Daily Brief Macro: The Art of the Trade War: HE SAID and more

• The meeting in Busan between Presidents Trump and Xi reduced the tension between the two countries, but the detente may only be temporary and confusion on details persist.
• Tariffs were immediately reduced and potential future increases delayed by a year.  President Trump offered to reduce the fentanyl tariff further to 0% after the meeting.
• The most critical issues of export restrictions on chips and Rare Earth Elements were dialed back with recent threatened restrictions delayed by a year.

• CEO of Quantly discusses market updates, geopolitical landscape, and trends in safe havens
• Focus on innovation and tech, AI, and bitcoin in the digital market
• Analysis of one year trends in safe havens, bitcoin, gold, and the impact of tariffs on the market.

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• Iron ore futures slipped as China’s steel output fell for the fifth consecutive week, with weak demand and rising inventories weighing on sentiment.
• Managed money participants trimmed their net long positions across all futures and options expiries, signalling profit-taking and a more cautious market stance.
• The DCE-SGX spread is gaining momentum, with technical indicators hinting at a sustained near-term widening trend.

• Asia’s base oils prices extend fall vs gasoil prices, with Group II heavy-grade differentials slipping to lowest since start of Q3 2024.
• Ongoing squeeze on base oils margins increases importance for refiners to maintain balanced-to-tight supplies to boost their leverage to adjust prices accordingly.
• Weaker margins and importance of balanced supplies boost incentive for refiners to adjust output accordingly.

• Production slips 12.8% amid lacklustre smallholder involvement  
• Imports rebound MoM, exports edge up on steady China demand  
• Glove exports slip in value to RM 1.2 billion, down 7.7% from July  

• China Sees ‘Stable Period’ for U.S. Ties After Xi-Trump Summit
• In Depth: Busan Summit Sets Course for New U.S.-China Equilibrium
• China to Scrap Tariffs on U.S. Farm Goods, Buy More Soybeans
• China’s 2035 GDP Goal Requires 4.17% Annual Growth

• Crude oil futures were drifting lower Tuesday with benchmarks unable to find conviction on any upwards move for a second session, following what had been viewed as a relatively neutral OPEC+ decision on Sunday.
• Front-month Janc25 ICE Brent futures were trading at $64.50/b (2107 BST) versus Monday’s settle of $64.89/b, while Dec25 NYMEX WTI was at $60.57/b against a previous close of $61.05/b.
• While the group of eight members added another 137,000 bpd to quotas in December, the members taking part in voluntary cuts agreed to pause the unwinding program in the first quarter.

• Crude oil futures opened the week steady after OPEC+ said it would hold off on further production increases following a small uplift in December.
• Front-month Jan26 ICE Brent futures were trading at $64.86/b (2205 BST) versus Friday’s settle of $64.77/b , while Dec25 NYMEX WTI was at $61.05/b against a previous close of $60.98/b.
• The OPEC+ announcement to pause production levels in Q1 came after the group rubberstamped another 137,000 bpd increase in December , a move that had been widely flagged and priced-in ahead of Sunday’s meeting.

• The RBA held its cash rate at 3.6% as anticipated, but its decision marks a shift from easing after September’s inflation surprise, signalling an extended pause in rate cuts through at least mid-2026.​
• Central forecasts now project trimmed mean inflation above 3% for the coming quarters before settling at 2.6% in 2027, requiring mildly restrictive policy rates of 3.4% by mid-2026—materially slower easing than many forecasters anticipated.​
• Labour market softening provides limited comfort as elevated vacancies and wage pressures persist. Two-sided uncertainty around demand strength and the global outlook creates risks justifying a cautious approach to future cuts.

• US Group II base oils price-premium to vacuum gasoil (VGO) holds firm.
• Firm price-premium vs VGO contrasts with falling price-premium this time a year ago.
• Firm price-premium incentivizes refiners to maintain or raise output.