Morning Report
Today's economic developments and market movements.
Morning Report PDF (PDF 290KB)
Key themes
Plenty of action in markets following the President’s Day holiday.
Increasing defence spending the potential for a ceasefire in Ukraine continues to be the dominant theme for European markets
Yields were higher across most developed markets with the Japanese 10-year bond yield rising to be the highest since 2009.
A 25% tariff on cars, pharmaceuticals and chips saw a flurry of activity right before market close in the US.
The DXY Index rebounded with the greenback appreciating against all G10 currencies.
Share markets: US stocks closed higher, albeit in the final moments before close, as President Trump announced a 25% tariff on cars, pharmaceuticals and chips. Major indexes were poised to close flat or slightly below open before the announcement. Ultimately the S&P500 closed 0.2% higher and NASDAQ 0.1% at time of writing.
Europe’s EuroStoxx 50 pushed higher to a new record of 5533.84 rising 0.3% in the day. Alongside investors favouring European defence stocks in recent weeks, the prospects of a ceasefire in Ukraine is also buoying sentiment. The DAX rose 0.2%.
Asian markets were more upbeat with Hong Kong’s Hang Seng rising 1.6% supported by enduring optimism around the Chinese tech sector.
Closer to home, the ASX200 finished 0.7% lower as hopes for rate cuts were moderated by hawkish commentary from the RBA. The index fell through most of the day but stabilised just before the announcement and continued to fall from there closing just above the session low.
Interest rates: Comments from Fed officials Daly and Waller implying their preference to keep rates on hold for longer saw the US yield curve steepen. The 10-year bond yield was up 7 basis points while the 2-year yield was up 4.
A reacceleration in wages in the UK reaffirm the BoE’s need to take a ‘gradual’ approach to easing monetary policy. This saw the 2-year/10-year part of the yield curve shift up and flatten -- the 2-year bond yield was up 4 basis points while the 10-year was up 3.
The Japanese 10-year bond yield rose 4 basis points to 1.425%, this is highest the 10-year bond yield has been since November 2009. This follows from GDP data earlier this week which showed a resurgence in household consumption and comments by BoJ officials, including Governor Ueda at his parliamentary testimony, that speak to sustained inflation in Japan. While incumbent Prime Minister Ishiba remains attuned to risks around price growth, a change in government could see political pushback against rate hikes subside. This will become more clear as the upper house elections draw closer.
In Australia, futures rates are up 2 basis point for the 3-year and the 10-year. Market are not pricing in another cut until July. After the meeting, markets pared back expectations for rate cuts for 2025.
Foreign exchange: The DXY Index finished strong after President’s Day, gaining 0.4% to 107.05 points. It finished higher against all G10 currencies, the New Zealand dollar was the weakest performer while the Canadian depreciated least followed by the Australian dollar.
A stronger than expected CPI print in Canada also saw the CAD maintain its position against the greenback finishing at 1.4188 at the time of writing. While growth risks have dominated the Bank of Canada’s thinking, a resurgence in inflation will make justifying future cuts more difficult.
Despite expectations for further hikes, the yen was one of the weaker performers out of the G10 rising to 152.02 against the USD. Whether exemptions on tariffs for Japan will flow through remain a key uncertainty.
More hawkish-than-expected rhetoric from the RBA helped the support the Aussie. The AUD/USD pair strengthened in Aussie’s favour later in the session after weakening through most of the day following the announcement of a rate cut. The pair finished at 0.6353 cents.
Commodities: WTI crude oil futures rose 1.5% to US$71.78/barrel in post US holiday trade as traders focused on the possibility that OPEC may again delay plans to phase out the 2.2mbpd of voluntary production cuts. This trumped news of a possible ceasefire between Ukraine and Russia and the possibility of lifting sanctions between the two nations.
Copper rose 0.85% to $9,475, according to the LME prices, while aluminium rose 0.98% to $2,671. The spread between the Comex and LME copper contracts narrowed with the Comex contract closing at a 2-week low suggesting that traders are less concerned about the prospects of copper tariffs. Meanwhile, global copper inventory continued its aggressive rise to be up 36% so far this year while global aluminium inventory is down 11%.
Gold rose 1.3% to a record high of $2936.02 following the possibility of increased central bank demand
Australia: The Reserve Bank of Australia cut interest rates by 25bps to 4.10% though maintained it was a ‘cautious cut’ and pushed back against market pricing for further cuts. Trimmed mean inflation forecasts were revised down to 2.7% through the forecast period -- lower in the near-term but above the midpoint of the inflation target band. Growth expectations were roughly the same as in the November SoMP, albiet with changing drivers. Household consumption is expected to pull back but public spending, fuelled by healthcare and social services, will support growth. That said, the RBA is still attuned to risks to the labour market. In particular the RBA is uncertain about whether their assessment of a balanced labour market is correct or if allowing the labour market to run as is will contribute to wage inflation and therefore consumer inflation. The 4.2% unemployment rate is still under the estimated NAIRU of 4 1/2% but the RBA maintains that broader labour market indicators suggest an easing in the labour market. The labour market has been tighter than expected, and yet inflation has fallen faster than the RBA expected. This cut was characterised as a removal of November 2023’s ‘cautionary raise’. Future cuts will materialise if inflation looks to descend faster than the RBA’s expectations but nothing was promised.
New Zealand: There were no major releases out yesterday.
Canada: Inflation ticked back up to 1.9%yr in January, reversing the drop in December. Median and trimmed inflation measures both rose to 2.7%yr suggesting an increase in underlying pressures at the start of the year. They likely reflect higher demand before the end of the temporary sales tax holiday.
UK: The UK labour market data once again highlighted that the Bank of England (BoE) must be extra careful when considering further monetary policy easing. The headline average weekly earnings growth accelerated by 0.5ppt in December to 6.0%3MoY, the highest level in more than a year. Private sector regular wages (excluding bonuses), a measure that the BoE closely follows, were up even faster 6.2%3MoY, accelerating almost 1.5ppt over the last four months. Interestingly, wage growth accelerated despite soft conditions in the labour market. Although in the latest month they appeared to be broadly stable, with official LFS employment increasing 107k, payroll employment rising 21k, and the official three-month unemployment rate remaining unchanged at 4.4%, 0.3ppt higher level where it was in August.
Eurozone: The ZEW survey of financial market experts reported an improvement in confidence this month. The headline euro area economic expectations indicator was up more than 6pts to 24.2, the highest level since July. The optimism appears to reflect better results in Germany, where financial analysts are hopeful that the federal elections this weekend could bring a new government eager to tackle main economic challenges.
US: The NY Fed Empire State Manufacturing Survey reported that business activity in New York State increased in February. The survey’s general conditions index rose from a six-month low of -12.7 reported in January to 5.7, a level well above the last year’s average. Subcomponents for new orders and ship grew modestly, but, looking ahead, fewer businesses expected conditions to improve, with the expectations index dropping to a nine-month low of 22.2.
The NAHB survey of single-family house builders suggested the optimism in the US housing market eased in February to the lowest level in five months. The headline confidence index was down by 5pts to 42, below the 2024 average of 45. Three major subcomponents were all weaker signalling that current demand for single-family homes softened, and builders expected weaker sales growth over the next six months.
Additionally, US President Donald Trump announced a 25% tariff on cars, pharmaceuticals and chips.
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.