US equity futures are higher this morning on the last day of a volatile week, amid healthy earnings results post market close yesterday. As of 8:00am, S&P futures are up 0.5%, while Nasdaq futures gain 0.8% with AAPL up +3.5% after first sliding after disappointing iPhone sales only to reverse losses on the company's (rather modest) guidance; Intel gained +1.4% as results were better-than-feared while Mag7 stocks were mostly higher (GOOGL +0.5%, AMZN +0.9%, AAPL +4%, MSFT +1%, META +0.5%, NVDA -1% and TSLA +0.2%). Europe’s Stoxx 600 index headed for its best month in two years as strong earnings reports burnished the appeal of the region’s stocks over pricier Wall Street equities. As we get closer to the Feb 1 deadline, headlines on Trump’s tariffs took the central stage. Trump’s reiteration of the 25% tariffs on Canada/Mexico led to some volatility yesterday, but the markets quickly rebounded and still managed to finish in the green. 10Y treasury yields were flat at 4.52% while the dollar gained ahead of President Donald Trump’s weekend tariff announcement. Today, key macro focus will be December PCE and Energy earnings (XOM and CVX).
In premarket trading, Apple rose 4% after the iPhone maker gave a modestly better-than-expected outlook (it guided single digit growth in sales, which probably is better than guiding to a contraction), helping to offset disappointing iPhone and China revenue in its first-quarter results. Chevron (CVX) declines 1% as profit underperformed expectations amid shrinking crude prices and fuel-making margins. Intel (INTC) rises 1.4% after the chipmaker reported fourth-quarter results that were better than investors expected as it navigates a difficult return to competitiveness. Here are some other notable premarket movers:
Investors are starting to come around to the European region, and Bank of America’s Michael Hartnett recommended diversifying away from the big tech stocks that underpinned last year’s US outperformance. Meanwhile, Trump is poised to unleash his first wave of tariffs on Canada and Mexico on Saturday, taking a gauge of dollar strength toward its best week since mid-November. The cost of hedging against price swings in the Canadian dollar over the next week rose to its highest level since October 2022 in anticipation of greater currency volatility.
“Markets are being too simplistic about Trump,” said Daniel Loughney, head of fixed income at Mediolanum International Funds Ltd. “We feel he will negotiate and threaten, but there will also be carrots.”
In economic data, investors will be watching the latest core price index numbers from the US, the Fed’s preferred inflation gauge, which is expected to pick up slightly in December. Meanwhile, the tech-sector concerns about competitive threats from China, which dominated at the start of the week, showed signs of abating. Reports from some of the largest technology companies in the US have proved resilient, helping stocks recover after Chinese startup DeepSeek shook up markets with its cheaper AI model.
Europe’s Stoxx 600 index headed for its best month in two years as strong earnings reports burnished the appeal of the region’s stocks over pricier Wall Street equities. The European benchmark was set for a 6.5% jump in January amid robust corporate results, European Central Bank easing and speculation the region can avoid US tariffs. Stoxx 600 rose 0.5% on Friday with tech and healthcare are the biggest gainers, while real estate and telecoms are the only declining sectors. Here are some of the biggest movers on Friday:
Earlier in the session, Asian equities slip, dragged by losses in Korean tech shares catching up with concerns about the artificial intelligence market after extended holidays. The MSCI Asia Pacific Index fell as much as 0.3%, with AI-trade beneficiary SK Hynix dropping 10%, and Samsung Electronics falling after missing profit expectations. Even with the recent concerns over the impact of DeepSeek’s cheap AI model, the regional benchmark is on track to post a gain for the Lunar New Year week, and its first monthly advance since September. The weakness in Korean memory chipmakers comes after the global selloff sparked by DeepSeek earlier this week. While the Seoul bourse reopened after a four-day holiday, markets remain closed in mainland China, Hong Kong, Taiwan and Vietnam.
In FX, the dollar gained ahead of President Donald Trump’s weekend tariff announcement; the Bloomberg Dollar Spot Index rises 0.2%. The yen underperforms with a 0.3% fall, while the euro slumped as well.
In rates, 10-Y Treasuries fell on bets the potential tariffs could spur inflation and keep interest rates high, while gold was on track for its best month since March as the danger of a trade war spurs haven demand. Long-end Treasury yields are ~1bp cheaper on the day following US President Trump’s late-Thursday repeated pledge of 25% tariffs on imports from Canada and Mexico on Feb. 1, with short-end little changed. US 10-year yield, up 1.2bp at 4.52%, underperforms Germany’s by 5bp, UK’s by 2.5bp; 2s10s and 5s30s spreads are ~1bp wider, near Thursday’s highs. European rates outperform, led by Germany’s, where soft regional inflation gauges unleashed a curve-steepening rally. Focal points of US session include December personal income and spending data including PCE price indexes and a speech by Fed Governor Bowman.
In commodities, oil prices are little changed, with WTI at $72.70. Commodity markets are pricing in elevated odds that crucial raw materials like oil will be included in sanctions against Canadian imports, Goldman Sachs said.
Spot gold surged to a new record high above $2800 and is now in a fast track to hit $3000 over the next few months.
The US economic data calendar includes 4Q employment cost index and December personal income and spending (8:30am) and January MNI Chicago PMI (9:45am, several minutes earlier to subscribers). Fed’s Bowman speaks on the economy and banks at 8:30am
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Asian stocks were mostly higher but with gains capped at month-end and as participants digested earnings and tariff threats. ASX 200 printed a fresh all-time high with the index led by strength in gold miners and tech although the defensive sectors lagged. Nikkei 225 remained afloat albeit with momentum restricted by a choppy currency and a slew of earnings. KOSPI underperformed on return from the holiday closure with tech names pressured as SK Hynix got its first opportunity to react to the DeepSeek debacle and Samsung Electronics was also negative despite better-than-expected earnings for Q4 as it provided a pessimistic view for the current quarter.
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European bourses (Stoxx 600 +0.5%) opened modestly firmer and continued to edge higher as the session progressed, with indices generally near highs. Overnight, a turnaround in futures began around the time the WSJ posted an article which suggested that the US administration could announce new tariffs by Saturday, but with a grace period to allow for negotiations (the grace period was not initially touted). European sectors opened mixed but now hold a strong positive bias. Tech is the outperformer today, with sentiment in the sector lifted by post-earning strength in Apple, which is higher by around 3.5% in US pre-market trade. Healthcare takes the second spot, lifted by post-earning strength in Novartis (+3.3%). US equity futures are mixed, with the RTY (-0.1%) marginally in the negative territory whilst the tech-heavy NQ (+0.6%) outperforms following results from Apple and Intel (details below).
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DB's Jim Reid concludes the overnight wrap
It's a sad day today. My 5 year fixed mortgage at 1.45% runs out. If you've seen UK yields recently you know what comes next. While I reduce the kids pocket money tonight to help offset the sizeable increase, we come to the end of a frantic week, and month end, with a busy couple of days still ahead with US core PCE and European inflation data today and a self imposed tariff deadline from Trump to Canada and Mexico tomorrow.
This latter topic moved back to the top of investors’ attention late in the US session yesterday as Trump said that he plans to follow through on his threat to impose 25% tariffs on Feb 1, saying that “we’ll be announcing the tariffs on Canada and Mexico for a number of reasons”, citing trade deficits, immigration and fentanyl flows. In the context of fentanyl, Trump also again raised the prospects of new tariffs on China. Trump’s comments did leave an open question on the exact scope of tariffs to be announced, notably saying he was still considering whether Canadian oil would be exempted. We’ll have to wait and see just what measures are implemented, or indeed if last minute concessions might yet be reached, or if the most aggressive tariffs are short lived. But it does look less likely that Feb 1st will pass with no tariff action and the exact approach may be instructive for how the new administration are going to approach the tariff question more broadly. I mentioned at the start of the week that Mr Trump has to follow through on some of his threats or he will lose some negotiating power.
Markets again showed that they’re reactive to tariff headlines even if only a relatively mild tariff agenda is broadly priced in. The most persistent reaction last night came in FX, with the broad dollar index trading +0.38% above yesterday’s European close as I type, while the Mexican peso and Canadian dollar closed -1.05% and -0.46% weaker respectively. Trump’s comments also drove a broader risk-off reaction, though this proved mostly short-lived as the exact scope of the tariff threat remained unclear. The S&P 500 fell from trading up +0.7% to being flat on the day, but then recovered to close +0.53% higher. Traditional US automakers were particularly affected, with GM and Ford initially slumping by -6% and -2% respectively, though they reversed about half of the drop by the close.
The other main event overnight were Apple’s results after the bell. The world’s most valuable company (taking over from Nvidia on Monday) delivered a marginal earnings and sales beat, with disappointing iPhone sales and China revenues offset by strong growth in the company’s services division. On the whole, investors appeared reassured by guidance that revenue growth is expected in the low- to mid-single digits in the coming quarter, with Apple’s shares rising 3% in after-market trading after retreating -0.74% in the regular session yesterday. This morning in Asia, S&P 500 (+0.24%) and NASDAQ 100 (+0.54%) futures are higher with the former exactly where it was now before the tariff headlines last night.
Notwithstanding the tariff-driven volatility late in the US session, markets put in a solid performance yesterday, with the S&P 500 (+0.53%) seeing 413 stocks advance, whilst gold prices (+1.28%) closed at a record high of $2,74.59/oz. That was supported by a robust set of US data, which showed the economy rounded out 2024 in decent shape, whilst the weekly jobless claims also came in beneath expectations. However, it was a very different story in Europe, where data showed the German and French economies contracted in Q4, whilst the Euro Area as a whole was stagnant. Yet despite the clear divergence in economic outcomes, European assets still put in the much stronger performance yesterday, with the STOXX 600 (+0.86%) up to another record.
Looking at the US data in more detail, Q4 GDP growth came in at an annualised pace of +2.3% (vs. +2.6% expected), whilst the full-year number for 2024 was at +2.8%, just a tenth beneath the +2.9% rate in 2023. So there was little in the way of obvious warning signs, and the inflation numbers were broadly as expected too, with core PCE running at a +2.5% rate. At the same time, there were fresh signs that the labour market was still strong into 2025, with the weekly initial jobless claims down to 207k in the week ending January 25 (vs. 225k expected). Moreover, that pushed the 4-week moving average down to 212.5k, which is its lowest level since April.
This helped US equities advance, with broad positive sentiment outweighing lingering concerns around big tech. The overall positivity saw the equal-weighted S&P 500 rise +1.03% on the day, whilst the small-cap Russell 2000 was up a similar +1.07%. On the other hand, the Magnificent 7 underperformed (+0.04%). This was mainly because of Microsoft’s decline (-6.18%) following its earnings the previous day, but there was also heightened volatility for Nvidia, which at one point was down -4.5% to within a percent of its Deep Seek inspired lows from Monday, but recovered to close +0.77% higher on the day. Separately, UPS (-14.11%) posted its worst daily performance since it went public in 1999, after its revenue forecast for 2025 fell short of analysts’ expectations. In the meantime, US Treasuries posted modest gains, with the 10yr yield ending the day down -1.3bps to a new 2025 low of 4.52%. They are back to 4.54% overnight.
Over in Europe, the main story was the ECB’s latest decision yesterday, where they delivered a 25bp rate cut as expected. That took their deposit rate down to 2.75%, meaning that they’ve now cut by a total of 125bps since they began last June. Looking forward, it was clear that further cuts were on the agenda, as the statement still described monetary policy as “restrictive”, and President Lagarde said “we are not at the neutral rate”. However, Lagarde didn’t want to signal how long they’d keep cutting for, saying that “it would be premature at this point in time to talk about the point where we have to stop”. Our European economists did not see anything in yesterday’s press conference to suggest that a “skip” has become more likely at the upcoming meetings. They maintain a baseline of 25bps continuing through H1, predicated on their view of below-trend growth and inflation falling moderately below target. Later in the day, we did hear some more hawkish ECB sources stories suggesting that ECB could drop the description of stance as “restrictive” at the next meeting in March and that some of the policymakers were open to the possibility of a pause by the April meeting.
European bonds rallied across the continent, with yields on 10yr bunds (-6.6bps), OATs (-5.8bps) and BTPs (-6.3bps) all falling. However, much of the decline in yields came earlier on after data showed that major economies saw weaker growth than expected in Q4, which added to the sense that the ECB would have to keep cutting rates in the months ahead. For example, the German economy contracted by -0.2% (vs. -0.1% expected), while France contracted by -0.1% (vs. 0.0% expected). In turn, that meant the Euro Area as a whole saw no growth in Q4 (vs. +0.1% expected). But despite the weak growth momentum, European equities continued to rally, with the STOXX 600 up +0.86% to a new record high. In fact, that now brings its YTD gains for 2025 up to +6.15%, which means it’s already surpassed the +5.98% gain it made in 2024.
Elsewhere in Europe, we’re now just over three weeks away from the German election, which is taking place on February 23. Our German economics team published an interesting blog on the campaign yesterday (link here), where they write how the campaign has become more heated and fraught in the last week. That comes after the CDU tabled a plan for a material tightening of German migration policy, which passed with the votes of the AfD, marking the first time that a centrist party has submitted a motion implicitly relying on AfD support. They point out how these events could cause a material shift in the polls, and challenge mutual trust between the Conservatives and the SPD and the Greens, thus challenging the cohesion of the next coalition from the start.
In Asia, the Nikkei (+0.26%) and the S&P/ASX 200 (+0.55%) are trading higher while the KOSPI (-1.21%) is trading sharply lower following a four-day break after index heavyweight – Samsung Electronics reported a smaller-than-expected profit. Elsewhere, markets in mainland China and Hong Kong remain closed for the Lunar New year holiday.
Early morning data showed that retail sales in Japan surged at its fastest pace since June 2024, jumping +3.7% y/y in December (v/s +3.2% expected), much higher than the +2.8% increase in the previous month. Meanwhile, industrial output rebounded +0.3% m/m in December (v/s +0.2% expected), picking up from the -2.2% contraction seen in the previous month. Separately, Tokyo CPI, excluding fresh food, rose +2.5% y/y in January, compared with +2.4% the previous month. This was is in line with Bloomberg estimates. Japan’s unemployment rate for December fell to 2.4% from 2.5% in the previous month (2.5% expected). Australia’s PPI rose +3.7% through the year to the December 2024 quarter. This is the lowest reading since the December 2021 quarter.
To the day ahead now, and data releases from the US include PCE inflation for December, the Employment Cost Index for Q4, and the MNI Chicago PMI for January. Meanwhile in Europe, there’s the German and French CPI prints for January, and in Germany we’ll also get December’s retail sales and January’s unemployment. From central banks, we’ll hear from the Fed’s Bowman and the ECB’s Villeroy. Finally, earnings releases include ExxonMobil.