Stable retail sales reinforce hopes of rate cut

Good morning. It's Angus in Sydney with the key morning news items.Today's must-reads:• Retail sales surpass expectations• Barrenjoey opens

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Good morning. It's Angus in Sydney with the key morning news items. Today's must-reads: • Retail sales surpass expectations • Barrenjoey opens in Hong Kong • Australia's trade-war resilience

What's happening now

Australian retail sales fell by much less than expected in December, likely reinforcing the Reserve Bank's confidence that the economy remains on a narrow path toward a soft landing. Sales slid 0.1% from the prior month, compared with a forecast 0.7% decline, data showed Monday. Economists and financial markets widely expect the central bank to finally embark on an easing cycle on Feb. 18. Barrenjoey has added a Hong Kong office to its growing international footprint as the Australian financial services firm boosts its offering in equity sales, research and trading.  The new outpost brings the equity team closer to its Asian customer base, said Head of Equities Chris Williams. The move marks Barrenjoey's second office outside Australia, after opening operations in Abu Dhabi last year. Australia is expected to remain resilient to global trade fractures, according to economists at Citigroup Inc., even as US President Donald Trump unleashes tariffs on Canada, Mexico and China. Australia's political ties with Washington, and its direct exports to the US only accounting for 3% of total shipments in 2023 are among reasons Trump 2.0 will not be a "calamity," Citi's Australian economists Josh Williamson and Faraz Syed said in a note. Gina Rinehart, Australia's richest woman, increased her donations to the center-right Liberal National opposition by more than 200%, as the country's billionaires bet big on both major parties ahead of a national election that is due by May 17. Joining Rinehart in making donations to the center-left Labor Party and the Liberal National Coalition were pro-Trump billionaire Anthony Pratt and real estate billionaire Harry Triguboff. New Zealand Prime Minister Christopher Luxon said the government is considering changes to tax settings in this year's budget, including the corporate tax rate. Asked Tuesday if the government is going to make changes to the company tax rate, Luxon told Newstalk ZB radio: "We're open to looking at all our tax settings that encourages growth," adding this would be for the May budget. How stupid is Trump's trade war, asks Bloomberg Opinion's John Authers. Markets didn't want to believe that Trump really meant broad tariffs, because they're such a plainly bad idea, Authers writes.

What happened overnight

US President Donald Trump agreed to delay 25% tariffs against Mexico for one month after a conversation with his counterpart Claudia Sheinbaum on Monday, a dramatic turnabout with the neighboring nations on the brink of a trade war. The leaders agreed that Mexico would send 10,000 National Guard officers to the border to help stem the flow of fentanyl and migration into the US, a key demand from Trump for Mexico to avoid tariffs.  Canada secured a 30-day pause on US tariffs after agreeing to take new measures to secure its border, Prime Minister Justin Trudeau said after a call with President Trump. Canada is appointing a Fentanyl Czar, will list cartels as terrorists, ensure 24/7 eyes on the border and launch a joint strike force with the US to combat organized crime, fentanyl and money laundering, Trudeau posted on X.  Wall Street traders trying to catch up on every new headline around Trump's tariff negotiations were faced with a renewed bout of volatility across asset classes. The S&P 500 trimmed most of a slide that earlier approached 2%. That was after Trump agreed to delay 25% tariffs against Mexico. That spurred a quick turnaround in currencies, with the peso going from worst to best performer among its major counterparts in a matter of minutes.  Trump's move to invoke an emergency and impose tariffs on Canada, Mexico and China is the most extensive act of protectionism taken by a US president in almost a century. In what may be the biggest geopolitical and economic consequence, it swings a wrecking ball through the regional compact at the foundation of US global competitiveness and economic power. Trump signed the United States-Mexico-Canada Trade Agreement at the White House in 2020. Photographer: Saul Loeb/AFP/Getty Images/AFP Vanguard Group has slashed the fees for dozens of its mutual funds and ETFs in a record move that's likely to send a shock wave through the asset management industry. The Jack Bogle-founded investing giant is lowering expense ratios for 168 share classes across 87 mutual funds and exchange-traded funds effective immediately. The cuts mean Vanguard's average asset-weighted fee is now just 0.07% for its $10 trillion under management, compared with 0.44% for the rest of the industry.

What to watch

All times Sydney 11:30 a.m. Australian household spending data

One more thing...

We all know there's so much more to Melbourne than avocado toast and flat whites. Check out our Two-Night Minimum guide to the Victorian capital to get to the heart of the city in a short time, whether on a business trip or a weekend vacation. People sit in Carlton Gardens in Melbourne, Australia,  Photographer: James Bugg/Bloomberg

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