US equity futures are slightly higher despite heavyweights such as including Ford and Qualcomm slumping in premarket trading after disappointing earnings while tech underperformed on mixed Mag7/Semis pre-mkt price action. As of 8:15am, S&P 500 futures were little changed after erasing an early gain fueled by Treasury Secretary Scott Bessent’s comment that the Trump administration is focusing on bringing down the Treasury 10-year yield. Contracts on the Nasdaq 100 were unchanged. Bond yields and the USD finally reverse recent losses and rise this morning while commodities are stronger across all of Ags, Energy, and Metals ex-Precious. Scott Bessent said that the Administration is focused on lowering the 10Y yield rather than the Fed Funds rates; the best way to decrease yields is through a lower budget deficit. In other news, HON is splitting into 3 companies. Today’s macro focus is on Jobless data and the BOE decision. The Fed speaker slate includes Waller (2:30pm) and Logan (5:10pm), and we get earnings from Amazon after the close.
In premarket trading, Qualcomm, the world’s biggest seller of smartphone processors, fell more than 5% on investor concern that demand for the devices will cool. Ford also tumbled more than 6% after warning that US tariffs would weigh on US carmakers’ profits. Skyworks Solutions, a chip supplier to Apple Inc., plunged more than 20% after saying competition in the industry is intensifying. Apple shares also retreated. Meanwhile, Honeywell International Inc. slid more than 5% after saying it will split into separate publicly traded companies following pressure from an activist investor. here are all the notable premarket movers:
In an interview on Fox Business, Bessent said that when it comes to the Federal Reserve, “I will only talk about what they’ve done, not what I think they should do from now on.” He repeated his view that expanding energy supply will help lower inflation. But some investors said 10-year yields are unlikely to go much lower while sticky prices and a resilient economy damp expectations of further Fed policy easing.
The 10-year Treasury yield ticked about two basis points higher on Thursday, though it’s still close to a one-month low. “It is difficult to see the 10-year yield come down a lot unless the economy slows significantly,“ said David Zahn, a senior vice president at Franklin Templeton Investment Management. “If that happens, which isn’t what they want, then I can see 10-year yields going lower.”
While there was some news relief out of the White House, which did not make any major announcements overnight, more earnings are expected today, with Amazon.com Inc. due to release results after the close. US data on jobless claims will also on traders’ radar today, with the payrolls report due tomorrow.
Europe’s Stoxx 600 benchmark rose 0.8% to an intraday record after another batch of solid corporate updates from the region. Health care and banks are among the best performing sectors after strong results from AstraZeneca and Societe Generale. A. P. Moller-Maersk A/S surged almost 9% after announcing a $2 billion buyback. Miners are leading gains as iron ore prices climb over 2%. UK stocks outperformed and the pound fell after the Bank of England cut interest rates, as expected, and traders added to bets on further easing. In economic news, German factory orders surged in December, adding to evidence that the outlook for the beleaguered sector may be improving. Here are the most notable European movers:
Earlier in the session, Asian equities rose, on track for a third day of gains, boosted by technology shares as a sense of calm returned after gyrations earlier in the week on global trade tensions. The MSCI Asia Pacific Index advanced as much as 0.4% Thursday to the highest since December 17. Tech firms TSMC and Samsung Electronics were among the top contributors after their customer Nvidia jumped 5% on positive news for its new Blackwell chip. BYD also led the region higher after Cailianshe reported the Chinese carmaker will hold an event Monday to introduce its smart-driving strategy. Chinese equities rebounded from Wednesday’s losses on tariff concerns. Tech shares tied to AI and robotics climbed amid continued optimism on industry developments, even as e-commerce stocks remained weak on concerns over regulations for shipments to the US.
In FX, the Bloomberg Dollar Spot Index rises 0.3% and the Japanese yen is flat having pared an earlier advance seen after BOJ board member Naoki Tamura flagged the need for two or more interest rate hikes by early next year.
In rates, treasuries are slightly cheaper on the day into early US session, having pared small declines amid UK bond rally. Gilts outperform after Bank of England cut rates by 25bp to 4.5% in a 7-2 vote, with dissenters favoring a half-point cut. US session includes weekly jobless claims data at 8:30am New York time. US yields are as much as 2bp higher across maturities, with curve spreads mostly holding Wednesday’s dramatic flattening move; 10-year around 4.44% is ~2bp cheaper on the day, trailing bunds and gilts in the sector by 1bp and 4bp. Gilts shook off early weakness to outperform their US and German peers, most notably at the short-end of the curve ahead of the Bank of England decision. UK two-year yields fall ~3 bps to 4.12%. The pound is also the weakest of the G-10 currencies, falling 0.7% against the greenback having extended the lows after UK construction PMI came in notably below estimates. US and German borrowing costs are slightly higher on the day.
In commodities, WTI rises 1% to $71.70 a barrel. Spot gold falls $6 to around $2,860/oz. Bitcoin climbs 2% to near $99,000.
Looking to the day ahead now, one of the main highlights was the Bank of England’s policy decision where the central bank cut rates by 25bps as expected and left space for more rate cuts, sending the pound tumbling. Central bank speakers will include BoE Governor Bailey, BoC Governor Macklem, the ECB’s Nagel and Escriva, and the Fed’s Waller and Logan. Otherwise, data releases include the weekly initial jobless claims from the US, Euro Area retail sales for December and German factory orders for December. Finally, earnings releases include Amazon.
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APAC stocks followed suit to the gains on Wall St where sentiment was underpinned amid a softer yield environment and the lack of trade war escalation. ASX 200 outperformed with the index led higher by strength in financials, consumer discretionary and gold-related stocks. Nikkei 225 advanced at the open and reclaimed the 39,000 level but then briefly pared the majority of the gains owing to yen strength and comments from hawkish BoJ board member Tamura. Hang Seng and Shanghai Comp conformed to the constructive mood in the region amid a lack of major escalation on the trade front with the US Postal Services flip-flopping on suspending parcels from Hong Kong and China, while China initiated a WTO dispute complaint regarding US tariffs although this was as previously announced. SK Innovation (096770 KS) - Expects about KRW 6tln in capex this year, adds a delay in EV market demand growth recovery is expected in the short term due to the Trump administration and automakers recalibrating their electrification business.
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European bourses (Stoxx 600 +0.7%) began the session modestly firmer across the board, and continued to climb higher as the morning progressed. European sectors hold a strong positive bias, with only a couple of industries in the red with losses minimal. Basic Resources is the clear outperformer in Europe today; Anglo American (+4%) after its Q4 Production Update. Healthcare is lifted by post-earning strength in AstraZeneca (+4.9%).
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DB's Jim Reid concludes the overnight wrap
It’s that time of the year…. I took my first hay fever tablet yesterday as the itchy eyes begun. Since I moved out of polluted London 15 years ago and into the country, I’ve gone from having no allergies to having terrible ones every year, always starting some time between mid January and mid February. Let's hope the drugs work this year.
After a severe allergic reaction on Monday after the tariff news, markets continued to be relatively sedated yesterday as investors continued to price out the chance of aggressive tariffs, whilst the ISM services index showed inflationary pressures were weaker than expected. That meant the US dollar (-0.35%) continued to fall, reaching its lowest level in the last week, and the prospect of lower inflation also helped to bring down Treasury yields, with the 10yr yield (-9.4bps) down to 4.42%. On that around the time of the US close Treasury Secretary Bessent said in an interview with FOX that while President Trump wanted lower rates, they were both focused on the 10yr yield not the Fed policy rate, adding that policies to boost energy supply and reduce the budget deficit would help achieve this. He implied that the "jumbo rate cut", referring the 50bps cut in September, helped create the bond sell-off. So this was an important interview and all other things being equal will encourage a flattening bias. However as Bill Clinton's political advisor James Carville famously said back in 1993 when referring to the afterlife "... I want to come back as the bond market. You can intimidate everybody". So this is new important news that shows the Trump administrations' attitude to monetary policy and yields. However at the end of the day their fiscal and supply side policies and how they impacts growth, supply and inflation will still be the most important.
In terms of more detail on what drove the moves yesterday, the ISM services print added fuel to the bond rally, as the prices paid component fell back to 60.4, after spiking to 64.4 the previous month. Remember that the release a month ago was one of the main factors in turbocharging the bond selloff, so the fact we saw a pullback came as a relief to investors. Moreover, the headline indicator fell to 52.8 (vs. 54.0 expected), so that also helped to alleviate concerns about demand pressure, and whether the Fed might have to hike rates in the months ahead. Indeed, the Atlanta Fed’s GDPNow tracker took down their Q1 estimate from an annualised 3.9% to 2.9% after the various releases, suggesting the economy was still doing well, but not seeing a noticeable acceleration either.
So that helped investors to dial up their expectations for rate cuts this year, with 47bps now priced by the December meeting, up +2.3bps, and having briefly reached a full 50bps intra-day. A partial reversal later on came in part as Chicago Fed President Goolsbee said that “If we see inflation rising or progress stalling in 2025, the Fed will be in the difficult position of trying to figure out if the inflation is coming from overheating or if it’s coming from tariffs”. Goolsbee had been one of the more sanguine FOMC voices on inflation in the past year so it’s a notable comment for how Fed might be thinking about tariff risks. Later in the evening, we heard from Fed Vice Chair Jefferson that the Fed can remain patient with the economy in a good place. Overall, the view that the Fed would still cut rates in 2025 helped the 2yr yield fall -2.6bps to 4.19%.
Equities also took part in a more positive mood, even as the Magnificent 7 were down -1.47% after Alphabet’s (-7.29%) earnings after the previous day’s close. Note that Amazon are the sixth Mag-7 to report tonight while we wait until February 22nd for Nvidia to complete the set.
Talking of which, it was not all bad news for the tech mega caps, with Nvidia (+5.21%) posting a strong advance after Super Micro Computer announced that its new AI data centres using Nvidia's new Blackwell chips were ready to ship. But the overall equity gains were broad-based, with the S&P 500 up +0.39% as more than two-thirds of its constituents were higher on the day. Europe also held up well, with the STOXX 600 up +0.47%, whilst Spain’s IBEX 35 (+1.32%) outperformed thanks to a surge from Santander (+8.29%).
While yesterday saw a breather from the tariff headlines, Peter Sidorov on my team published a note looking at the lessons we can draw from the opening salvo of the new trade war over the past week and the potential implications going forward, including a review of who is most exposed to US tariff risks.
Looking forward, one of the main highlights today will be the Bank of England’s policy decision at 12:00 London time. They’re widely expected to cut rates by 25bps, taking the policy rate down to 4.5%, which would be their third rate cut of this cycle. However, recent weeks have seen quite a bit of volatility in UK markets, and this is the first decision since the bond selloff in early January, where the 30yr gilt yield hit its highest since 1998. Indeed, at the height of the pound’s slump, there had been speculation about whether the BoE would cut at all at this meeting. However, since the downside surprise in the latest CPI release, market expectations have converged around another 25bp rate cut. For today, our UK economist is expecting an 8-1 vote in favour of a rate cut, but expects them to retain as much flexibility as possible. See his full preview here for more info.
Ahead of the BoE’s decision, gilts and other European sovereign bonds put in a strong performance yesterday. In fact for gilts, it was the biggest decline in the 10yr yield (-8.5bps) since the CPI release three weeks earlier, taking it down to 4.44%. That was echoed across Europe, where yields on 10yr bunds (-3.2bps), OATs (-2.8bps) and BTPs (-4.4bps) all fell back. That said, the declines were mostly limited to the long-end, with the 2yr German yield actually up +0.5bps, which came as the ECB’s Lane said that getting inflation to settle at target “might take longer than expected”.
This morning in Asia markets are higher across the board with the the Shanghai Composite (+0.86%), KOSPI (+0.78%) and Hang Seng (+0.65%) reversing their previous session losses. Elsewhere, the Nikkei (+0.49%) is also higher. US equity futures are up around a quarter of a percent.
Early morning data showed that Australia’s trade balance rose less than expected in January, shrinking to A$5.09 bn (v/s +$6.5bn) as imports surged, and exports came in sharply below estimates amid weak demand from China.
In FX, the Japanese yen (+0.26%) continues to gain ground for the fourth straight session trading at 152.20 against the dollar, its highest level since December 12 amid growing acceptance that the BOJ would keep raising interest rates. Those moves have come following hawkish comments from BOJ’s board member Tamura Naoki stating that the central bank must raise rates at least to around 1% in the latter half of fiscal 2025.
Looking at yesterday’s other data, we got the ADP’s report of private payrolls from the US, which comes ahead of tomorrow’s jobs report. That was stronger than expected at 183k (vs. 150k expected), but the number was in the tight range it’s stayed in over the last 6 months, suggesting that the labour market was still in decent condition.
To the day ahead now, and one of the main highlights will be the Bank of England’s policy decision. Central bank speakers will include BoE Governor Bailey, BoC Governor Macklem, the ECB’s Nagel and Escriva, and the Fed’s Waller and Logan. Otherwise, data releases include the weekly initial jobless claims from the US, Euro Area retail sales for December and German factory orders for December. Finally, earnings releases include Amazon.