US equity futures are flat, trading in a narrow range overnight, with SPX unchanged, while Nasdaq futs rise after TSMC beat on sales guidance. Since yesterday’s close, incremental macro headlines were muted, but earnings reports were solid (TSM, UAL). As of 8:00am ET, S&P futures are unchanged, Nasdaq futs are up 0.1% boosted by a positive outlook from TSMC, and Rusell 2000 futs are down 0.4%. European stocks also advance with the Stoxx 600 up 0.7%, led by gains in industrial, construction and auto sectors. In Pre-market trading, megacap tech is higher, with NVDA (+0.8%) leading gains, followed by META (+0.7%) and AAPL (+0.3%) as TSMC’s raised outlook is a good sign that spending on AI is holding up; on sector basis, Health Care and Real Estate are outperforming. Yields are 1-2bp higher and the dollar staged a comeback as dip-buyers stepped in, following Wednesday’s brief bout of panic over the future of Powell. Commodities are mixed, with oil and iron ore higher, while base and precious metals are lower. Today, markets will focus on Retail Sales (8:30am), Jobless Claims (8:30am), Philly Fed Business Outlook (8:30am), NAHB Housing Mkt Index (10am), Fed speakers Kugler (9:15am), Daly (12:45pm), Cook (1:30pm), Waller (6:30pm). We also get earnings from ABT, CFG, CTAS, ELV, FITB, GE, MAN, MMC, PEP, TRV, USB before the market; while after the close we get: IBKR, NFLX, SFNC, WAL.
In premarket trading, Magnificent Seven are mixed (Nvidia +0.5%, Meta Platforms +0.4%, Tesla +0.2%, Apple +0.1%, Amazon +0.1%, Microsoft -0.5%, Alphabet -0.4%). Here are some other notable premarket movers:
Speculation over Powell’s future rattled markets on Wednesday before US President Donald Trump downplayed the prospect of replacing him. Trump, who has long pushed for lower interest rates, has made no secret of his frustration with the Fed Chair. Overnight newsflow returned focus back on tariffs, after Trump said “we could possibly make a deal with the EU… The European Union has been brutal, and now they’re being very nice." He also said he would send letters to more than 150 countries notifying their tariff rates maybe 10% or 15%. New York Fed President John Williams said he expects tariffs to have a bigger impact on inflation in the months ahead, making the Fed’s restrictive stance “entirely appropriate.” And yesterday’s headlines on Powell prompted several top Wall Street bank CEOs to emphasize the importance of an independent central bank. A record share of American firms in a recent survey froze investments in China as trade ties worsened. Fewer than half of the companies surveyed by the US-China Business Council between March and May said they plan to invest in China in 2025, a drop from 80% last year.
“It’s a clear symptom of the resistance developed by markets for the roller coaster of headlines that have characterized Trump’s term so far,” wrote Francesco Pesole, a currency strategist at ING Groep NV. “After yesterday’s scare, the bar will be even higher to take Fed independence threats seriously.”
Meanwhile, Trump softened his rhetoric toward China in hopes of arranging a summit with President Xi Jinping and reaching a trade agreement with the world’s second-largest economy. He also said he would send letters to more than 150 countries to notify them about tariff rates that could be 10% or 15%. “Markets have learned to largely ignore what Trump says,” said Francois Rimeu, strategist at Credit Mutuel Asset Management in Paris. “Markets believe that he wants them to rise and as long as it remains the case, the trend is higher. The only possible problem coming forward in this favorable macro backdrop is inflation.”
Elsewhere in micro Taiwan chip giant TSMC rose +3.8% pre mkt, after printing better 2Q results along with a better guide for Q3/FY25 citing stronger than three months ago data-center/server/sovereign AI orders; as Goldman notes, this "should help AI spend narrative stay intact."
Attention now shifts to Retail Sales this morning which will give clues about how tariffs are affecting demand for various goods. The headline number was likely flat in June, after a 0.9% drop in May, due to a slower decline in auto sales. “What we are hearing from JPMorgan, from Goldman Sachs, from most of US investment banks, is that the US economy is holding up,” Emmanuel Cau, head of European equity strategy at Barclays Plc, told Bloomberg TV. “Despite all this uncertainty, we have corporate resilience acting as a backstop to the equity market.”
We also get another slew of earnings reports: Pre mkt we get earnings from ABT, CFG, CTAS, ELV, FITB, GE, MAN, MMC, PEP, TRV, USB; while after the close we get: IBKR, NFLX, SFNC, WAL. Focus today will be on Retail Sales (8:30am), Jobless Claims (8:30am), Philly Fed Business Outlook (8:30am), NAHB Housing Mkt Index (10am), Fed’s Kugler (9:15am), Daly (12:45pm), Cook (1:30pm), Waller (6:30pm). What to watch into NFLX eps: NFLX: according to Goldman, positioning skews (very) long and feels like Bulls are in set-and-forget / do-no-harm mode. Investors looking for a beat on quarter with FY guidance raise, especially given FX tailwinds. Other focus items will be capital return pacing and future strategic commentary (Ads, Live, Sports, EU/TF1).
Elevated US valuations, a depreciating dollar and rising volatility suggest it may be time to look abroad for high-quality growth, according to Bloomberg Intelligence. BI’s analysis shows 27 stocks that screen better than the Mag 7 on growth, value and quality and have significantly outperformed US stocks this year.
European stocks also advance with the Stoxx 600 up 0.7%, led by gains in industrial, construction and auto sectors. Most major markets are higher with tech stocks leading the advance after Taiwan’s TSMC reported strong earnings. This morning, UK Unemployment Rate prints 4.7% vs. 4.6% survey vs. 4.6% prior. Thematically, Electrification, AI Datacentre and semis are among the best performing baskets. Among individial movers, many significant advancers are triggered by earnings, including Ocado and ABB, as well as decliners such as Nordea and Wise. Here are the biggest movers Thursday:
Earlier in the session, Asian stocks traded in a narrow range as investors weighed ongoing US tariff risks and uncertainty around Federal Reserve leadership. The MSCI Asia Pacific Index rose as much as 0.3%, with Samsung Electronics and Sony the biggest boosts. Seven & i slid after Couche-Tard abandoned its $46 billion bid for the Japanese 7-Eleven operator. Benchmarks climbed in Thailand and Indonesia, while Australian stocks hit a new record after the latest jobs data bolstered the case for further interest-rate cuts. Volatility remains muted as traders await further trade developments. President Donald Trump said he plans to send letters to more than 150 countries, outlining prospective tariff rates of 10% or 15%. Uncertainty around the Fed also lingers, as tensions flared again between Chair Jerome Powell and Trump. Chinese onshore stocks climbed as Trump softened his tone amid an effort to secure a summit with President Xi Jinping. Meanwhile, the government continues to seek ways to boost consumption while also curbing destructive price wars spreading through various industries. Notable Asian movers:
In FX, the Bloomberg Dollar spot index rose 0.3%, paring declines seen on Wednesday after President Donald Trump downplayed the prospect of replacing Federal Reserve Chair Jerome Powell amid speculation over Powell’s future. EURUSD dropped as much as 0.6% to 1.1573, erasing Wednesday gains; the euro headed for its sixth daily drop in seven as interbank demand to fade its latest retreat was offset by real money selling. The Aussie dollar is the weakest of the G-10 currencies, falling 0.9% after Australian unemployment unexpectedly climbed to a four-year high in June.
In rates, treasuries dip, pushing 10-year yields up 1 bp to 4.47% while 2-year yields rose the same amount to 3.90%, bouncing of 3.86% touched on Wednesday, its lowest in nearly a week, as investors continued to signal that the Fed’s wait-and-see approach to policy easing is likely to prevail. Swaps are pricing fewer than two quarter-point cuts this year, down from the possibility of three at the start of the month as US policymakers continue to argue for a patient approach to further easing. Traders are betting that the Fed will deliver a total of 44bps of cuts by year-end, little changed from levels in late US trading. New York Fed President John Williams said he expects tariffs to have a bigger impact on inflation in the months ahead, making the central bank’s current restrictive stance “entirely appropriate.” Short-end Gilts lead a selloff in European government bonds after some mixed UK jobs data. UK 2-year yields rise 3 bps to 3.89%, limiting losses in the pound against the greenback to just 0.2%.
In commodities, oil prices are treading water with Brent near $68.50 a barrel. Spot gold falls $18 to around $3,329/oz. Bitcoin dropped ~1% to near $119,000.
Looking to the day ahead now, retail sales for June, import and export prices for June, weekly jobless claims and Philadelphia Fed index for July are all scheduled for 8:30am ET, followed by NAHB housing index for July at 10am. Central bank speakers include the Fed’s Kugler, Daly, Cook and Waller, along with the ECB’s Villeroy. Finally, earnings releases include Netflix, General Electric, PepsiCo, and Abbott Laboratories.
Market Snapshot
Top Overnight News
Trade/Tariffs
Earnings
A more detailed look at global markets courtesy of Newsquawk
APAC stocks were somewhat mixed following the two-way price action stateside where the major indices ultimately gained, although price action was choppy amid Fed independence concerns due to reports regarding a potential firing of Fed Chair Powell, which President Trump refuted. ASX 200 advanced with gains seen in nearly all sectors while stocks were unfazed by disappointing Australian jobs data. Nikkei 225 declined at the open amid currency- and data-related headwinds but gradually clawed back its losses as the JPY resumed its weakening trend. Hang Seng and Shanghai Comp lacked conviction in the absence of any pertinent fresh macro catalysts.
Top Asian News
European bourses (STOXX 600 +0.6%) opened firmer across the board and have traded sideways at elevated levels throughout the morning. European sectors hold a strong positive bias, with only a couple of industries holding marginally in negative territory. Industrials take the top spot, lifted by post-earning strength in ABB. Followed closely by Autos (post-earning strength in Volvo Car) and then Tech (TSMC results).
Top European News
FX
Fixed Income
Commodities
Geopolitics: Middle East
Geopolitics: Ukraine
US Event Calendar
DB's Jim Reid concludes the overnight wrap
Central bank independence was back in the spotlight yesterday, with a huge market reaction after several outlets reported that President Trump might be about to fire Fed Chair Powell. That led to a major selloff for long-end Treasuries and the US Dollar, but the moves mostly unwound after Trump said that he was “not planning” on firing Powell and that it was “highly unlikely”. So despite all the volatility in the middle of the session, the 30yr Treasury yield (-0.7bps) ultimately saw a marginal decline on the day to 5.01% and the S&P 500 (+0.32%) closed less than -0.3% below its record high last week. Even the dollar index (-0.23%) recovered most of its intraday losses, and is up +0.15% this morning, so it’s clear that Powell’s removal is still a prospect that markets view as unlikely for the time being.
The question of Powell’s removal had risen up the agenda over recent days, particularly given Trump’s regular calls for lower rates. But for the most part, this really wasn’t being priced in much, particularly given Trump himself had said on several occasions that he wasn’t planning to do it. However, that changed yesterday after CBS reported that Trump had indicated to Republican lawmakers that he’d remove Powell. So that triggered a more meaningful market reaction, which got further momentum after Bloomberg reported that a White House official said Trump was likely to fire Powell soon. Then shortly after that, the reaction became even more aggressive as the New York Times said that Trump had drafted a letter to fire Powell and waved a copy in front of lawmakers in the Oval Office.
Very soon after that NYT report, Trump spoke in the Oval Office and said that he wasn’t planning to fire Powell. So that quickly unwound the market reaction, even though he still left the door open to Powell’s removal, saying “I don’t rule out anything, but I think it’s highly unlikely, unless he has to leave for fraud”. So for about an hour we had a brief glimpse of the likely market reaction as investors started to view Powell’s removal as a serious prospect. Notably, there was a huge steepening in the yield curve as investors ramped up the prospect of a near-term rate cut. Indeed at one point, a rate cut by September was priced as an 80% chance, having been at 57% the previous day. And at the lows, the 2yr yield was down -8.2bps on the day at 3.86%, whilst the 30yr yield surged by over 10bps in under an hour to an intraday peak of 5.07%. Meanwhile, the dollar index slumped too, down -0.91% at the lows.
Ultimately, the bulk of those moves unwound after Trump’s comments. But the extent of the unwind varied across asset classes, and there were still clear jitters in markets that lingered after Trump’s remarks. While the S&P 500 (+0.32%) posted a full recovery, the dollar index closed -0.23% lower, its first decline in two weeks. The Treasury curve saw a sizeable bull steepening, as 2yr yields closed -4.8bps at 3.89%, while the 10yr (-2.6 bps to 4.46%) and 30yr (-0.9bps to 5.01%) yields saw more modest declines. And in a sign of the rising risk premium for long-term Treasuries, the 5s30s curve steepened to 102bps, its steepest level since October 2021. For more thoughts on the issue, our US economists published a note yesterday evening.
It feels like ancient history now, but before the Powell story, markets had seen some positive momentum after the US PPI report was softer than expected. So that helped to ease fears about inflation, and investors viewed the release as enough to keep Fed rate cuts in play for this year. Specifically, headline producer prices were unchanged in June (vs. +0.2% expected), which meant the year-on-year rate fell back to a 9-month low of +2.3% (vs. +2.5% expected). Moreover, core PPI was also subdued, and came in unchanged on the month as well (vs +0.2% expected). So the release pushed back against the more inflationary narrative from Tuesday’s CPI print, where strength among certain core goods led to fears that the tariff impact was becoming more obvious on inflation.
Inflation was also in the spotlight in Europe, as the UK CPI print was notably higher than expected, which led to an underperformance for UK gilts. The release showed headline CPI moving up to +3.6% in June (vs. +3.4% expected), whilst core CPI also rose to +3.7% (vs. +3.5% expected). So that was the fastest headline CPI print since January 2024, and it led investors to dial back the likelihood of rapid rate cuts from the Bank of England. For instance, the amount of cuts priced in by the November meeting came down -3.1bps on the day to 43bps. And it meant yields on 10yr gilts rose +1.5bps, in contrast to the declines elsewhere in Europe, which meant yields on 10yr bunds (-2.5bps), OATs (-2.7bps) and BTPs (-3.0bps) all moved lower. For more on inflation, I put out a note yesterday on how markets are still underestimating the risk of a further rise (link here).
For equities, it was also a volatile session, with the S&P 500 down -0.68% at the intraday low around the Powell news. But those losses were then pared back and the index ultimately closed +0.32% higher. Banks had been particularly hit by the initial Powell headlines, with the KBW bank index falling as much -1.51% but this also recovered into positive territory (+0.30%) by the close. The small cap Russell 2000 (+0.99%) outperformed while the Magnificent 7 (+0.27%) posted a 6th consecutive advance for the first time this year. And there was also decent economic data, with industrial production up +0.3% in June (vs. +0.1% expected). In Europe, the STOXX 600 (-0.57%) fell for a 4th consecutive session, but the index closed right before Trump’s comments about not firing Powell, so that came before the recovery in US equities. Indeed, European equity futures are clearly positive this morning, with those for the DAX (+0.41%) and FTSE 100 (+0.40%) both rising.
Overnight in Asia, the major equity indices have all posted modest gains, with advances for the Nikkei (+0.16%), the Hang Seng (+0.07%), the KOSPI (+0.03%) and the Shanghai Comp (+0.09%). Meanwhile, the CSI 300 (+0.31%) has been one of the stronger performers, and is currently on track for its highest closing level of 2025 so far. Another has been Australia’s S&P/ASX 200 (+0.68%), which comes after some disappointing labour market data overnight, with employment up just +2k in June (vs. +20k expected), and the unemployment rate also up to 4.3% (vs. 4.1% expected). So that’s led investors to price in a growing probability of rate cuts from the RBA this year, and the country’s 10yr government bond yield is down -4.6bps as well. The Australian Dollar is also the weakest G10 currency this morning, having fallen -0.64% against the US Dollar. Looking forward, US equity futures are pointing to a somewhat more negative performance, with those on the S&P 500 down -0.19% this morning.
To the day ahead now, and data releases include US retail sales for June, the weekly initial jobless claims, the NAHB’s housing market index for July, and UK unemployment for May. Central bank speakers include the Fed’s Kugler, Daly, Cook and Waller, along with the ECB’s Villeroy. Finally, earnings releases include Netflix, General Electric, PepsiCo, and Abbott Laboratories.