Futures are flat, Europe’s Stoxx 600 slipped from session highs and the euro gave up an earlier advance against the dollar sparked by hopes for a Ukraine war ceasefire, after President Donald Trump signaled he’s about to announce reciprocal tariffs on trading partners, just as we warned last night he would. As of 8:00am ET, S&P futures are down 0.1% while Nasdaq futures rise by a similar percentage even as Chinese technology stocks saw a dramatic intraday turnaround to finish lower. TSLA is up 2.2% pre-market with the rest of Mag 7 largely unchanged this morning; CSCO rose 6.8% on the back of a higher revenue forecast. Bond yields are 2-3bp lower, while the USD reversed an earlier loss. Commodities are mostly lower: WTI and aluminum are -1.5% and -0.9% lower, respectively. Today, the macro focus will be PPI and any updates on Trump’s reciprocal tariff plan which the president said in a social media post will be announced on Thursday. Futures contracts on the S&P 500 and Nasdaq 100 erased early gains, while
While the main economic event of the day will be the January PPI (expected at 0.3% MoM and 3.3% YoY for both headline and core), traders will be focused instead on the latest front in Trump's trade war after the president said in a Truth Social post the new levies will be announced on Thursday.
In premarket trading, Apple leads losses for the Mag7 as Tesla shares are up, putting the stock on track to extend gains after snapping a five-session streak of losses( Apple -0.4%, Nvidia, Alphabet, Amazon, Meta Platforms were edging lower, while Tesla +2.3%). Reddit shares tumbled as much as 18% after the social network reported fewer-than-expected daily active users. Jefferies said the user miss raises growth questions. Here are some more premarket movers:
The EUR reversed most of its gains after it climbed earlier as much as 0.6% on optimism that US-Russia talks could end the Ukraine war. Oil fell on speculation that risks to Russian supply may ease (it won't according to JPM), and Ukraine dollar bonds rose the most among emerging-market peers. On Wednesday, Trump agreed in a phone call with Russian President Vladimir Putin to start negotiating an end to the war in Ukraine. Trump revealed the conversation — his first publicly announced contact with Putin since retaking the US presidency — on social media.
“No concrete announcements, but the market reacted to the fact that discussions are starting,” said Georgios Leontaris, chief investment officer for EMEA at HSBC Global Private Banking. “There is still a long way, there is a lot to talk about. But the fact that the discussions are starting was reflected in the pricing of European assets.”
Aside from tracking developments over tariffs and Ukraine, Wall Street is preparing for a fresh batch of US economic data including initial jobless claims and producer-price inflation. Wednesday’s hot consumer price index numbers forced traders to push out bets on the next Federal Reserve interest-rate cut to December.
“An end to the conflict could eliminate war-related costs, particularly in energy, reduce uncertainty, and potentially boost business confidence and investment—crucial for Europe’s largest economies,” said Susana Cruz, a strategist at Panmure Liberum. “While sectors like defense might face a temporary selloff, this is likely to correct over time, as recent conflicts have underscored the need for increased defense spending.
European markets rose again, on pace for a 4th consecutive record high, as energy prices dropped on optimism about a possible end to the Ukraine war. The Stoxx 600 rose 0.7% and is on course for another record close. UK stocks underperform peers as earnings provide a drag while a stronger than expected GDP print reduced odds of a rate cut. Shares of Unilever, British American Tobacco and Barclays are down after their respective updates. Here are the most notable European movers:
Asian stocks headed for a second day of gains as traders largely shrugged off stronger-than-expected US inflation data. Hong Kong shares fell as traders took profit after recent advances. The MSCI Asia Pacific Index rose as much as 1.4% before paring, with Alibaba and SK Hynix among the biggest boosts. Japanese and South Korean stocks were among the best performers in the region. A gauge of Chinese tech shares in Hong Kong erased earlier gains in the session to fall almost 1%, after the index became overbought on optimism for the nation’s artificial intelligence development. Alibaba shares briefly touched the highest level in about three years before pulling back. The positive sentiment in Asia came even as stronger-than-expected US inflation data eroded bets for more Federal Reserve interest-rate cuts this year. Traders were instead focused on US-Russia talks to end the war in Ukraine.
In FX, the Bloomberg Dollar Spot Index falls 0.2%. The pound rose after Britain registered unexpected economic growth at the end of 2024. Gross domestic product rose 0.1% in the fourth quarter, an acceleration from the flat performance in the third quarter. It was better than the 0.1% fall expected by economists and the Bank of England. The euro rises 0.3% and back above $1.04.
In rates, treasuries rose across the curve, a day after their biggest selloff since December, supported by lower oil prices and bigger rally in bunds during European morning. Both markets also drew support from US President Trump’s social media post saying by reciprocal tariffs will be announced Thursday. US yields are 1bp-3bp richer across maturities with the curve flatter, 2s10s and 5s30s spreads each by about 1bp; 10-year near 4.59% trails Germany’s by ~1.5bp. Gilts lag their European counterparts as traders trim their Bank of England interest-rate cut bets after the UK registered unexpected growth at the end of 2024. Treasury coupon auction cycle concludes with $25b 30-year bond sale at 1pm; demand was soft for Wednesday’s 10-year note auction, which tailed by almost 1bp. WI 30-year yield at ~4.795% is ~12bp richer than January’s auction result.
In commodities, WTI crude oil futures are down 1.1% after a 2.7% drop Wednesday while Brent crude futures are also down 1.3% to ~$74 a barrel. European natural gas prices drop ~5%. Spot gold climbs $15 to $2,919/oz.
US economic data calendar includes January PPI and initial jobless claims (8:30am). Fed speaker slate empty for the session.
Market Snapshot
Top Overnight News
A more detailed look at global markets courtesy of Newsquawk
APAC stocks traded somewhat mixed albeit with a mostly positive bias among the major indices following the two-way price action across global markets owing to hot US CPI data and geopolitical optimism. ASX 200 touched a record high with advances led by the mining sector following results from South32 and Northern Star. Nikkei 225 climbed on the back of recent currency weakness despite the firmer-than-expected PPI data from Japan. Hang Seng and Shanghai Comp saw mixed price action as the Hong Kong benchmark extended its recent strong upward momentum, while the mainland traded cautiously as participants continued to await Trump's reciprocal tariffs.
Top Asian News
European bourses (Stoxx 600 +0.4%) are mostly firmer as market digest the constructive commentary from Trump surrounding the potential of Russia-Ukraine peace talks; though indices have cooled a touch off highs as traders await US PPI and then President Trump who is set to sign executive orders at 18:00 GMT. European sectors hold a strong positive bias, with the clear winners/losers associated with recent remarks out of the US. Energy underperforms given the slump in oil prices, as markets digest comments via Trump who said peace negotiations with Russia is to start "immediately" - this also weighed on the Defense sector; downside which has since pared as traders focus on comments via US Defense Secretary Hagseth who called for higher defence spending.
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FX
Fixed Income
Commodities
Geopolitics: Ukraine
Geopolitics: Middle East
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US Event Calendar
DB's Jim Reid concludes the overnight wrap
Markets saw a moderate selloff yesterday, as an upside surprise for US inflation saw investors price in fewer rate cuts for the rest of the year. However, the news that the US and Russia were set to start negotiations over Ukraine saw those losses pared back, with the Euro spiking and oil prices falling after those headlines came through. But even so, that wasn’t enough to counteract the impact of the CPI report, which featured the strongest monthly print for core CPI since April 2023. In turn, that saw the 10yr Treasury yield (+8.6bps) post its biggest daily jump of 2025 so far, moving up to 4.62%. And it brought back uncomfortable echoes of last year, when a strong January inflation print was then followed by further upside surprises over the rest of Q1.
In terms of the details of the release, headline CPI came in at +0.47% in January (vs. +0.3% expected), which pushed the year-on-year rate up to +3.0% (vs. +2.9% expected). Moreover, there are growing signs that strong print isn’t just a blip, and in the most recent 3 months, CPI was running at an annualised +4.5% pace. Bear in mind that’s the strongest 3m rate since November 2022, so this really isn’t in a zone where the Fed can relax. Meanwhile for core CPI, that came in at +0.45% on the month (vs. +0.3% expected), pushing the year-on-year rate up to +3.3% (vs. +3.1% expected). This pattern of upside surprises in January has been a consistent theme over recent years, which is something Jim looked at in his chart of the day yesterday (link here). It shows how upside surprises for core CPI have been much more likely in H1 than H2, with January seeing the most upside surprises of any month.
With that release in hand, investors became increasingly alarmed about inflation risk, which has already been mounting over recent weeks. That’s been driven by several factors, including higher commodity prices, the prospect of higher tariffs, along with more resilient growth data. Indeed, we put in a note last month (link here) on how we’re currently experiencing the sort of conditions that have historically led to inflation spikes, as you’ve got several long-term forces interacting with more recent inflationary trends. And only yesterday, the 2yr inflation swap rose +3.4bps to 2.83%, which is the highest since March 2023, just before SVB’s collapse and the regional bank turmoil led to fears of another slowdown.
In terms of the Fed, the CPI release saw investors significantly dial back their expectations for rate cuts this year. For instance, the likelihood of a cut by the June meeting was down to just 37% by the close, having been at 59% the previous day. And looking further out, just 28bps of cuts were priced by the December meeting, or in other words, a bit over one 25bp rate cut. Meanwhile, Fed Chair Powell spoke before the House Financial Services Committee, where he said “we’re close, but not there on inflation”, and that “we want to keep policy restrictive for now”. We also heard from Chicago Fed President Goolsbee who said that the latest inflation numbers were “concerning” but that it was “just one month” of data. And Atlanta Fed President Bostic commented that “until we have more clarity” on policy changes by the new administration, “it’s going to be impossible to make a judgment about where our policy should go”.
As investors priced in higher inflation and a more hawkish Fed, US Treasuries sold off sharply across the curve yesterday. That meant the 10yr yield (+8.6pbs) was up to 4.62%, marking its biggest daily jump of 2025 so far. The moves were driven by higher real yields, with the 10yr real yield (+8.7bps) back up to 2.15%. And at the front end of the curve, the 2yr yield was up +7.2bps at 4.35%. Over in Europe it was much the same story, albeit to a lesser extent, with yields on 10yr bunds (+4.7bps), OATs (+3.2bps) and BTPs (+3.1bps) all moving higher. However, yields have reversed slightly overnight, with the 10yr Treasury yield down -1.0bps this morning to 4.61%.
Equities took a hit after the inflation surprise, but those losses had been largely pared back by the close. For instance, the S&P 500 initially fell -1.08% at the open, but was only down -0.27% by the close, which means it’s still only -1.09% beneath its all-time high back in January. However, there was a significant divergence between small-caps and mega-caps, with the small-cap Russell 2000 down -0.87%, whilst the Magnificent 7 only fell -0.18%. And over in Europe there was continued strength, with the STOXX 600 (+0.11%) paring back its post-CPI losses to reach another record high, with records for the FTSE 100 (+0.34%) and the DAX (+0.50%) as well. Looking forward, that equity recovery has continued overnight, with S&P 500 futures currently up +0.24%.
Staying on Europe, there were several headlines regarding Ukraine yesterday, as President Trump had a call with Russian President Putin. Trump said that the two “agreed to have our respective teams start negotiations immediately”, whilst US Defense Secretary Hegseth said that a return to Ukraine’s pre-2014 borders was an “unrealistic objective”, and that the US did not believe “that NATO membership for Ukraine is a realistic outcome of a negotiated settlement.” The prospect of negotiations saw the Euro spike by about half a percent to $1.043 as those headlines came through, whilst Brent crude oil prices fell -2.36% yesterday to $75.18, with the move lower also helped by the weekly EIA data showing a larger-than-expected rise in US crude inventories. European equity futures are also performing strongly this morning, with those on the DAX up +0.94%.
Overnight in Asia, markets have put in a strong performance for the most part, with gains for the Nikkei (+1.47%), the KOSPI (+1.12%) and the Hang Seng (+1.71%). The exception to that has been mainland Chinese equities, where the CSI 300 (-0.09%) and the Shanghai Comp (-0.06%) are both slightly lower. In the meantime, 10yr Japanese government bond yields are up to 1.35% this morning, their highest since 2011. That follows the PPI data for January, which came in above expectations at +4.2% (vs. +4.0% expected), which is its fastest pace since June 2023.
To the day ahead now, and US data releases include the PPI reading for January and the weekly initial jobless claims. Meanwhile in Europe, there’s the UK GDP print for Q4 and Euro Area industrial production for December. Otherwise from central banks, the ECB will publish their Economic Bulletin, and we’ll hear from the ECB’s Cipollone and Nagel.