Oil prices fall 2% to two-month low on worries about US economy

NEW YORK – Oil prices fell about 2% to a two-month low on Tuesday on weak economic news from the US and Germany that fed fears of slower energy demand, along with signs from several countries that oil output was on track to increase.

Brent futures fell USD 1.76, or 2.4%, to settle at USD 73.02 a barrel, while US West Texas Intermediate (WTI) crude fell USD 1.77, or 2.5%, to settle at USD 68.93.

That was the lowest close for Brent since December 23 and WTI since December 10.

US data showed consumer confidence in February deteriorated at its sharpest pace in 3-1/2 years, with 12-month inflation expectations surging.

Analysts said President Donald Trump’s stated plans for higher tariffs have raised inflation worries at the US Federal Reserve. This could lead the Fed to keep interest rates higher, which in turn could slow economic growth and energy demand.

Trump said tariffs against Canadian and Mexican imports, scheduled to start on March 4, are “on time and on schedule,” which may boost oil prices by reducing supplies from both countries.

But “tariffs are increasingly being viewed as a negative influence on global economic growth that could force additional downside revisions in world oil demand,” analysts at energy advisory firm Ritterbusch and Associates said.

Data showed the German economy shrank by 0.2% in the final quarter of 2024 from the previous quarter. German election winner Friedrich Merz ruled out a quick reform to state borrowing limits known as the “debt brake,” which some investors have urged to boost the economy.

OIL OUTPUT COULD RISE

Also weighing on oil prices was the possibility of a peace deal between Russia and Ukraine that “foreshadows the lifting of Russian sanctions, potentially welcoming unfettered Russian supply back to the market,” said Tamas Varga at oil broker PVM.

Russia is the third-biggest oil producer behind the US and Saudi Arabia and a member of OPEC+, the Organization of the Petroleum Exporting Countries (OPEC) and allied countries.

In Iraq, the second-largest OPEC producer, oil major BP BP.L signed a deal to redevelop four Kirkuk oil and gas fields. Iraq is also waiting for Turkey’s approval soon to restart oil flows from the Iraqi Kurdistan region.

In Nigeria, another OPEC member, oil production rose to 1.8 million bpd, up from just 1 million bpd over a year ago.

In the US, Trump said he wanted the Keystone XL pipeline built and pledged easy regulatory approvals for the project that would move crude from Canada to the US.

US OIL INVENTORIES

US oil inventory data from the American Petroleum Institute (API) trade group is due on Tuesday and US Energy Information Administration data is due on Wednesday.

Analysts forecast energy firms added about 2.6 million barrels of oil to US stockpiles during the week ended February 21.

If correct, that would be the first time energy firms added oil into storage for five weeks in a row since March 2024. That compares with an increase of 4.2 million barrels during the same week last year and an average build of 2.3 million barrels over the past five years (2020-2024).

(Reporting by Scott DiSavino, Paul Carsten, and Colleen Howe; Editing by Kevin Liffey, David Evans, Christina Fincher, David Gregorio, and Nia Williams)

Forget stock tweets, Trump 2.0 is watching bonds: McGeever

ORLANDO – In US President Donald Trump’s first term in office, he regularly posted boastful tweets when Wall Street hit fresh highs, taking credit for the record stock prices that he believed would fuel wider economic growth.

But this time around, it is not the stock market that Trump is looking at as the primary gauge of US consumer well-being and economic strength. It is the bond market, and specifically, longer-term borrowing costs.

In a note last week, JP Morgan analyst Antonin Delair compared Trump’s 3,803 social media posts on ‘market-relevant topics’ in his first term with the 126 since his election victory in November.

Delair calculates there were 273 posts in his first term with “direct reference to markets”, of which 156, or 57%, were specifically about “US stock market strong performance” and 85, or 31%, were on the “Fed, level of rates, and dollar”.

In contrast, only one of Trump’s 126 posts since November has been on the stock market and five, or 42%, have been on rates and the dollar. True, the current sample size is more limited, but the discrepancy is notable and, frankly, understandable given the current economic backdrop.

ON THE ‘WRONG’ SIDE

When the Fed started lowering interest rates in September, long-term bond yields were expected to follow. But for various reasons – including worries over the deficit, debt and inflation outlooks – that did not happen. Rates on mortgages and other long-term loans shot up, putting the squeeze on borrowers.

Treasury Secretary Scott Bessent has repeatedly said he and Trump are focusing on the 10-year yield and implementing policies that will bring it down. On Tuesday, he once again stated that’s where he is paying “particular attention”.

Elon Musk, the billionaire CEO of Tesla who has been tasked with taking a scythe to federal spending, has said anyone selling bonds will be “on the wrong side” of that trade.

Musk and Bessent’s sway over the direction of long-term yields may be marginal in a USD 28 trillion market that is driven by a multitude of global factors, but as luck would have it, they seem to be getting their wish.

BONDS RALLY

A string of recent US economic data points – purchasing managers index reports, retail sales, consumer sentiment, and manufacturing numbers – suggests US economic activity is deteriorating. Treasuries are on a roll, and yields are tumbling, as investors pile into bonds as a safe-haven alternative to crumbling stocks.

The 10-year Treasury yield slumped almost 10 basis points on Tuesday to 4.28%, a low not seen since mid-December. And the two-year yield touched its lowest level since before the election and is sliding towards 4.00%.

This move could have legs. For one, those short positions that Musk warned about are, by some measures, near record high levels. So there is plenty room for further short covering, which would accelerate the decline in yields.

But here is the problem. Trump and Bessent want yields falling because energy prices are coming down, inflation is cooling, and the “Goldilocks” economy is humming along nicely, not because it is on the verge of rolling over.

So Trump may get his lower yields, but he should be careful what he wishes for.

(The opinions expressed here are those of the author, a columnist for Reuters.)

(By Jamie McGeever; Editing by Marguerita Choy)

Growth worries put brakes on Treasury yields’ ascent

NEW YORK – A weakening economy and what looks to have been an overly aggressive “Trump trade” has led some Treasury market participants to reevaluate calls for how high US yields will go as speculation the Federal Reserve may cut rates several times this year re-emerge.

Yields tumbled after data on Friday showed US business activity nearly stalled in February, while consumer fears about inflation surged. Data on Monday further showed US consumer confidence deteriorated at its sharpest pace in 3-1/2 years in February.

Government job cuts by Elon Musk’s Department of Government Efficiency (DOGE) are raising fears they will lead to a weaker labor market and hit consumer spending. The Citigroup economic surprise index also fell further into negative territory, indicating data is coming in worse than economists predicted.

Peter Tchir, head of macro strategy at Academy Securities, has cut his target on 10-year Treasury yields to 4.6%, after formerly expecting 4.8% or higher, and said “I’m beginning to think that that might even be too high.”

“It does feel like this growth prospect isn’t materializing,” Tchir said. “There’s so much noise coming out of DC, or Mar-a-Lago, that it’s hard to tell what to focus on,” he said referring to President Donald Trump’s Florida resort and residence. “But I feel like everything now is giving people pause and hesitancy and it doesn’t take long for that to feed into the economy or market.”

Trump’s election in November raised expectations for stronger economic growth on looser business regulations and the potential for more tax cuts. Tariffs and a crackdown on illegal immigration, meanwhile, are seen as potentially adding to inflation.

Data from December reinforced the perception of a robust economy, which along with inflation concerns prompted the Fed to pause the easing cycle that brought its policy rate down a full percentage point since its initiation in September.

That sent Treasury yields higher and led investors to cut bets on how many times the Fed will cut rates this year.

The benchmark 10-year yield traded as low as 3.60% in September before traders began pricing in higher odds of a Trump victory. It reached 4.81% in January, a 14-month high and was at 4.31% on Tuesday.

Now, some analysts say the benefits of Trump’s fiscal shifts may take longer to be realized. And DOGE’s cost-cutting, while potentially improving the fiscal picture longer term, could hurt the economy in the shorter run.

“The risk in the short term is that many of the layoffs that the federal government has undertaken in the last four weeks create a short-term downdraft in consumer spending, and that expands into more material economic slowing,” said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott.

“The stimulative plans from tax cuts and so forth will take much longer, if not years, to add to the economy, and so there’s a little bit of a timing problem with how fiscal policy is evolving right now that could cause a slowdown,” LeBas said.

Fed funds futures traders are now pricing in at least two 25 basis point cuts this year, after seeing only a roughly 50/50 probability of a second cut early last week.

Some of the recent drop in yields has come from other factors that are more favorable for the market. These include US Treasury Secretary Scott Bessent’s statement that there are no near-term plans to increase long-term debt issuance, and a discussion by Federal Reserve officials about a possible pause or taper to its quantitative tightening program.

Market moves have also so far been orderly and are not yet reflecting panic about an imminent recession as traders wait for more clarity around tariffs and the strength of the labor market.

“I’d say the US economy continues to slowly slow, which is a key reason that you’re seeing yields chopping around here and not really plunging,” said Emily Roland, co-chief investment strategist at John Hancock Investment Management.

“You saw excitement around America First policies – deregulation, the potential for lower taxes,” she said of the run-up in yields around the election. “We are seeing a bit of a reversion there as we have more evidence that it’s going to take time for clarity around some of these policies.”

(Reporting By Karen Brettell; Editing by Alden Bentley and Nick Zieminski)

US yields tumble amid policy uncertainty, signs of US deceleration

NEW YORK – US Treasury yields dropped sharply on Tuesday, with the benchmark 10-year yield hitting its lowest in 10 weeks, as investors sought a refuge in bonds from signs of deceleration in the US economy and persistent uncertainty about the effects of tariffs pursued by President Donald Trump.

Yields accelerated their fall after news that the US consumer confidence index declined to 98.3 in February, the lowest reading since June. Meanwhile the risk off mood that lifted bond prices and knocked yields was also evident on Wall Street, where the tech-heavy Nasdaq led declines on Tuesday, hitting a six-week low.

“We are in a correction mode in US equities. If that trend persists there will be wealth destruction. The lower-income consumer is already struggling and that could make wealthy consumers more cautious,” said Jack McIntyre, portfolio manager at Brandywine Global Investment management in Pennsylvania.

Consumer confidence deteriorated sharply in February to an eight-month low, with the uncertainty about the policies of Trump’s administration contributing to the drop.

US single-family house prices increased in December, another blow to affordability alongside elevated mortgage costs, even as the housing supply increases.

Aside from growing signs of a slowdown, investors worried about Trump’s economic policies after he said proposed tariffs on Mexico and Canada were still set to start next week.

“We are beginning to see some cracks in the markets regarding the economic outlook and anxiety about some of the conflicting policies,” said Robert Tipp, head of global bonds at PGIM Fixed Income.

The bond market as a result is betting on more rate cuts by the Federal Reserve this year, compared to a few weeks ago. On Tuesday, US rate futures priced in 61 basis points (bps) of easing in 2025, compared with 44 bps late on Monday, according to LSEG calculations.

Futures also showed that markets are expecting the first rate cut to come in June rather than July. The higher odds for a second cut also moved to September and October.

US two-year yields, which typically move in step with interest rate expectations, dropped 5.8 bps to 4.1%, after reaching earlier 4.07%, the lowest since November 1.

In mid-afternoon trading, the yield on the US 10-year Treasury note was down 8.7 basis points to 4.306%, after earlier sliding to the lowest since December 12. The yield on the 30-year bond declined 8.4 bps to 4.564%.

The US Treasury sold USD 70 billion in five-year notes on Tuesday, with demand equivalent to 2.4 times the offering, a day after a strong two-year note auction. Yields on five-year notes fell 3 basis points after the auction to 4.12%.

A sharp drop in business activity reported last week was seen as the first sign of an economy slowdown.

The Trump administration’s promises to reduce government spending so far are the “right talk,” said McIntyre, but investors have yet to see a real change in longer-term trends for the US deficit and debt.

Markets are still skeptical of the immediate effects on the deficit of spending cuts spearheaded by Elon Musk’s Department of Government Efficiency, known as DOGE. A significant deficit reduction would “require more legislative progress on spending cuts,” PGIM’s Tipp said. Substantive budget changes would require congressional approval.

(Reporting by Tatiana Bautzer; Editing by Gertrude Chavez-Dreyfuss, Will Dunham and Kevin Liffey)

Bond yields slide as US growth fears, tech rout snowball

Is the US economy beginning to roll over?

The culmination of recent data misses, escalating trade tensions and powerful asset price swings suggests investors may be beginning to contemplate such a scenario. Even Treasury Secretary Scott Bessent on Tuesday warned that the economy may be more “brittle” under the surface than headline numbers show.

If so, Asian and emerging markets are in for a rocky ride, no matter how their domestic economies are performing. The widespread stock market decline in these countries on Tuesday – MSCI’s Asia ex-Japan and emerging indexes, Chinese and Japanese benchmarks all fell more than 1% – points in this direction.

Figures from the US on Tuesday showed that consumer confidence in February slumped the most in three and a half years while inflation expectations surged, the latest in a string of indicators lately – including retail sales and business activity indices – that have raised red flags.

The two-year Treasury yield hit its lowest level since before November’s US presidential election and the 10-year yield fell almost 10 basis points. Rates futures markets are now pricing in at least another two quarter-point Fed cuts this year, starting in July.

Lower Treasury yields and a weaker dollar are often springboards for Asian and emerging markets, but not when they’re being depressed by fears that growth is flagging and more analysts are advising clients to trim their risk exposure.

Wall Street ended mixed on Tuesday, with the Nasdaq sinking more than 1% as the ‘Magnificent Seven’ stocks – the undisputed market kings over the last two years – fell sharply again.

The ‘Mag 7’ are now down 13% from their December peak, putting them into ‘correction’ territory. It’s worth noting that they were in bear market territory last summer, plunging more than 20% in barely a month, so they have shown remarkable powers of resilience.

Can they recover, and lift the rest of the market, again? Perhaps, but Nvidia’s earnings after the market close on Wednesday will be crucial.

Most assets other than bonds and a few notable currencies fell on Tuesday as investors cashed in on even their winning bets. Gold, traditionally a safe-haven play, fell 1.5% while bitcoin shed 6% and oil fell 3%.

The calendar in Asia on Wednesday includes GDP from Taiwan, Australian inflation, industrial production from Singapore, and an interest rate decision from Thailand.

The Bank of Thailand is expected to keep its key interest rate on hold at 2.25% and cut only once this year to preserve a policy buffer amid growing global uncertainties, according to a Reuters poll. Swaps markets are pricing in 50 bps of cuts this year.

Here are key developments that could provide more direction to Asian markets on Wednesday:

– Thailand interest rate decision

– Taiwan GDP (2024 revised, 2025 outlook)

– Australia CPI inflation (January)

(By Jamie McGeever, editing by Deepa Babington)

Gold hits new record high on tariff worries, exchange-traded fund inflows

Gold prices surged to a record high on Monday, driven by safe-haven demand amid concerns over US President Donald Trump’s tariff plans, with additional support coming from inflows into the world’s top gold-backed exchange-traded fund.

Spot gold rose 0.4% to USD 2,947.48 an ounce as of 01:55 p.m. ET (1854 GMT). It hit USD 2,956.15 earlier in the session — its eleventh record high in 2025.

US gold futures settled 0.3% higher at USD 2,963.20.

US dollar index touched its lowest level since December 10 earlier in the session, making bullion more affordable for buyers using other currencies.

“Investors believe that in the coming weeks and months or longer than that gold prices are going to continue to appreciate,” said Jim Wyckoff, a senior market analyst at Kitco Metals.

“The path of least resistance for gold remains sideways to higher and as long as uncertainty persists, gold is likely to continue rising.”

US President Donald Trump warned of imminent new tariffs last week. These plans are broadly viewed as inflationary and capable of sparking trade wars, thereby increasing the demand for safe-haven assets like bullion.

SPDR Gold Trust GLD, the world’s largest gold-backed ETF, said its holdings rose to 904.38 metric tons on Friday, the highest since August 2023.

Prices holding above USD 2,950 per ounce are drawing investor focus toward the USD 3,000 mark, with the metal up more than 12% in 2025.

Investors will watch Friday’s US Personal Consumption Expenditures report, the Fed’s preferred inflation gauge.

The Fed is likely to wait until next quarter before cutting rates again, according to a majority of economists in a Reuters poll who previously expected a March cut.

Also, on the radar are speeches from at least nine US central bank officials this week, who are expected to reinforce a cautious stance on further rate cuts.

Spot silver fell 0.7% to USD 32.32 an ounce, platinum shed 0.7% to USD 962.70 and palladium lost 2.6% to USD 944.19.

(Reporting by Daksh Grover in Bengaluru. Editing by Jane Merriman, Krishna Chandra Eluri, and Alan Barona)

Hedge funds exit tech, media stocks at fastest pace in six months, Goldman Sachs says

LONDON – Hedge funds exited US tech and media stocks in the two weeks to February 21 at the fastest pace in six months, according to Goldman Sachs, just as Nvidia NVDA.O, one of the biggest tech firms by market capitalization, readies to report earnings.

Nvidia’s profit report this week is seen as a bellwether of the burgeoning artificial intelligence (AI) industry. The AI and graphics chipmaker is the world’s second most valuable company, with a 6.3% weight on the S&P 500, according to LSEG. Its shares have skyrocketed over 550% over the last two years.

Speculators “aggressively” dumped both long and short positions in AI-related equipment, media, and communications equipment companies, according to a note sent to Goldman Sachs clients on Friday.

A short position expects an asset price to fall while a long, or bullish, position expects it to rise.

Stock hedge funds, which usually mix long and short bets in their trading strategies, last week lost money on their short wagers but made money on the parts of their portfolios holding long bets, said the note.

While stock pickers finished the week flat, systematic traders returned 0.36% between February 14-20.

US stocks tumbled on Friday in the wake of gloomy economic reports. Some analysts and traders said that the expiration of options positions worth USD 2.7 trillion also added further pressure.

ASIA BULLS

Hedge funds also bought developed and emerging market Asia stocks at the quickest pace in five months, Goldman Sachs said, with Asia now the only region globally where the balance of hedge fund trades is long rather than short.

“China, Taiwan, and Hong Kong are by far the most net bought markets on our Prime book [year to date],” said the note.

About 8% of hedge fund portfolio positions hold the stock of companies in Asian developed markets, while net allocation to Asia’s emerging markets stands at 13.3%, the note said, among the highest levels for both in the past year.

(Reporting by Nell Mackenzie; Editing by Dhara Ranasinghe and Rachna Uppal)

US yields slip after decent two-year note auction, ahead of inflation data

NEW YORK – US Treasury yields were slightly down on Monday, with benchmark 10-year yields hitting their lowest in more than two months amid good results on a USD 69 billion two-year note auction.

Markets are waiting for inflation data that could help gauge the timing of the Federal Reserve’s first interest rate cut this year.

Analysts saw a two-year auction as solid, with the note priced at a rate below the expected yield at the bid deadline, suggesting strong demand. Indirect bids, which include demand from foreign central banks, surged to a record 85.5% from the prior 65.0% and the 67.6% average, according to analysts from Action Economics.

On the economic data front, the Personal Consumption Expenditures index, the Federal Reserve’s preferred inflation gauge, is expected on Friday. Later this week, investors will also get the second estimate of fourth-quarter growth figures in the US

The yield on the benchmark US 10-year Treasury note fell 2.2 basis points (bps) to 4.398%, after earlier falling to 4.389%, the lowest since December 17. The yield on the 30-year bond slipped 1.3 bps to 4.656%.

A closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at a positive 21.6 basis points, flattening from 22.9 basis points late on Friday.

The two-year US Treasury yield, which typically moves in step with interest rate expectations, dipped 2.8 bps to 4.166%. Earlier, it hit the lowest since February 5 on Monday.

According to the CME’s Fed watch tool, the highest probabilities for the first rate cut of the year are between June and July. Markets estimate a higher possibility of a second cut between October and December, according to the tool.

Markets are attentive to any sign of a cooling economy after the S&P Global Survey showed on Friday a sharp decrease in US business activity in February.

Bob Brusca, chief economist at Fact and Opinion Economics, said markets are very optimistic about the interest rate trajectory.

“No one is considering that inflation has slowed, but (it) has been above target for a long time, so interest rate cuts should not be a done deal,” he said.

The 10-year TIPS breakeven rate was last at 2.412%, indicating the market sees inflation averaging about 2.4% a year for the next decade.

“The labor market continues to be strong, and I don’t see a lot of evidence of the ‘residual seasonality’ cited by Powell,” Brusca said, referring to seasonal patterns appearing in data that have already been seasonally adjusted.

(Reporting by Tatiana Bautzer in New York; Editing by Nia Williams and Nick Zieminski)

Oil settles higher on fresh Iran sanctions, Iraq commitment to OPEC+

Oil prices settled higher on Monday as fresh US sanctions on Iran and a commitment to compensate for overproduction by Iraq added to concerns of near-term supply tightness, helping the market recover some of Friday’s steep losses.

Brent crude futures settled up 35 cents, or 0.5%, at USD 74.78 a barrel. US West Texas Intermediate crude futures gained 30 cents, or 0.4%, to USD 70.70.

On Friday Brent notched its lowest close since February 6 while WTI had its lowest settlement so far this year.

On Monday, the US Treasury imposed a fresh round of sanctions targeting Iran’s oil industry, hitting brokers, tanker operators, and shippers who sell and transport Iranian petroleum.

That might have had a modest impact on oil prices, along with the Iraqi oil ministry’s reaffirmation of its commitment to the OPEC+ group’s supply agreement, UBS analyst Giovanni Staunovo said.

He cautioned, however, that Iranian crude oil exports remain elevated. “Time will tell if (the sanctions) impact exports,” he said.

Iraq said it would present an updated plan to compensate for any overproduction of its OPEC+ quotas in recent months. Iraq on Sunday said it will export 185,000 barrels per day from Kurdistan’s oilfields through the Iraq-Turkey pipeline once oil shipments resume.

Oil prices were bound to recover from the prior session’s steep selloff, when expectations of the resumption in northern Iraqi exports and of an end to the war in Ukraine pulled benchmarks more than USD 2 lower, Commodity Context analyst Rory Johnston said.

The market structure has also flashed signs of near-term supply tightness, he added. The premium of front-month Brent futures over the next month’s contract was at its highest on Monday since February 11, having climbed steadily over the past week.

Others cautioned oil prices could stay under pressure from talks to end the Ukraine war, which could pave the way for more Russian oil onto the market, and a slew of US tariff measures, which could weigh on economic activity and crude oil demand.

US President Donald Trump said on Monday the US is close to a minerals deal with Ukraine as he and French President Emmanuel Macron held talks that covered prospects for ending the Ukraine war despite stark differences on how to proceed.

Trump said Washington is ‘on time’ with tariffs against Canada and Mexico, responding to a question about the deadline ending a previous pause on such action which expires next week.

“We’re just clearing out room to trade lower and I would be cautious if I was a buyer in the market today,” Mizuho analyst Robert Yawger said.

“Just sitting here, waiting for the next big event to happen, and obviously there are plenty of big ones out there that could hit any moment.”

(Reporting by Anna Hirtenstein; Additional reporting by Mohi Narayan and Emily Chow; Editing by David Goodman, Sharon Singleton, Bill Berkrot, and David Gregorio)

Peace hopes pierce gloom, but safety trades dominate

World markets are at a delicate juncture as a string of unexpectedly soft economic indicators intensify US growth concerns, just as rising global trade tensions and geopolitical uncertainty are already clouding the investment landscape.

Stocks are feeling the heat and the dollar is under pressure too, while safe-haven assets like Treasuries and gold – especially gold – are attracting strong demand.

Investors on Monday initially welcomed Germany’s election result and gave a thumbs up to the new government’s ‘pro-growth’ policies, but the early bounce in Europe faded and Asian bourses were a sea of red.

Wall Street managed to erase some losses after US President Donald Trump said G7 nations are united in their resolve to see an end to the Russia-Ukraine war, and that he and Russian President Vladimir Putin are in “serious discussions” about achieving that goal.

But Trump later repeated his commitment to slapping tariffs on imports from Canada and Mexico soon, and stocks stumbled again.

The Asian calendar on Tuesday includes an interest rate decision from the Bank of Korea, trade figures from Thailand and Hong Kong, and Taiwanese industrial production figures for January.

Economists expect the BOK to cut its key interest rate by 25 basis points to 2.75% on Tuesday, after unexpectedly standing pat last month as policymakers waited for domestic political turmoil to stabilize before easing further.

Economists polled by Reuters expect Tuesday’s cut to be followed by a further 50 points of easing this year. Money markets are a little less dovish, pricing in only two full quarter-point cuts this year.

Industrial production in Taiwan ended last year on a high, boosted by seasonal factors and perhaps firms accelerating production ahead of potential US tariffs. The 20% year-on-year rise in December was the fastest growth in five years, and is unlikely to be repeated in January.

The bigger issue for markets right now, however, is the deterioration in US economic numbers. Having convinced themselves that the ‘soft landing’ was assured, investors are now entertaining the possibility that the economy may be in the early stages of rolling over.

Citi’s US economic surprises index is now negative, and the lowest since the Fed kicked off its easing cycle with a 50-basis point cut last September. It has been mostly falling since the November presidential election.

Two more quarter-point cuts from the Fed this year are now fully priced into the US rates futures curve, and options market activity may also be pointing in the same direction. S&P 500 option volumes hit an all-time high of 4.74 million contracts on Friday, according to CBOE, with demand for ‘puts’ rising.

Here are key developments that could provide more direction to Asian markets on Tuesday:

– South Korea interest rate decision

– Taiwan industrial production (January)

– BoE, Fed, ECB policymakers speak at BoE conference

(By Jamie McGeever, editing by Bill Berkrot)

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