Macro

• Overall, we maintain the view that parts of China’s household sector are showing signs of a balance sheet recession, due to the buildup of debt in the past 20 years.
• The non-financial corporate sector is more difficult to interpret, due to strength for SOE/high tech manufacturing and private sector confidence being less impacted than consumers.  
• Fiscal policy is favored in this environment, as interest rate cuts alone risk being ineffective for sections of the household sector. 

• As the US government has entered into a lower interest rate environment, it would be intuitive to hunt for yield in the hang seng companies.
• The net interest margin should widen and the loan book of the banks  may be impacted by the fall of the local housing prices and secondary market transactions.
• The housing supply of the new housing remains subdued but the yield returns seem attractive.

• Hong Kong Hang Seng was up over 6% in the past five days as key component stocks rallied due to the Deepseek effect.
• Compared to Chinese stocks, US market was more dormant though S&P was up 1.13%.
• Gold was up 2.09% over worries of heightened US inflation and the prospect of rate cuts.

• Revenues of P$274.7bn were 8.3% higher YoY, in line with our estimates and consensus, with SSS in Mexico of 4.3% (vs our 4.0% estimates), driven by ticket growth of 4.5%, as traffic declined for another quarter (0.2%).
• In CAM, SSS of 3.1% were again below our estimates and a further deceleration from the 3Q24 figure, with positive ticket and traffic performance of 0.8% and 2.3%, respectively.
• Margins were in line with our estimates starting at the gross margin level.

• Resurgent US inflation and UK GDP growth sicken dovish arguments, even if the turn is exaggerated by residual seasonality in H1. We now see the Fed’s next move as a hike. Uruguay joined Brazil as another hawkish canary by hiking, while BSP didn’t cut.
• It’s the RBA and RBNZ’s turn next week, where cuts are expected, but they are lagging behind the global policy cycle, not leading it. UK inflation, unemployment and wage data will be the highlights for us, along with FOMC minutes and flash PMIs.
• Note: Smartkarma is now the sole distributor of our research, so clients will only receive all other research from Smartkarma (queries to [email protected]).

• The higher than expected headline and core CPI data in January raised concerns regarding the inflation backdrop 
• But my analysis suggests that the upside CPI surprises were mainly driven by the least persistent categories of inflation
• For now, the more persistent categories of CPI inflation imply that the improvements in trend inflation are likely to stall    

• A fascinating lunch discussion with LLM engineer sparked an investigation into how AI models process information through vector spaces – revealing parallel but mechanistically different biases compared to human analysts 
• Built comprehensive framework mapping traditional financial biases against their LLM counterparts – showing how things like confirmation bias manifest differently (emotional investment vs statistical pattern reinforcement)
• Result: Effective quant research requires understanding both human AND machine biases – can’t just apply traditional risk controls to LLMs. Need tailored mitigations for how biases uniquely manifest in #AI.  

• Insurers / In Depth: Falling yields pile pressure on China’s insurers
• Malaysia /Interview: Malaysia ideally placed for high-tech development, economy minister says
• AI /: Boost inference to follow in DeepSeek’s footsteps, AI veteran tells Chinese firms

• Sales grew almost 30% YoY to P$65bn, well above our estimates and consensus, on the back of solid pricing as volume grew 3.5% YoY –volumes were positive across most of the categories, and sales in local currency grew 12.7% YoY–.
• Profitability expanded solidly starting at the gross profit.
• Gross margin of 48.2% was slightly below our estimates yet expanded YoY and QoQ.

• Sharp decline in heavy OEM commercial vehicle tire production in 2024
• China PCLT tire import volume into EU up 50% since 2019
• EU extends tariffs on Chinese truck and bus tires

• For the week ending 07/Feb, US crude inventories increased by 4.1m barrels, exceeding expectations of a 2.4m barrel build. Gasoline stockpiles surprisingly fell, while distillate stocks unexpectedly rose.
• US natural gas inventories fell by 100 Bcf for the week ending 07/Feb, beating analyst expectations of a 90 Bcf drawdown. Inventories are 2.8% below the 5-year seasonal average.
• BP’s Q4 net profit fell 48.5% QoQ and missed estimates by 2.5% due to weak refining margins. Chevron plans to trim workforce by 20% to cut costs. 

• U.S. government spending inefficiencies under scrutiny, but political resistance remains strong.

• Inflation remains high, delaying expected interest rate cuts and fueling public frustration.

• India’s CPI drop hints at potential RBI rate cuts; Philippines keeps rates steady amid peso concerns.

• The BSP held its key rate at 5.75%, contradicting market expectations of a 25bp cut, citing persistent global economic uncertainties and a stable inflation outlook.
• Inflation risks for 2025 and 2026 are balanced, though upside pressures from utilities and downside risks from lower rice tariffs remain.
• The BSP signalled a cautious, data-dependent approach to easing, with future rate cuts contingent on further clarity regarding inflation trends and global economic developments.

• We expect US retail sales to fall by 1.0% in January with declines of 0.2% both ex autos and ex autos and gasoline.
• The monthly weakness is likely to be largely due to bad weather with potential for a correction from Q4 strength adding to downside risk.
• January retail sales are sensitive to weather with January 2023 producing a strong rise that was subsequently corrected, and a harsh January 2024 seeing a decline that was subsequently reversed.

• GDP defied dovish expectations by surging 0.4% m-o-m, flipping the expected sign on Q4 to grow by 0.1% q-o-q amid broadly positive performances across industry and services.
• We called November the statistical bottom amid residual seasonality, which is turning higher into what should be a more resilient H1 again. That call remains on track.
• Statistical noise misled dovish rate views into seeing a spurious fundamental weakness. A lack of follow-through should allow cuts to end after a final one in May.

• Hong Kong’s secular bull market gained after DeepSeek’s announcement ignited shares in the tech sector.
• Kingsoft Corp (3888 HK) broke out to new high after it announced its DAU for WPS exceeded 100mm.  Kingsoft Cloud Holdings (3896 HK) is benefiting from the AI rally.
• BYD (1211 HK) broke out to an all-time high after announcing it would offer its ADA service for free. The move caused Tesla (TSLA US) shares to fall.

• Nextrade (NXT) is an alternative trading system (ATS) in Korea which will start to go live on 4 March.
• Nextrade provided a list of 10 stocks including Lotte Shopping,  Cheil Worldwide,  Kolon Industries, LG Uplus, and S Oil that will start to trade on NXT starting 4 March. 
• Most of these 10 stocks tend to be lower beta stocks with relatively low amounts of share volatility. These 10 stocks are up on average 2.8% YTD, underperforming KOSPI.

• All across the world, people are worried about Donald Trump and the uncertainty he will bring to the global order.
• For macro investors particularly, Trump has proven a continuing headache with his weekly insistence on pushing out tariffs news or other bombshells late Friday.
• This past week-end was not exception with Trump’s remarks on reciprocal tariffs and potential tariffs on aluminium and steel.

• Intensifying US inflationary pressures significantly exceeded consensus expectations in January, accumulating news potentially worth 1pp in 2026 since the Fed first cut.
• We now doubt there can be sufficient downside news to offset these hawkish pressures, with the Fed on hold in March. That means we see the next Fed move as a hike in 2026.
• Annual core inflationary pressures are not outliers in the US, nor is its labour market resilience, so other central banks should struggle to sustain cutting cycles beyond H1.

• HIIR from Japan, Russia, Singapore, UK, USA face action
• India producer Reliance Sibur petitions DGTR on dumping
• ADD range from 10% to 70% on the affected imports

• The 25% Steel and Aluminum tariff could have small to modest adverse inflation and GDP growth impacts on the U.S., but reciprocal and more product tariffs create trade policy uncertainty. 
• This could amplify the impact of the cumulative tariffs under president Trump’s administration.
• President Donald Trump 25% tariffs on all steel and aluminium imports from March 12 has no exemptions, though Trump did hint at an exemption for Australia on U.S. aircraft imports. 

• The RBI forecast 4.4%YoY inflation in Jan-Mar’25, but a 15.7%MoM decline in vegetable prices in Jan’25 enabled headline CPI inflation to ease to 4.3%YoY. 
• Our forecast of 4.1%YoY inflation for Jan-Mar’25 remains on track. With food inflation set to recede, we expect CPI inflation below 4%YoY in Apr-Sep’25, enabling 75bp of further rate cuts. 
• If the SW Monsoon in Jun-Sep’25 is normal or better, another 25bp rate cut is likely in Dec’25, taking the repo rate to 5.25% by the end of 2025. 

• The global investment landscape is undergoing a paradigm shift as geopolitical risks evolve from transient shocks to structural forces reshaping market efficiency.
• Historically, markets absorbed episodic geopolitical crises—like oil embargoes or regional conflicts—through short-term volatility and mean-reverting adjustments.
• However, the post-2020 era has seen economic policy fused with national security imperatives, exemplified by techno-nationalism (e.g., U.S. CHIPS Act), weaponized supply chains (e.g., rare earth export controls), and financial system fragmentation (e.g., SWIFT exclusions).

• A review of recent events/data impacting our investment themes or outlook
• China listed HK shares continue to lead the pack in Asia
• India’s rate cuts, tax cuts and election wins are not supporting the market

• Trump is a disrupter. But it is game change NOT game end.
• If he as we expect unleashes a global deregulation wave, reins in government, implements Reagonomics 2.0 and level the trade playing field everyone benefits.
• We are overweight on US equities and the dollar and believe every market dip is an opportunity to exposure in conviction stocks.

• Japanese tire firms mull option of broadening production base in US  
• May explore low-cost Southeast Asian destinations too  
• Diversifying supply-chain network to be on top of agenda  

• On 11 February, the Korea Exchange announced eight major incentives for selected excellent Corporate Value Up companies every May starting this year.
• Some of the major incentives include preferential tax treatment and preferential inclusion in the Korea Value Up index. 
• The Korea Exchange plans to select and announce 10 companies that will be included as Excellent Value Up Companies for the first time in May 2025.

• WTI futures fell by 2.1% for the week ending 07/Feb on the back of uncertain trade policy, growing U.S. crude stockpiles, and a strengthening dollar.
• WTI options Put/Call volume ratio fell to 1.18 from 1.31 (31/Jan) last week, as call volume fell by 51% WoW while put volume dropped by 56.1%.  
• WTI OI PCR fell to 0.98 from 1.00 last week. Call OI rose by 5.2% WoW, while put OI grew by 3.5%.

• For the week ending 07/Feb, U.S. natural gas prices gained 8.7% on the back of colder weather forecasts, rising LNG exports, and falling inventories.
• Henry Hub Put/Call volume ratio decreased to 1.33 from 1.50 (31/Jan) the previous week as call volumes fell by 26.7% WoW, while put volumes declined by 35%. 
• Henry Hub OI PCR rose to 0.97 from 0.96 from last week. Call OI rose by 5.6% WoW, while put OI increased by 7.2%.

• DeepSeek / Cover Story: How DeepSeek is redefining the future of AI
• Panama /: Panama quits China’s Belt and Road Initiative amid pressure from U.S.
• Consumption /Analysis: What are the key factors to spur China’s consumption?

• The early days of the Trump administration has seen lots of volatility around the tariffs with Canada and Mexico, but the more stable U.S. Treasury market helps provide an anchor. 
• U.S. Treasuries have shift towards the view that the 10yr budget bill will be delayed until H2 and likely be only modestly stimulative in 2026. 
• Combined with the Fed still leaving the door open to rate cuts this has helped avoid major directional movements. 

• The U.S. oil and gas rig count rose for the second straight week, increasing by 4 to 586 for the week ending 07/Feb.
• For the week ending 31/Jan, U.S. oil production rose to 13.48m bpd from 13.24m bpd the week prior.
• The number of active oil rigs rose by 1 to 480 and gas rigs grew by 2 to 100. The number of rigs in Permian basin remained unchanged at 303.

• Central banks provide vague and evolving estimates of neutral rates that are unreliable guides to policy decisions, although these estimates inform the perceived terminal rate.
• Resilient labour markets and persistent unit labour cost growth challenge the dovish view that policy rates are well above their neutral settings, urging caution.
• Neutral estimates gradually drift to explain the prevailing regime, which doesn’t prevent a pause in cuts or a return to rate hikes consistent with historical norms.

• The podcast is called New Barbarians and focuses on digital assets and opportunities in the market
• The special guest, Connor Farley, is the CEO and co-founder of Truvias, an SEC registered investment advisor specializing in digital asset portfolio management
• The current market trends include rising inflation concerns, increasing interest in gold, and the potential for Bitcoin to act as digital gold, according to the hosts and guest.

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• Welcome to our weekly editorial on everything macro, where we aim to paint a medium-term picture of liquidity, growth, and inflation—and how these factors will impact your allocation.
• It seems The Donald has a penchant for late Friday tariff announcements, keeping markets on edge for a second consecutive Monday open.
• This pattern is starting to take shape, though we likely need a third occurrence before drawing statistical conclusions.

• Recent announcements of tariffs by the Trump administration have caused global tensions and retaliatory measures
• The tariffs are aimed at countries like Mexico, Canada, and China, with potential impacts on US companies and global supply chains
• The situation is evolving, with negotiations and potential escalations to watch for in the coming days

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• Debate surrounding potential increase in Russian pipeline gas to Europe, with uncertainty of timing and magnitude of flows
• Russia, Ukraine, Europe, and the US all have vested interests in potential negotiations for increased pipeline gas flows
• Impact on European natural gas balance and global gas balance if increased Russian pipeline flows were to manifest, with current base case price forecast for TTF market in 2025 and 2026 without embedding increase in Russian natural gas flows

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• The outlook for copper in the near term is positive, but the market interest in copper may mean higher prices
• Investing in copper may be expensive due to high demand and M&A activity in the sector
• Finding a pure play copper company of significant scale on the ASX may be challenging, with considerations of China’s impact on copper demand and production levels in mind.

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• The podcast discusses advanced portfolio optimization techniques in the world of digital assets
• Modern portfolio theory (MPT) is a key concept in investing, but newer models and techniques like Black Litterman and shrinkage estimators are being used to address limitations
• Thematic model grouping and consolidated alpha optimization are two key approaches to portfolio construction discussed in the episode.

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• Long gold has been a winning strategy over the last two calendar years. Gold futures has clocked a 125% increase since start of 2019 until now.
• Gold has seen its strongest rally yet over the last two years, breaking through previous all-time highs with minimal retracement.
• GLD ETF has delivered a 7.4% price returns over the last month and an 8% upside YTD in 2025 so far.

• SGX Iron Ore Futures rose by $2.25/ton, closing at $107.30/ton on Feb 7, after trading within a $5.50/ton range, the widest in recent weeks.
• Strong demand from steel mills, a weaker U.S. dollar (-0.4%), and supply risks from Rio Tinto port clearances drove iron ore prices higher.
• Prices trade above key moving averages, with RSI nearing the overbought zone (65.08), suggesting a potential correction in line with historical post-CNY trends.

• Following last year’s political drama in France, the Bayrou government successfully passed a 2025 budget last week.
• The smooth passage of the budget is likely a temporary political reprieve.
• This situation does not factor in the probable fiscal impact of potential US tariffs.

• RBI cut its policy rate by 25bp on 7th Feb’25. With inflation set to moderate substantially over the rest of CY25, we expect another 75bp of rate cuts by Aug’25. 
• Delhi election results on 8th Feb’25 saw resounding BJP victory after 27 years. Urban governance, a major focus of Budget’25, will be bolstered in Delhi and Mumbai, India’s largest cities. 
• With the policy rate at 5.5% by Aug’25, and substantial income tax cuts boosting PCE, real GDP should return to 8% growth in FY26 (Apr’25-Mar’26). EPS growth will benefit too. 

• Banxico (the Bank of Mexico) cut the policy rate by 50bps to 10.5%, with a cautious stance and a split vote. Inflation has fallen but remains above target.
• Global risks, including Trump’s tariff threats, add uncertainty. Despite economic weakness, some monetary tightening may still be needed.
• Banxico plans further 50bps cuts, likely pausing at 8.0%, depending on economic conditions.

• Trump imposed smaller than anticipated tariffs on China and Xi reacted with a smaller than anticipated retaliation.  China is in a better negotiating position than Canada and Mexico.
• DeepSeek’s announcement of its powerful and less expensive A.I. model which performed at a similar level to ChatGPT changes the dynamic of US tech domination in the A.I. field.
• Xi has taken aim at the Magnificent 7 companies as a strategy to weaken Trump’s hand in negotiations and pressuring the US stock market. 

• Plenty of warnings of a long-term market top are appearing, but the warnings belong to the category of condition indicators and not actionable trading signals.
• Current conditions amount to just a sell signal set-up, and a review of the short-term technical picture shows a resilient market structure.
• Long-Term investment-oriented accounts should de-risk to more neutral positions. Traders can wait for more definitive signs of downside breaks before turning defensive.

• Vibrant secondary home sales have emerged, particularly since supportive measures were announced by the government last September. Falling prices have enhanced affordability and triggered the return of buyers.
• Premium primary sales have been boosted by relaxed restrictions and “trading up” by existing homeowners, helping private developers. Their hare of primary home sales will, however, still  be squeezed.
• China’s consumers remain downbeat due to numerous factors, but a weak labour market for younger people has raised the urgency of the government to provide more affordable housing stock.

• Copper prices closed above $9,000 per ton once more and are poised for short-term gains as the outlook on China’s economic recovery becomes more favorable.
• The COMEX spread has hit a 12-week high, nearly reaching $1,000 per ton, as traders expressed concerns about copper potentially being included in the Trump administration’s blanket levies.
• We favor Southern Copper (SCCO US)  and Antofagasta PLC (ANTO LN)  due to their greater copper exposure, higher ROCEs, and robust long-term expansion strategies.

• Treasury Secretary Scott Bessent declared in an interview that he is  mainly focused on lowering the 10-year Treasury yield and Trump is not calling the Fed to lower short-term rates.
• The market is co-operating and giving Bessent the benefit of the doubt. The bulls can rightly argue that inflation expectations have declined since the inauguration, which pushed down the 10-year.
• In the end, much depends on the trajectory of the term premium. Any spike in the term premium would pose a serious threat to the success of Trump’s economic agenda.

• The RBI has cut the repo rate by 25 basis points to 6.25%, marking its first reduction in five years. 
• While aimed at supporting growth, the central bank maintains a neutral stance, signaling caution amid global uncertainties.
• Inflation is projected to ease, but risks from trade disruptions and financial volatility remain key concerns.

• Goldman Sachs has upgraded its iron ore price forecast, highlighting rising near-term demand from China’s steel sector during the spring construction season and weather-related disruptions at Australian ports.
• However, Goldman is bearish on iron ore for the second half (a consensus view), predicting a decline in China’s steel demand and the emergence of lower-cost supply.
• We continue to pound the table on Fenix Resources (FEX AU). Read “Fenix Resources (FEX AU) Q2 FY25 Update: Close to Tripling Production.

• For the week ending 31/Jan, US crude inventories increased by 8.7m barrels, exceeding expectations of a 2.4m barrel build. Gasoline stockpiles unexpectedly rose, while distillate stocks fell more than expected.
• US natural gas inventories fell by 174 Bcf for the week ending 31/Jan, beating analyst expectations of a 167 Bcf drawdown. Inventories are 4.4% below the 5-year seasonal average.
• TotalEnergies’ Q4 adjusted earnings rose 8.1% QoQ and beat estimates by 4.8% led by robust growth in the LNG and Integrated Power divisions.

• New U.S. trade deals will likely make slow progress in reducing bilateral trade deficits as the underlying drivers behind the U.S. trade deficit are macro forces. 
• While the U.S. economy outperforms other major trading partners; the value of the USD remains overvalued
• As long as tariffs are not high enough to undermine comparative advantage of importing countries, the U.S. will struggle to reduce the size of the trade deficit. 

• January’s non-farm payroll with a 143k increase is on the low side of expectations, though we suspect January data was restrained by bad weather.
• January’s non-farm payroll with a 143k increase is on the low side of expectations, though we suspect January data was restrained by bad weather.
• Unemployment slipped to 4.0% from 4.1%, with weather restraining the labor force more than employment.

• Total revenues decreased by 5% to US$3.8 Bn, while EBITDA dropped 3% (or +3% on a like-to-like basis) to US$681 M, slightly above the consensus estimate of US$673 M and slightly below our US$692 M estimate.
• On the other hand, the net profit of US$48 M compares positively to the US$441 M net loss in 4Q23, while in 2024, the company reached a US$939 M net profit, a record level for CEMEX.
• CEMEX’s EBITDA margin during the quarter was 17.9% (vs. 17.5% in 4Q23), implying a 0.4 pp.

• Trade war impacts the market sentiment
• Arbitrage widens for international cargoes 
• Lower inventory could bring some buying back

• New neutral estimates for the UK and Euro area suggest policy is less tight, if at all, urging caution. The BoE unsurprisingly cut again but with a shockingly dovish dissent for 50bp. A strong US labour market and EA inflation sustain cyclical hawkish pressure.
• Next week’s thin European data calendar leaves UK GDP data as a focal point despite it suffering residual seasonality. US inflation data are more globally relevant, though unlikely to impact monetary policy decisions from the Philippines or Peru.
• Note: Smartkarma is now the sole distributor of our research, so clients should log in now to ensure smooth ongoing access (send queries to [email protected]).

• Hong Kong equity boost this week may imply longer positive rally down the road. 
• In US market, there are a number of individual firms that have rallied over at least 10% this week.
• Today marks the day for nonfarm payrolls, which may direct not only the equity market but also gives guidance to Fed policies in coming months.

• We expect inflation for the second half of January to be at 0.16% bw, as prices of agricultural products would have continued to decline.
• The forecast of 0.16% bw is slightly below the historical 0.20% bw for this period, as we expect a -0.33% bw contraction in non-core inflation (historical average of +0.10% bw).
• Our price monitoring shows a generalized reduction in agricultural and meat & egg prices, which would be partially offset by the increase in energy prices.

• Investment banks / Exclusive: Billionaire investment banker Bao Fan may face bribery charges, sources say
• Vaccine /MSD halts supply of HPV vaccine to China after slump in demand
• Holiday /Analysis: Record Lunar New Year travel boosts consumer spending

• Trump declares a national energy emergency and calls for increased oil production
• The US shale revolution led to a surge in oil and gas production
• Despite Trump’s push for more drilling, the oil industry is hesitant due to current market conditions and oversupply of oil

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• India is becoming a key player in global oil demand growth, with forecasts predicting substantial expansion in the coming years
• The global oil industry is shifting its focus from China to India as the main driver of demand growth
• Challenges for India in meeting oil demand include weather effects, economic activity rhythms, currency strength, and inflation impacts on affordability

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• Equities opened down, with futures showing a decline across various markets
• January saw significant gains in gold and Bitcoin, outperforming equities
• European stocks surged 8.2% in a month, surprising many investors and challenging traditional market outlooks

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• We’ve been tracking the data on approved financing for the projects on the ‘whitelist’ for over a year now, considering it a major factor in addressing the ‘sold-not-completed’ problem
• New data released in January shows the approved loans for the ‘whitelist’ projects exceeded the target in 2024
• There was a big acceleration in approvals in Q4 2024

• December’s US trade deficit of $98.4bn from $78.9bn in November is even wider than expected and the widest since March 2022.
• Exports fell by 2.6% after a 2.7% November increase while imports rose by 3.5% for a second straight month.
• Goods exports fell by 4.2% versus 4.5% in the advance report while goods imports rose by 4.0% versus 33.9% in the advance report.

• Drug / Analysis: China’s rock bottom drug prices spark quality concerns
• PMI /China services growth slows as supply, demand moderate, Caixin PMI shows
• Export controls: China has restricted exports of five metals used in the semiconductor and defense industries to protect its national security.

•  Heavy rain may occur in east Indonesia during one-month period
• Disruption to rubber production may be mostly from heat
• WEF, WMO seek private contribution for early weather warning

• Global uncertainty grows due to U.S. trade policies, impacting investment and slowing economic activity across multiple regions, including Europe and Asia.
• Hong Kong’s retail sector struggles, with falling sales and rents, while India and Indonesia show resilience despite expected slowdowns.
• UK and India cut interest rates, but UK economic policies remain ineffective, whereas India’s growth, though slowing, remains strong.

• There is no imminent inflation threat in our assessment of business cycle indicators.
• We do not buy the mainstream view that Trump’s policies will lead to a structural upshift in inflation. Quite the contrary.
• However inflation is not going back to pre-Covid rates. Around 2.5- 3% will be the norm hereon, which is good for corporate earnings growth and real assets

• The BoE’s 25bp rate cut came with a shockingly dovish vote split as the former hawkish dissenter proved to be an activist in backing an immediate 50bp reduction.
• Bank inflation forecasts are trending up and only touch the target with one or two more cuts as the MPC appears to be more cautiously concerned about persistence.
• We maintain our call for the BoE to hold rates in March before delivering a final 25bp cut in May, assuming conditions that also end the Fed’s cycle in March and ECB in June.

• Trump announced 25% tariffs on Canada and Mexico, 10% tariffs on oil and China
• Tariffs are paid by US consumers at the point of entry, not fully equating to a 25% price increase
• Uncertainty about impact of tariffs on prices of goods like maple syrup and avocados

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• A full-fledged trade war is now underway and will soon envelope more countries including Europe and East Asia.
• Such a decisive shift in the approach taken by the global hegemon, the US,  will result in a more unstable world, particularly for smaller and less powerful countries.
• Asia will be a big loser. It will be hit by a slowdown in exports, a diversion of Chinese exports from the US into Asia, and tighter global financial conditions.

• Welcome to this week’s The Drill, which I will be authoring by myself moving forward.
• This means a continued focus on commodities and energy, but also an increased dosage of geopolitics as many of you have wished for.
• Each week, we’ll cover a couple of key topics as well as provide you with a sneak peak into our data models and what they have to say on commodities.

• Negotiating will likely start in spring, but negotiating will be tough as the U.S. wants a phase 2 deal with new objectives to boost U.S. exports and penalties
• China will likely be quick to make concessions on needed agricultural imports and illegal Fentanyl from China, but slow to concede on the idea of penalties. 
• It will be a volatile road to an eventual deal in late H1 or early H2.    

• History shows structural shifts in inflation are rare and that the price of most goods falls over time. 
• The inflation – goods, services and assets –  we know is mostly cyclical- dependent on policy and business cycle driven.
• The real cost of capital and money supply growth are only two leading inflation indicators that matter.

• Tire industry to be a collateral damage in the tariff battle  
• 91% of projected light truck tire requirement is import reliant  
• Trade balance tipping towards China and Canada  

• Donald Trump has currently refrained from imposing tariffs on Canada and Mexico.
• However, there is a looming threat of tariffs on America’s allies.
• This suggests the tax war initiated by Trump against Europe on 20 January could escalate further, potentially surpassing the intensity of trade-in-goods disputes.

• We are updating our models ahead of 4Q24 Results; we downgrade Gruma to Underperform (from Market Perform), while slightly raising our PT to P$380 (from P$377).
• While FX remains a relevant factor for the company (reporting in USD, with most of the sales originated in the U.S., where margins are higher FY25), we see limited upside at current levels.
• We are keeping our other ratings unchanged, with some adjustments to PTs, mostly to the upside, as FX benefits a relevant proportion of our covered Consumer companies that have exposure in the U.S. Within our Supermarkets coverage, we continue to prefer Chedraui, and Beverage companies AC, KOF, FEMSA and Becle within Food & Bev.

• Travel / In Depth: Gulf states roll out the welcome mat for Chinese tourists as focus shifts from oil
• Hong Kong /: Hong Kong stocks rebound after sharp drop as Trump’s tariff war weighs on markets
• Google /: China launches antitrust probe into Google’s market dominance

• Historical challenges of neurosciences. The complexity of the central nervous system (CNS), which includes the brain and spinal cord, is unrivalled in the human anatomy, being made up of billions of interacting neurons and other cells.
• More than 600 neurologic diseases and conditions have been identified.
• Historically, progress in developing disease-modifying, let alone curative solutions for these disorders, has been stymied by incomplete understanding of the CNS, diagnostic challenges due to the lack of reliable biomarkers, the blood-brain barrier (BBB) obstacle, and the high rate of clinical drug development failure rates.