Markets
Markets today ‘enjoyed’ some final calm before the expected storm. US markets are closed for Martin Luther King Day, given investors an additional day to reassess their strategy before Donald Trump later takes office as president of the US. Already at its first working day, he is expected to kickstart a policy U-turn with a barrage of sweeping executive orders on everything ranging from migration and boarder control, over US energy production and broad deregulation. Trump also was expected to announce multiple layers of trade tariffs. However, the Wall Street Journal today reported that Trump in a first step is planning to issue a broad Memorandum that directs federal agencies to study US trade policies and evaluate trade relationships with its neighbors and China. However, the action is said to stop short of already imposing new tariffs. This at least supported risk sentiment on European markets intraday. Already for quite some time, the expected US measures were some kind of a black box as investors were obliged to guess the potential impact on growth and inflation inside and outside the US. A high degree of unpredictability will probably remain the watermark of Trump policy, but of over the next 24 hours investors will get a first insight on the degree of disruptiveness of the new policy for actors inside and outside the US. Up until new, the ‘preamble Trump trade’ mostly consisted of higher US yields, a stronger dollar and US equities outperforming most of their ‘friends’/‘allies’. Even as quite some ‘Trumpism’ should already be discounted it would be a surprise for the first flood of voluntary Trump measures to already profoundly reverse the trends of higher (US) yields and a stronger dollar. Looking at the strong performance of European equity markets today and over the previous week, investors apparently consider(ed) a WSJ like scenario were tariffs on trade with Europe won’t be overly disruptive and/or that already quite some negative news is discounted from now.
Returning to day-to-day price action in Europe, the EuroStoxx 50 index (+0.6%) is trading at the highest level since September 2000! After having jumped to level north of $82 p/b last week, Brent oil today drops back below $80. As one of its first measures, US president Trump is rumoured to possibly declare an Energy Emergency in order to facilitate the production and export of US fossil energy and to take measures to decrease domestic US energy costs. EMU interest rate markets show yield changes of 1-2 bps max across the curve. Dollar moves initially also were limited but the US currency fell off a cliff after the WSJ headlines. DXY dropped about 1.0% to trade near 108.25. EUR/USD jumped from the 1.0315 area to 1.042.
News & Views
Slovakia kicked of this year’s debt issuance with a regular auction. Four bonds were on offer, raising a combined €812mn instead of the targeted €600mn with total demand almost reaching €2bn. The country has an estimated gross issuance need of €12bn this year. Debt agency Ardal intends to raise half of that amount via syndicated deals and half via auctions like today. Three new bonds will be launched in one of those processes: a 4-yr, a 12-yr and a 15-yr(+) one. Today’s auction was overshadowed by political developments over the weekend. Smer party member and deputy speaker Gasper suggested that Slovakia could in the future consider leaving the EU and NATO though that would be an extreme solution. Slovak PM Fico indirectly backed his opinion by saying that the country should prepare for any possible EU-crisis. PM Fico holds together a very fragile and narrow coalition government with snap elections before the autumn of 2027 not ruled out.
Several members of the Polish central bank hit the wires today, softening last week’s hawkish (solo?) by NBP President Glapinski. The chairman suggested unaltered policy rates over 2025. While today’s comments of NBP Tyrowicz, Wnorowski and Kotecki all suggest that it will be premature in March, despite updated growth and inflation forecasts, to put a policy rate cut on the table, they all leave more maneuvering room for the rest of the year. Energy regulations will obviously be key – without subsidy extension they’ll push inflation higher again in Q4 2025 – with NBP Kotecki also referring to the presidential ballot mid-May and early-June. Leading candidate of the ruling party of PM Tusk has criticized the hawkish Glapinski (confidant of previous PiS-government) turn as being politically motivated. The Polish presidency is more than a ceremonial function with current PiS-president Duda hampering the political decision making process. The Polish zloty holds strong, continuing the test of EUR/PLN 4.25 support.
