Morning Report
Today's economic developments and market movements.
Morning Report PDF (PDF 286KB)
Key themes: Markets were closed in the US for President’s Day.
Comments from US Vice President JD Vance in Munich over the weekend drew attention to Europe’s need to support its eastern borders, seeing defence stocks rally and bond yields move higher.
In currencies, the Aussie dollar reached an intraday two-month high in anticipation of a rate cut later today, which swaps markets have priced in with 90% probability. The Japanese Yen also outperformed on the back of stronger-than-expected activity data.
Oil prices stabilised on news that OPEC+ are considering delaying production increases, while concerns over tariff announcements saw intense volatility in copper markets.
Share markets: With markets closed in the US for President’s Day, the focus was on Europe and Asia.
European markets strengthened overnight, primarily on greater interest in defence stocks given the risk of higher military spending in the region. The Euro Stoxx 50 rose +0.5%, London’s FTSE 100 was up +0.4%, while Germany’s DAX outperformed and moved to a fresh record high, finishing +1.3% higher on the day.
Markets were mixed across Asia and were little changed on the day, with stocks inching higher in Shanghai (+0.2%) and Tokyo (+0.1%) but holding flat in Hong Kong. The ASX 200 started the week on weaker footing, closing –0.2% lower yesterday, with declines being led by financials and energy (–1.5%). Futures markets are pointing to a positive open this morning.
Interest rates: Following a weekend speech from US Vice President JD Vance in Munich, markets were focussed on Europe’s need to ramp-up defensive spending to support its eastern borders in time. This saw Bunds come under pressure, with the ten-year yield rising 6 basis points to 2.49%. Meanwhile, the ten-year Gilt yield also rose 3 basis points to 4.53%. Expectations for ECB policy easing has pared back ever-so slightly, though swaps markets are still pricing in a near-certain chance of a rate cut at the March meeting in about two weeks’ time.
Australian government bonds also fell under selling pressure in the late afternoon, with the three-year and ten-year yields rising 4 basis points each, to 3.88% and 4.45% respectively. Overnight, futures markets traded and a tight range and were broadly unchanged. Market pricing for the RBA is currently unchanged on a week ago, with swaps markets pricing in a 90% chance of a rate cut today. Today’s much-anticipated decision and tone of guidance will likely see expectations for rate cuts the year-ahead recalibrated, with the risk of an on-hold decision or more ‘hawkish’ cut unable to be fully ruled out.
Foreign exchange: Major currencies had distinct performances against the USD yesterday, with the local dataflow and forthcoming event risk playing a key role for those that outperformed. The DXY traded a very tight range, moving between a low of 106.63 and a high of 106.90, but ultimately trading broadly flat over the day to 106.73 at the time of writing.
The Aussie dollar appreciated against the greenback, the AUD/USD reaching an intraday two-month high of 0.6374 in anticipation of the RBA’s forthcoming rate cut later today, before ultimately paring back and finishing +0.1% higher to 0.6361. The chief risk for the currency pair is to the upside, should the RBA go against consensus and decide to delay rate cuts.
The Japanese Yen reacted positively to local activity data which surprised to the upside, appreciating against the USD. The USD/JPY continued to trade lower after the fact, ultimately finishing –0.6% lower from Friday’s close to 151.39 at the time of writing.
The Euro provided somewhat of an offset against this within the main DXY pairs, with the EUR/USD paring back –0.1% to 1.0484. The Sterling meanwhile put in a good innings, the GBP/USD rising +0.3% to 1.2626, while the Canadian dollar held broadly flat.
Commodities: Oil prices started to stabilise on news that OPEC+ are considering delaying monthly supply increases, citing the fragility of global oil markets at present. West Texas Intermediaries (WTI) futures rose 0.9% to US$71.39/bbl, while Brent futures rose 0.7% to US$75.29/bbl.
Metals were broadly mixed. Copper markets have had a volatile few days – with sharp moves in spot-to-three month spread and LME-to-COMEX spread – as markets try to position themselves ahead of further announcements over tariffs, with the three-month futures contract falling –0.9% to $9,396. Meanwhile, aluminium and nickel continue to march higher, rising 0.3% and 0.1% higher respectively.
Gold prices only recovered partly from Friday’s sharp decline, rising 0.5% back to stabilise just under the $2,900 mark but well off the previous peak that was closer to $2,940. Also, iron ore prices continued to pare back as earlier weather disruptions were not as large as once feared, the March SGX contract falling –0.4% to $105.35.
Australia: There were no major data releases in Australia on Monday.
New Zealand: January’s PSI (performance of services) recorded its first expansionary read since February 2024, rising from 48.1 in December to 50.4 in January. This follows a similar rebound in the PMI (performance of manufacturing) last week, which together, provides early signs of a recovery in economic growth back toward trend after sharp declines over 2024. The PSI detail points to a strong bounce-back in sales activity (from 46.5 to 54.0), a modest improvement in new orders to breakeven territory, but continued contractions in employment.
Meanwhile, December’s net migration data (see here) reported a net inflow of 3,800 migrants in the month and roughly 27,000 over the year. Broad trends remain in place, that being foreign arrivals remaining above pre-pandemic levels and departures of New Zealanders slowing from its highs. On the outlook for net migration, the weakening local labour market may continue to support outflows, but at the same time, government policy is geared towards drawing in more skilled migrants.
Japan: GDP surprised materially to the upside, printing 0.7% in Q4 (2.8% annualised), while the market consensus was looking for a 0.3% lift. This came alongside a modest upward revision to the previous quarter’s data as well. Importantly, the chief culprit behind the upside surprise was private consumption, managing to lift 0.1% (vs. –0.3% forecast). Meanwhile, the bulk of the growth impetus in domestic demand was driven by business spending, up 0.5%, while net exports also contributed significantly to growth, reflecting strength in inbound tourism and lower imports in the quarter. Overall, this data is likely to give the Bank of Japan some confidence that the economy is on decent footing to withstand further policy normalisation, in the form of gradual increases in interest rates, over the course of the year.
Eurozone: The Euro Area’s trade surplus continues to rebound from its fifteen-month low in October, more than doubling over the past two months to reach €14.6bn in December. In the latest month, a pull-back in imports drove the improvement in the surplus, but over Q4 as a whole, it looks as though exports and imports growth were broadly in line with each other. Across key trading partners, the surplus with the US remains near historical highs seen earlier in 2024, while the deficit with China remains around twice as high as pre-pandemic levels.
United States: There were no major data releases yesterday given it was President’s Day. We did receive some comments from the FOMC’s Harker and Bowman, both of which continued to express a preference for patience in order to gain greater confidence over inflation’s downward trajectory before any decision could be made to cut interest rates further. There is plenty more Fedspeak due over the days ahead, which will provide more clues on the nuances behind Committee members’ own opinions.
Stay informed with Westpac IQ
Get the latest reports straight to your inbox.
Related articles
Morning Report
Morning Report
Morning Report
Browse topics
Disclaimer
©2025 Westpac Banking Corporation ABN 33 007 457 141 (including where acting under any of its Westpac, St George, Bank of Melbourne or BankSA brands, collectively, “Westpac”). References to the “Westpac Group” are to Westpac and its subsidiaries and includes the directors, employees and representatives of Westpac and its subsidiaries.
Things you should know
We respect your privacy: You can view our privacy statement at Westpac.com.au. Each time someone visits our site, data is captured so that we can accurately evaluate the quality of our content and make improvements for you. We may at times use technology to capture data about you to help us to better understand you and your needs, including potentially for the purposes of assessing your individual reading habits and interests to allow us to provide suggestions regarding other reading material which may be suitable for you.
This information, unless specifically indicated otherwise, is under copyright of the Westpac Group. None of the material, nor its contents, nor any copy of it, may be altered in any way, transmitted to, copied of distributed to any other party without the prior written permission of the Westpac Group.
Disclaimer
This information has been prepared by the Westpac and is intended for information purposes only. It is not intended to reflect any recommendation or financial advice and investment decisions should not be based on it. This information does not constitute an offer, a solicitation of an offer, or an inducement to subscribe for, purchase or sell any financial instrument or to enter into a legally binding contract. To the extent that this information contains any general advice, it has been prepared without taking into account your objectives, financial situation or needs and before acting on it you should consider the appropriateness of the advice. Certain types of transactions, including those involving futures, options and high yield securities give rise to substantial risk and are not suitable for all investors. We recommend that you seek your own independent legal or financial advice before proceeding with any investment decision. This information may contain material provided by third parties. While such material is published with the necessary permission none of Westpac or its related entities accepts any responsibility for the accuracy or completeness of any such material. Although we have made every effort to ensure this information is free from error, none of Westpac or its related entities warrants the accuracy, adequacy or completeness of this information, or otherwise endorses it in any way. Except where contrary to law, Westpac Group intend by this notice to exclude liability for this information. This information is subject to change without notice and none of Westpac or its related entities is under any obligation to update this information or correct any inaccuracy which may become apparent at a later date. This information may contain or incorporate by reference forward-looking statements. The words “believe”, “anticipate”, “expect”, “intend”, “plan”, “predict”, “continue”, “assume”, “positioned”, “may”, “will”, “should”, “shall”, “risk” and other similar expressions that are predictions of or indicate future events and future trends identify forward-looking statements. These forward-looking statements include all matters that are not historical facts. Past performance is not a reliable indicator of future performance, nor are forecasts of future performance. Whilst every effort has been taken to ensure that the assumptions on which any forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ substantially from any forecasts.
Conflicts of Interest: In the normal course of offering banking products and services to its clients, the Westpac Group may act in several capacities (including issuer, market maker, underwriter, distributor, swap counterparty and calculation agent) simultaneously with respect to a financial instrument, giving rise to potential conflicts of interest which may impact the performance of a financial instrument. The Westpac Group may at any time transact or hold a position (including hedging and trading positions) for its own account or the account of a client in any financial instrument which may impact the performance of that financial instrument.
Author(s) disclaimer and declaration: The author(s) confirms that (a) no part of his/her compensation was, is, or will be, directly or indirectly, related to any views or (if applicable) recommendations expressed in this material; (b) this material accurately reflects his/her personal views about the financial products, companies or issuers (if applicable) and is based on sources reasonably believed to be reliable and accurate; (c) to the best of the author’s knowledge, they are not in receipt of inside information and this material does not contain inside information; and (d) no other part of the Westpac Group has made any attempt to influence this material.
Further important information regarding sustainability-related content: This material may contain statements relating to environmental, social and governance (ESG) topics. These are subject to known and unknown risks, and there are significant uncertainties, limitations, risks and assumptions in the metrics, modelling, data, scenarios, reporting and analysis on which the statements rely. In particular, these areas are rapidly evolving and maturing, and there are variations in approaches and common standards and practice, as well as uncertainty around future related policy and legislation. Some material may include information derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. There is a risk that the analysis, estimates, judgements, assumptions, views, models, scenarios or projections used may turn out to be incorrect. These risks may cause actual outcomes to differ materially from those expressed or implied. The ESG-related statements in this material do not constitute advice, nor are they guarantees or predictions of future performance, and Westpac gives no representation, warranty or assurance (including as to the quality, accuracy or completeness of the statements). You should seek your own independent advice.
Additional country disclosures:
Australia: Westpac holds an Australian Financial Services Licence (No. 233714). You can access Westpac’s Financial Services Guide here or request a copy from your Westpac point of contact. To the extent that this information contains any general advice, it has been prepared without taking into account your objectives, financial situation or needs and before acting on it you should consider the appropriateness of the advice.
New Zealand: In New Zealand, Westpac Institutional Bank refers to the brand under which products and services are provided by either Westpac (NZ division) or Westpac New Zealand Limited (company number 1763882), the New Zealand incorporated subsidiary of Westpac ("WNZL"). Any product or service made available by WNZL does not represent an offer from Westpac or any of its subsidiaries (other than WNZL). Neither Westpac nor its other subsidiaries guarantee or otherwise support the performance of WNZL in respect of any such product. WNZL is not an authorised deposit-taking institution for the purposes of Australian prudential standards. The current disclosure statements for the New Zealand branch of Westpac and WNZL can be obtained at the internet address www.westpac.co.nz .
Singapore: This material has been prepared and issued for distribution in Singapore to institutional investors, accredited investors and expert investors (as defined in the applicable Singapore laws and regulations) only. Recipients of this material in Singapore should contact Westpac Singapore Branch in respect of any matters arising from, or in connection with, this material. Westpac Singapore Branch holds a wholesale banking licence and is subject to supervision by the Monetary Authority of Singapore.
U.S.: Westpac operates in the United States of America as a federally licensed branch, regulated by the Office of the Comptroller of the Currency. Westpac is also registered with the US Commodity Futures Trading Commission (“CFTC”) as a Swap Dealer, but is neither registered as, or affiliated with, a Futures Commission Merchant registered with the US CFTC. The services and products referenced above are not insured by the Federal Deposit Insurance Corporation (“FDIC”). Westpac Capital Markets, LLC (‘WCM’), a wholly-owned subsidiary of Westpac, is a broker-dealer registered under the U.S. Securities Exchange Act of 1934 (‘the Exchange Act’) and member of the Financial Industry Regulatory Authority (‘FINRA’). In accordance with APRA's Prudential Standard 222 'Association with Related Entities', Westpac does not stand behind WCM other than as provided for in certain legal agreements between Westpac and WCM andobligations of WCM do not represent liabilities of Westpac. This communication is provided for distribution to U.S. institutional investors in reliance on the exemption from registration provided by Rule 15a-6 under the Exchange Act and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors in the United States. WCM is the U.S. distributor of this communication and accepts responsibility for the contents of this communication. Transactions by U.S. customers of any securities referenced herein should be effected through WCM. All disclaimers set out with respect to Westpac apply equally to WCM. If you would like to speak to someone regarding any security mentioned herein, please contact WCM on +1 212 389 1269. Investing in any non-U.S. securities or related financial instruments mentioned in this communication may present certain risks. The securities of non-U.S. issuers may not be registered with, or be subject to the regulations of, the SEC in the United States. Information on such non-U.S. securities or related financial instruments may be limited. Non-U.S. companies may not be subject to audit and reporting standards and regulatory requirements comparable to those in effect in the United States. The value of any investment or income from any securities or related derivative instruments denominated in a currency other than U.S. dollars is subject to exchange rate fluctuations that may have a positive or adverse effect on the value of or income from such securities or related derivative instruments.
The author of this communication is employed by Westpac and is not registered or qualified as a research analyst, representative, or associated person of WCM or any other U.S. broker-dealer under the rules of FINRA, any other U.S. self-regulatory organisation, or the laws, rules or regulations of any State. Unless otherwise specifically stated, the views expressed herein are solely those of the author and may differ from the information, views or analysis expressed by Westpac and/or its affiliates.
UK and EU: The London branch of Westpac is authorised in the United Kingdom by the Prudential Regulation Authority (PRA) and is subject to regulation by the Financial Conduct Authority (FCA) and limited regulation by the PRA (Financial Services Register number: 124586). The London branch of Westpac is registered at Companies House as a branch established in the United Kingdom (Branch No. BR000106). Details about the extent of the regulation of Westpac’s London branch by the PRA are available from us on request.
Westpac Europe GmbH (“WEG”) is authorised in Germany by the Federal Financial Supervision Authority (‘BaFin’) and subject to its regulation. WEG’s supervisory authorities are BaFin and the German Federal Bank (‘Deutsche Bundesbank’). WEG is registered with the commercial register (‘Handelsregister’) of the local court of Frankfurt am Main under registration number HRB 118483. In accordance with APRA’s Prudential Standard 222 ‘Association with Related Entities’, Westpac does not stand behind WEG other than as provided for in certain legal agreements (a risk transfer, sub-participation and collateral agreement) between Westpac and WEG and obligations of WEG do not represent liabilities of Westpac.
This communication is not intended for distribution to, or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. This communication is not being made to or distributed to, and must not be passed on to, the general public in the United Kingdom. Rather, this communication is being made only to and is directed at (a) those persons falling within the definition of Investment Professionals (set out in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”)); (b) those persons falling within the definition of high net worth companies, unincorporated associations etc. (set out in Article 49(2)of the Order; (c) other persons to whom it may lawfully be communicated in accordance with the Order or (d) any persons to whom it may otherwise lawfully be made (all such persons together being referred to as “relevant persons”). Any person who is not a relevant person should not act or rely on this communication or any of its contents. In the same way, the information contained in this communication is intended for “eligible counterparties” and “professional clients” as defined by the rules of the Financial Conduct Authority and is not intended for “retail clients”. Westpac expressly prohibits you from passing on the information in this communication to any third party.
This communication contains general commentary, research, and market colour. The communication does not constitute investment advice. The material may contain an ‘investment recommendation’ and/or ‘information recommending or suggesting an investment’, both as defined in Regulation (EU) No 596/2014 (including as applicable in the United Kingdom) (“MAR”). In accordance with the relevant provisions of MAR, reasonable care has been taken to ensure that the material has been objectively presented and that interests or conflicts of interest of the sender concerning the financial instruments to which that information relates have been disclosed.
Investment recommendations must be read alongside the specific disclosure which accompanies them and the general disclosure which can be found here. Such disclosure fulfils certain additional information requirements of MAR and associated delegated legislation and by accepting this communication you acknowledge that you are aware of the existence of such additional disclosure and its contents.
To the extent this communication comprises an investment recommendation it is classified as non-independent research. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and therefore constitutes a marketing communication. Further, this communication is not subject to any prohibition on dealing ahead of the dissemination of investment research.