"Powell hawkish, QRA a damp squib. Just when it felt darkest, MSFT and META came to the rescue." That's how Goldman Delta-1 head Rich Privorotsky summarized overnight events in his overnight wrap and boy was he right: US equity futures are soaring deep into record territory following blowout earnings from META and MSFT, which are +11.8% and +8.4% pre-mkt, and traders are asking if AAPL and AMZN - which report after the close - can provide an encore performance? As of 8:00am, S&P futures are 0.9% higher, having risen more than 1% earlier, while Nasdaq futures are surging as much as 1.3% after results and spending plans from Meta and Microsoft confirmed the AI trade is here to stay. That’s helping traders overlook Trump’s last-minute tariff curveballs and a more hawkish tone from Fed Chair Powell. Yields are 1-2bp lower as USD is flat. Commodities are mixed with Energy somehow weaker even though it appears that the world's entire future is based on data center construction for the next several decades; Ags are stronger, gold is up/silver down, and base metals weaker with copper down more than 20% on adjustments to copper tariff policy. Overnight, US/S.Korea reached a deal for 15% plus $350bn in investments and $100bn in energy purchases. Brazil stays at 50% but delayed start with some exemptions (commodities, aircraft, orange juice). US says India to have 25% tariff plus penalty but negotiations to continue. This leaves Canada (call later today), Mexico, China, and Australia as major partners without an updated deal. Today’s macro data focus is on monthly PCE, Jobless Claims, Personal Income/Spending.
In premarket trading, most Mag7 stocks are flying: Meta surges 11% after Facebook’s parent company gave a strong revenue forecast and reported second-quarter results that beat analysts’ expectations. While it also raised its full-year forecast for capital expenditures, analysts said the company’s spending was justified by its growth. Microsoft shares rally 8% after the software giant reported very strong results, with notable strength in its cloud business and Azure product (Amazon +3%, Nvidia +2%, Apple -0.1%, , Tesla -0.2%, Alphabet -0.4%).
Brace for another busy session, with Apple and Amazon reporting and core PCE data for June due. S&P 500 futures surge after blowout earnings from MSFT and META put the index on track for another record. Analysts said that Meta capex may reach $100b next year - an eye-popping 45% increase on this year’s projected figure. Microsoft is also spending big on AI. Along with better-than-expected growth in its cloud business, that’s set to help it become the second company ever to reach a $4 trillion market cap. If even a portion of Microsoft’s 8% premarket gain holds through the start of cash trading, the tech giant is set to match the feat of Nvidia, which hit the $4 trillion milestone earlier this month. Apple and Amazon.com are due to report later Thursday.
Headline-grabbing earnings are helping to allay fears about a tariff-driven slowdown in the world’s biggest economy and justifying high stock valuations. Investors are also navigating trade tensions and central bank decisions.
“It’s really the good results in the US which are providing a tailwind for markets,” said Karen Georges, a fund manager at Ecofi. “We needed the Mag 7 to deliver this quarter for the rally to continue throughout the summer.”
The deluge of data continues Thursday, with reports on jobless claims and monthly core inflation due before the open of trading. The PCE deflator, the Federal Reserve’s preferred inflation gauge, is likely to show a quicker rate of price growth than the CPI index has revealed, bolstering the Fed’s go-slow approach, according to Bloomberg Intelligence.
Treasuries rose across the curve, helping to reverse some of their pullback Wednesday after Powell said no decision had been made about easing policy in September. The dollar traded at its highest levels since May. “Our base case remains that the Fed will begin cutting rates in the second half of this year as we expect the economy to continue to slow,” Richard Clarida, global economic advisor at PIMCO wrote in a note after the meeting. “However, uncertainty remains high and data will continue to drive the Fed.”
European stocks are down, having given up earlier gains. Losses in mining and travel shares have weighed on the Stoxx 600. Rolls-Royce shares soar to a record after the aircraft-engine maker raised its outlook for the year, while AB InBev plunges on its latest results. Here are the biggest movers Thursday:
Earlier in the session, Asian equities were set for their longest losing streak since December, as economic gloom and disappointment over outcomes from a key political meeting swamped shares in China. The MSCI Asia Pacific Index fell as much as 0.4%, poised for a fifth-straight daily decline. Samsung Electronics was among the biggest drags after disappointing earnings. Stocks in Tokyo bucked the regional drop, maintaining gains after the Bank of Japan kept policy rate unchanged. Equity benchmarks in Hong Kong and mainland China declined more than 1% amid weak economic data and little positive surprise from a key government meeting. Some negative sentiment also carried over to the region from US trading overnight after Federal Reserve Chair Jerome Powell said there’s been no decision on easing policy in September. Indian shares erased earlier losses as President Donald Trump said both sides were still in discussions on trade after he threatened at least 25% tariff on imports from the South Asian nation. Meanwhile, stocks in Seoul swung from a gain to a loss as investors shrugged off a relatively light 15% US tariff.
In FX, the Japanese yen is now about 0.2% weaker against the dollar, having erased an earlier gain after BOJ Governor Ueda reduced expectations of a near-term rate increase. The yen weakened to 150 against the dollar for the first time since April 2 as investors took comments from Bank of Japan Governor Kazuo Ueda to be less hawkish than expected. The Bloomberg Dollar Spot Index rose, and traded at its highest levels since May. The euro climbs 0.3% after showing little reaction to regional euro-area inflation data that was largely in line with estimates.
Treasuries rose across the curve, helping to reverse some of their pullback Wednesday after Fed Chair Jerome Powell said no decision had been made about easing policy in September. US yields are mostly richer by 1bp-3bp with 2-year little changed, flattening 2s10s curve by 1.5bp, 5s30s by less than 1bp; 10-year lower by 3bp near 4.34%, outperforming Germany’s by about 1.5bp while UK 10-year keeps pace. European government bonds are mixed. Both the UK and German yields curves flatten with the short-end underperforming.
In commodities, US crude futures fall 0.8% to near $69.50 a barrel. Spot gold rises $32 to around $3,307/oz. Copper prices slipped 0.7% on the London Metal Exchange Thursday — following a collapse in New York — after US President Donald Trump shocked the metals world by exempting the most widely traded forms of copper from his hotly anticipated import tariffs.
Bitcoin rises 1.2% and above $118,000.
To the day ahead now, for the data releases in the US, the focus will be on June personal income/spending (includes PCE price indexes), 2Q employment cost index and weekly jobless claims (8:30am) and July Chicago PMI (9:45am, several minutes earlier to subscribers). The earnings calendar will remain busy with Apple and Amazon being the main highlight, while in Europe we have Rolls-Royce and BMW.
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A more detailed look at global markets courtesy of Newsquawk
APAC stocks traded mixed in the aftermath of a hawkish Powell and strong mega-cap earnings stateside, while participants also digested the US-South Korea trade deal, disappointing Chinese PMIs and the BoJ policy announcement at month-end. ASX 200 was lacklustre amid losses in miners following weaker H1 earnings from Rio Tinto and with a record drop seen in copper prices after the Trump administration excluded refined copper from planned 50% tariffs. Nikkei 225 outperformed and reclaimed the 41,000 level after recent currency weakness and better-than-expected Industrial Production & Retail Sales from Japan, while the BoJ policy provided no major fireworks as the central bank kept its short-term rates unchanged but highlighted trade-related uncertainty and raised its Core CPI projections. Hang Seng and Shanghai Comp were pressured following disappointing official PMI data in which the headline Manufacturing and Non-Manufacturing PMI figures missed expectations with the former remaining in contraction territory.
BOJ Announcement
European bourses (STOXX 600 +0.1%) opened higher across the board with a slew of mostly positive earnings from within Europe, and with significant post-earning strength in Meta and Microsoft also boosting sentiment. Though in recent trade, the complex has waned off best levels, with a few indices now slipping into the red; no fresh driver behind this pullback. European sectors are mixed, and with a fairly wide breadth of the market. Banks take the top spot, with several European banking reporting today; including from the likes of BBVA (+8%, Bottom line beat), SocGen (+7%, lifts annual targets), Credit Ag (U/C, broadly in-line), Mediobanca (-0.2%, in-line), ING (-0.3%, missed on NII, expects impact following sale of Russian business). Industrials have also been buoyed following key results from within the sector; Airbus (-0.6%, Q2 metrics beat but provided cautious commentary on meeting 2025 delivery target), Safran (+4.6%, Revenue beat and upped its rev. growth outlook for FY), Rolls Royce (+9%, soars after raising profit guidance). Basic Resources is found right at the foot of the pile, pressured by the significant losses seen in copper prices seen in the prior session.
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US Event Calendar
DB's Jim Reid concludes the overnight wrap
While the Fed kept rates steady yesterday, a hawkish-leaning tone from Fed Chair Powell led markets to trim the amount of Fed cuts priced by year-end by a full 10bps. Higher yields and a solid US Q2 GDP print in turn left the dollar on course for its best week since 2022, cementing a July revival of the US exceptionalism story that had suffered in the first half of the year. While Powell’s “wait-and-see” tone saw the S&P 500 decline -0.12% yesterday, S&P futures are up nearly 1% this morning following strong results from Microsoft and Meta that have reignited the hype around AI investment. And in case this was not enough news to digest, we’ve also had an array of tariff headlines ahead of President Trump’s August 1 deadline.
Starting with the FOMC, there were two dissents to the on-hold decision (at 4.00-4.25%), with Fed Governors Waller and Bowman supporting a 25bps cut. The prepared statement saw a modest downgrade to the language on growth, but Powell’s press conference leaned more hawkish as he painted a picture of a solid US economy with a labour market that is in balance. While the Fed Chair acknowledged that a “reasonable base case” was that the impact of tariffs on prices would be a one-time shift, he noted the risks that it could be more persistent and even went as far as saying “You could argue we are a bit looking through goods inflation by not raising rates”. While seeing the modestly restrictive stance as currently appropriate, Powell declined to be drawn on what data would justify a September cut. Our US economists note that Powell avoided potential dovish hints, not emphasizing slowing services inflation and downplaying any signals from payrolls weakness. They continue to expect the next rate cut in December, with earlier easing likely to require weaker labor market data.
In other topics, Powell defended central bank independence as an “arrangement that has served the public well” when asked about the pressure from President Trump and emphasized that the Fed does not factor fiscal costs into their rates decisions. He declined to comment whether he would stay on the Fed Board after his term as Chair expires in May. Prior to the decision, President Trump had posted that the “Fed must lower the rate” as “(GDP) way better than expected.”
Following Powell’s press conference, markets sharply pared back expectations of near-term rate cuts. The likelihood of a September rate cut fell from 70% to 47%, with only 36bps of cuts now priced by the December meeting (-10.1bps on the day). Treasuries sold off in turn, with 2yr yields posting their biggest rise in six weeks (+7.3bps to 3.94%), while 10yr yields were up +5.1bps to 4.37%. Yields have retreated by about -2bps overnight.
Prior to the FOMC, long-end yields were already 2-3bps higher following the Treasury's Quarterly Refunding Announcement. This was largely in line with our rates strategists' expectations but perhaps disappointed some of the narratives that emerged to put downward pressure on yields the previous day. In the end, the Treasury continued to anticipate keeping coupon auction sizes unchanged “for at least the next several quarters”, while the quarterly buyback cap was increased from $30bn to $38bn, slightly more than DB expected ($34bn).
Front-end yields were also boosted by a solid Q2 US GDP print, as the economy expanded by +3.0% annualised (vs. +2.6% expected), rebounding from its -0.5% contraction in Q1. Personal consumption was a little softer at 1.4% (vs. 1.5% expected), but core PCE inflation for Q2 came in above expectations at 2.5% (vs. 2.3% expected), implying a stronger rise in today’s June PCE inflation print or upward revisions for April/May. In other data, the ADP employment report showed stronger job gains in July at 104k (vs. 76k expected), rebounding after a negative June reading.
Higher rates and solid data meant the dollar index (+1.06%) advanced for a fifth consecutive day, marking its largest daily increase since May and its longest winning run since February. With a +2.22% rise since Friday, it is on course to post its biggest weekly gain since 2022.
Powell’s “wait-and-see” tone weighed on equities, with the S&P 500 closing -0.12% lower on the day, having been up +0.3% pre-FOMC. The NASDAQ (+0.15%) posted a modest gain. Metals & mining stocks (-3.94%) led the S&P decline as new 50% copper tariffs announced by the US exempted refined metal, with tariffs on this to be phased in only starting in 2027. This exemption was a big surprise, with COMEX copper futures in the US plunging -20%, eliminating most of the premium that had emerged compared with prices in Europe.
The equity mood turned more positive overnight as strong results from Microsoft and Meta renewed AI optimism. Meta’s shares rose by +11.5% in post-market trading as its Q3 sales guidance exceeded expectations ($47.5-50.5bn vs $46.2bn est.) with the company claiming that new AI features were boosting ad revenue and announcing an increase in AI-related investment. Meanwhile, Microsoft gained more than +8% after-hours as it delivered stronger-than-expected Azure revenue growth (+39% vs +34% est.) and announced it will spend over $30bn on AI data centers in the current quarter. Following the results, futures on the S&P 500 and NASDAQ are up +0.95% and +1.35% respectively as I type. We’ll hear from Apple and Amazon after today’s close.
In other trade news, President Trump announced 25% tariffs on India starting August 1 in a social media post, though he later suggested the two sides were still in talks. He also mentioned that India will incur a “penalty” as one of the biggest importers of Russian energy and ammunition. There were no concrete numbers on what this penalty will be and if other countries buying Russian oil (notably China) could be affected also. Brent crude rose another +1.01% to $73.24/bbl on the news, with a 7% gain since Friday’s close.
In the evening, the White House then announced a trade deal with South Korea that will see it face 15% US tariffs, same as Japan and the EU, and establish a $350bn fund for investment into the US, with $150bn allocated for a shipbuilding partnership. Meanwhile, the US confirmed 50% tariffs against Brazil and Politico is reporting that President Trump plans today to sign executive orders imposing higher tariffs rates on several more countries that have been unable to reach agreements by the Friday deadline. President Trump had posted yesterday afternoon that “other Countries are making offers for a Tariff reduction”.
Asian equity markets are mostly lower this morning, with Chinese stocks lagging on the back of softer-than-expected official July PMIs. The manufacturing PMI came in at 49.3 (vs. 49.7 in June), marking the fourth consecutive month of contraction, while the non-manufacturing index fell to 50.1, its lowest level since November. The Hang Seng (-1.07%) and the CSI (-1.02%) are leading the equity decline, followed by the Shanghai Composite (-0.70%). Meanwhile South Korea’s KOSPI (-0.31%) is moderately lower following the deal announced with the US, while the Nikkei (+0.90%) is bucking the region’s negative trend.
In Japan, the BoJ overnight kept its policy rate at 0.5%, as widely expected. But in a hawkish undertone, the central bank revised up its inflation forecast for the current fiscal year from 2.2% to 2.7%, while also making slight upgrades for 2026 and 2027 inflation and to growth for the current year. The adjustments suggest that the next BoJ rate hike could be coming closer into view after four on-hold decisions in a row and the Japanese yen is trading +0.41% at 148.90 against the dollar this morning after hitting its lowest levels since early April during the US session yesterday. 10yr JGB yields are +0.8bps higher at 1.56%.
Turning to Europe, yesterday’s flash euro area Q2 GDP came in at +0.1% qoq, in line with our economists’ expectation and a touch above consensus (for 0.0%). Across the largest countries, France saw its Q2 GDP grow +0.3% (vs.+ 0.1% expected), but Germany (-0.1% in line with consensus) and Italy (-0.1% vs. +0.1% expected) saw marginal declines. In Germany, the federal cabinet approved the draft 2026 budget plan, confirming expected front-loading of fiscal stimulus and providing more details on the planned infrastructure spending.
European bonds initially saw a slight rally following the softer German GDP print, but yields were little changed by the close, with those on 10yr bunds (-0.3bps) and OAT (-0.5bps) marginally lower but BTPs up +0.2bps. European equities also saw muted moves with the Stoxx 600 seeing a marginal decline (-0.02%),while the DAX (+0.19%) gained and Italy’s FTSE MIB outperformed (+0.89%). The Stoxx aggregate was again weighed down by Novo Nordisk, which shed another -6.31% after Monday’s -23.11%, falling to 7th place in Europe after L’Oreal.
In yesterday’s other news, the Bank of Canada kept rates on hold at 2.75% as expected amid ongoing inflationary pressures, but left the door open for more cuts “if a weakening economy puts further downward pressure on inflation”. BoC pricing was little changed, with 18bps of cuts priced by year-end.
To the day ahead now, for the data releases in the US, the focus will be on US June PCE, personal income and
spending, and initial jobless claims. In Europe, the data highlights will be German, France and Italy July CPI prints – you see can our European economists CPI preview here. We will also have the eurozone unemployment and Canada May GDP. And the earnings calendar will remain busy with Apple and Amazon being the main highlight, while in Europe we have Rolls-Royce and BMW.