US stock futures gained, led by tech as news reports of Microsoft's spending plans underscored the sustained demand for AI infrastructure (even though the same and more has been said about Facebook and yet the company's massive capex spending plans have yet to materialize). S&P 500 futures were up 0.6%, set to rise for a second day after ending the longest losing streak since April on Friday; Nasdaq 100 futures advanced 1%, with chip giants Nvidia and AMD rising more than 2% in premarket trading. In Europe, the Stoxx 600 also edged higher, fueled by ASML’s biggest daily gain since October. The dollar, which recently traded at a more than two year high tumbled on a Wapo report that Trump aides are looking at targeting import taxes at certain industries, rather than across the board resulting in a less strict tariff regime (spoiler alert: not only is this fake news, if anything Trump will double down on tariffs and make them even stricter). The news sent both the dollar and treasuries higher, with the former slipping earlier ahead of a sale of three-year debt as well as auctions of 10- and 30-year notes later this week, with the 30-year yield climbing overnight to the highest since November 2023 before retracing the move. On today's calendar we get the S&P service PMI, as well as factory/durable orders report.
In premarket trading, semiconductor stocks gained after Nvidia’s server assembly partner Foxconn reported faster-than-expected revenue growth on continuing demand for AI infrastructure, lifting chip names (Micron Technology (MU US) +3.9%, Advanced Micro Devices (AMD US) +3.0%, Nvidia (NVDA US) +2.04%, Broadcom (AVGO US) +1.9%). The news also boosted the Mag7 universe (Apple +0.777%, Nvidia +2.04%, Microsoft +1%, Alphabet +1.0%, Amazon +1.2%, Meta Platforms +0.8% and Tesla +1.4% all up in premarket trading). Here are some other notable premarket movers:
In a blog post on Friday, Microsoft announced it expects to spend $80 billion in 2025 on the construction of data centers for AI workloads, while Nvidia’s Taiwanese partner FoxConn reported faster-than-expected revenue growth. The news helped kickstart another tech meltup. Tech’s rebound “is a technical move after the year-end correction,” said Fares Hendi, portfolio manager for global equities at SG Prevoir in Paris. “Microsoft’s decision to raise capex in 2025 is probably helping momentum.”
US Treasuries erased the session’s losses following the Washington Post report. The 30-year rate climbed as much as four basis points to 4.85% earlier in the day, the most since November 2023, ahead of a $58 billion sale of three-year notes on Monday. Morgan Stanley strategists warned Monday that rising yields could pose a headwind to US stocks in the first half, and that rates are “the most important variable to watch” in early 2025. Ten-year yields have now surged around 50 basis points since early December to 4.60% as traders price in the possible inflationary effect of Trump’s policies. Any resurgence of price pressures would likely slow the pace of interest-rate cuts by the Federal Reserve. The US central bank has dialed back its expectations for easing in 2025, and markets now fully price just one reduction this year.
RBC Capital Markets LLC strategist Lori Calvasina expects that markets will soon get better clarity on Trump’s policies. “One of my core beliefs about politics and markets, whatever it is, you have to go through some temporary pricings, and those can be painful,” Calvasina told Bloomberg TV. “It tends to be rather short-term and then you move on.”
Later today, Federal Reserve Governor Lisa Cook will speak at a conference on law and microeconomics at the University of Michigan. Her colleague Tom Barkin, the Richmond Fed President, suggested on Friday his preference was to keep rates restrictive for longer.
European stocks edged higher, led by technology shares as Microsoft’s plan to spend $80 billion on AI data centers this year boosted the sector. Hon Hai earnings also aided sentiment. The Stoxx 600 added 0.2%. European semiconductor stocks posted broad-based gains on Monday, following a rally in US peers on Friday. Microsoft’s commitment to invest further in data centers also hands a potential boost to companies helping to build cutting-edge AI chips. Here are some other notable premarket movers:
Earlier in the session, Asian stocks traded in a narrow range as technology shares got a boost from Microsoft’s $80 billion data center pledge, while Japanese benchmarks fell as the market reopened after holidays. The MSCI Asia Pacific Index swung between gains and losses of less than 0.3%, with chipmakers including TSMC, SK Hynix and Samsung Electronics among the biggest boosts after Microsoft announced its spending plan for the year. Taiwanese and South Korean benchmarks led advances in the region, while Japanese shares declined in the first day of trading this year. Stocks in India also fell. The global tech rally is expected to continue as major firms ramp up artificial intelligence-related investments. Beyond this, Asian stocks face headwinds from uncertainty over potential US tariffs, a stronger dollar and increased geopolitical risk. Goldman Sachs cut its target for the MSCI Asia Pacific ex-Japan Index, anticipating lower earnings amid a challenging macro environment.
Chinese equities closed marginally lower, with upbeat services activity data offering little respite. Investors may have to wait longer for more support for the economy as the government is unlikely to “come out with stronger stimulus policy just before the Chinese New Year,” Hao Hong, partner and chief economist at GROW Investment Group, said on Bloomberg TV. China maintained its support for the yuan with the daily reference rate after the currency slumped past a key level on Friday. Services sector activity in the world’s No. 2 economy expanded at the fastest pace since May, a private survey showed on Monday, signaling improving domestic demand after Beijing’s stimulus blitz.
In FX, the dollar tumbled, underperforming all G-10 peers with the exception of the Japanese yen, on a report that Donald Trump’s aides are exploring targeting import taxes at certain industries, rather than across the board, suggesting that the dollar’s recent strength is more dependent on fiscal rather than monetary policy. Bloomberg’s gauge of the dollar fell the most since November. Japan's yen also slumped after comments out of Japan overnight indicated that the central bank is nowhere close to hiking rates. The Canadian dollar got a lift from a Globe and Mail report that Prime Minister Justin Trudeau is likely to announce his resignation as leader of the Liberal Party this week. However, the gains in the loonie may be short-lived given the “bearish macro backdrop” for the currency, according to RBC Capital Markets.
In rates, early losses in Treasuries were quickly erased after Washington Post report detailing potential for Trump tariff plan to cover only “critical imports.” The dollar dropped sharply while Treasuries rose more gradually, leaving yields richer across maturities after an early cheapening move that sent long-end yields to a 14-month high. Supply is in focus as three-day coupon auction cycle begins Monday and around $50 billion of corporate bond offerings is expected this week, front-loaded by Thursday’s early close and December jobs data on Friday. Front-end Treasury yields remain lower by ~2bp with long-end yields little changed, leaving 2s10s and 5s30s spreads wider; 10-year, near flat at 4.60%, outperforms bunds and gilts by 2.5bp and 1bp on the day. A gusher of corporate bond issuance is anticipated this week, totaling around $50 billion and front-loaded ahead of Carter’s state funeral Thursday and the December jobs report
In commodities, gold slipped as Goldman said it no longer sees the metal reaching $3,000 an ounce by the end of the year, pushing the forecast to mid-2026 on expectations the Fed will make fewer rate cuts. Oil steadied near its highest level in almost three months as Saudi Arabia raised its official prices on signs of tightness in Middle Eastern crude markets.
The US economic data calendar includes December final S&P Global services PMI (9:45am) and November factory orders (10am); JOLTS job openings, ISM services and ADP employment change also are ahead this week. Fed speakers scheduled for the session include Cook at 9:15am; Barkin, Waller, Harker, Schmid and Bowman also due this week
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A more detailed look at global markets courtesy of Newsquawk
APAC stocks traded mostly subdued following the lack of macro catalysts over the weekend and as participants digested the mixed signals from Chinese Caixin PMI data, while Japanese markets underperformed in their first trading session of 2025. ASX 200 failed to sustain early gains as strength in real estate and tech was offset by losses in materials and miners. Nikkei 225 retreated on return from the New Year holiday closures amid higher yields and after the US blocked Nippon Steel's bid to take over US Steel, while a weaker currency failed to support the risk appetite as participants also braced for weak results from retailers including Fast Retailing and Seven & I Holdings. Hang Seng and Shanghai Comp were choppy following the somewhat mixed PMI data in which Chinese Caixin Services PMI data beat expectations, but the Caixin Composite PMI figure slowed, while comments late last week from the PBoC's MPC, which recommended strengthening the intensity of monetary policy adjustments and said it will cut RRR and interest rates at the proper time, did little to spur demand.
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European bourses are almost entirely in positive territory (ex-FTSE 100), with sentiment lifted by strength in Tech names. Bourses slipped a touch in early morning trade, but managed to stabilise and then head back to best levels where they generally reside. European sectors initially opened with a slight positive bias, but now displays a bit more of a mixed picture. Tech is by far the clear outperformer today, for a couple of reasons. Firstly, Foxconn reported strong December sales figures, helping to lift sentiment in the sector. Elsewhere, reports suggest that Microsoft plans to spend USD 80bln to build out AI this FY. US equity futures are entirely in the green, with slight outperformance in the tech-heavy NQ, taking impetus from the sectoral strength seen in Europe thus far. Microsoft plans to invest USD 80bln in FY25 to construct AI-capable data centres, with over half of this expenditure directed towards the US, CNBC reports. The investment is part of the company’s broader strategy to support AI advancements, including its partnership with OpenAI. Foxconn’s Q4 revenue hit a record USD 64.7bln (+15% Y/Y), exceeding estimates, driven by strong AI server demand. While consumer electronics, including iPhones, saw flat growth, Foxconn expects significant year-on-year growth in Q1 2025. NOTE: Foxconn denied reports that its chairman expressed positive outlook, that 2025 sales will trend upwards topping TWD 7tln, and said the company did not make any such financial forecasts.
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DB's Jim Reid concludes the overnight wrap
Hope you all had a great weekend and welcome back to those returning to work today. If you’ve just got back, markets have had a fairly rough time since Christmas, with the S&P 500 down another -0.48% last week, whilst China’s Shanghai Composite saw its biggest weekly decline (-5.55%) since February. However, we did start to see a recovery on Friday, with the S&P 500 snapping a run of 5 consecutive daily declines with a +1.26% advance, whilst futures on the index are very slightly higher this morning with a +0.05% gain.
One factor helping to turn sentiment around on Friday was strong economic data out of the US, with the ISM manufacturing print up to a 9-month high of 49.3 in December (vs. 48.2 expected). Moreover, the new orders component ticked up to an 11-month high of 52.5. Plus that came just a day after the weekly initial jobless claims fell to their lowest level since April. So collectively, that helped to reassure investors that the US growth outlook was still robust into the new year.
Later in the session on Friday, we also got confirmation that Mike Johnson had been re-elected as Speaker of the House of Representatives in the new US Congress. On Friday, that had appeared in some doubt, as the Republicans only have a 220-215 margin over the Democrats following the election, and a few Republicans had been resistant to supporting Johnson. Indeed, two years ago it took former Speaker Kevin McCarthy a total of 15 ballots to be elected. For markets, the vote was also in focus because it was seen as the first test of how cohesive the narrow Republican majority would prove, and whether they’ll be able to enact Donald Trump’s second-term agenda, with his inauguration now just two weeks away. Indeed, this is the narrowest majority in the House of Representatives since the midterm election in 1930, so it’s quite a different situation to the start of Trump’s first term, when the Republicans initially had a 241-194 majority in the House.
In the meantime, we had comments from several different Fed speakers about the policy outlook over the weekend and on Friday. Generally, those comments have implicitly sounded quite cautious about the scale of further easing, which echoes the Fed’s hawkish shift in their December dot plot, where they only signalled 50bps of cuts for 2025. For instance, on Friday Richmond Fed President Barkin said he was “in the camp of wanting to stay restricted for longer.” Then over the weekend, San Francisco Fed President Daly said that inflation was still “uncomfortably above our target”, whilst Governor Kugler said that “we know the job is not done” with inflation still not at 2% yet. This backdrop has seen US Treasury yields move higher this morning, with the 30yr yield (+1.8bps) currently at 4.83%, which would be its highest closing level since November 2023. And this Wednesday coming up, we’ll get the minutes from the FOMC’s recent meeting in December, so it’ll be interesting to see how that debate unfolded given there was a dissenting vote.
As we look forward to the first full week of 2025, a key question for the Fed’s outlook will be how strong the US jobs report for December is, which is out this Friday. In terms of what to expect, our US economists are looking for nonfarm payrolls to grow by +150k in December. That would be beneath the +227k print in November, but that gain was boosted by a bounce back from previous weather disruption and the end of strikes. Indeed, a +150k print would basically be in line with the 6-month average, which is currently running at +143k. Otherwise, our economists see the unemployment rate ticking up a tenth to 4.3%.
Turning to Europe, the main focus this week will be the Euro Area flash CPI print for December, which is out tomorrow. This is an important one, as it comes amidst growing concern about European inflation, particularly with the recent rise in natural gas prices, along with the recent depreciation of the euro. On top of that, the December flash print from Spain last week was stronger than expected, so the backdrop hasn’t been too favourable, and both headline and core inflation for the Euro Area are widely expected to remain above the ECB’s 2% target. We’ve seen that have an impact in markets too, and last week saw the 10yr bund yield move higher for a 5th consecutive week.
Elsewhere in Europe, another thing to look out for will be the ongoing political situation in France and efforts to put together a new budget. That comes as last week saw the Franco-German 10yr spread widen by +4.8bps to 86.3bps, which is the widest it’s been since early December, back when the National Rally confirmed they would vote against Michel Barnier’s government. That underperformance was evident among other French assets last week, with the CAC 40 down -0.99%, in contrast to the +0.20% gain for the Europe-wide STOXX 600.
Staying on politics, it’s been reported by Canada’s Globe and Mail newspaper that Prime Minister Justin Trudeau is expected to resign as Liberal Party leader this week. Canada has to hold a federal election by October at the latest, and Trudeau’s Liberals are polling well behind the opposition Conservatives, with CBC’s poll tracker currently putting the Conservatives on 44%, and the Liberals on 21%. Trudeau has already faced calls from some Liberal MPs to resign, and his position came under further pressure last month after finance minister and Deputy PM Chrystia Freeland resigned from the cabinet.
Overnight in Asia, most of the major equity indices are trading lower, with the Nikkei (-1.49%) falling sharply as Japan’s markets reopen after the new year. That also comes as BoJ Governor Ueda confirmed their expectations to keep hiking rates, saying that “we will raise the policy interest rate to adjust the degree of monetary easing if economic and price conditions keep improving”. Elsewhere, Chinese equities have posted further declines, with the Shanghai Comp (-0.29%) and the CSI 300 (-0.29%) losing ground. However, South Korean equities have posted strong gains, with the KOSPI up +1.83% this morning.
Finally on the week ahead, US stock markets will be closed on Thursday for the funeral of former President Jimmy Carter, whilst bond markets will close early that day.