US equity futures are higher following a two-day slide, led by Tech with a favorable court ruling boosting GOOG (+5.7% pre-mkt) and lifting the Mag7 group. As of 8:00am ET S&P futures are up 0.5%, recovering most of yesterday's losses; while Nasdaq 100 futs add 0.7%. In premarket trading, Mag7 names are all higher with AAPL (+2.9%) and TSLA (+1.7%) the notable standouts alongside GOOG. Cyclicals are poised to outperform as the yield curve bear steepens. In Europe, the Estoxx 50 is up by almost 1%, led by info tech and industrials sectors. Longer duration bonds are seeing a global sell-off (30Y JGBs +7bp, 30Y Gilts +6bp) while US is outperforming (30Y +2bp); underperformance is driven by global budget concerns (these come and go), which have sent gold is higher for the 7th consecutive session, adding ~5% in that time. USD is weaker and commodities are mixed. WTI crude futures fall 1.7% to near $64.50 after a report said that OPEC+ is considering another supply boost for October at this weekend’s meeting. Today’s data focus is on JOLTS, Durable/Cap Goods, Beige Book, and consumer-sector earnings to gain clarity on the consumer.
In premarket trading, Alphabet (GOOGL) shares are up 5% after a US antitrust ruling was not as severe as feared. Google will be required to share online search data with rivals while avoiding harsher penalties, including the forced sale of its Chrome business. Apple (AAPL) rises 4% after a US judge stopped short of barring the iPhone maker’s lucrative search arrangement with Google. All other Mag 7 stocks are also higher (Tesla +1.5%, Nvidia +0.4%, Meta +0.8%, Amazon +0.03%, Microsoft unch).
Stocks were boosted as the selloff in government debt lost momentum as well. The yield on 30-year Treasuries came within touching distance of 5% before erasing the advance. UK gilts and euro-area bonds rebounded. Japan’s 20-year debt yields hit the highest since 1999 earlier in the day. The recent fragility of bond markets has underscored the strain from heavy public spending, which demands ever-rising issuance. That uncertainty is spilling into equities, where traders grapple with stretched valuations after a record rally, alongside persistent concerns over monetary policy and inflation.
Meanwhile, the bond market is pouring gasoline on the fire: the week has so far seen more than $116 billion of bond sales by governments and companies. The figure includes a record $57.7 billion of issuance in Europe on Tuesday.
“Yesterday was the largest issuance day on record in Europe as a whole,” wrote Fred Repton, a senior fund manager at Neuberger Berman. “One should not draw too many conclusions from one extremely active day. What can be said though is that market participants are again focused on deficits and political risk, and this theme is likely to continue.”
After Fed Chair Jerome Powell last month signaled the central bank’s support for a softening jobs markets, Wednesday’s JOLTS data is likely to indicate more labor-market cooling. Further ahead, Friday’s nonfarm payrolls report is expected to show a fourth straight month of sub-100,000 job growth, the weakest stretch since the onset of the pandemic in 2020. Swaps currently imply around a 90% chance of a quarter-point Fed rate cut later this month, with three more similar moves expected by June.
“We don’t see yields rising much further than their current levels,” said Roland Kaloyan, head of equity strategy at Societe Generale SA. “That being said, this bond selloff means that there will be an even greater focus on Friday’s US job data and their impact on the Fed’s easing policy.”
In Europe, the Stoxx 600 is up 0.7% as investors welcomed a calmer day in the European government bond market. European stocks rebound after bonds globally sold off Tuesday on worries about fiscal deficits in developed markets. Adidas rises after the sportswear group was upgraded to buy at Jefferies. Here are some of the biggest movers on Wednesday:
Earlier in the session, Asian shares headed for a second day of declines, weighed by those in Japan due to domestic political uncertainty and weakness in regional chip-making stocks. The MSCI Asia Pacific Index slid as much as 1%, the most in about a week. Japanese shares, which make up around 30% of the index, were a big drag as the Nikkei 225 Index fell 0.9%%. Australian equities also dropped after growth data reinforced the case for the central bank to keep interest rates unchanged. Investor sentiment soured in Japan after Prime Minister Shigeru Ishiba’s key power broker announced his intention to resign. Asian chip stocks were under pressure after the US revoked Taiwan Semiconductor Manufacturing Co.’s authorization to freely ship essential gear to its main Chinese chipmaking base. TSMC fell as much as 1.3% before erasing the loss. Elsewhere in the region, Thai stocks rose after the country’s largest political party said it will back conservative politician Anutin Charnvirakul’s bid to form a government following last week’s sacking of Paetongtarn Shinawatra as prime minister for ethics violations.
In rates, treasuries are slightly lower, with US 30-year yields up 1 bp at 4.96% having come within a whisker of 5% earlier while European bonds stabilize following Tuesday’s global government bond selloff. UK gilts erased an earlier fall to trade higher on the day, pushing UK 30-year yields down 2 bps to 5.67%. German long-end yields also dip. US yields are 2bp-3bp cheaper on the day with 5s30s flatter by around 1bp as long-end marginally outperforms. 10-year is near 4.285% with bunds and gilts in the sector outperforming by around 3.5bp
In FX, the Bloomberg Dollar Spot Index is down 0.1%. The pound and euro add 0.2% each against the greenback. Spot gold rises $5.
In commodities, WTI crude futures fall 1.7% to near $64.50 after a report said that OPEC+ is considering another supply boost for October at this weekend’s meeting. Gold’s latest record came as growing expectations for US interest-rate cuts bolstered the metal’s appeal, while the drop in bonds and equities has strengthened its haven status. Bullion climbed as much as 0.5% to close in on $3,550 an ounce.
US economic data slate includes July JOLTS job openings and factory orders (10am). Fed speaker slate includes Musalem at 9am, and Fed releases Beige Book at 2pm
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APAC stocks were predominantly lower following the weak handover from Wall St, where the major indices declined on return from the extended weekend as sentiment was dampened by global debt concerns amid a higher yield environment. ASX 200 retreated with the declines led by underperformance in tech, utilities and financials, while slightly stronger-than-expected Australian GDP data failed to inspire. Nikkei 225 was pressured amid a higher global yield environment but with the downside initially cushioned by recent currency weakness. Hang Seng and Shanghai Comp gradually fell despite the better-than-expected RatingDog Services PMI data from China and with the attention in Beijing on the military parade, which was attended by Russian President Putin and North Korean Leader Kim, while US President Trump reacted in a post and accused them of conspiring against the US.
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European bourses (STOXX 600 +0.5%) opened in the green and have held an upward bias throughout the morning. Sentiment which is seemingly driven by a paring of the significant pressure seen on Tuesday, and as Google received a favourable judge ruling. European sectors hold a slight positive bias, following on from a poor session on Tuesday. Tech takes the top spot, paring back some of the underperformance seen in the prior session as Google (+5.8% pre-market) helps to lift the mood within the sector (see US section for details). Consumer Products follows closely behind, with the Luxury sector building on the prior day’s gains, this time following a positive trading update from Watches of Switzerland (+7.6%). The Co. confirmed strong sales, affirmed its guidance and highlighted that it does not expect to be materially impacted by US tariffs in H1’26.
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DB's Jim Reid concludes the overnight wrap
Last night we published a new presentation pack, Back to work… until Xmas. Since it has become almost de rigueur to reach for the ‘back-to-school’ analogy, we’ve chosen instead to highlight the joy of returning to work - though with the daunting reality of no holiday break until Christmas. In the pack, we outline five themes we believe will shape the remainder of 2025: whether AI and US equities are in a bubble; the pros and cons of Fed rate cuts; the path for US Treasuries if the Fed is indeed cutting; the state of play five months on from Liberation Day (April 2); and the situation after 225 days of Trump 2.0.
These themes felt immediately relevant yesterday as global markets fully reopened for the first main day of trading after the holiday season. Fixed income markets led the moves, with a major bond sell-off that pushed 30-year UK gilt yields to their highest since May 1998, while French OATs hit levels last seen in 2009. The pressure was not confined to Europe, with US Treasuries also selling off—10s and 30s both rising sharply, the latter again testing 5% before closing just under at 4.96%. We’re at 4.985% again in Asia as I type. At the same time, gold extended Monday’s record, rising +1.64% to surpass $3,500 for the first time, as its role as a hedge against inflation and fiscal concerns remains firmly in play.
Equities struggled across the board. The S&P 500 fell -0.69%, with the Nasdaq (-0.82%) and the Mag-7 (-1.08%) down by more, as tech underperformed. The S&P did partially recover after trading -1.5% lower intra-day but it was still a broadly weak day with more than three-quarters of its constituents losing ground. Nvidia (-1.95%) and Amazon (-1.60%) were among the key laggards, reigniting investor concerns over AI-linked valuations as US markets returned from the long Labor Day weekend. The risk-off tone was even sharper in Europe, where most indices lost over a percent, led by the DAX with a -2.29% drop as IT (-3.12%) and Industrials (-3.05%) weighed heavily.
Concerns around Fed independence also contributed to the bond market moves. A second court hearing began yesterday on whether President Trump can be temporarily barred from dismissing Fed Governor Lisa Cook, though Bloomberg reporting suggests that there likely won’t be a ruling before the end of the week. Earlier, nearly 600 economists signed an open letter in Cook’s defence, while FHFA Director Bill Pulte kept up accusations of mortgage fraud. Meanwhile, Treasury Secretary Scott Bessent confirmed the search for Powell’s successor as Fed Chair is already underway, with the WSJ reporting that he plans to start interviews on Friday. In comments to Reuters, he stressed that the Fed “should remain independent,” though he was quick to add that it has also “made a lot of mistakes.”
In the UK, 30yr gilt yields rose +5.2bps to 5.69%, their highest since May 1998, a month when pop group Aqua had a number one single that wasn’t “Barbie Girl”. A prize if you remember what it was without looking. The gilt move underscored the fiscal challenges Chancellor Reeves faces ahead of the autumn budget. The government must fill a £20–25bn gap by November, and sterling fell more than 1% against the dollar as those risks came into sharper focus. See our economist Sanjay Raja’s latest thoughts on all things UK related here.
In France, 30yr OAT yields rose +4.9bps to 4.49%, the highest since 2009, amid rising expectations of another government collapse next week. Our economists see the French deficit running at 5.6–5.8% of GDP in 2025, above the official 5.4% target, further adding to concerns around debt sustainability.
Data offered a mixed picture. In the US, the August ISM manufacturing survey showed a modest improvement, rising to 48.7 from 48.0, though still below the 49.0 expected. New orders beat expectations (51.4 vs 48.0 expected and 47.1 previously). However, the employment index remained subdued (43.8 vs 45.0 expected and 43.4 previously) and prices paid fell from 64.8 to a 6-month low of 63.7, which helped yields reverse from the day’s intra-day highs. Although we have JOLTS today, attention will increasingly shift to Friday’s payrolls, where our economists expect headline and private payroll growth of around 100k, up from the prior month, with unemployment steady at 4.2%—though there is a risk it rounds down to 4.1%. All eyes on the revisions after last month’s shock.
In Europe, core flash inflation surprised slightly to the upside, at 2.3% YoY (vs. 2.2%), while headline was in line with expectations at 2.1%. Services inflation eased a touch from 3.2% to 3.1%, but the stickiness in core goods kept pressure on yields and reinforced our economists view that we have likely reached the ECB’s terminal rate. Among ECB speakers, the more dovish Simkus suggested in an interview that a rate cut may be in play in October or December, but Isabel Schnabel said “ I do not see a reason for a further rate cut” and indicated that renewed rate hikes “may come earlier than many people currently think”. The amount of ECB rate cuts priced by next June is now down to a cycle low of 15bps.
Geopolitics also crept back onto the radar, with reports that Russia and the US are preparing for a new round of consultations. Meanwhile, in Turkiye, the BIST 100 fell -3.57% after a court removed Ozgur Celik, the newly elected CHP leader.
Asian equity markets are following the global trend and are lower this morning. Across the region, the S&P/ASX 200 (-1.62%) is leading losses as RBA rate cut prospects dimmed following upbeat GDP data (details below). Additionally, the Nikkei (-0.79%), the Hang Seng (-0.40%), the CSI (-0.88%) and the Shanghai Composite (-0.96%) are also trading notably lower. US equity futures are creeping higher though, with the S&P 500 +0.10% higher, while the NASDAQ is outperforming (+0.26%) after Google spiked by more than 7% after-hours following a court decision that it won’t have to sell its Chrome browser.
Coming back to Australia, the economy expanded +1.8% y/y (v/s +1.6% expected) in the second quarter of the year, marking the fastest pace of growth since September 2023 and higher than the revised +1.4% growth seen in the previous quarter with the growth largely led by household consumption. Following the data, the Australian Dollar reversed opening losses and is trading flat against the dollar as I type while the yield on the policy sensitive 3yr government bonds have jumped +9.1bps, extended an earlier gain to hit 3.541%, the highest level in seven weeks.
Elsewhere, yields on Japan’s longer maturity JGBs continue to be at multi-decade highs, following the global selloff in bonds and political uncertainty in the nation. Yields on 20-year government bonds are +3.1bps to trade at 2.667%, a level last seen in 1999 while those on the 30-year are +4.1bps to 3.26%, its highest since its debut in 1999.
Looking ahead, today brings the US JOLTS report, factory orders, and August vehicle sales. In Europe, we’ll get Italy’s services PMI and Eurozone PPI, while Canada releases Q2 labour productivity. Central banks are also busy: the Fed’s Beige Book is due, with remarks from Musalem, Lagarde, Bailey, and several other BoE speakers. On the earnings side, highlights include Salesforce, HPE, Gitlab and Dollar Tree.