US equity futures slumped, dragged by tech following disappointing earnings from two tech giants (AMD, GOOG) and concerns that an escalation of the Trade War 2.0 will lead to negative revenue impacts for MegaCap Tech (AAPL, Mag7). Further, USPS suspends mail deliveries from China/HK as small parcels that were previously exempt from tariffs are coming under the new Executive Order; impacts about 4mm parcels per day (AMZN; Shein; Temu). As of 8:00am ET, S&P futures were down 0.4%, suggesting Wall Street’s rebound may be short-lived, while Nasdaq 100 futures dropped 0.8% as Google parent Alphabet and AMD plunged in US pre-market trading after disappointing results, and dragged the entire Mag7 lower (GOOGL -7%, AMZN -1%, AAPL -2%, MSFT -0.3%, META -0.4%, NVDA +0.4% and TSLA -1%). Bond yields slide again, dropping 6bps to 4.46%, and down some 14bps from Tuesday's highs as rates react to the negative growth impact rather than the expected inflationary impact. The USD is weaker again and commodities mixed as goal soars to a new record high approaching $2900 while energy is sold, and Ags particularly Softs move higher. Today’s macro data focus is on ADP, Mtge Apps, and ISM-Srvcs though the Trade Balance details may pique the Market’s interest. US companies reporting results on Wednesday include Uber, Disney, Ford and Qualcomm.
In premarket trading, Alphabet plunged 7% after slower growth in its cloud business contributed to lower-than-expected revenue in the fourth quarter. Advanced Micro Devices tumbled 9% after giving a disappointing outlook for its data center business, an area where it’s struggling to catch up with AI computing leader Nvidia Corp. Apple dropped in premarket trading after China’s antitrust watchdog signaled a probe into the company’s policies. The poor tech results and news hit the broader Mag7 group (GOOGL -7%, AMZN -1%, AAPL -2%, MSFT -0.3%, META -0.4%, NVDA +0.4% and TSLA -1%). Here are the other notable premarket movers:
While the first volleys in the latest US-China trade war made clear that Xi Jinping would take a more cautious approach than during Donald Trump’s first term, tariff risks remain at the forefront.
“It remains tough for anyone to have a particularly high degree of conviction when operating in such an uncertain environment,” said Michael Brown, senior research strategist at Pepperstone Group Ltd. “I still favor adopting a more cautious stance in the short run, as uncertainty remains elevated, and participants chew through this week’s remaining risk events, including earnings from Amazon, and Friday’s US jobs report.”
Meanwhile, disappointing results from Alphabet and AMD also heightened unease about the outlook for megacap tech companies that have driven the S&P 500’s gains. Alphabet posted fourth-quarter revenue that missed analysts’ expectations after growth in its cloud business slowed, raising concern from investors about the billions the company is spending on artificial intelligence. Chip maker AMD gave a disappointing outlook for its data center business, an area where it’s struggling to catch up with AI computing leader Nvidia Corp. Amazon.com is scheduled to report on Thursday.
“Those expectations that analysts have placed, the bar is a lot higher this time,” said Aneeka Gupta, director of macro-economic research at Wisdomtree UK Ltd. “There is a greater probability that they don’t meet that higher bar. If they disappoint, the ramifications are a lot bigger.”
The breakneck speed of news continue: besides Trump's trade war, companies reporting results on Wednesday include Uber, Disney, Ford Motor and Qualcomm. Traders will also look to the US ISM services data later today for more clues on the Federal Reserve’s rate path. Activity in the services sector likely grew more slowly in January amid winter storms across much of the country and wildfires on the West Coast. High-frequency payroll data suggest hiring activity was relatively steady on a seasonally adjusted basis, according to Bloomberg Economics.
The Stoxx Europe 600 fluctuated, down 0.1% at last check, with declines for technology shares offsetting gains in health care after upbeat guidance from the region’s biggest listed company, Novo Nordisk A/S. Among individual movers in Europe, Spanish lender Banco Santander SA surged after reporting record profit and announcing at €10 billion buyback. Drugmaker GSK Plc. jumped after boosting its sales forecast. Renault SA declined after a report that Nissan Motor, in which it has a 36% stake, will withdraw from its deal with Honda Motor Co. Ltd. to integrate their businesses. Here are the biggest movers Wednesday:
Earlier in the session, Asian equities advanced as tech shares tracked their US peers higher, offsetting Chinese stock declines due to heightened trade tensions after the onshore market reopened post-holiday. The MSCI Asia Pacific Index rose as much as 1% before trimming gains, with tech-heavy markets such as Taiwan and South Korea helping to lead gains in the region. Japanese stocks reversed midday losses, as Toyota Motor gained after raising its annual operating profit outlook. Honda Motor surged and Nissan Motor slumped after the Nikkei reported that the two competitors failed to reach a consensus on a combination. Onshore Chinese equities traded lower after the Lunar New Year holidays, as sentiment was hit by fresh headlines on Sino-US relations, including a report that the US Postal Service is temporarily suspending inbound parcels from China and Hong Kong. A gauge of Chinese shares listed in Hong Kong fell more than 1%.
In FX, the Bloomberg Dollar Spot Index drops 0.3% to its lowest since Jan. 27, extending yesterday's losses after US job openings fell in December by more than forecast to a three-month low. The move reflects unwinds of longs built on tariff risks and meets spillover of yen strength. USD/JPY drops 1.1% to 152.65, its lowest since Dec. 13; one-week risk reversals are little changed at 140bps, puts over calls. Japan nominal wages rose 4.8% in December from a year earlier, the largest jump since 1997; real wages also grew for a second straight month in December, even as economists expected a drop amid accelerating inflation. The yen also rallied after Economic Revitalization Minister Ryosei Akazawa said the nation is in an inflationary situation.
In rates, treasuries hold gains, accumulated during London morning amid a bigger rally in gilts after a sale of UK 30-year bonds was most oversubscribed since July, leaving yields richer by 2bp-4bp across maturities. Also supporting Treasuries, US equity index futures fell after disappointing earnings from Alphabet and AMD. US 10-year yields trade around 4.45%, richer by 6bps on the day with gilts outperforming by 2.5bp in the sector; long-end leads gains in Treasuries, flattening 2s10s spread by ~1.5bp. Gilts lead a rally in European bonds, with UK 10-year yields falling 7 bps to 4.46%. Bunds extended declines after the ECB’s main gauge of future euro-zone pay growth continued to signal a sharp slowdown in 2025.
In commodities, WTI crude drops to $72 a barrel. Bitcoin rises 1.5% toward $98,000.
Treasuries rise, with US 10-year yields falling ~4 bps to 4.47%. Other haven assets are also bid with gold rising $29 to a fresh record high while the Japanese yen tops the G-10 FX leader board, climbing 1.1% against the greenback. The yen is also bid after data showed Japanese nominal wages rising at the fastest pace in nearly three decades. The Bloomberg Dollar Spot Index falls 0.3%.
Wednesday's US economic data calendar includes January ADP employment change (8:15am), December trade balance (8:30am), January final S&P Global US services PMI (9:45am) and January ISM services index (10am). Fed speaker slate includes Barkin (7:30am and 9am), Goolsbee (2:30pm), Bowman (3pm) and Jefferson (7:30pm)
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A more detailed look at global markets courtesy of Newsquawk
APAC stocks traded mixed with the region only partially sustaining the positive momentum from the US, as Chinese markets reopened from the Spring Festival and participants digested disappointing China Caixin Services PMI data. ASX 200 edged higher with the gains led by outperformance in the resources, tech and mining sectors, while Australian Services and Composite PMI figures were revised higher from the preliminary release. Nikkei 225 swung between gains and losses with the index pressured intraday as the Japanese currency strengthened after data showed the fastest pace of wage growth in Japan since 1997. Hang Seng and Shanghai Comp declined on the mainland's return from the Spring Festival holiday as participants digested the recent US-China tit-for-tat tariffs, while disappointing Chinese Caixin Services PMI data added to the downbeat mood.
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European bourses (Stoxx 600 -0.2%) began the session with a clear downward bias, and has traded sideways at subdued levels throughout the morning. Little price action was seen following the release of today's EZ Final PMIs/ECB Wage Tracker. European sectors began the session with a negative bias, and sentiment continues to remain downbeat. Healthcare tops the pile, lifted by post-earning strength in Novo Nordisk (+3.6%) and GSK (+5.2%). Autos and Parts has parked itself right at the bottom of the pile, with losses driven by downside in Renault after it was reported overnight that the Nissan/Honda merger could collapse; recent sources suggest the deal has been scrapped. The French automaker holds a 17% stake in Nissan. Nissan (7201 JT) board decides to scrap merger talks with Honda (7267 JT), according to Reuters sources.
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Geopolitics: Middle East
Geopolitics: Ukraine
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DB's Jim Reid concludes the overnight wrap
After a tricky few days for markets, the last 24 hours saw things begin to stabilise again, with most asset classes unwinding the tariff-driven moves around the weekend. For instance, the S&P 500 (+0.72%) posted a decent recovery, the VIX index (-1.41pts) fell back a bit, and the US Dollar also weakened after its recent surge. There wasn’t a single factor driving the moves, but investors have grown hopeful that the tariff delays for Mexico and Canada will mean that tariffs are ultimately avoided, whether that’s via further delays or some kind of deal. If that does transpire, then that would avoid a major trade shock that hits growth and raises US inflation, hence the more positive market reaction over the last 24 hours. Nevertheless, there’s little doubt that markets remain pretty nervous about the whole situation, withtariff risk still being priced in to several key assets, and gold prices (+0.98%) hit an all-time high of $2,843/oz.
Some of that optimism followed reports that a call between President Trump and President Xi was being scheduled, leading to speculation about whether something might also be worked out with the 10% China tariffs now in force. However, that was then downplayed, with Trump himself saying “We’ll speak to him at the appropriate time. I’m in no rush”. We’re starting to see some real economy impacts from the new tariffs as well, as the US Postal Service suspended inbound international packages from China.
Reflecting the growing optimism on tariffs, some of the best performers yesterday were the most trade-sensitive assets. For instance, the Canadian Dollar (+0.74%) strengthened further against the US Dollar, continuing to bounce back from its 9-year low on Friday. Another outperformer was the NASDAQ Golden Dragon China Index (+2.65%), which is made up of companies that are publicly traded in the US, but where a majority of their business happens in China, though this did give up some of its gains after being up +4.3% intraday. And over in Europe, the STOXX Automobiles & Parts Index (+2.09%) had its best day in four weeks, as investors grew a bit more confident that tariffs might be avoided.
Aside from the latest trade developments, markets got a further boost from the latest JOLTS report of job openings from the US, which showed the labour market remained on an even keel into December. Admittedly, job openings fell by more than expected, down to a 3-month low of 7.6m (vs. 8m expected). But it still meant the ratio of vacancies per unemployed workers was at 1.10, which is broadly in line with its levels over the previous 6 months. Moreover, the quits rate (2.0%), the hires rate (3.4%) and the layoffs and discharges rate (1.1%) were all unchanged. So from a market point of view, it was in a goldilocks zone where it wasn’t showing inflationary pressures from a tight labour market, but it didn’t show a serious deterioration either.
All-in-all, that helped the S&P 500 (+0.72%) to recover after the last couple of sessions, aided by a strong performance for the Magnificent 7 (+1.70%). Palantir (+23.99%) saw the best performance in the S&P 500, which came as their revenue forecast surpassed estimates. However, the tech mood then soured after the close as Alphabet’s quarterly results missed sales estimates amid slowing growth in its cloud business, with the company also announcing a higher than expected 2025 CAPEX plan. The stock fell by more than -7% in after-hours trading. Next up on the Mag 7 earnings are Amazon, who report after tomorrow’s close. As seen on slide 6 of Jim’s “Deeply seeking comparisons to 2000” chat pack last week (link here), investors are expecting 9-22% per annum growth in earnings for the Mag-7 for the next 5 years, so the expectations bar is high, and any disappointment in earnings are likely to be met with a sharp sell-off.
Meanwhile in rates, US Treasuries also unwound the previous day’s moves, with yields moving lower across the curve. That was supported by comments from Fed Vice Chair Jefferson, who reiterated the view that he saw “a gradual reduction in the level of monetary policy restraint” as “the most likely outcome”, even as he said that “I do not think we need to be in a hurry to change our stance.” So along with the tariff delays, that supported investors’ belief that the Fed would still cut rates this year, and the amount of cuts priced in by the December meeting moved up +2.4bps on the day to 44.5bps. In turn, that helped Treasury yields to move lower, with the 2yr yield (-3.5bps) down to 4.21%, whilst the 10yr yield (-4.4bps) fell to 4.51%.
Over in Europe, markets also put in a decent performance that unwound much of the previous day’s moves. For sovereign bonds, that meant yields rise across most of the continent, as the prospect of fewer tariffs saw investors dial back the likelihood of rapid ECB rate cuts. So that helped yields on 10yr bunds (+1.4bps) to move back up a bit. Moreover, there was a fresh tightening in sovereign bond spreads, with the Franco-German 10yr spread falling to 71.4bps, its tightest since mid-September. European equities also advanced, with gains for the STOXX 600 (+0.22%) and the DAX (+0.36%), and there were particularly strong gains in southern Europe for Italy’s FTSE MIB (+1.38%) and Spain’s IBEX 35 (+1.37%). Otherwise, there wasn’t too much ECB commentary, but France’s Villeroy confirmed existing market expectations that “there will probably be more” rate cuts.
Overnight in Asia, data has shown Japanese wages growing by their fastest pace since 1997 in nominal terms, cementing the view that the Bank of Japan are set to keep hiking rates. That’s led yields to rise across the curve, with the 10yr JGB yield (+1.2bps) up to 1.28%, which is its highest level since 2011, whilst the Japanese Yen has strengthened by +0.61% against the US Dollar overnight. In terms of the data itself, it showed that nominal earnings were up by +4.8% year-on-year (vs. +3.7% expected), and real earnings were up +0.6% year-on-year (vs. -0.1% expected). This morning the Nikkei (+0.07%) is broadly flat. Elsewhere in Asia, the CSI 300 (-0.27%) and the Shanghai Comp (-0.36%) both fell back as they reopened after the holiday, although South Korea’s KOSPI (+1.04%) is on track for a second consecutive advance. Looking forward, US equity futures are pointing lower after Alphabet’s earnings, with those on the S&P 500 down -0.42%.
To the day ahead now, and data releases from the US include the ISM services index for January, the ADP’s report of private payrolls for January, and the trade balance for December. Otherwise, there’s the final services and composite PMIs for January from around the world. From central banks, we’ll hear from Fed Vice Chair Jefferson, along with the Fed’s Barkin, Goolsbee and Bowman, and the ECB’s Lane.