Futures tumble, led by Tech as the world is hammered by soaring yields from Europe to Japan. As of 8:00am ET, S&P futures are down 1.1%, and Nasdaq futures plunged 1.4% as Marvell Technology shares were among the biggest premarket losers, dropping about 15%, after the chipmaker’s result and revenue forecast failed to live up to investors’ lofty expectations. MongoDB Inc. dropped 17% after the database software company gave a disappointing forecast. Mag 7 underperform: NVDA (-1.8%), TSLA (-1.6%) and META (-1.5%) pre-market. 10y yields are +2bps higher while 2y is -1.5bp lower this morning but the move is nothing compared to Germany where yields earlier soared as much as 15bps (they have since retraced much of the move) extending yesterday's record rout; the USD plunge continues, just as Bessent wanted, with the rest of the world about to find out what soared trade deficits really mean. Commodities are mixed: oil saw small gains (+0.5%) after yesterday’s selloff; basic metals are rallying this morning, while precious metals are lower. Since yesterday’s close, the equity weakness was not contributed by single catalyst but more due to a number of macro uncertainties (the auto tariffs delay will not resolve the tariffs risks; more evidence of sentiment impacts from Beige book) and rotation to international stocks. Today, we will hear from AVGO on AI outlooks; MRVL fell -15% post earnings release yesterday (after-market) despite numbers are mostly in line with expectation.
In premarket trading, Tesla and Nvidia fall more than 2% are leading premarket losses among the Magnificent Seven stocks on Thursday. Amazon, Microsoft, Alphabet, Meta and Apple fall less than 1%. Burlington Stores (BURL US) shares rise 14% in premarket trading after the retailer reported fourth-quarter comparable sales and profit that topped Wall Street expectations. Still, its annual forecasts fell short, with Chief Executive Officer Michael O’Sullivan saying the outlook for 2025 is “very uncertain.” Here are the other notable premarket movers:
Chip shares came under renewed pressure after Alibaba Group Holding Ltd. introduced its Qwen platform, a model that it claims performs as well as Chinese start-up DeepSeek but with a fraction of the data. The news, alongside the underwhelming earnings, are denting investor confidence in US companies’ dominance in AI.
“Clearly Alibaba is weighing on sentiment,” said Alexandre Hezez, chief investment officer at Group Richelieu in Paris. “The tech sector has been weakened lately, if you combine that with Marvell, it’s a pretty sour cocktail for US stocks”
Europe’s Stoxx 600 index slipped 0.6%, as real estate and consumer product names underperform, reacting to sharply higher bond yields across the continent, following Germany’s announcement earlier this week that it would deploy hundreds of billions of euros in additional spending. Indeed, German government bonds fall again, extending their worst daily drop since 1990 and pushing 10-year yields up another 6 bps to 2.85%. And this time the selling has spilled over across Europe and is also hammering Japan.
Auto shares bucked the trend, however, after President Donald Trump offered the sector a one-month reprieve from the tariffs levied on Mexican and Canadian imports. The DAX is up 0.4% as bonds sell off across the world. Automakers extend rally following a delay in some US tariffs on Mexico and China. Focus is also on the European Central Bank meeting later Thursday. Here are some of the biggest movers on Thursday:
Germany’s spending plan drove Bunds on Wednesday to their worst session since 1990 and the selloff extended on Thursday. The moves rippled into markets across the euro area and beyond, with Japanese 10-year borrowing costs earlier reaching the highest in over a decade and Treasury yields rising three basis points.
Investors are now waiting for the European Central Bank’s meeting, which is expected to deliver a 25 basis-point interest rate cut, and could yield clues on how rate-setters might react to the additional spending plan.
“This is ultimately a reassessment of the reality that Europe needs to find some financing,” Rabobank strategist Matthew Cairns said of the bond selloff. “Some more repricing is likely, then the ECB will come in and attempt to settle market sentiment.”
Earlier in the session, Asian stocks rose as Chinese shares extended their rally and Donald Trump exempted automakers from newly imposed tariffs on Mexico and Canada for one month. The MSCI Asia Pacific Index rose as much as 1.5%, set for second day of gains, with Alibaba among the biggest boosts after unveiling its latest AI model. Hong Kong’s Hang Seng Index led advances, rising 3.3%. Stocks also climbed in mainland China, Japan and South Korea. Ongoing anticipation of further stimulus as well as vows to support the development of new technologies such as AI are powering China’s rally after the nation set bullish growth targets for the year at the start of the National People’s Congress on Wednesday. While China’s ambitious goals signal its preparedness for a looming trade war, investors remain cautious on the sustainability of share-price gains amid increasing geopolitical uncertainty. Elsewhere, Japanese stocks climbed on boosts from the US tariff delay as well as Germany’s historic spending plans. Malaysian equities slipped ahead of an interest rate decision, with the central bank standing pat as expected.
In FX, the euro is little changed just below $1.08 ahead of the European Central bank decision, having ventured above that level earlier.
In rates, treasuries are mixed as US trading gets under way with belly to long-end yields higher on the day while front end outperforms, leaving 2s10s spread near widest levels of past month. France and Germany lead bigger selloff in core European rates, weighing on Treasuries and extending this week’s global yield-curve steepening move. US 10- to 30-year yields are more than 3bp higher on the day with 2-year little changed, leaving 2s10s near 32bp, last seen Feb. 4; German 10-year adds more than 6bp to Wednesday’s 30bp surge, French 10-year is 8bp higher after rising 26bp.Focal points of US session include weekly jobless claims data and three Fed speakers, following ECB rate decision at 8:15am New York time; President Christine Lagarde speaks 30 minutes later. German government bonds fall again, extending their worst daily drop since 1990 and pushing 10-year yields up another 6 bps to 2.85%. And this time the selling has spilled over across Europe and is also hammering Japan.
In commodities, oil prices advance, with WTI up 0.5% near $66.60 a barrel. Spot gold falls $20 to around $2,898/oz. Bitcoin rises 1% and above $91,000.
The US economic data calendar includes February Challenger job cuts (7:30am), January trade balance, 4Q final productivity and unit labor costs, and jobless claims (8:30am) and January wholesale trade sales (10am). Fed speaker slate includes Harker (8:45am), Waller (3:30pm) and Bostic (7pm)
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Russian Foreign Minister Lavrov says a "solution in Ukraine is possible within weeks if the West stops supporting Kiev", via Sky News Arabia. Ukrainian President Zelensky anticipates positive outcomes from US cooperation next week. It was also reported that Zelensky’s top aide discussed with the US National Security Advisor steps to achieve just peace, while Ukraine and the US agreed on a meeting in the near future. Four senior members of Trump's entourage have held secret discussions with some of Kyiv’s top political opponents to Ukrainian President Zelensky, according to Politico.
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European bourses (STOXX 600 -0.5%) opened with a clear positive bias, but as the morning progressed, indices gradually drifted lower to display a more negative picture in Europe. European sectors are mixed vs initially opening with a positive bias. Autos is the clear outperformer today with optimism stemming from the White House, which said it will give one month exemptions on any autos coming through USMCA; Stellantis (+2.3%), Porsche AG (+2%). Real Estate is once again towards the foot of the pile, as yields continue to tick higher in the fall out from Germany’s spending plans. US equity futures are entirely in the red, with clear underperformance in the tech-heavy NQ (-1.2%); sentiment for the index is hit following Marvell results; the co. beat on headline metrics but its Q1 guidance disappointed – shares are lower by 15% in pre-market trade.
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DB's Jim Reid concludes the overnight wrap
On what will be the hottest day of the year so far in London (it's all relative), I'm writing this late at night in Chicago watching snow lightly come down outside my hotel room. Given the flight and the time difference I've been awake for pretty much most of what has been another remarkable 24 hours for markets, especially in Germany. The reality is that I still don't think the enormity of the news has got close to being fully comprehended and digested by global investors yet. This is a seismic shift of the most epic proportions from Germany and perhaps only fast money and nimble investors have responded so far. However, over the days, weeks and months to come, investment committees and asset allocators will slowly and surely have to adjust their thoughts and positioning on what is the 3rd largest economy in the world, especially after five years of essentially zero growth.
In terms of reactions, the rise in the 10yr bund yield (+29.8bps) was the biggest daily jump since German reunification in 1990. So that beats the previous record, which was a +22.8bps move in late-2011 at the height of the Euro crisis. On top of that, we’ve just seen the biggest 3-day jump in the Euro (+3.99%) since August 2015, and the German DAX (+3.38%) just posted its best daily performance since late-2022. So there’s no doubt that markets are pricing in a once-in-a-generation policy regime shift, which has brought about a huge risk-on move for European assets.
Those moves were clearly in train at the market open, following the announcement from Germany the previous evening. But they then got further momentum in the middle of the day, as Bloomberg reported that Germany had called for reform of the EU’s fiscal rules to allow more defence spending. On Tuesday the European Commission proposed a 4-year fiscal rule exemption for defence spending but, according to the FT, Germany has called for a longer-lasting change. That’s a massive shift from previous positions, as Germany has traditionally been among the most resistant to looser fiscal policy at the EU level. Remember that EU leaders are meeting again tonight in Brussels for a summit on Ukraine and defence, with President Zelensky also attending, so keep an eye out for further headlines. Ahead of the summit France’s President Macron said last night that he wanted to open talks on extending France’s nuclear deterrent to European allies.
All this led to a massive surge for European bond yields, as investors faced up to a huge wave of new spending. As I put it in my chart of the day yesterday (link here), this could see Germany run the largest sustained deficits in its post-war history, so the scale of the reaction is understandable. Indeed, it pushed the 10yr bund yield up to 2.79%, the highest since late-2023. And it was much the same story elsewhere, with France’s 10yr yield (+26.0bps) posting its biggest daily jump since late-2011, moving up to 3.49%. Meanwhile in Italy, bond yields have long been more volatile given the higher political risk, but their 10yr yields (+27.6bps) also posted their biggest daily jump since late-2022.
The moves also led to a huge surge for European equities, with the DAX (+3.38%) leading the way. That continues an absolute rollercoaster ride for the index, which saw the best day since 2022 on Monday (+2.64%), followed by the worst day since 2022 on Tuesday (-3.54%), and then the best move since 2022 again yesterday. Elsewhere in Europe, there were sizeable gains for both France’s CAC (+1.56%) and Italy’s FTSE MIB (+2.08%). However, with the FSTE 100 (-0.04%) flat on the day, the STOXX 600 (+0.91%) posted a more moderate gain and is still down -0.20% so far this week, which if sustained would end a run of 10 consecutive weekly gains.
All that will create an interesting backdrop for today’s ECB decision, along with President Lagarde’s press conference. In terms of the decision itself, it’s widely expected they’ll announce another 25bp cut in their deposit rate, taking it down to 2.5%, and bringing the total cuts to 150bps since last summer. However, the potential for a huge fiscal impulse has suddenly rewritten the medium-term outlook, leading to speculation about whether they’ll stop cutting quicker than previously thought. Indeed, yesterday saw investors dial back their rate cut pricing this year, with 69bps of further cuts now expected by the December meeting, down -15.4bps on the previous day.
Over in the US, and it's hard to believe it's taken us this long to get here given all that's going on there, tariffs again dominated the headlines and ultimately a more positive narrative emerged as the US announced a 1-month delay to the 25% Canada/Mexico tariffs for automakers so US car producers “are not at an economic disadvantage”. Cars and auto parts account for just under 25% of total US imports from Canada and Mexico so most of the tariffs that came in force on Tuesday will remain in place. But the delay added to hopes that the US administration may limit the most economically disruptive tariffs and the White House Press Secretary said that Trump “is open to hearing about other exemptions”. The tariff noise had remained tense earlier in the day, with Bloomberg citing Canadian officials that its government would not lift retaliatory tariffs if the US leaves any tariffs in place as it was cool on the idea of a “middle ground” settlement.
Ultimately, improved sentiment on the auto tariff delay sent the S&P 500 +1.12% higher by the close, having been -0.5% down intra-day before Bloomberg first reported that a delay for autos was being considered. Automakers rebounded, with Stellantis (+9.24%), GM (+7.21%) and Ford (+5.81%) essentially reversing their losses earlier in the week. Tech stocks saw a modest outperformance with the NASDAQ and Mag-7 +1.46% and +1.83% higher respectively. Elsewhere, there were contrasting moves for commodity-linked stocks. Energy (-1.51%) was the weakest sector in the S&P 500 as Brent crude (-2.45% to $69.30/bbl) closed below $70/bbl for the first time since September amid growing fears of an oil market surplus. By contrast, materials stocks (+2.63%) were the strongest performers as copper (+5.28%) saw its biggest daily spike since 2022.
Treasury yields closed higher on the auto tariff delay news, with the 2yr yield up +1.4bps to 4.01% and the 10yr yield up +3.5bps to 4.28%. Treasuries had earlier seen a sizeable round-trip amid a mixed batch of US data. The 2yr yield traded as low as 3.89% following an underwhelming ADP report of private payrolls for February, which came in at just +77k (vs. +140k expected). So that raised some fears about what the jobs report on Friday might show. But shortly afterwards, yields rebounded as the ISM services index painted a much more positive picture, coming in stronger than expected at 53.5 (vs. 52.5 expected). Moreover, the employment component moved up to 53.9, the strongest it’s been since December 2021.
The global bond selloff continued in Asia with yields on 10yr Japanese government bonds crossing 1.5% for the first time since June 2009 and those on the 30yr breach the 2.5% mark for the first time since 2008. Yields on 10yr USTs (+4.22bps) pushed upwards for a third consecutive day, reaching 4.32% as I type. Yields on Australian 10yr government bonds surged by 13bps.
Asian equity markets are mostly climbing this morning, mirroring Wall Street’s rally. The Hang Seng tech index (+4.72%) is leading gains, surging to a three-year high after Alibaba released a new open-source AI model that appears to perform as well as DeepSeek’s R1 on a fraction of the training data. The Hang Seng (+2.64%), the CSI (+1.09%) and the Shanghai Composite (+0.95%) are all up, a day after Beijing set an ambitious economic growth target and vowed more support for domestic consumption. Elsewhere, the Nikkei (+0.88%) and the KOSPI (+0.41%) are also trading in positive territory while the S&P/ASX 200 (-0.50%) is a notable exception in early trade. Outside of Asia, US equity futures tied to the S&P 500 (-0.06%) are trading flat.
Early morning data showed that South Korea experienced a slowdown in consumer inflation for the first time in four months in February. Prices rose +2.0% y/y (v/s +2.1% expected), following January’s +2.2% rise, thus offering some breathing room for policymakers intent on easing monetary policy. On a m/m basis, CPI growth slowed to +0.3%, compared to a +0.7% increase in January.
To the day ahead now, and EU leaders will be meeting in Brussels for a summit on Ukraine and defence. Otherwise, the main highlight will be the ECB’s policy decision, along with President Lagarde’s subsequent press conference. Other central bank speakers include the Fed’s Harker and Waller. Finally on the data side, US releases include the weekly initial jobless claims and the January trade balance, and we’ll also get Euro Area retail sales for January.