Trade disputes escalate

US tariffs of 25% on Canadian and Mexican imports were imposed yesterday, while the 10% previously imposed on Chinese imports were doubled to 20%. Retaliatory measures were announced by Canada, which has imposed 25% tariffs on imports including orange juice and motorcycles, while China has imposed 15% tariffs on a range of US agricultural exports. Mexico has said that it will also respond. Commerce Secretary Howard Lutnick has said that a deal can be reached but comments from President Trump have been more combative, and he has been addressing Congress this morning where he has defended his actions even if acknowledging that there ‘may be a little disturbance’ on the back of the tariffs. He also pledged to balance the Federal budget.

The Chinese government has set its growth target for the year at 5.0%, in line with 2024, even as it faces an escalating trade war with the US, raising expectations of further stimulus to come. Consensus forecasts put growth this year at 4.5%. The China Caixin services PMI survey surprised to the upside at 51.4 in February, up from 51.0 in January and beating the predicted 50.7. Following on from the 50.8 in the manufacturing survey this puts the composite index at 51.5, up from 51.1.

Saudi Aramco reported net income of USD 106.2bn for 2024, down from USD 121.3bn recorded a year earlier as Saudi Arabia committed to lower production and oil prices were lower year/year. Even as income declined, the company maintained a large dividend payout of USD 124bn for 2024 though it did project a lower level for 2025 at USD 85.4bn.

Australia recorded real GDP growth of 0.6% q/q in Q4, in line with expectations and up from 0.3% in Q3. Annual growth was 1.3% y/y. The boost to growth was driven by a surge in consumer spending.

Today’s Economic Data and Events

08:15 UAE S&P Global PMI survey, February

Fixed Income

• The recent rally in USTs stalled yesterday amid trade war concerns, with yields up across the curve. The 2yr yield was up 4bps at 3.9905% while the 10yr closed 9bps higher at 4.2442%.

FX

• The dollar index closed down 0.9% yesterday with the greenback closing down against most major currencies save JPY which lost 0.2% to 149.79. Comments by Howard Lutnick about there being trade deals still to be had prompted dollar weakness.
• EUR strengthend by 1.3% to 1.0626, boosted by German plans to amend its constitution in order to boost defence spending. GBP was up 0.7% to 1.2795.

Equities

• Global equity markets slumped yesterday amid concerns around the impact of a trade war on business, with many prominent US business leaders cautioning that they would weigh on activity. In the US, the NASDAQ, the S&P 500, and the Dow Jones fell 0.4%, 1.2%, and 1.6% respectively.
• In Europe, the DAX closed 3.5% lower while the CAC fell by 1.9%, with concerns about potential US tariffs hitting the EU weighing on sentiment.
• Locally, the ADX added 0.3% and the DFM 0.5%.

Commodities

• The announcement that additional production cuts from some OPEC+ members would be rolled back in part from April weighed on global oil prices yesterday as the news coincided with heightened concerns around what a trade war would mean for global demand.
• Brent futures closed down 0.8% at USD 71.0/b and WTI fell 0.2% to USD 68.3/b.