China retaliated with trade tariffs (see Looking Ahead) targeted at the U.S., but markets perceived them as more modest than anticipated. The Nikkei 225 printed strong gains of +0.72%, the Hang Seng surged +2.83%, while the Shanghai faded -0.06%. Most of Europe posted gains. The Stoxx 600 inched up +0.22%, the DAX index tacked on +0.36%, yet the FTSE 100 edged back -0.15%. 10-year Bunds yield 2.404%. December Factory Orders fell from -0.8% prior to -0.9%, worse than -0.6% expected, and YoY they are down -1.1%. December JOLTS sank from 8.156M down to 7.600M, well below expectations of 8.000M. 10-yr Note yields fell to 4.516%. The March US$ index sank -1.0% to 107.780. March Crude Oil faded -0.6% to $72.70. Feb Gold printed another record close, up +0.68% to $2,853.30. In the last 24 hours Bitcoin ranged from $102,504 to $97,956, and ending lower by -3.6% at $98,246. China announced a series of tariffs targeting the U.S. and stock market indexes initially reacted overnight by slumping, but near the open of the day session they were mostly flat. After the open the ES and NQ began to surge. Overnight, shares of Palantir soared more than +20% on a small earnings beat, with PayPal off -6%. Indexes closed stronger across the board. After the close GOOG sank -7.0% on a Q4 earnings miss.

The Nikkei 225 sank -2.66%, yet the Shanghai and Hang Seng Indexes lost only -0.06% and -0.04% respectively. The Stoxx 600 fell -0.87%, the DAX index plunged -1.40%, and the FTSE 100 lost-1.04%. 10-year Bund yields fell to 2.391%. The Jan. Mfg. PMI went from 49.4 prior to 51.2 (1st time in expansion in 16 mos.) vs. 50.1 est., with the ISM Mfg. Index up from 49.3 to 50.9 (1st time since Sep. 2022 above 50) vs. 49.5 est. Dec. Construction Spending gained +0.5% MoM vs. +0.3% est. (YoY up from +3.0% to +4.3%). 10-yr Note yields fell to 4.521%. The March US$ index gained +0.51% to 108.765 (the CD$ hit a 22-yr low). March Crude Oil added +0.5% to $72.86. Feb Gold rallied +0.8% to $2,834.10. Bitcoin sank to $91,687 in last 24 hrs, but ended at $101,223. Over the weekend Canada retaliated to the Trump admin’s tariffs (see Looking Ahead), and Sunday evening the ES sank -125 points! Stocks opened Monday deeply red. Early in the day Trump and Mexico agreed to a one-month delay of tariffs and U.S. stock index futures and the ES spiked 60 pts. The Telegraph reported the Trump admin is considering a 10% tariff on EU imports. Note that at least 50% (and 90% according to JPM) of market moves are algo-driven. Stocks continued to recover off lows during the session, and by the close the ES and NQ had pared the worse of the losses.

The Shanghai Composite and the Hang Seng Index remain closed for the Lunar New Year Holiday. The Nikkei 225 bounced +0.15%. Zerohedge.com notes, “EZ GDP stagnated in Q4, with recovery ongoing, the slight uptick in EZ inflation was expected. The ECB expects gradual cuts towards neutral.” The Stoxx 600 had its best mo. performance (up +6.6%) in 2 years, adding +0.13%. The DAX inched up +0.02% to another ATH. 10-year Bunds yield 2.583%. The Dec PCE Price Index went from +0.1% MoM to +0.3% as exp. Core PCE gained +0.2% as exp. (up +2.8% YoY). Personal Income printed +0.4% as exp., Personal Savings Rate was revised down. The Q4 Employment Cost Index printed +0.9%, as exp. The Jan. Chicago PMI increased to 39.5 vs. 40.0 est. 10-yr Notes yields climbed to 4.566%. The March US$ index gained +0.56% to 108.230. March Crude Oil added +0.3% to $72.51. Feb Gold finally took a breather, retreating -0.5% to $2,807.90. iPhone sales disappointed, yet AAPL shares rallied overnight on improving guidance. U.S. stock indexes were initially higher during the morning. At midmorning however, the WH confirmed that on Feb. 1 the U.S. will impose 25% tariffs on Mexico & Canada, and 10% on China (unless they impose border controls). This sent stock indexes into an immediate selloff (ES sank -50 pts, NQ -120 pts in 1 hour), erasing all gains, and closing deeply red.