US stocks extended gains in the latter stages of Monday’s session with all major indices now down by just over 3% from all-time highs. Steel stocks outperformed, supported by hopes that US President Trump will impose harsh tariffs on imports. Trump did state that if it takes tariffs to bring back the steel industry, so be it. Investors also welcomed further declines in US government bond yields from last week’s multi-year highs, weighed by weak US new home sales and dovish remarks from St Louis Fed President Bullard. He argued that the natural, safe real rate of interest, and hence the appropriate policy rate, is relatively low and unlikely to change very much over the forecast horizon. We later heard from Fed Governor Quarles there are some upside risks to the economic outlook for the US, adding a sustainability of upturn in growth economically depends on an increase in investment and productivity. He said fiscal policy will likely spur increased growth over the next couple of years, including a boost to the economy’s potential capacity adding he believes a tightening labour market will feed through prices and wages. He mentioned it remains to be seen if higher growth would spur inflation. Elsewhere, speaking at his hearing to become ECB Vice President, Luis De Guindos said the ECB focusing on price stability has been successful. He also noted the ECB are in a different phase than the Federal Reserve but expects over time that their policies will converge.
Ahead of the Asian open, New Zealand logged a trade deficit of NZ$0.566 Bln (f/c NZ$0.0 Bln) in January as exports gained NZ$4.31 Bln (f/c +NZ$4.58 Bln) and imports rising NZ$4.87 Bln (f/c +NZ$4.60 Bln). The Kiwi Dollar fell sharply on the data release. Meanwhile, Australia’s weekly consumer confidence rose to 117.9.
Looking ahead, we get Japan’s core CPI. Also of note, the BoK wraps up its monetary policy meeting, in which rates are widely expected to remain on hold at +1.50%.