EQUITIES: US Cash Opening calls

ERM5 97.75/98.50 RR, bought the put for 12 in 10k (ref 97.735, 52%d).

President Volodymyr Zelenskyy has been speaking at the World Economic Forum annual meeting in Davos. Making his first public comments since US President Donald Trump's return to office, Zelenskyy urges Europe to unify its security and defence policy, adding that Europe 'must establish itself as a strong global player'. Says Russia's deals with Iran and North Korea are 'against Europe and the US'. 

• Referring to Trump's demand that European NATO members raise defence spending to 5% of GDP, Zelenskyy says 'If it takes 5% of GDP for Europe to cover defence, then so be it, 5% it is', adding 'Europe must be able to guarantee peace and security for itself and for others.' Zelenskyy claims that 'Real security guarantees for Ukraine will serve as real guarantees for Europe.'
• The call for 5% of GDP to be spent on defence has divided EU members. Poland and Lithuania back the target, even if they are not yet spending at that level. Others have said 5% of GDP would be unachievable without economically devastating tax hikes and spending cuts.
• French President Emmanuel Macron said on 20 Jan “France currently exceeds 2 percent of GDP for defense spending. But is that enough to achieve the mass, depth and innovation to defend ourselves in a major confrontation? Is that enough to organize ourselves on a European scale and have the means to fight?”, implying he would not opposed further spending increases (albeit coming during difficult budget negotiations domestically). 

• They are still only relatively small moves but 2Y GoC yields have pared most of their dip on the CAD CPI release, now just 0.5bp lower although still -3bp on the day. For context, 2Y Tsy yields are -1bp post-data for also -3bp on the day.
• The further acceleration in the BoC’s core to 3.5% annualized could be at play here, being a second month above the 1-3% target band and technically its highest since Sep 2023.
• It is however a volatile series, whilst the smoother six-month run rate increased a steadier 0.1pp back to 2.8% Y/Y to just about remain within that target band (although still its fastest since Jan 2024).