US stocks were set to rebound following Wednesday's slide, after Walt Disney announced it would fire 7,000 sending its stock surging (alongside mediocre earnings) as investors assessed corporate earnings reports and awaited the latest US jobless claims data. Contracts on the Nasdaq 100 were up 1.1% at 7:30 a.m. ET while S&P 500 futures added 0.8%. Both underlying indexes slumped more than 1% on Wednesday following a barrage of hawkish commentary by Fed officials. European stocks also advanced after positive earnings updates from heavyweights Siemens and AstraZeneca, although a stinker from Credit Suisse soured the mood. Asia was also solidly in the green. The dollar slid, Treasuries edged higher after a strong rally yesterday and an index of commodities rose.
Among notable movers in premarket trading, Disney shares rose as much as 6.7% after the media company announced restructuring that includes 7,000 job cuts and $5.5 billion in cost savings. It also reported first-quarter sales and profit that beat estimates; streaming subs missed. Analysts noted strength in its Parks business and were optimistic about its Media division’s profitability. ProspectsCorp. surged as the mobile application technology company’s results exceeded estimates. Here are some other notable premarket movers:
US stocks have oscillated this week as optimism around an easing in central bank policy sparked by Powell's Tuesday's remarks was tempered by a string of Federal Reserve speakers who reinforced the idea that interest rates will need to keep rising to tame inflation. Michael Hewson, chief market analyst at CMC Markets UK, said market volatility is expected to remain high amid the debate between “the bullish narrative of an imminent peak in rates and the bearish narrative of a higher terminal rate.”
After a much stronger-than-expected jobs report last week, focus today will be on the latest weekly jobless claims figures. Economists expect a small increase in claims compared with the previous week.
“Investors are shaking off another case of the jitters over how far interest rates will go in the United States, as a raft of better than expected corporate results came in after the bell,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown. After this week’s hawkish chorus, Fed-funds futures markets are pricing in higher rates, with some options traders betting the US policy benchmark will reach 6%.
“I don’t think the Fed will cut within this year,” Jun Bei Liu, portfolio manager at Tribeca Investment Partners, said on Bloomberg Television. “The Fed was behind the curve in terms of putting up their interest rate and they certainly are going to be very slow in cutting the interest rate.”
European stocks advanced for a third session, reaching the highest in almost a year, as investors weighed a slew of corporate earnings and greeted a slowdown in German inflation. The Stoxx 600 Index was up 1%, trading at highest level since February 2022 lifted by better-than-forecast results from firms including Siemens AG and AstraZeneca Plc. Industrials and banking stocks led gains, while the food, beverage and tobacco subindex was the worst performer, weighed down by declines in British American Tobacco Plc after the firm’s decision to end a buyback program disappointed some investors. Adding to positive sentiment Thursday, data showed that German inflation slowed in January to the lowest level in five months, with consumer-price growth easing to 9.2% from 9.6% in December.
Among other companies that reported earnings today, Delivery Hero SE slumped after the food-delivery company missed estimates for gross merchandise value, while Credit Agricole SA and AstraZeneca Plc both gained after profit beat estimates. Credit Suisse Group AG slid after the Swiss lender reported a fifth-straight quarterly loss, with clients pulling a record amount of funds. Here are the most notable European movers today:
Earlier in the session, Asian stocks edged higher as Chinese shares gave the region a boost, offsetting renewed concerns over the trajectory of US interest rates after hawkish comments made by Federal Reserve officials. The MSCI Asia Pacific Index erased an earlier loss of 0.4% to rise 0.5%. Shares in China and Hong Kong jumped, fueled by the tech sector, as recent market optimism in AI-related stocks continued despite a warning against speculative trades from an official media. Concerns on geopolitical tensions eased after President Joe Biden denied that relations with Beijing have suffered a serious blow following a US decision to shoot down an alleged Chinese spy balloon. Meanwhile, benchmarks in Australia and Taiwan fell after the most-recent string of Fed speakers reinforced the idea that US rates will need to keep climbing to quash inflation. Asian equities have lost momentum after a strong start to the year, after a US jobs report last week stoked concerns over borrowing costs. Shares will likely remain volatile over the next few months, as the “expected softness in the economic outlook for developed markets may weigh on externally exposed sectors and markets,” said Soo Hai Lim, head of Asia ex-China equities at Barings.
Japanese equities closed mixed, as investors assessed hawkish comments from Federal Reserve officials on the need for further rate hikes in the US. The Topix Index rose 0.1% to 1,985.00 as of market close Tokyo time, while the Nikkei declined 0.1% to 27,584.35. Daiichi Sankyo Co. contributed the most to the Topix Index gain, increasing 1.4%. Out of 2,163 stocks in the index, 1,141 rose and 900 fell, while 122 were unchanged. “Growing concerns about monetary tightening and the economy in the US are also affecting Japanese stocks,” said Tetsuo Seshimo, a portfolio manager at Saison Asset Management. “Investors are also watching the quarterly earnings results and the uncertainty is increasing amid potential slowdown in US economy.”
Indian stocks rose for a second session as software exporters continued to surge. Adani Group stocks resumed decline after a two-day rally as index firm MSCI said it was reviewing the amount of shares linked to the group that were freely tradable in public markets. The S&P BSE Sensex rose 0.2% to 60,806.22 in Mumbai, while the NSE Nifty 50 Index advanced 0.1%. Eight out of BSE 20 sector-gauges rose while rest declined. A gauge of commodities companies was the worst performer, followed by power producers. Infosys contributed the most to the Sensex’s gain, increasing 1.8%. Out of 30 shares in the Sensex index, 17 rose, while 13 fell.
In FX, the Bloomberg Dollar Spot Index fell as the greenback weakened against all of its Group-of-10 peers while the Swedish krone outperformed after the Riskbank hiked rates 50bps and pointed to another increase in the spring. The euro rose for a first day in six and European bonds advanced, snapping a four-day run of declines, after German inflation slowed in January to the lowest level in five months. Consumer-price growth eased to 9.2% from 9.6% in December
In rates, Treasuries were slightly richer across the curve which steepened very modestly, led by core European rates, particularly bunds and gilts, after German inflation slowed more than the median estimate in January. US yields are richer by 1bp-2bp across the curve, new 10-year around 3.59% vs Wednesday’s 3.613% auction stop; bunds, gilts outperform by 9bp and 8bp in the sector following soft German inflation. European bonds are also in the green with German and UK 10-year yields both lower by 7bps. Focal point of the US session focus is conclusion of auction cycle with 30-year bond sale at 1pm New York time. The week's refunding auction cycle concludes today with $21BN 30-year new Treasury issue; Wednesday’s 10-year stopped 3bp below the WI level with record low dealer allotment; WI 30-year yield at 3.670% is 8.5bp cheaper than January’ auction, which stopped 2.4bp through.
In commodities, crude futures advance with WTI rising 0.3% to trade near $78.70. Russia's Kremlin says there could be delays in the Turkish Gas Hub implementation following quakes, but plans will be fulfilled. Spot gold rises roughly 0.3% to trade near $1,882.
Coinbase CEO Armstrong said he's heard rumours that the US SEC would like to ban cryptocurrency staking, but added that he hopes this is not the case as it would be a terrible path for the US if it happens, according to CoinDesk.
To the day ahead now, and data releases include the delayed German CPI release for January, as well as the US weekly initial jobless claims. From central banks, we’ll hear from BoE Governor Bailey, as well as the ECB’s Vice President de Guindos, Nagel and de Cos. Lastly, an EU leaders’ summit will be taking place in Brussels.
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APAC stocks traded mixed with some cautiousness after the losses in the US where risk assets were pressured as markets focused on the hawkish aspects of the recent two-sided remarks from Fed officials. ASX 200 was dragged lower by underperformance in tech and utilities with the latter not helped by a near-10% slump in AGL Energy after H1 generation volumes fell 7% Y/Y and it cut its FY guidance. Nikkei 225 was subdued with individual stock movers influenced by the slew of earnings results. Hang Seng and Shanghai Comp. were initially lacklustre amid the absence of any major catalysts but shrugged off the opening losses and edged higher after the PBoC’s liquidity injection which provided some relief against the rising funding costs from a recent jump in loan demand.
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European bourses are firmer across the board, Euro Stoxx 50 +1.5%, with the region benefitting from a particularly heavy earnings docket with heavyweights including Siemens and AstraZeneca particularly well received. As such, sectors are in the green and feature outperformance in Industrial and Healthcare names. Stateside, futures are firmer across the board as the region recovers from Wednesday's Fed speak induced downside, NQ +1.2% modestly outperforms as yields ease.
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DB's Jim Ried concludes the overnight wrap
Readers from yesterday's EMR will be pleased to know the glamour of business travel is back after three very nice meals in Paris over the last 24 hours after a disastrous late-night trawl of the back streets for food the night before. I had to go to the gym at 5am and 6pm to offset it though. I suspect intake still exceeded output! We had a big DB macro dinner last night and the view I found most interesting was the bearishness on Euro government rates. A vast majority of the table voted for higher Euro rates over lower as the next move. It was a bit more neutral to slightly bullish for Treasuries. Our co-head of Euro rates sales warned that the retail flows we're seeing in Euro Government bonds were relatively small in ticket size but relentless this year and maybe caution against the European trade a little.
So consistent inflows versus hawkishness seems to be sizing up to be a decent battle at the moment and over the last 24 hours the hawkish drumbeat from central bankers continued and a rise in yields and terminal was the prevailing theme for most of the day. As Europe went home, 10yr Treasuries hit 3.69% and US terminal 5.18% - a level that would have marked the highest close of the cycle had it held. However, after a surprisingly strong 10yr US auction, 10yr yields rallied -8bps into the bell and closed down -6.4bps on the day to 3.61%. The rally would have been bigger if not for higher inflation breakevens, with the 10yr breakeven up to a 2-month high of 2.356%, whilst the 2yr breakeven hit its highest level in nearly 3 months at 2.629%. So that fits into a picture of growing doubt over recent days about whether inflation will remain as calm as previously hoped, particularly given a few indicators like higher used car prices which we talked about in yesterday’s EMR and in our CoTD (link here).
Interesting the S&P 500 barely budged from European closing level even with the c.+8bps rally in 10yr US yields from that point. The damage from the earlier hawkish commentary held and we closed -1.11%. But even with this decline, it’s worth noting that the index is still just above the levels before Fed Chair Powell started speaking on Tuesday, so this is only bringing us back to that point. Even with the late rally in rates, the NASDAQ (-1.68%) also closed at around its European levels. US markets weren't helped by Alphabet closing -7.68% after its new AI tool Bard showed inaccuracies in a demo. The company lost around $100bn of market cap in the process which shows the high stakes and competitive pressures of the new technology.
Back in Europe, equities here were an outperformer with the STOXX 600 hitting its highest intraday level since April before losing a bit of ground into the close to finish up just +0.28%.
In terms of the hawkish remarks themselves, New York Fed President Williams opened the day, saying that he thought a terminal rate of 5-5.25% was still a reasonable view. But he also commented the wage growth was still “well above” levels consistent with the Fed’s inflation target, and acknowledged that “there’s definitely scenarios where inflation ends up being more persistent for various reasons”. Then Fed Governor Cook struck a similar tone to Fed Chair Powell last week, and said “I think we are not done yet with raising interest rates”. Later on in the day, Governor Waller joined the chorus and further noted that “It might be a long fight, with interest rates higher for longer than some are currently expecting.” Lastly, Minneapolis Fed President Kashkari (FOMC voter this year) told the Boston Economic Club that “There’s not yet much evidence, in my judgment, that the rate hikes that we’ve done so far are having much effect on the labor market...we need to do more”. He also stated that he needed to see wage growth around 3% to feel confident that inflation was coming back to trend.
Before the late US rally, yields on 10yr bunds (+1.4bps) and OATs (+2.2bps) both hit a one-month high. That followed a similar round of comments from ECB officials, including Vice President de Guindos who said that “it might well be that financial markets are too optimistic with regard to inflation and our monetary-policy response”. That was followed up with comments from the ECB’s Knot, who said that “if underlying inflation pressures do not materially abate, maintaining the current (50bps) pace of hikes into May could well remain warranted.” Watch out for the delayed German inflation numbers this morning just after we go to press.
The overnight losses on Wall Street are weighing on Asian equity markets this morning. As I type, the Nikkei (-0.32%) and the KOSPI (-0.15%) are in the red while the S&P/ASX 200 (-0.56%) is also trading in negative territory. Bucking the negative trend are Chinese stocks with the CSI (+0.75%), the Shanghai Composite (+0.62%) and the Hang Seng (+0.34%) all edging higher, after reversing initial losses. Outside of Asia, US stock futures are showing a bit of a rebound with those on the S&P 500 (+0.22%) and NASDAQ 100 (+0.27%) trading higher.
On the oil front, prices have somewhat stabilised overnight after advancing more than +6% over the last three trading sessions with Brent futures (-0.04%) trading at $85.06/bbl as we go to print.
Elsewhere, financial markets in Turkey have continued to slump following the devastating earthquake on Monday. Yesterday saw the BIST 100 index shed a further -7.09%, before trading on the stock exchange was suspended until February 15, marking the first time in 24 years that trading has been stopped. Furthermore, all trades executed yesterday before the closure were cancelled. Up until the closure, the index had been down -16.24% since the start of the week.
To the day ahead now, and data releases include the delayed German CPI release for January, as well as the US weekly initial jobless claims. From central banks, we’ll hear from BoE Governor Bailey, as well as the ECB’s Vice President de Guindos, Nagel and de Cos. Lastly, an EU leaders’ summit will be taking place in Brussels.