U.S. Indices eventually closed lower on Tuesday with the exception of the Russell 2000 which closed positive, albeit well off the earlier highs and lows, in what was a headline-intensive day which drove choppy trade. On Trump tariffs, the President initially raised the 25% tariff on all steel and aluminum coming into the US from Canada to 50%, effective March 12th, but this was later revoked after the Ontario Premier announced they are suspending the 25% surcharge on exports of electricity. Elsewhere, and also improving risk sentiment through the US afternoon, was the joint US/Ukraine statement on a ceasefire proposal. The US State Department said the US and Ukraine took important steps toward restoring durable peace for Ukraine and Ukraine expressed readiness to accept the US proposal to enact an immediate and interim 30-day ceasefire. Following this, Trump stated he will talk to Russian President Putin, but it takes “two to tango” and thinks he will talk with him this week, but he hopes to have a total ceasefire in the coming days. On data, the JOLTS report came in above expectations while the quits rate and vacancy rate increased, but saw little reaction due to it being stale data whilst participants had tariff updates to focus on. The Dollar was sold as the Dollar Index hitting a new low for the year. The Euro outperformed as it was boosted by comments from the German Green party co-leader that they are hopeful of a defence deal occurring this week. Meanwhile, the Japanese Yen lagged as it was hit by Nikkei reporting that the GPIF will not be boosting its holdings of stocks, firmer US Treasury yields also weighed. Treasuries were sold on the choppy tariff updates and Russia/Ukraine ceasefire optimism. The crude complex was choppy but settled with slight gains as it pared some of Monday’s losses amid broader macro sentiment, as opposed to energy-specific headlines. Ahead, US CPI and the Bank of Canada rate announcement are the highlights on Wednesday, as well as any further rhetoric on Trump Tariffs on Ukraine/Russia. After Canada’s Ontario announced a 25% tariff on electricity coming into the US, US President Trump said he will add an additional 25% tariff, to a total of 50%, on all steel and aluminum coming into the US from Canada. Ontario suggested it will not back down, but later withdrew the 25% surcharge on electricity. Trump was quizzed about whether he would then step down on the retaliation, and he said he is looking at backing down on the 50% duties on Canada, and he may back off doubling the tariffs but said he will “let you know” if they are going into effect. However, White House Trade Adviser Navarro said that the 50% tariffs on Canada steel and aluminum will no longer be taking effect today. Note, the 25% tariffs on steel and aluminum coming into the US are set to come into effect today. US JOLTS job openings for January printed 7.74 million, above the expected 7.63 million, and down from the prior 7.508 million. Drilling into the details, Quits rate and Vacancy rate rose to 2.1% (Rev. 1.9%) and 4.6% (prev. 4.5%), respectively. Overall, total job postings were unaffected by the federal government hiring freeze ordered by President Trump on January 20th. Pantheon Macroeconomics notes that Federal government postings fell by only 3K to 135K, even though the JOLTS data reflect postings on the last business day of the month. Overall, Pantheon adds that both the hiring and separations rates remained at extremely low levels in January, but they expect involuntary separations to rise over coming months, given the recent deterioration in two reliable forward-looking indicators. PM adds, WARN layoff announcements were 18% higher in the three months to January than in the previous three months. The Bank of Canada will publish their next rate decision on Wednesday 12th March 2025 at 13:45GMT/09:45EDT alongside the accompanying statement from BoC Governor Macklem, ahead of the press conference at 14:30GMT/10:30EDT. The BoC is expected to cut rates by 25bps on Wednesday although some do look for the BoC to keep rates unchanged. The main challenge to the BoC is the impact of tariffs but it is hard to quantify the overall impact until the final rate, duration and on what products have been decided, as the situation is currently very fluid. The unknowns result in a lot of uncertainty, and even that can have an impact on the economy before the measures take effect. Given the uncertainty and US President Trump’s love for tariffs, one more cut at this meeting is likely but the path ahead will likely see a slowdown of the pace of rate cuts. The second 25bps rate cut is not fully priced until July. Recent data saw an uptick in inflation, a disappointing labour market report, while Q4 GDP growth was strong, it was buoyed by the sales tax holiday, although the main focus right now is on the impact of upcoming tariffs. Elsewhere, Oil closed 0.72% higher while Gold reversed Tuesday’s losses ending yesterday’s session with a gain of 0.8%.
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