US equity futures are higher, led by Tech as investors largely ignored tariff headlines, in this case the 25% tariffs on steel/aluminum which were announced yesterday, and which will predominantly impact both Canada and Mexico. As of 8:00am ET, S&P futures are 0.5% higher, reversing half of Friday's drop as the tariff news lifted American metals stocks, with US Steel Corp. surging as much as 15% in premarket. Alcoa Corp. rallied 5%. Nasdaq futures are up 0.6%, with Mag7 names all higher ex-TSLA with Semis and Financials catching a bid. Bond yields are mostly unchanged with USD higher. Commodities are seeing strength across the entire complex with gold’s record run continuing, now above $2900. Today’s macro data focus is on the NY Fed’s 1-year inflation expectation given the hotter print on Friday from Univ of Mich; CPI is on Weds.
In premarket trading, McDonald’s rose 2% as sales rose in the fourth quarter after growth in the chain’s international business made up for a decline in the US. Meta once again led gains for the Mag7 group. Meanwhile, shares in Tesla are set to extend losses for a fourth session(GOOGL +0.6%, AMZN +0.4%, AAPL +0.5%, MSFT +0.6%, META +0.6%, NVDA -0.05% and TSLA -1.6%). Aluminum and steel company shares rose as President Donald Trump plans to impose 25% tariffs on all imports of the metals into the country (Alcoa (AA) climbs 5% and Century Aluminum (CENX) jumps 10%). Steel firms moving higher include: Cleveland-Cliffs (CLF) +8%, US Steel (X) +5%, Steel Dynamics (STLD) +6%.
Aspen Technology (AZPN) falls 2% as Emerson said the $265 per share price offer for the company is Emerson’s best and final price. Here are some other notable premarket movers:
Trump’s intention to announce a 25% levy on steel and aluminum Monday added to already tense sentiment before Fed Chair Jerome Powell’s semiannual congressional testimony and the US President’s possible unveiling of reciprocal tariffs on “everyone” this week. Trump said the metals tariffs would apply to imports from all countries, though he didn’t specify when they would take effect.
“Our view in tariffs remain that they will cause volatility, are a negotiating tool and will eventually be not as bad as feared,” said Mohit Kumar at Jefferies International.
The dollar strengthened and gold hit a record high as Trump’s latest plan for steel and aluminum import tariffs brought fresh disruption to markets. The yen and the Canadian dollar were the main losers against the greenback as the Bloomberg Dollar Spot Index rose to its highest in nearly a week. Like the dollar, bullion climbed as the president’s latest trade threats helped boost demand for haven assets.
Separately, Trump said Elon Musk’s government efficiency team has found irregularities while examining data at the US Treasury Department. Benchmark 10-year Treasuries were steady.
There are a number of key events on the radar in coming days, including Powell’s speech and US CPI data.
Powell will deliver his semi-annual testimony at a time when officials are signaling they’re not in a hurry to further ease policy. Nonfarm payrolls moderated last month and revisions show US job gains were softer but still solid in 2024. Inflation data due this week may help buttress those arguments and underpin market pricing for just one Fed rate cut this year.
In Europe, the Stoxx 600 rose 0.3% with real estate, energy and telecommunication stocks among the best performers. Basic resources provide a drag due to the aforementioned metal tariffs. BP Plc shares surged the most since 2020 as Bloomberg News reported that activist investor Elliott Investment Management had built a stake in the oil company. Here are the most notable European mover:
Earlier in the session, Asian stocks dropped on concern US President Donald Trump’s plans for tariffs on all imports of steel and aluminum will add to a growing trade war. Hong Kong shares rose for a third day amid optimism toward the tech sector. The MSCI Asia Pacific Index fell as much as 0.5%, with TSMC the biggest drag on the benchmark. Shares in Taiwan and Australia dropped, while Japanese stocks were mixed. A gauge of Chinese tech shares listed in Hong Kong jumped more than 2% as the nation’s growing artificial intelligence capability fueled optimism on the beaten-down sector. Sentiment was also boosted by Trump’s decision to delay suspension of the “de minimis” exception, boosting e-commerce shares.
“This is actually a very good reminder for global investors to look at the innovation capabilities of some of the Chinese players,” Jin Yuejue, a multi-asset solutions investment specialist at JPMorgan Asset Management, said on Bloomberg Television. “We are very much monitoring the National People’s Congress coming up, whether there will be more fiscal impulse that’s going to be announced.”
In FX, the Bloomberg Dollar Spot Index inched up 0.2%, while commodity currencies pared earlier declines, after US President Donald Trump said he would announce 25% tariffs on all imports of steel and aluminum. “Markets are becoming incrementally less sensitive to these headlines,” said Laura Cooper, global investment strategist at Nuveen. “It’s not clear whether this is a negotiating tool to get a deal.” The Japanese yen is the weakest of the G-10 currencies, falling 0.6% against the greenback and taking USD/JPY above 152. EUR/USD steadied around 1.0326; Options markets suggest traders are positioning for a fresh round of euro weakness fueled by widening tariff-risk premiums.The Canadian dollar also underperformed with a 0.3% decline.
In rates, treasuries are mixed in early US trading Monday, holding most of Friday’s yield increases sparked by the January jobs data. 10Y yields are at 4.40%, unchanged from Friday; most yields remain within 2bp of closing levels from Friday with the curve steeper; 2s10s and 5s30s spreads are wider for first day in five. Treasury auctions begin Tuesday with 3-year notes and include 10- and 30-year new issues over subsequent two days. With no major US economic data slated before the CPI report Wednesday, Treasury and corporate bond supply may be the main driver of flows, along with reaction by other markets to President Trump’s latest tariff threats. Gilts rise and outperform their German counterparts with UK 10-year yields falling a basis point to 4.46%.
In commodities, WTI crude oil rose 1.5% to trade at $72, near session highs. Gold prices soared $41 to a record high above $2,900. Bitcoin rose 3% to near $98,000. Elsewhere in commodities markets Monday, European natural gas prices rose to a two-year high as colder temperatures accelerate the depletion of the region’s storage facilities. Benchmark futures rose as much as 4.1% to the highest since February 2023. Aluminum futures in London — the global benchmark — were steady as traders waited for more details on when and how the latest tariffs would operate. Copper was little changed.
The US economic data calendar includes only NY Fed 1-Year inflation expectations at 11am New York time. Fed speaker slate is blank; Chair Powell is slated to give congressional testimony over the next two days
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APAC stocks saw mixed price action as participants reflected on last Friday's NFP print and President Trump's latest tariff remarks in which he stated they will be announcing on Monday 25% tariffs on all steel and aluminium coming into the US and will announce reciprocal tariffs on Tuesday or Wednesday, while China's retaliatory tariffs against the US took effect. ASX 200 declined with the index led lower by underperformance in tech and telecoms, while miners also suffered owing to the US tariff threat although Australia will urge the US to give Australia exemption over steel tariffs. Nikkei 225 retreated at the open but the clawed back its losses as a weaker currency provided a cushion and with some optimism from Japanese PM Ishiba that Japan could avoid higher US tariffs following his recent meeting with US President Trump. Hang Seng and Shanghai Comp were positive following the recent CPI data from China which showed an acceleration and with the outperformance in Hong Kong led by notable strength in tech and telecom stocks. Nonetheless, the gains in the mainland were limited by the tariff and trade frictions after China's retaliatory tariffs against the US took effect and with officials also said to be building a list of US tech firms for potential probes.
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European bourses (STOXX 600 +0.4%) are modestly firmer across board, after a mixed APAC session overnight. European sectors hold a positive bias, but with the breadth of the market fairly narrow; Energy takes the top spot, lifted by gains in BP (+6%) after Elliott Management took an activist stake in the company. For the autos sector, it was reported on Friday that the EU is offering to lower tariffs on US car imports to avoid a trade war with the US. Mining names in Europe are generally on the backfoot today, with losses driven by commentary via US President Trump who said that he will be announcing 25% tariffs on all steel and aluminium coming into the US.
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DB's Jim Reid concludes the overnight wrap
The week after payrolls is usually quiet but due to the first Friday of the month being the latest it could possibly be this month, then we bump straight into US CPI (Wednesday) week, with PPI (Thursday) for an added bit of inflationary sparkle. Outside of this the main highlight will be Powell's semi-annual monetary policy testimony before the Senate Banking Committee (tomorrow) and the House Financial Services Committee (Wednesday). The latter comes after CPI which will possibly spread the interest level over the two appearances rather than most of the focus being on the first as per usual. Elsewhere in the US, watch out for the NY Fed inflation expectations series today after a stronger equivalent from the University of Michighan survey just before the weekend on Friday. After that we wait until this Friday for the other important US data, namely retail sales and industrial production.
In Europe we have the UK Q4 GDP reading on Thursday following last week's BoE meeting (our UK economist's recap is here). Elsewhere in the region, January CPIs are due in Denmark and Norway today, and Switzerland on Thursday. In terms of earnings we have 75 S&P 500 companies and 79 Stoxx 600 companies reporting.
The tariff news will clearly continue to dominate the agenda all week, especially after Mr Trump announced on Friday that he'd be holding a press conference early this week on the US plans for equalising tariffs on "reciprocal trade" with an added mention for autos. Then on Air Force One last night Mr Trump said he would put 25% tariffs on steel and aluminium imports later today. Canada, Mexico and Latin America would be the most impacted given that's where the US imports most of these goods from.
Looking forward now and in terms of Powell's testimonies this week, the overarching message is likely that the Fed is not in a hurry to cut rates at the moment, with Friday's payrolls and to a lesser extent the UoM inflation expectations series the latest support to that message. Even though headline (+143k) and private (+111k) payroll gains were below expectations, net upward revisions of 100k over the prior two months, a decline in the unemployment rate to 4.0% (4.1% expected), and average hourly earnings +0.5% on the month (vs. +0.3% expected), made it a hawkish report.On top of that, the annual benchmark revision to the level of March 2024 nonfarm payrolls (-598k final vs. -818k preliminary) was not as large as the BLS had previously projected. See our economists' US employment chart book here for everything you wanted to know about the labour market post this release.
For those inflation expectations last Friday the 1yr level was up to 4.3% (expected 3.3%) and the more important 5-10yr one at 3.3% (expected 3.2%). If confirmed in the final reading the longer-term expectations have only been higher for one month (June 2008) since 1995. This series continues to be ridiculously partisan post the election though with the 1-yr number seen around 5% from Democrat supporters and around zero for Republicans. So how reliable this number is at the moment is open is debatable.
Talking of inflation, strong seasonally adjusted gains in food and energy prices should keep headline CPI (+0.31% forecast vs. +0.39% previously) above core (+0.28% vs. +0.23%). YoY headline CPI should remain roughly steady at 2.9%, while that for core would just round down to 3.1%. OER will continue to be a big focus. For PPI it‘s as ever the components that go into core PCE that will gain all the attention.
Continuing with inflation, on Sunday data from China showed that consumer inflation (+0.5% y/y) accelerated at its fastest in five months in January (v/s +0.4% expected), up from December's +0.1% increase, mainly because of the brisk consumption seen in the recently concluded Spring Festival holidays. At the same time, producer price deflation persisted as the PPI (-2.3% y/y) fell for a 28th consecutive month. The decline was marginally faster than Bloomberg’s estimate of -2.2% while matching December’s contraction.
Chinese risk is doing well this morning with the Hang Seng (+1.80%) leading the way with the Shanghai Composite (+0.50%) also higher. Other markets are a bit more subdued with the Nikkei (+0.20%) and the KOSPI (+0.13%) swinging between gains and losses. S&P 500 (+0.32%) and NASDAQ 100 (+0.60%) futures are rebounded after a weak Friday session. The yen (-0.31%) is retreating from a two-month high, trading at 151.88 against the dollar, with 10yr JGB yields +1.8bps higher at 1.32%, the highest since 2011.
Last week saw markets experience a steady overall performance, but one that was bookended by tariff-related news. At the start of the week, the imposition and then delay to tariffs on Mexico and Canada saw the S&P 500 first fall sharply but then close less than 0.6% beneath its all-time high by Wednesday. The index then fell -0.95% on Friday (and -0.24% over the week) as news broke of US reciprocal tariff plans on Friday. Tech stocks were a particular underperformer, with the Mag-7 down -2.79% (-1.95% Friday) as Alphabet’s and Amazon’s results underwhelmed. However in Europe, the STOXX 600 was up +0.60% (-0.38% Friday), having hit an all-time high on Thursday. And there was also a strong performance for emerging markets, with the MSCI EM index up +1.38% (+0.57% Friday).
The hawkish data on Friday led investors to dial back their expectations for rate cuts this year, with just 36bps now priced in by the December meeting, which is the fewest in over three weeks and a turnaround from the 50bps priced intra-day on Wednesday. This helped trigger a significant selloff for Treasuries at the end of the week, which saw the 10yr yield up +6.1bps on Friday to 4.50%, even though the 10yr yield was still down -4.5bps over the week as a whole. In Europe, 10yr bund yields fell -8.8bps last week to 2.37%, including a -0.7bps decline on Friday as tariff risks outweighed the read-across from stronger US data.