The global market rally stalled and US equity futures are flat with small caps underperforming (SPX and NDX made new ATHs yesterday while the Russell still sits ~5% below its ATH) into this morning's PPI print, where the market may confirm CPI’s trend as well as solidifying PCE estimates. As of 8:00am, S&P 500 futures were flat changed after the benchmark notched a record close for a second straight session; Nasdaq futures dropped 0.2% after Cisco shares fell after issuing a cautious full-year revenue outlook. Europe’s Stoxx 600 rose 0.3%. Pre-mkt, Mag7 names are mostly higher with Semis weaker; Defensives looking stronger than Cyclicals with healthcare leading. Bond yields are lower as the curve bull flattens: the yield on 10-year notes dropping two basis points to 4.21%. Bitcoin retreated 1.7% from an all-time high and the USD is flat. Today’s macro data focus is on PPI and Initial Jobless Claims; an in-line print in both should support stocks. JPMorgan says that should the rally resume, look for RTY to close the gap to tech/large caps.
In premarket trading, Magnificent Seven stocks are mixed (Microsoft +0.3%,Tesla +0.4%, Meta -0.01%, Amazon +0.2%, Alphabet -0.06%, Nvidia +0.09%, Apple +0.07%).
Today's PPI report is expected to show an uptick in producer prices, while Friday’s retail sales figures will offer insight on US consumer health as the labor market shows signs of losing momentum. Traders are now fully pricing in a quarter-point cut at the Fed’s September meeting, with some bets leaning toward a larger move following this week’s benign inflation data.
“We’re constructive about the market and that’s been backed up by data and earnings, but we’re certainly not looking to add more at these levels,” said Rory McPherson, chief investment officer at Magnus Financial Discretionary Management. “Bad news is good news as far as retail sales are concerned. But a 50-basis-point cut would seem too reactionary.”
Today’s data “could be make-or-break to cement a 25 basis-point rate cut from the Fed, or even to encourage the possibility of a jumbo cut,” said Andrea Gabellone, head of global equities at KBC Securities in Brussels. “People are already speaking of a 50 basis-point cut, but I think we will need further labor data to shift the narrative.”
San Francisco Fed President Mary Daly pushed back against calls for a half-point cut next month, telling the Wall Street Journal the move “would send off an urgency signal that I don’t feel about the strength of the labor market.”
In Europe, the Stoxx 600 rises 0.3% as upbeat earnings from insurers helped offset disappointing reports from companies including Adyen and HelloFresh. Earnings also caused other major swings, like a 40% surge for warehouse automation firm Autostore, which surged 40%, and game developer Embracer, which sank 25%. Here are the biggest movers Thursday:
Earlier in the session, Asian equities declined, with Japanese shares under pressure after US Treasury Secretary Scott Bessent said the Bank of Japan was behind the curve on inflation and likely to raise interest rates, triggering a yen surge. The MSCI Asia Pacific Index fell as much as 0.5%, set to snap a three-day rally. TSMC and Mitsubishi Heavy Industries were among the biggest drags on the benchmark. Shares in Taiwan, China and Hong Kong declined. Indonesian stocks headed for a record. The weakness in Japanese shares follows record highs in the country’s stock benchmarks on Wednesday, fueled by relief over US tariffs and a tech rally. Bessent’s comments coincide with the Bank of Japan’s continued adherence to one of the lowest policy rates among major economies, despite inflation exceeding its 2% target.
In FX, the Japanese yen retains its lead at the top of the G-10 FX leader board, rising 0.6% against the greenback after US Treasury Secretary Scott Bessent said the Bank of Japan is falling behind the curve in addressing inflation. The Norwegian krone climbs 0.2% after the Norges Bank left interest rates on hold and reiterated its plan to extend easing later this year. The pound inched higher as the UK economy fared better than expected in the second quarter, raising the bar for further rate cuts from the Bank of England.
“Hopes of a sharp rebound are likely to be dashed,” said George Brown, senior economist at Schroders. “The labor market has softened and capacity constraints mean even tepid growth is generating inflation pressures. With this in mind, we expect the Bank of England to keep rates on hold for the remainder of the year.”
In rates, treasuries rise and outperform their European counterparts, with US 10-year yields falling 3 bps to 4.21%, outperforming bunds and gilts in the sector by 1bp and 2bp. US yields are 1bp-3bp richer across tenors with the curve flatter, leaving 2s10s spread tighter by around 1.5bp. Treasury futures hold gains, sitting at weekly highs and outperforming European bonds, in anticipation of weekly jobless claims and July PPI data. Fed rate-cut expectations implied by swap contracts ebbed slightly, however, after San Francisco Fed President Mary Daly pushed back on the need for a 50bp cut at the September meeting. Rates markets price in about 24bp of easing for September meeting ahead of US data releases at 8:30am New York time, and a combined 61bp by year-end vs 63bp at Wednesday’s close
In commodities, WTI crude futures climb 0.4% to near $62.90 a barrel. Oil steadied near a two-month low as traders monitor the lead-up to Friday’s summit between the US and Russian leaders. US President Donald Trump cautioned he would impose “very harsh consequences” if Vladimir Putin didn’t agree to a ceasefire in the country’s war with Ukraine. Brent crude traded below $66 a barrel. Spot gold is steady near $3,356/oz. Bitcoin retreats from a record high.
Today's economic data slate includes July PPI and weekly jobless claims (8:30am). Fed speaker slate includes Musalem (10am) and Barkin (2pm).
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A more detailed look at global markets courtesy of Newsquawk
APAC stocks were ultimately mixed despite the positive handover from Wall St, where the major indices extended on gains amid Fed rate cut hopes as money markets fully priced in a September rate cut. ASX 200 extended on record highs with utilities and financials leading the advances following earnings releases from the likes of Origin Energy and Westpac. Nikkei 225 pulled back from record highs and returned to beneath the 43,000 level with pressure seen amid profit taking, higher yields and a firmer currency. Hang Seng and Shanghai Comp were initially supported with earnings releases in focus including a jump in profits for Tencent Holdings, although gains were capped following weaker-than-expected loans and aggregate financing data from China which showed New Loans contracted for the first time since 2005.
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European bourses (STOXX 600 +0.3%) opened flat/modestly higher, but sentiment gradually improved as the session progressed to display a positive picture in Europe. Nothing really behind the upside today, but building on two prior days of strength (for the STOXX 600). European sectors opened mixed but now hold a slight positive bias. Insurance takes the top spot and is the clear outperformer in Europe today; Swiss Re (+2.6%) benefits after posting strong H1 results and confirming its FY guidance. Also, booting sentiment is post-earnings upside in Admiral (+5%) and Aviva (+4%), which both reported a beat on op. profit.
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DB's Jim Reid concludes the overnight wrap
The market rally continued to power forward over the last 24 hours, with the S&P 500 (+0.32%) reaching another record as investors grew more confident about the near-term outlook. The main catalyst was mounting speculation about a Fed rate cut as soon as the next meeting in September, with the hope being that a series of cuts would help to maintain the economic expansion and support risk assets. Indeed, it’s worth noting that when the Fed have historically cut rates into a soft landing (rather than cutting because of a recession), that’s usually been a very strong backdrop for markets, and so far at least, that pattern has been playing out again.
This strength has been clear across multiple asset classes, with several milestones that demonstrated just how buoyant markets are right now. For instance, the VIX index of volatility (-0.24pts) fell to its lowest closing level of 2025, at just 14.49pts, and Bitcoin prices (+2.31%) hit an all-time high of their own yesterday at $122,951. Meanwhile in credit, Euro IG spreads remained at 79bps, their joint-lowest since 2018. And among sovereign bonds, the spread of 10yr Italian yields over bunds fell to the tightest since 2010, at just 77bps, which was last seen right before the Euro crisis began to kick off in earnest.
One factor driving those moves were comments from Treasury Secretary Bessent, who added to the calls for more aggressive rate cuts. For instance, he said in a Bloomberg interview that “I think we could go into a series of rate cuts here, starting with a 50 basis point rate cut in September”. And more generally, he said that “we should probably be 150, 175 basis points lower.” In the interview, Bessent argued that if the negative revisions to payrolls had been known beforehand, then “I suspect we could have had rate cuts in June and July”. Later in the session, those calls for rate cuts were echoed by President Trump, who said “I believe we should be 3 or 4 points lower”.
After Bessent’s comments, fed funds futures saw an immediate reaction, with 26.7bps of cuts priced for the September meeting by the close. So in other words, markets are now fully pricing in a 25bps cut. Moreover, investors priced in a more aggressive cycle of rate cuts beyond September, with a total of 110bps of cuts now priced in by the June 2026 meeting, up +5.4bps on the day. And in turn, that led to a fresh rally for Treasuries across the curve, with the 2yr yield (-5.6bps) down to 3.68%, whilst the 10yr yield (also -5.6bps) fell to 4.23%.
But even as the administration were calling for faster cuts and markets priced that in, Fed officials were still sounding cautious. In particular, Chicago Fed President Goolsbee (a voter this year) said that the labour market was “strong”, and he referred to the rise in services inflation in this week’s CPI print, saying that “I want some more surety that that’s not going to be a persistent inflation shock.” Meanwhile, Atlanta Fed President Bostic said that “I still have one cut on my outlook” for this year, which is more hawkish than current market pricing, which expects 2 to 3 cuts by the December meeting. Next week the Kansas City Fed are hosting their annual economic policy symposium in Jackson Hole in Wyoming, which has historically often been used for the Fed to signal policy shifts. It was last year that Chair Powell said that the “time has come for policy to adjust”, just weeks before they cut rates for the first time since the pandemic. So all eyes will be on that conference for any fresh signals on the likelihood of rate cuts.
Staying on the Fed, Treasury Secretary Bessent also commented on the search for a new Fed chair, suggesting there were lots of candidates being considered. He said that “I’m going to cast a wide net, 10, 11 people, and then there’ll be a group of us who are meeting with them”. And separately, there was a CNBC article that said they were considering 11 candidates, three of which hadn’t previously been mentioned, including former Fed Governor Larry Lindsey, Rick Rieder at BlackRock, and David Zervos at Jefferies. However, President Trump said later that “I’m down to 3 or 4 names”. As a reminder, Powell’s current four-year term comes to an end in late-May, and in recent instances, the nomination for the next Chair has been announced by the President a few months beforehand.
As markets were pricing in more rate cuts, that proved to be a great backdrop for equities, and the S&P 500 (+0.32%) advanced to a fresh all-time high. That was despite a decline for the Magnificent 7 (-0.31%), which slipped back from its own record on Tuesday. But it was a broad-based advance otherwise, with 421 of the S&P 500’s constituents higher on the day, while the small-cap Russell 2000 (+1.98%) hit a 6-month high and posted its best two-day run (+5.03%) since early April when Trump delayed the Liberation Day tariffs. Meanwhile in Europe, there were solid gains as well, with the STOXX 600 (+0.54%) advancing, whilst the FTSE 100 (+0.19%) was up to a new record. There were also fresh milestones for Italy’s FTSE MIB (+0.60%) and Spain’s IBEX 35 (+1.08%), as both indices closed at their highest levels since 2007.
Otherwise yesterday, there were further headlines on Ukraine ahead of President Trump’s meeting with Russian President Putin tomorrow in Alaska. In particular, a call took place between Trump and several European leaders, and afterwards the European leaders maintained their position that Ukraine needs to be involved in any peace talks. Meanwhile President Trump said that Putin would face “very severe consequences” if he didn’t agree to a ceasefire, and he also suggested that a second meeting could take place afterwards that could potentially also involve Ukraine’s President Zelensky.
Ahead of that meeting tomorrow, oil prices continued their recent decline, with Brent crude (-0.74%) falling to a two-month low of $65.63/bbl. So that helped to alleviate some concerns about inflationary pressures in Europe, and coupled with the move for US Treasuries, European sovereign bonds also posted a very strong rally. For instance, yields on 10yr bunds (-6.5bps), OATs (-7.4bps) and BTPs (-8.0bps) all moved lower, and the 30yr Germany yield (-7.1bps) also came off from its post-2011 high on Tuesday.
Overnight in Asia, there’s been a more mixed tone overnight. In particular, Japan’s Nikkei is down -1.35% from its record high on Tuesday, which comes as the Japanese Yen has strengthened by +0.68% against the US Dollar this morning. That follows comments by US Treasury Secretary Bessent, who said in his Bloomberg interview yesterday that the Bank of Japan were “behind the curve” and that “they’re going to be hiking and they need to get their inflation problem under control”. The US Treasury have commented on BoJ policy before, and in their semiannual currency report, it said that “BOJ policy tightening should continue”, and that tighter policy support “a normalization of the yen’s weakness against the dollar and a much-needed structural rebalancing of bilateral trade”. Japan's sovereign bond yields have also moved higher this morning, with the 10yr yield up +4.0bps to 1.54%.
Outside of Japan however, markets in Asia have put in a relatively stronger performance. For instance, the Shanghai Comp (+0.20%) is on track for its highest closing level since September 2021, whilst the CSI 300 (+0.54%) is on track for its highest close since October last year. In Australia, the S&P/ASX 200 (+0.55%) has also advanced, and there’ve only been modest losses for the Hang Seng (-0.06%) and the KOSPI (-0.22%).
To the day ahead now, and data releases include the US PPI reading for July, the weekly initial jobless claims, along with the UK Q2 GDP reading. Meanwhile, central bank speakers include the Fed’s Barkin.