Markets
It’s been a while since we’ve seen financial media using “Sell America”. The term was coined in the aftermath of president Trump’s tariff announcement on April 2 to describe surging risk premia rolling over all US assets, from stocks over the currency to government bonds. Trump’s aggressive trade policy came after a series of other – let’s call them unconventional – policy decisions and tested holders’ of US assets nerves. Moves today are of a totally different magnitude but nevertheless equally broad. They originated from what is seen as a renewed attack by the Trump administration on Fed independence. The DoJ served the Fed and its chair with subpoenas related to above-budget Fed HQ renovations. According to the chair himself, though, it’s nothing but a pretext used by the US administration to arm wrestle the Fed into lower (short-term) policy rates. US Treasuries underperform Bunds, with downward pressure strongest at the long end of the curve. Net daily changes vary between +0.2 (2-yr) and +3 bps (30-yr). Bringing Fed independence back on investors’ radar today is a bit unfortunate with a combined $58 3-yr and $39 bn 10-yr auction scheduled for today. Luckily for Treasury, however, market appetite is usually the strongest at the start of the year. The German curve bull flattens by -1 bps (2-yr) to -2.3 bps (30-yr). Intra EMU-spreads are broadly stable, including in France, where two no-confidence votes were filed by the far-left and right over the country’s failure to block the Mercosur trade deal. The Socialists have already signaled they won’t support any of them, meaning the motions are dead on arrival. US stocks open with losses of up to 0.7% but were off the intraday lows (in the futures market). The US dollar lags major peers in the FX market. DXY retraced part of last week’s gains by dropping back below 99. EUR/USD snaps a losing streak by rebounding back towards but remaining below 1.17. You won’t be surprised to read that from a technical point of view, literally nothing changed. The Japanese yen is the only currency worse off than the USD in the G10 environment. Rumours of snap elections, to be announced as soon as Jan 30, are weighing on the currency through rising fiscal risk premia in a not unlikely scenario where PM Takaichi’s ruling LDP regains its majority in the powerful lower house. The impact on JGB’s is yet to be seen since Japanese markets were closed today. Oil prices rose in early morning deals on geopolitical concerns related to protests in Iran and potential US involvement that could upend Iranian oil supply. Brent’s move didn’t go any further than $64 though before hitting a speed bump.
News & Views
The KPMG and REC UK report on jobs as compiled by S&P global, indicates that uncertainty around the economic outlook and rising costs still weighed on recruitment activity at the end of 2025. Permanent staff appointments fall at the quickest pace in four months and with the downturn already in place for 39 months. Temporary billings also decline at a faster pace. Vacancy data signaled another marked reduction in demand for workers at the end of the fourth quarter, with the rate of decline quickening slightly from November. Fewer job opportunities and widespread reports of redundancies drove a further substantial rise in candidate availability. The report at the same time showed a tentative improvement in pay trends. After a multi-year low in September, starting salary touched a seven-month high, but stays below the long term trend. Temporary wages rose but also remain well below the historical average.
Industrial production in Hungary disappointed in November. After two months of positive growth, production declined 2% M/M pushing the level of output 5.4% lower Y/Y. Cumulative production over the first 11 months of 2025 was 5.3% lower compared to 2024. Hungary’s statistical office indicated that ‘production volume decreased in the great majority of the manufacturing subsections’ compared to the same month of the previous year’. Growth in computer, electronic and optical products, as well as the manufacture of food products, beverages and tobacco products was positive, but a decline occurred in the manufacture of transport equipment, as well as in the manufacture of electrical equipment. Last Friday’s November retail sales (2.5% Y/Y) also were unconvincing. These sub-par data come as the MNB last month mitigated its assessment that policy should remain restrictive as it will reassess its policy on a meeting-by-meeting basis. The Hungarian 2-y yield declines another 3 bps today to 5.86%.This compares to levels near 6.30% just one month ago. The forint weakens further to EUR/HUF 386.8.
