US equity futures are - what else - higher, and rapidly approaching a new all time high, boosted by exemptions in Trump’s plans for 100% tariffs on chips that are seen as bullish ways for most big tech firms to avoid levies. The mood was also cheered by a report that Trump and Putin are expected to meet for summit talks in the next few days while
hopes for a rate cut rise some more as additional Fed officials have dovish pivots. As of 8:15am ET, S&P futures are up 0.6% and Nasdaq 100 futures gain 0.7% with Mag7 higher led by AAPL while Semis are the global standout. Eli Lilly & shares plunged after the drugmaker reported underwhelming study results for its weight-loss pill. Shares of its main European rival, Novo Nordisk A/S, soared. Cyclicals are poised to rip, although as JPM notes "today appears to be setting up for an ‘Everything Rally’." Bond yields are down 1bp across the curve but 10Y is +1bp; USD is flat but has erased ~25bp of overnight losses. Today’s macro data focus is on Jobless Claims, 1Y Inflation Expectations, Nonfarm Productivity, Labor Costs, Consumer Credit, and Inventories. While none, ex-Claims, are market moving it will help sharpen the macro picture on the labor market and consumer. At 12pm, Trump will sign an executive order that aims to allow private equity, real estate, cryptocurrency and other alternative assets in 401(k)s.
In premarket trading, Mag 7 stocks are all higher (Apple +2%, Nvidia +1.4%, Meta +0.9%, Alphabet +0.6%, Microsoft +0.6%, Tesla +0.5%, Amazon +0.1%)..
Market sentiment got a boost earlier after Trump announced that companies producing goods in the US, such as Apple, would be eligible for exemptions from his proposed 100% levy on chip imports. Increasing bets on a Federal Reserve interest-rate cut are also fueling optimism in stocks as sweeping new tariffs to reshape global trade officially took hold Thursday. Ironically the only major US semiconductor stock, Intel, plunged after Trump sa id on Truth Social CEO its has to resign.
“Risk sentiment is positive with a focus on peace deal hopes for Ukraine,” said Bob Savage, head of markets macro strategy at Bank of New York Mellon. “Also supporting the dollar down/stocks up narrative is ongoing September rate cut expectations for the FOMC. However, investors still face a pushback from the uncertainty over tariffs ahead.”
This morning, the BoE delivered a hawkish 25bps cut, with the vote split 5:4 for 25bps vs hold, and the statement noting that timing/extent of further cuts will be based on continued improvements in underlying inflation. The vote was the first ever revote in 28 years after the 4:4:1 vote in the first round failed to reach a majority.
Europe’s Stoxx 600 benchmark advanced more than 1%, with the the travel and leisure sector outperforming. A basket of equities exposed to Ukraine rose, while defense shares dropped, after the Kremlin said that presidents Vladimir Putin and Donald Trump will meet for summit talks within the next few days. Upbeat earnings from some of the region’s biggest companies helped boost sentiment, even after German industrial production suffered its biggest drop in almost a year in another setback for Europe’s largest economy. Here are the biggest movers Thursday:
Earlier in the session, Asian stocks rose, led by technology stocks as some of the region’s largest chipmakers were expected to win exemptions from Donald Trump’s threatened 100% chip tariff. The MSCI Asia Pacific Index advanced 1%, rising for the fourth straight day. Taiwan’s benchmark rose more than 2%, with notable gains in most other markets around the region. Thailand’s key index was on the brink of entering a bull market. Chipmakers TSMC and Samsung were among the biggest boosts to the MSCI index as investors saw their US manufacturing operations as freeing them from Trump’s newest levies. A gauge of regional tech stocks climbed by the most since June 24. Meanwhile, Indian equities fell after the US moved to double the tariff on imports from the South Asian nation to 50%. The higher rate is seen further hurting sentiment on a market already underperforming Asian peers on disappointing corporate earnings.
In FX, the Bloomberg Dollar Spot Index falls 0.1%. The Antipodean currencies outperform their G-10 peers, rising 0.4% each against the greenback. EUR/USD briefly extended gains on news that Putin and Trump would meet within days, hitting a session high of almost $1.17, before falling back to $1.1648. GBPUSD rose, putting it on track for a fifth day of gains against the dollar, its longest winning streak since April.
In rates, treasuries are steady, with yields broadly within one basis point of Wednesday’s close, despite slide in gilts which sharply underperform following a 4-4-1 Bank of England vote to cut rates by 25bp. US yields steady, marginally cheaper on the day with 10-year near 4.245%, outperforming gilts by around 4bp in the sector. UK 2-year yields higher by around 6bp on the day up to around 3.88% following the announcement. Bunds outperform, pushing German 10-year yields down 2 bps to 2.63%. In the US, focus turns to early data and then a $25 billion 30-year new-issue bond sale at 1pm New York time, which follows a 1.1bp tail on Wednesday’s 10-year note auction.
In commodities, oil prices erase an earlier drop following the Putin-Trump meeting news, with Brent now up 0.5% near $67.22 a barrel. Gold rises $8 to around $3,377/oz.
Looking ahead today, Trump will sign an executive order that aims to allow private equity, real estate, cryptocurrency and other alternative assets in 401(k)s. Data-wise we have 2Q preliminary nonfarm productivity and unit labor costs and weekly jobless claims (8:30am), June final wholesale inventories (10am), July NY Fed 1-year inflation expectations (11am) and June consumer credit (3pm). Fed speakers scheduled include Bostic in a virtual fireside chat on monetary policy (10am)
Market Snapshot
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Trade/Tariffs
A more detailed look at global markets courtesy of Newsquawk
APAC stocks traded mixed as reciprocal tariffs took effect overnight and following the latest tariff threat from US President Trump who plans to impose 'approximately 100%' tariffs on chips and semiconductors unless manufacturers build in the US. ASX 200 pulled back from record highs despite the surprise growth of imports from Australia's largest trading partner. Nikkei 225 pared initial losses and briefly reclaimed 41,000 amid a busy slate of earnings and as markets shrugged off comments from a US official that the US will not exempt Japan from stacking 15% tariffs on top of existing levies. Hang Seng and Shanghai Comp ultimately kept afloat after the latest Chinese trade data which showed stronger-than-expected exports and surprise growth in the nation's imports.
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European bourses (STOXX 600 +0.9%) opened mostly higher, albeit with very modest gains. Since then, indices gradually edged higher, then followed by a more pronounced bid following commentary from a Russian Kremlin aide, who said an agreement had been made for a Presidential meeting between Trump and Putin, in the next few days.
European sectors opened mixed but now hold a slight positive bias. Insurance takes the top spot, lifted by post-earnings strength in the likes of Allianz (+2%) and Zurich Insurance (+1%). Elsewhere, Travel & Leisure has been buoyed by upside in IHG, after it reported strong H1 metrics; European gambling names are also broadly higher today, in tandem with upside in US-peer DraftKings which reported a record rev. and EBITDA. The Tech sector finishes off the top 3, benefiting from a) the risk tone and, b) US President Trump announcing that the US will slap 100% tariffs on imported chips, but will exempt those firms who manufacture in the US/have committed to do so. On this, ASML (+2%) has gained, given the proposition incentivises relocating to the US, which may boost demand for manufacturing units.
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Fixed Income
Commodities
Geopolitics: Ukraine
Geopolitics: Other
US Event Calendar
Central Bank Speakers
DB's Jim Reid concludes the overnight wrap
Tech stocks have continued to drive a buoyant mood in markets, with the Mag-7 (+1.93%) reaching a new all-time high. Momentum was also supported by strong earnings and rising hopes of imminent rate cuts as Fed speakers turned more dovish in response to last Friday’s weak payroll print. The upbeat tone has continued overnight despite Trump outlining a plan for 100% tariffs on semiconductors, with the impact of these mitigated by carveouts.
US equity markets had a strong day yesterday with S&P 500 (+0.73%) and Nasdaq (+1.21%) closing less than 1% from record highs, while the Mag-7 (+1.93%) was lifted by a +5.09% spike in Apple’s shares. That came as the company announced additional $100bn of investments into the US, particularly in new manufacturing. This comes on top of an earlier pledge of $500bn investment over four years and as the company has sought to reduce tariff risks. During a White House event with Apple CEO Tim Cook, Trump then said that “we’ll be putting a tariff of approximately 100% on chips and semiconductors”. However, he added that companies that are building, or “have committed to build”, capacity to move production to the US would face no charge. Imports of electronics have so far been exempt from tariffs.
While it’s not clear exactly how it will work, the new floated exemption has added a sense of relief for markets overnight, with Taiwan’s chip giant TSMC up +4.44% and Korea’s Samsung +1.74%. In terms of the major indices, the Nikkei (+0.68%) and the KOSPI (+0.72%) are visibly higher, while the Hang Seng (+0.52%) and the Shanghai Composite (+0.12%) are seeing more modest gains. Futures on both the S&P 500 (+0.27%) and the NASDAQ (+0.31%) are also higher overnight.
The other major tariff news yesterday was a new US executive order outlining an additional 25% tariff on India in response to its purchases of Russian oil, which would bring the total levies on Indian exports to 50%. India’s government called the latest tariffs “unfair, unjustified and unreasonable”. The executive order also leaves the door open for tariffs on other countries “directly or indirectly importing Russian Federation oil”. Trump said there could be “a lot more” secondary sanctions related to Russian oil, including potentially on China, but that this would depend on how talks proceed. Brent crude fell for a fifth consecutive session (-1.11% to $66.89/bbl) yesterday, the longest such run since May, though it is up +0.8% this morning. In addition to India being the only target so far, the sanguine oil reaction came as the additional 25% tariffs will kick in only after 21 days, leaving ample time for negotiations.
Later in the day we heard that Trump could meet Russia’s President Putin as soon as next week, with reports citing a call that Trump had with European leaders after his envoy Steve Witkoff met with Putin in Moscow. Trump himself said there was a “very good chance” he would meet soon with Putin and Ukraine’s President Zelenskiy to try and broker peace, though he was more ambiguous on the likely timing. Secretary of State Rubio said that “a lot has to happen” before Trump meets with Putin.
In the latest news on the Fed’s leadership, Trump said he will likely nominate a temporary Fed governor after Kugler’s departure on August 8, adding that the decision would come “over the next two, three days” and that there were “probably” three candidates for the role. A temporary replacement for the remainder of Kugler’s term until January would avoid the person being seen as a likely candidate for Fed Chair once Powell’s term ends in May.
Meanwhile, Fed officials on Wednesday struck a more dovish tone in response to Friday’s soft jobs report. Fed Governor Cook said the report was concerning, with significant downward revisions “somewhat typical of turning points” in the economy. Minneapolis Fed President Kashkari suggested that in case of a slowdown in the economy, a cut might be appropriate “in the near term”, whileSan Francisco President Daly said “we will likely need to adjust policy in the coming months” as additional labour market slowing was “unwelcome”. Pricing of a September Fed rate cut ticked up from 90% to 95% amid the shifting rhetoric, with 60bps of cuts priced by the December meeting (+2.0bps on the day).
In turn, 2yr Treasuries rallied by -1.0bps, but yields moved higher at the long end, with the 10yr up +1.5bps to 4.23%, and 30yr up +3.8bps to 4.82%. That came amid a soft 10yr auction that saw $42bn of bonds issued +1.1bps above the pre-sale yield, with the bid-to-cover ratio at its lowest level in 12 months. 10yr yields are another +1.5bps higher overnight.
Increased rate cut expectations saw the dollar index (-0.61%) fall to its lowest level in nearly two weeks. Meanwhile, the Swiss franc has been the worst performing G10 currency this week as Switzerland’s President Karin Keller-Sutter left Washington yesterday without securing any easing of the 39% US tariffs that came into force along with other new country rates overnight.
Back to yesterday’s equity moves, there was some softness beneath the headline gains with more than half of the S&P 500 constituents lower on the day, led by a decline in healthcare stocks (-1.52%). The Philadelphia semiconductor index (-0.20%) underperformed following underwhelming results from AMD (-6.42%) and Super Micro Computer (-18.29%). Other notable post-earnings movers included McDonald’s (+2.98%), whose same store sales grew more strongly (3.8% yoy vs. +2.6% expected), and Walt Disney (-2.66%), which saw profit guidance weighed down by its movie and TV businesses. Over in Europe, the Stoxx 600 (-0.06%) was again dragged down by another decline for Novo Nordisk (-5.36%) as it released its latest earnings. The pharma giant’s shares are now down -36% since its profit warning last Tuesday. However, most European indices gained with the DAX (+0.33%), CAC (+0.18%), FTSEMIB (+0.65%) and FTSE 100 (+0.24%) all in the green. In one of the more unusual stories, pharma conglomerate Bayer AG (-9.92%) was the worst performer in Stoxx 600 in part as it revealed that its earnings had been recently inflated by football player transfer receipts stemming from its ownership of Bayer Leverkusen. I will let Jim opine on whether Liverpool’s club record signing of Florian Wirtz in June which boosted Bayer’s bottom line was a good deal.
European government bonds saw a modest sell off on Wednesday, with yields on 10yr bunds (+2.7bps), OATs (+2.7bps) and BTPs (+2.1bps) all higher. Pricing of ECB rate cuts ticked lower, with amount of easing priced by year-end down -1.3bps to 15bps as outgoing Austria central bank governor Holzmann said he saw no reason for another rate cut.
Staying with central banks, today the Bank of England is expected to deliver a 25bp rate cut to 4.00%, which would mark the fifth cut in the BoE’s gradual easing cycle. Our UK economist Sanjay Raja expects divisions on the committee, foreseeing a 2-5-2 vote across no change, -25bp and -50bp options. You can see Sanjay’s full preview here.
Turning to the data, yesterday was quiet in the US but investors will be dissecting today’s jobless claims for whether evidence of US labour market deterioration is visible outside of payrolls. In Europe, June factory orders in Germany surprised to the downside at -1.0% mom (vs. +1.1% expected), with components such as transport equipment (-23%), autos (-7.6%) and fabricated metal products (-13%) slumping. The moves suggest a drag from tariffs with foreign orders weighing while domestic orders rose by almost 4%. On a more positive note, euro area retail sales pointed to a resilient consumer, rising by an expected +0.3% mom in June but with the yoy reading at a stronger +3.1% thanks to revisions (+2.6% expected).
In goods trade data out of China this morning, both exports (+7.2% yoy vs +5.6% exp.) and imports (+4.1% vs -1.0% exp.) grew more strongly than expected in July. So suggesting a resilient aggregate trade performance of the world’s primary manufacturing hub, even as China’s exports to the US fell by -22% yoy.
To the day ahead, the main highlight in Europe will be the Bank of England’s latest policy decision, along with the subsequent press conference with Governor Bailey. In terms of data, we'll have the initial and continuing jobless claims out in the US, while in Germany the highlight is June industrial production. Looking at earnings, the focus will be on Eli Lilly and Toyota