US equity futures are lower after the S&P gained 2.9% last week and erasing all post-Liberation Day losses. As of 8:00am, S&P futures were down 0.9%, putting the index on track to snap its longest streak of gains since 2004; Nasdaq futures dropped 1.0% with the Mag7 weaker, pulling markets lower, and cyclicals under pressure. Berkshire Hathaway stock is down 2% after Warren Buffett surprised Berkshire’s annual meeting on Saturday by announcing that he plans to step down at the end of the year. Overnight, Trump’s latest flurry of tariff comments gave little clarity on the path forward for markets: the president suggested some deals could come as soon as this week, but also that he had no current plans to speak with Chinese President Xi Jinping; he also said that a trade deal may come as soon as this week (India? Japan? S Korea?). Trading outside the US has been subdued to start the week, with several financial market including Japan, Hong Kong, China and the UK, closed today. The USD is weaker and bond futures are flat around 4.30%. Crude oil slumped after OPEC+ announced it is increasing supply (411k bpd), hurting oil prices but providing a disinflationary offset to tariff. Today’s macro data focus is on ISM-Services with the Fed on Weds.
In premarket trading, Berkshire Hathaway fell 2% after Warren Buffett announced he will be stepping down as CEO of Berkshire Hathaway at year-end, with Greg Abel set to take over upon board approval. The Mag 7 stocks were uniformly lower (Amazon -1.5%, Nvidia -1.1%, Meta -0.9%, Microsoft -0.6%, Apple -1%, Alphabet -0.6%, Tesla -0.7%). Gold mining stocks are rising as bullion advanced after its first back-to-back weekly loss this year (Barrick Gold +2.6%). Media stocks in decline after President Donald Trump announced Sunday that he plans to impose a 100% tariff on films produced overseas, extending his restrictive trade policies on US imports to the entertainment sector for the first time.(Netflix drops 4%; Warner Bros -2%; Paramount -1.5%; Disney -2%). Here are some other notable premarket movers:
Financial markets have steadied in the past two weeks as Trump dialed back his tariffs amid signs that trade talks are progressing, with the S&P 500 rallying for two straight weeks and notching nine successive days of gains. Still, a trade deal with China would be a prerequisite for the US benchmark to sustain the advance, according to strategists at Morgan Stanley led by Michael Wilson.
“Recent cyclical gains in equities don’t change the structural ‘Sell America’ theme,” said Charu Chanana, the chief investment strategist at Saxo Markets in Singapore. “Trade-deal optimism is giving way to the reality of complex, slow-moving negotiations.”
ISM Services data for April is due at 10am, with economists expecting it to decrease to 50.3 from 50.8. Attention will quickly turn to the Federal Reserve meeting on Wednesday, as Trump insists he doesn’t plan to fire Powell but continues pushing him to cut rates. Tyson Foods Inc. is due to report Monday morning, with the chicken and beef producer likely to shed light on consumption trends. Palantir Technologies Inc. is expected after markets close.
European equities were little changed, with the Stoxx 600 rising 0.1% to 536.75 as healthcare and media stocks were the biggest gainers, while energy and chemicals the worst performers. Here are the biggest movers Monday:
Earlier in the session, stocks in Asia advanced, helped by gains in Indian equities, as investors monitored evolving developments on the trade war front. The MSCI Asia Pacific Ex-Japan Index rose 1% to the highest since February, with Indian shares such as HDFC Bank and Mahindra providing a boost. Stocks in Taiwan fell 1.2%, the most in nearly two weeks, on concerns that a stronger currency would weigh on earnings of companies in the export-oriented economy. Investors are looking for the next cue after President Donald Trump suggested that his administration could strike trade deals with some countries as soon as this week. However, he also said he has no plans to speak with Chinese President Xi Jinping this week. In Australia, market players shrugged off Prime Minister Anthony Albanese’s historic election win as the S&P/ASX 200 Index fell 1%; The gauge was weighed down in part by Westpac’s shares, which fell on concerns about increased competition and headwinds from rate cuts. Markets in Japan, China and South Korea were closed for a holiday. In Singapore — which also saw the ruling party deliver a strong performance in weekend polls — the Straits Times Index ekes out a small gain.
In Taiwan, the biggest contributors to the benchmark index’s decline included Taiwan Semiconductor Manufacturing Co., Hon Hai Precision Industry Co. and Fubon Financial Holding Co. The local dollar surged as much as 5% on Monday, the biggest intraday gain in over three decades, on speculation exporters are rushing to convert their holdings of US dollars to the island’s currency.
In FX, Asian currencies surge on dollar weakness on a day when local holidays shutter most Asian equity markets. The Japanese yen leads major currencies higher gaining 0.5%, the Aussie is bolstered by a solid win for the incumbent Labor Party in weekend elections, and Taiwan’s currency surges as much as 5% to the highest in more than two years. Hong Kong’s dollar tests the top end of its range and the offshore yuan adds 0.2%.
In rates, treasuries are mixed in early US trading, with front-end yields lower as oil and stock prices slide after President Trump said he had no plans to talk to his Chinese counterpart this week. The 10Y yield was unchanged at 4.30%; front-end yields are 2bp-3bp richer on the day, 20- to 30-year cheaper by 1bp-2bp, leaving 2s10s and 5s30s spreads ~3bp wider.
In commodities, crude oil plunged as much as 5.1% in New York before paring the decline after OPEC+ agrees to a further increase in output over the weekend, bolstering global supplies. Gold advanced, and traded back over $3300.
Today's US economic calendar includes April final S&P Global services PMI (9:45am) and April ISM services index (10am). This week’s focal points include first coupon auctions of May-July quarter, beginning with 3-year note sale at 1pm New York time, and Wednesday’s Fed rate decision. Markets in Japan, Hong Kong, China and the UK were closed today.
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APAC stocks were ultimately mixed in holiday-thinned trade with most major markets in the region shut including in Japan, South Korea, China and Hong Kong, while tariff concerns lingered after 25% tariffs on auto parts took effect on Saturday and President Trump announced a 100% tariff for foreign films but had also noted a willingness to lower tariffs on China at some point because the levies now are so high that the world's two largest economies have essentially stopped doing business with each other. ASX 200 was led lower by weakness in the energy sector following a decline in oil prices due to the OPEC+ decision for another accelerated oil output increase, and with the top-weighted financial sector also hit post-Westpac's earnings, while the landslide victory by Australian PM Albanese's Labor party had little impact. TAIEX retreated with Taiwan-listed US Treasury ETFs heavily pressured amid headwinds from the recent surge in the local currency.
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European bourses (STOXX 600 U/C) opened mixed and have traded rangebound throughout the morning thus far. Note: The FTSE 100 remains shut on account of the Early May Bank Holiday. European sectors hold a slight positive bias, with Insurance and Healthcare leading whilst Energy is the clear laggard. Healthcare is buoyed by strength in Novo Nordisk (+2.1%) after the FDA accepted the Co’s application for oral Semaglutide 25mg, which if approved, would be the first oral GLP-1 treatment for obesity. Energy is by far the clear laggard today, given the slump in oil prices, following the recent supply hike from OPEC+. Shell Plc is evaluating a potential acquisition of BP – though talks are still at an early stage. Shell is reportedly waiting for further declines in stock and oil prices before deciding whether to proceed with a bid.
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US Event Calendar
DB's Jim Reid concludes the overnight wrap
Filling in for Jim with the UK off for the May Day bank holiday and as we enter a week that should see attention turn back towards central banks, with the latest Fed (Wed) and BoE (Thu) decisions due. These come as markets have largely shaken off the tariff-driven stress of the past few weeks, as rising optimism on tariff de-escalation and Friday’s solid US payrolls print brought the S&P 500 back above its pre-Liberation Day level, with the index posting its longest winning streak since 2004 (see weekly recap below). Admittedly, the recovery has been far from even across asset classes. A notable laggard is the US dollar, trading nearly -4% below April 2 levels this morning. Investors will continue to keenly watch the tariff headlines and peruse the latest evidence of tariff impacts in this week’s data ranging from the US April ISM services (today) to German factory orders (Wed) and China’s April trade data (Fri).
The full day by day week ahead is at the end as usual, but the main highlight will be the Fed's decision on Wednesday and Chair Powell's press conference afterwards. Our US economists expect the Fed to keep rates steady and avoid explicit forward guidance about the policy path ahead. They see the overall tone as likely to echo recent Fed comments that the administration's policies are likely to push the economy away from the Fed's dual mandate objectives for a period of time but that monetary policy is "well positioned" to respond to the evolving outlook. They continue to see the next rate cut coming in December and while risks are tilted towards earlier easing, they see this as contingent on a weaker labour market rather than the Fed delivering pre-emptive cuts. Fed funds futures are pricing a 37% chance of a cut by the next meeting in June, with a full 25bp cut priced by July.
In an interview on Sunday, President Trump repeated calls for the Fed to cut rates but appeared to rule out removing Powell before the end of his term in May 2026. Meanwhile on trade, Trump suggested that he would lower tariffs on China “at some point” and that some trade deals could come as soon as this week, but also said that he had no plans to speak to China’s Xi this week. US equity futures are trading lower following the news, with the S&P 500 and NASDAQ 100 down -0.73% and -0.72% respectively. So perhaps some doubts whether last week’s increasing optimism was fully justified. Most Asian markets are closed today but the big story there is that of Asian currencies gaining further ground against the dollar. The Taiwanese dollar is +2.97% higher at its highest in over two years, while Malaysia’s ringgit (+1.41%) has risen to its strongest since October. Meanwhile, China’s offshore yuan (+0.17%) hit its highest in almost six months at 7.2009 per dollar.
With East Asia being a major energy importer, those currency moves may also be supported by the latest fall in oil prices after OPEC+ agreed on Saturday to increase oil production by another 411k barrels a day starting in June. The move follows a similar increase in May and confirms a stark turnaround away from the production cuts that have persisted since 2022.Reuters and Bloomberg reported thatSaudi Arabia has threatened to continue this pace of production increases if other OPEC+ countries don’t stop producing above quota levels. Brent crude is trading -3.72% lower at $59.01/bbl as I type, its lowest level in four years and following on a -8.34% drop last week. With oil now down more than -20% YTD, energy prices have become a sizeable disinflationary factor even as core inflation remains above target across most DM economies.
In terms of the rest of the week ahead, central banks will also be in focus in Europe, with policy decisions from the UK, Norway and Sweden all due on Thursday. Our UK economist expects the BoE to deliver a 25bp cut that would take the Bank Rate to 4.25% (see preview here), while Norges and Riksbank are expected to keep rates on hold. Meanwhile, the ECB will hold an informal meeting on May 6-7 to discuss its 2025 monetary policy strategy assessment.
Turning to economic data, in the US the main test ahead of the Fed will be today’s April ISM services reading, which our economists see declining to 50.2 from 50.8. That comes as the April data so far, including a decent US ISM manufacturing print last week, have shown few signs of either the US or the global economy ‘breaking’ from the tariff turmoil even as sentiment indicators paint a worrying picture. It will be a pretty quiet data week in Europe, with Germany’s factory orders (Wed) and industrial production (Thu) prints the highlights, while in Asia the April trade figures out of China (Fri) are expected to show a material slowing amid the tariff disruption.
In corporate earnings, key US releases include Palantir, AMD, Walt Disney and Uber. In Europe, earnings from the likes of Novo Nordisk, Siemens Energy, AP Moller-Maersk, BMW, AB InBev and Rheinmetall will be of extra interest in light of the trade tensions.
In other weekend news, the preliminary results from Saturday’s federal election in Australia saw the centre-left Labour party retain power with an increased majority. Following on Canada’s election last Monday, this marks the second G10 election in a week that has seen left-leaning parties come back from behind in the polls to retain power, seemingly benefitting from a ‘Trump effect’.
Recapping last week in detail, risk assets continued to recover, driven by more encouraging signals on tariffs as well as better than expected US economic data. On the latter, the April employment print on Friday saw the US adding a stronger than expected +177K in nonfarm payrolls (vs +138K expected). Private payrolls increased +167K (vs +125k exp), while the unemployment rate was in line at 4.2%. Revisions for the previous two months (-58k) did take off some of the headline shine but overall the print defied fears that volatility following Trump’s Liberation Day announcements could put a dent in the labour market performance.
Equities responded jubilantly to payrolls, as the S&P 500 (+1.47%) advanced for a ninth session running on Friday, the longest such run since 2004, to end the week +2.92% higher. This left the index +0.28% above its level on April 2 prior to the reciprocal tariff announcements. Tech stocks outperformed as strong earnings from Microsoft and Meta outweighed subdued results from Apple and Amazon, with the Mag-7 up by +3.51% (+1.33% Friday) and the NASDAQ by +3.42% (1.51% Friday). European equities saw similarly strong gains, with the STOXX 600 rising +3.07% (+1.67% Friday) and the DAX up +3.80% (+2.62% Friday).
The stronger payrolls print on Friday drove Treasury yields higher, with the 2yr yield rising +12.4bps to 3.82% (+7.5bps on the week) after hitting 6-month lows earlier in the week. 10yr yields moved +9.0bps higher to 4.31% (+7.3bps on the week). Easing trade risks and higher yields helped the dollar index (+0.56%) post a second consecutive weekly advance. However, while the dollar gained against the euro and the yen, it lost ground to most Asian currencies, with strong gains for the Taiwanese Dollar (+5.50%) and South Korean Won (+2.79%). On the other hand, gold (-2.39%) saw its biggest decline in nine weeks amid the risk-on tone.
In Europe, bonds also sol off with yields on 10yr bunds up +8.9bps on Friday to end the week +6.4bps higher at 2.53%. This increase followed stronger-than-expected April inflation data, with euro area core inflation coming in at +2.7% (vs +2.5% expected). However, our European economists expect the ECB to look through the upside surprise for now given that other underlying indicators and wage data continue to support services disinflation.