 44416.3, S&P E-Minis down 41 points (-0.68%) at 6027.75, Nasdaq down 188.2 points (-1%) at 19439.99.
• Health Care and Consumer Staples sectors led gainers in the first half, IDXX surged +10.75% after beating earnings and providing positive 2025 guidance, Molina Healthcare +3.27%, Universal Health Services +3.15%. The Consumer Staples sector was buoyed by Kroger +3.60%, Tyson Foods +3.29%, Keurig/Dr Pepper +2.04%.
• Conversely, Information Technology and Consumer Discretionary sectors continued to underperform: tech laggers included Super Micro Computer -5.82%, Microchip Technology -3.61%, while Nvidia and Dell declined 3.25%. Weighing on the Consumer Discretionary sector: Tesla -5.15%, Aptiv -3.54, Deckers Outdoor -3.07%.
• Reminder, another heavy earnings docket this week includes the following on Monday-Tuesday: PepsiCo Inc, Archer-Daniels-Midland Co, Snap Inc, Alphabet, Match Group, Amgen Inc, Advanced Micro Devices, Lumen Technologies, Chipotle Mexican Grill, Juniper Networks Inc.

Construction activity surprised significantly to the upside in December, rising 0.5% M/M (0.2% expected, 0.2%), with residential construction leading the way.

• Private sector construction (more than 75% of total spend, with public spending the remainder) rose by 0.9% M/M to a fresh all-time high on a SAAR basis, with residential construction up 1.5%.
• The latter is picking up again after a lull in the fall, which may have been impacted by hurricanes.
• Public sector construction - which had been soaring for most of H2 2024 - pulled back sharply at -0.5%, the weakest since July 2023 and after a 0.1% contraction in November.
• There has been a clear pickup in private versus public sector spending: the 3M/3M annualized rise in private sector spending hit a 31-month high 6.2%, with public spending slowing to 7.3% by that metric, vs double-digit growth in the preceding 2 months.
• Private nonresidential investment on the other hand remained fairly soft, growing just 0.1% M/M (same as prior) and has been fairly static for 6+ months.
• Considering the apparent recovery in both "soft" and "hard" manufacturing indicators, manufacturing construction has failed to pick up any momentum - it remains below mid-2024 levels, albeit that came after an impressive tripling of spending over the preceding 3 years.
• These figures are all in nominal terms but broadly reflect what we saw in the Q4 GDP figures: residential investment rose for the first time in 3 quarters (+5.3% Q/Q annualized in real terms) with nonresidential structures contracting for a 2nd consecutive quarter (-1.1%).
• Both look to be stabilizing going into 2025.

US President Donald Trump has confirmed in a message on Truth Social that he has paused imposing tariffs on Mexican imports for one month, citing an agreement with Mexican President Claudia Sheinbaum to take steps to secure the US-Mexico border to illicit flows of fentanyl and migrants. 

• Trump: "I just spoke with President Claudia Sheinbaum of Mexico. It was a very friendly conversation wherein she agreed to immediately supply 10,000 Mexican Soldiers on the Border separating Mexico and the United States. These soldiers will be specifically designated to stop the flow of fentanyl, and illegal migrants into our Country. We further agreed to immediately pause the anticipated tariffs for a one month period during which we will have negotiations headed by Secretary of State Marco Rubio, Secretary of Treasury Scott Bessent, and Secretary of Commerce Howard Lutnick, and high-level Representatives of Mexico. I look forward to participating in those negotiations, with President Sheinbaum, as we attempt to achieve a “deal” between our two Countries."
• Sheinbaum noted the same agreement in a message on X a short time ago: We had a good conversation with President Trump with great respect for our relationship and sovereignty; we reached a series of agreements... They are pausing tariffs for one month from now.."
• Trump's message doesn't mention separate tariffs on Canada and China, with Trump scheduled to hold a second call of the day with Prime Minister Justin Trudeau at 15:00 ET 20:00 GMT.