US equity futures rebounded from yesterday's 3:30pm pension-selling inspired airpocket, and are higher along with European markets, even as Goldman anticipates continued month-end turbulence due to a sizable $32 billion in quarter-end selling, the largest since June 2023 (more details here for premium subs). As of 8:10am ET, S&P 500 futures rose 0.4% while Nasdaq 100 contracts add 0.5%, while European stocks were little changed near Tuesday’s record closing high. As JPM notes, the S&P is on a 3-day losing streak which appears to be mostly month-end/quarter-end related given the trading patterns. SPX -0.73% over those three days.Bond yields are up 1bps across the curve, but USD is flat while the yen bounced from a 34-year low on speculation that Japanese officials may be preparing to intervene to support the currency; commodities are for sale across all 3 complexes with the notable exceptions gold and natgas. Keep an eye on oil prices which could push past near-term expectations as Russia looks to cut production. The major macro events are Waller’s speech (6pm ET) and the 7Y bond auction; yesterday’s 5Y was digested well
In premarket trading, all Mag7 names are higher as are Semis and Large-cap Healthcare. Merck shares jumped 4.8% after Winrevair, a treatment for pulmonary arterial hypertension, which is a rare and dangerous form of high blood pressure, won approval from the US Food and Drug Administration. Merck also rose after its Winrevair drug won US approval. Shares in Trump Media & Technology were set to extend gains following its debut as a public company. Here are the other notable premarket movers:
As we first reported last night, with stocks set to cap another strong quarter, pension funds are likely to sell an estimated $32 billion in equities to rebalance their positions, according to Goldman.
While projections on pension flows vary widely on Wall Street, it could heap extra pressure on markets when trading volumes are thin around Easter. After the S&P 500 soared about 26% since late October, traders have flagged concern that positioning is stretched and stocks are more vulnerable to short-term profit taking.
Officials from Japan’s Ministry of Finance, the Bank of Japan and Financial Services Agency met to discuss markets in their first three-way meeting since late May. After the talks, Japan’s top currency official Masato Kanda pledged to take appropriate action against excessive swings, saying he sees speculative moves behind the yen’s plunge. The yen strengthened 0.3%.
"The BOJ’s finger will be on the trigger for FX intervention,” said David Forrester, Singapore-based senior FX strategist at Credit Agricole.
Elsewhere, Chinese President Xi Jinping met with a group of American business executives in Beijing as China seeks to restore confidence in the economy and keep relations with the US on a stable footing. Meanwhile, as much as 2.5 million tons of coal and hundreds of car shipments are threatened with disruption after the sudden collapse of the Baltimore Bridge clogged the supply chains around the port.
Stocks have had a strong start to the year, with major benchmarks scaling record levels. The S&P 500 is set for its fifth month of straight gains, while Japan’s Nikkei 225 Index of shares closed within a whisker of its all-time high. Still, moves this week have been muted ahead of Friday’s release of the Federal Reserve’s preferred inflation gauge.
“I’m still rather positive on equity markets, as long as nothing changes in the broader picture, one can just go with the flow,” Francois Rimeu, a strategist at La Francaise Asset Management in Paris, said. He sees a possibility the rally can broaden toward other parts of the market, such as European or mid-cap shares, given “extreme” valuation gaps among technology and US stocks.
European stocks were little changed near Tuesday’s record closing high. Retail shares are the best performers as clothing retailer Hennes & Mauritz jumped as much as 14% after its profit beat estimates thanks to cost cuts, while payments firm Adyen NV got a boost from a broker upgrade. Euro-area data showed an improvement in economic confidence, supporting expectations that the region can soon move beyond its recent weakness.
Earlier in the session, Asian stocks traded mixed after the subdued handover from Wall St heading into quarter-end and Easter. ASX 200 was underpinned by strength in the top-weighted financials and consumer-related sectors, while data also provided a tailwind after an improved leading index and softer-than-expected monthly CPI. Nikkei 225 outperformed as the yen fell to a 33-year low amid dovish-leaning BoJ comments. Hang Seng and Shanghai Comp. declined amid a slew of earnings and weakness in tech with Alibaba pressured after it withdrew its Cainiao IPO application, while the mainland failed to benefit from the PBoC's firm liquidity operation and improved Industrial Profits.
In FX, the yen rebounded after slumping to the weakest level in about 34 years, while the krona fell against the euro after the Riksbank opened the door to a rate cut as soon as May. The USDJPY fell 0.3% to ~151.10 after hitting its highest since 1990 earlier on Wednesday after Japan’s top currency official pledged to take appropriate action against excessive moves in the foreign-exchange market as the MOF stepped closer to intervention with its strongest warning yet as the yen slid to the weakest level in about 34 years against the dollar.
In rates, treasuries were little changed after trading in a narrow range through Asia session and European morning, leaving yields within 1bp of Tuesday’s closing levels. Treasury 10-year yields around 4.235%, slightly cheaper on the day with bunds and gilts outperforming in the sector by 3bp and 1bp; curve spreads also within 1bp of Tuesday’s close. Core European rates outperform as bunds rise after Spanish harmonized and core inflation rose less than expected in March. German 10-year yields fall 2bps to 2.33%. With no data scheduled, US session focal points are 7-year note auction and comments from Fed’s Waller after the close. The week's auction cycle concludes with $43b 7-year note sale at 1pm New York time; Tuesday’s 5-year note stopped through by 1bp.
In commodities, oil prices pared a decline, with WTI falling as much as 1% before rebounding to trade near $81.2. Spot gold rises 0.6%.
In crypto, Bitcoin has been relatively contained and holds around the $70k mark, with Ethereum also holding at key levels around $3.6k.
Looking at today's calendar, the US economic data slate is empty for the session; Fed members scheduled to speak include Waller at 6pm.
Market Snapshot
Top Overnight News
A more detailed look at global markets courtesy of Newsquawk
APAC stocks traded mixed after the subdued handover from Wall St heading into quarter-end and Easter. ASX 200 was underpinned by strength in the top-weighted financials and consumer-related sectors, while data also provided a tailwind after an improved leading index and softer-than-expected monthly CPI. Nikkei 225 outperformed as the yen fell to a 33-year low amid dovish-leaning BoJ comments. Hang Seng and Shanghai Comp. declined amid a slew of earnings and weakness in tech with Alibaba pressured after it withdrew its Cainiao IPO application, while the mainland failed to benefit from the PBoC's firm liquidity operation and improved Industrial Profits.
Top Asian News
An uninspiring session thus far in Europe, Stoxx600 (+0.1%), bourses within tight ranges and sentiment mixed in relatively light newsflow. European sectors are mixed with little theme or bias; Retail is the clear outperformer after H&M's (+12%) earnings and Energy lags amid the slide in crude oil prices. US Equity Futures (ES +0.4%, NQ +0.4%, RTY +0.1%) are trading on a firmer footing, attempting to make back the losses seen in the prior session.
Top European news
FX
Fixed Income
Commodities
Geopolitics: Middle East
Geopolitics: Other
US Event Calendar
Central Bank Speakers
DB's Jim Reid concludes the overnight wrap
As we continue to draw closer to the Easter holiday, it remained quiet in markets yesterday other than for a sizeable late sell-off in US equities which came a bit out of the blue. Markets have been a bit thin this week so that might have contributed as we await the main event at 12.30pm London time on Friday when I’ll be driving through the French countryside, and you may be having a well-deserved piece of Easter chocolate! That will, of course, be the much anticipated core PCE print.
Perhaps the most exciting thing in the last 24 hours has been the Yen hitting 34-year lows of 151.97 overnight before rallying a touch to 151.75 as I type. The move came on the back of dovish remarks by the BoJ board member Naoki Tamura that the central bank must proceed slowly and steadily towards normalising its ultra-loose policy. However, the prospect of intervention in the currency market has increased after Japanese Finance Minister Shunichi Suzuki commented that the government "will take bold action" to slow the currency’s drop if needed. The Nikkei is +1.44% as I type and bucking the trend in Asia as we'll see below.
Indeed, equities closed out weak last night with the S&P 500 -0.28% lower yesterday, following in the footsteps of Monday's -0.31% loss, with the Nasdaq (-0.42%) slightly underperforming. The S&P 500 had looked set for a very narrow but positive trading range, but then sold off by nearly half a percent in the final 30 minutes of the session, seemingly driven by quarter-end positioning.
Nvidia, the standout stock of the past year, led this late correction, falling from near flat on the day an hour before close to -2.57% at the close. That still leaves its shares up a more than heathy +86.9% YTD. There were also other contrasting moves within the Magnificent Seven (-0.52% overall). Apple fell early on following the news that iPhone shipments into China fell 33% year-on-year in February, but recovered during the session, ending the day as a modest underperformer (-0.67%). On the other hand, Tesla, which has so far trailed behind in 2024 (-28.5% YTD), was among the strongest performers in the S&P 500, rising +2.92% after new developments in the delivery of its self-driving assistance system. S&P (+0.37%) and Nasdaq (+0.38%) futures are back higher this morning.
Earlier on, equities had closed on the firmer side in Europe, with the STOXX 600 gaining +0.24% and the German Dax +0.67%, the latter supported by a moderate improvement in the GfK consumer confidence index from -29.0 to -27.4 (vs -28.0 expected). See Robin Winkler's recent blog here on the green shoots we're seeing in German data of late.
Government bonds have had a more difficult quarter but lacked a bit of direction yesterday. Yields rose a bit after decent durable goods data but fell back to broadly flat after a decent 5yr auction. $67bn was issued 1.0bps below the pre-sale yield, so it was a fairly solid auction, even as the indirect bidder share fell to 70.5%. The auctions for this week are far from over, as we have the US 2yr FRN ($28bn) and 7yr Notes ($43bn) auctions coming up later today. 10yr yields eventually fell -1.3bps on the day. 2yr Treasuries outperformed, with yields down -3.3bps. Markets slightly dialled back expectations of Fed cuts, trimming rate cut bets for 2024 by -1.4bps to 78bps.
The US data was mixed. As mentioned above, durable goods orders came in above expectations, up 1.4% (vs 1.0% expected), with core capital goods orders up +0.7% (vs. +0.1% expected). On the other hand, we saw some softer house price data, with the FHFA (-0.1% vs 0.3% expected) and the Case-Shiller 20-City (+0.14% vs +0.20% expected) house price indices for January seeing their weakest monthly prints since summer 2022 and early 2023, respectively. There were also mostly weaker signals in the survey releases. The Philadelphia Fed non-manufacturing activity index fell from -8.8 to -18 and the Richmond Fed’s manufacturing index fell to -11 (vs no change at -5 expected). The headline US Conference Board consumer confidence print for March declined to 104.7 (vs 107.0 expected). More encouragingly, the details of the print saw a rise in the jobs component, as the share of respondents saying jobs are plentiful rose to 43.1% (vs 42.8% prior), the highest level since July. This highlights a still tight labour market for now, which if maintained may weigh on the Fed’s decision to cut rates later this year.
Sticking with the US cycle, overnight Peter Sidorov published a report dissecting the recent resilience of economic activity to tight bank credit conditions. He sees a number of the tailwinds that supported this resilience last year as fading in 2024, leaving risks of a cyclical downturn in play. By contrast, he sees European growth as on track for a gradual cyclical upswing. See the note here for more.
Yesterday in Europe, we heard from the ECB’s Muller, one of the known hawks, who remarked that we are now “closer to [the] point where [the] ECB can start cutting rates.” Notably, Muller stated that “data may confirm inflation trend for ECB’s June meeting”, the first time he has explicitly commented on the June timing for the ECB’s potential next move. For more detail on the next step for the ECB, see the latest note from our European Economics team on the ECB policy path here. Off the back of this, markets increased their expectations of rate cuts, with the expected probability of a 25bps cut by the June meeting rising from 87% to 94% over the day. This sent both 2yr and 10yr bund yields down -1.1bps and -2.2bps, respectively. 10yr BTPs outperformed (-4.3bps) but OATs saw a more modest rally (-1.5bps) amid news that France’s budget deficit was larger than expected in 2023.
This morning in Asia, outside of the Japan move we discussed earlier, equity markets are mostly trading lower with the Hang Seng (-0.63%), CSI (-0.46%), Shanghai Composite (-0.52%) and the KOSPI (-0.17%) all on the weaker side.
Early-morning data showed that Australia’s inflation remained at +3.4% y/y in February for the third straight month against analyst expectations for a +3.5% gain. However, trimmed mean rose to 3.9% from 3.8% which is the first increase since last April and will be a bit uncomfortable for the RBA.
Elsewhere, China’s combined industrial profit for January and February rose sharply, advancing +10.2% y/y mainly because of a weaker base for comparison from last year.
Now to the day ahead. In terms of data releases, we have the Eurozone March services, industrial and economic confidence and the France March consumer confidence. We will hear from the Fed’s Waller and the ECB’s Cipollone. Lastly, we have the US 2yr FRN ($28bn, reopening) and 7yr Notes ($43bn) auctions.