Futures Fluctuate Amid Disappointing Earnings As Dollar, Yields Rise

US equity futures are slightly higher despite heavyweights such as including Ford and Qualcomm slumping in premarket trading after disappointing earnings while tech underperformed on mixed Mag7/Semis pre-mkt price action.  As of 8:15am, S&P 500 futures were little changed after erasing an early gain fueled by Treasury Secretary Scott Bessent’s comment that the Trump administration is focusing on bringing down the Treasury 10-year yield. Contracts on the Nasdaq 100 were unchanged. Bond yields and the USD finally reverse recent losses and rise this morning while commodities are stronger across all of Ags, Energy, and Metals ex-Precious. Scott Bessent said that the Administration is focused on lowering the 10Y yield rather than the Fed Funds rates; the best way to decrease yields is through a lower budget deficit. In other news, HON is splitting into 3 companies. Today’s macro focus is on Jobless data and the BOE decision. The Fed speaker slate includes Waller (2:30pm) and Logan (5:10pm), and we get earnings from Amazon after the close.

In premarket trading, Qualcomm, the world’s biggest seller of smartphone processors, fell more than 5% on investor concern that demand for the devices will cool. Ford also tumbled more than 6% after warning that US tariffs would weigh on US carmakers’ profits. Skyworks Solutions, a chip supplier to Apple Inc., plunged more than 20% after saying competition in the industry is intensifying. Apple shares also retreated. Meanwhile, Honeywell International Inc. slid more than 5% after saying it will split into separate publicly traded companies following pressure from an activist investor. here are all the notable premarket movers:

• Apple (AAPL) edges 0.5% lower after disappointing updates and smartphone commentary from two of its key suppliers, including Qualcomm and Skyworks.
• Arm Holdings (ARM) slips 3% after the chip-design company provided a tepid outlook, underlining concerns about the pace of spending on AI.
• Bausch + Lomb Corp. (BHC) declines 4% after the eye-health company said it won’t go private at this time.
• Bristol Myers Squibb Co. (BMY) slips 3% after releasing sales and profit forecasts for 2025 below Wall Street’s expectations — a sign the company’s return to growth may take longer than anticipated.
• Chinese stocks listed in the US are broadly higher as analysts say Beijing’s retaliatation to Donald Trump’s tariffs is relatively measured and appears to be aimed at increasing its bargaining power at trade talks. Alibaba (BABA) +1.5%, Nio (NIO) +1%, PDD (PDD) +1%
• Coherent (COHR) rises 13% after the semiconductor device company reported results and guidance ahead of expectations.
• FormFactor (FORM) a provider of test and measurement equipment designed for chipmakers, drops 25% after providing a 1Q profit forecast that’s well short of estimates.
• Impinj (PI) sinks 21% after forecasting first quarter revenue that trailed the average analyst estimate.
• Molina (MOH) falls 5% after the managed-care company reported quarterly adjusted earnings per share that fell below Wall Street expectations.
• Peloton Interactive Inc. (PTON) rises 13% after reporting that cost cuts have bolstered profit more than anticipated, even as its revenue continues to shrink.
• Qualcomm (QCOM) falls 4% amid investor concerns that demand for new smartphones will cool in 2025. Analysts, however, note that the results for the first quarter were positive.
• Salesforce (CRM) slips 1% after the software company announced management changes. It created a new role naming its lead board director, Robin Washington, as president and chief operating and financial officer (COFO), effective March 21.
• Skyworks Solutions (SWKS) plunges 30% after the semiconductor device company reported its first-quarter results and outlook.
• Symbotic (SYM) slides 17% after the factory automation technology company gave guidance that missed the average analyst estimate.
• Tapestry Inc. (TPR) rises 14% after the company raised its guidance again for the year on stronger-than-expected sales at its biggest brand Coach.
• Tesla (TSLA) is set to extend losses, falling 1.6%, after sales plummeted 59% last month in Germany, adding to indications that Elon Musk’s political activities are hurting the carmaker’s business in major EV markets.
• TTM Tech (TTMI) rises 17% after first-quarter forecasts for adjusted EPS and revenue topped the average analyst estimates at the midpoints.
• Under Armour (UAA) climbs 9% after the company raised its annual profit guidance, signaling that its turnaround strategy is working.
• Yum! Brands (YUM) rises about 2% as sales surpassed expectations, powered by growth at Taco Bell as the fast-food chain continues to sidestep a slowdown that has plagued many competitors.

In an interview on Fox Business, Bessent said that when it comes to the Federal Reserve, “I will only talk about what they’ve done, not what I think they should do from now on.” He repeated his view that expanding energy supply will help lower inflation. But some investors said 10-year yields are unlikely to go much lower while sticky prices and a resilient economy damp expectations of further Fed policy easing.

The 10-year Treasury yield ticked about two basis points higher on Thursday, though it’s still close to a one-month low. “It is difficult to see the 10-year yield come down a lot unless the economy slows significantly,“ said David Zahn, a senior vice president at Franklin Templeton Investment Management. “If that happens, which isn’t what they want, then I can see 10-year yields going lower.”

While there was some news relief out of the White House, which did not make any major announcements overnight, more earnings are expected today, with Amazon.com Inc. due to release results after the close. US data on jobless claims will also on traders’ radar today, with the payrolls report due tomorrow.

Europe’s Stoxx 600 benchmark rose 0.8% to an intraday record after another batch of solid corporate updates from the region. Health care and banks are among the best performing sectors after strong results from AstraZeneca and Societe Generale. A. P. Moller-Maersk A/S surged almost 9% after announcing a $2 billion buyback.  Miners are leading gains as iron ore prices climb over 2%.  UK stocks outperformed and the pound fell after the Bank of England cut interest rates, as expected, and traders added  to bets on further easing. In economic news, German factory orders surged in December, adding to evidence that the outlook for the beleaguered sector may be improving. Here are the most notable European movers:

• European miners rise after positive earnings from companies including Anglo American, Boliden and ArcelorMittal. Prices for iron ore and base metals also climbed on expectations of a Chinese demand recovery following Lunar New Year holidays
• Societe Generale shares jumped as much as 10% after the French lender reported what analysts say are good results that help confirm the recovery in French retail banking
• AstraZeneca shares rose as much as 5.6%, the most since April, after the drugmaker reported better-than-expected core EPS and revenue for the fourth quarter, and provided guidance for 2025
• Siemens Healthineers shares jumped as much as 7.7%, to the highest since March 2022, after the German medical technology company reported better-than-expected earnings and revenue for the first quarter
• ArcelorMittal shares rose as much 6.7%, to the highest intraday since April, after the world’s biggest steelmaker outside China reported Ebitda for the fourth quarter that beat the average analyst estimate
• Maersk shares gained as much as 11%, the most since March 2020, after the Danish shipping giant’s fourth-quarter results beat estimates. The announcement of a buyback program worth as much as $2 billion is positive, Barclays said
• Orsted shares gained as much as 7.9%, the most since October, after the Danish offshore wind giant cut its investment plans by 25%
• ING Groep NV declined as much as 4.2% after the lender missed 4Q profit estimates on higher costs, while net interest income declined 5% from a year earlier as lower policy rates weighed
• Soitec shares slumped as much as 32%, to the lowest since March 2020, after the wafer maker reduced its outlook for fiscal 2025 and said growth for fiscal 2026 will be “quite limited”
• IMI shares dropped as much as 2.7% after the engineering company said it is currently responding to a cyber security incident involving unauthorized access to the company’s systems
• Kering shares fell as much as 3.8% after the luxury-goods maker said it’s ending its collaboration with Sabato de Sarno, the creative director of its Gucci label

Earlier in the session, Asian equities rose, on track for a third day of gains, boosted by technology shares as a sense of calm returned after gyrations earlier in the week on global trade tensions. The MSCI Asia Pacific Index advanced as much as 0.4% Thursday to the highest since December 17. Tech firms TSMC and Samsung Electronics were among the top contributors after their customer Nvidia jumped 5% on positive news for its new Blackwell chip. BYD also led the region higher after Cailianshe reported the Chinese carmaker will hold an event Monday to introduce its smart-driving strategy. Chinese equities rebounded from Wednesday’s losses on tariff concerns. Tech shares tied to AI and robotics climbed amid continued optimism on industry developments, even as e-commerce stocks remained weak on concerns over regulations for shipments to the US.

In FX, the Bloomberg Dollar Spot Index rises 0.3% and the Japanese yen is flat having pared an earlier advance seen after BOJ board member Naoki Tamura flagged the need for two or more interest rate hikes by early next year.

In rates, treasuries are slightly cheaper on the day into early US session, having pared small declines amid UK bond rally. Gilts outperform after Bank of England cut rates by 25bp to 4.5% in a 7-2 vote, with dissenters favoring a half-point cut. US session includes weekly jobless claims data at 8:30am New York time. US yields are as much as 2bp higher across maturities, with curve spreads mostly holding Wednesday’s dramatic flattening move; 10-year around 4.44% is ~2bp cheaper on the day, trailing bunds and gilts in the sector by 1bp and 4bp. Gilts shook off early weakness to outperform their US and German peers, most notably at the short-end of the curve ahead of the Bank of England decision. UK two-year yields fall ~3 bps to 4.12%. The pound is also the weakest of the G-10 currencies, falling 0.7% against the greenback having extended the lows after UK construction PMI came in notably below estimates. US and German borrowing costs are slightly higher on the day.

In commodities, WTI rises 1% to $71.70 a barrel. Spot gold falls $6 to around $2,860/oz. Bitcoin climbs 2% to near $99,000.

Looking to the day ahead now, one of the main highlights was the Bank of England’s policy decision where the central bank cut rates by 25bps as expected and left space for more rate cuts, sending the pound tumbling. Central bank speakers will include BoE Governor Bailey, BoC Governor Macklem, the ECB’s Nagel and Escriva, and the Fed’s Waller and Logan. Otherwise, data releases include the weekly initial jobless claims from the US, Euro Area retail sales for December and German factory orders for December. Finally, earnings releases include Amazon.

Market Snapshot

• S&P 500 futures up 0.2% to 6,101.50
• MXAP up 0.2% to 184.67
• MXAPJ up 0.5% to 579.21
• Nikkei up 0.6% to 39,066.53
• Topix up 0.2% to 2,752.20
• Hang Seng Index up 1.4% to 20,891.62
• Shanghai Composite up 1.3% to 3,270.66
• Sensex down 0.3% to 78,050.59
• Australia S&P/ASX 200 up 1.2% to 8,520.71
• Kospi up 1.1% to 2,536.75
• STOXX Europe 600 up 0.8% to 542.63
• German 10Y yield little changed at 2.39%
• Euro down 0.4% to $1.0363
• Brent Futures up 0.6% to $75.04/bbl
• Gold spot down 0.3% to $2,857.93
• US Dollar Index up 0.38% to 107.99

Top Overnight News

• Treasury Secretary Scott Bessent told Fox Business that the Trump administration wants to make the 2017 tax cut permanent, and added that Trump wants lower interest rates and is focused on the 10-year treasury yield. Furthermore, he said Trump is not calling for the Fed to lower interest rates and interest rates will take care of themselves if they get energy costs down and deregulate economy. He gave no indication he was in favor of direct intervention. BBG
• US government vessels will now be able to transit the Panama Canal without charge fees, according to the State Department, which added it’ll save “millions of dollars a year.” BBG
• The Trump administration’s offer to buy out federal employees is said to have attracted over 40,000 sign-ups, about 2% of the workforce. It expects more applications by the end of the day deadline. BBG
• US lawmakers are reportedly pushing to ban Chinese AI start-up's DeepSeek app from US government devices over security concerns, according to WSJ sources.
• US President Trump's USTR nominee Greer says US needs an active and pragmatic trade policy to foster growth; resilient supply chains are critical; US needs robust manufacturing base.
• Honeywell International is preparing to split into three independent companies, marking the end of an era for one of America’s last big industrial conglomerates.  Honeywell announced Thursday plans to separate its aerospace division from its automation business and move ahead with plans to spin off its advanced-materials arm. WSJ
• Fed's Jefferson (voter) said they need to look at the totality of the net effect of the Trump administration's influence on policy goals and he is happy to keep policy at the current level of restrictiveness until there is a better sense of the totality of impacts. Jefferson also stated that even with a 100bps decline, the Fed's rate is still restrictive, which allows the Fed to be patient and wait to see the net effect of policy changes.
• Fed released 2025 stress test scenarios which include heightened stress in commercial and residential real estate, as well as corporate debt markets.
• Treasury Secretary Bessent said the Trump administration wants to make the 2017 tax cut permanent, while he added that Trump wants lower interest rates and is focused on the 10-year treasury yield. Furthermore, he said Trump is not calling for the Fed to lower interest rates and interest rates will take care of themselves if they get energy costs down and deregulate economy.
• Naoki Tamura of the BOJs policy board on Thursday called for potentially faster interest-rate increases, sending the yen to its strongest level against the dollar in eight weeks. He stated said that the central bank should raise rates to 1% or higher in the fiscal half starting in October and that that level is likely consistent with a neutral rate setting that is neither restrictive nor stimulating for the economy. WSJ
• Japan has “completely” ended deflation and it’s natural for the central bank to proceed with rate hikes to normalize policy, according to former BOJ Governor Haruhiko Kuroda. BBG
• The UK’s SONIA rose for five sessions through Tuesday — the first consecutive gains since April — reflecting the BOE’s ongoing efforts to drain excess liquidity from the financial system.
• The BOE cut rates by 25 bps to 4.5% today as expected.  The big surprise was that two members of the Monetary Policy Committee voted for 50 basis point cut. BOE’s Bailey confirmed taking ‘gradual and careful’ approach to cuts. BBG
• Manufacturing orders in Germany rose in December on the back of aerospace orders, although any tentative signs of a recovery for the struggling industrial sector face the imminent threat of tariffs from the U.S. German factory orders for Dec come in strong at +6.9% M/M (vs. the Street +2%). WSJ

Earnings

• Arm Holdings (ARM) -3.5%: Beat, Q4 guidance aligned with forecasts defying anticipation of a stronger guide.
• Ford (F) -4.7%: Q4 beat, 2025 guide cautious.
• Qualcomm (QCOM) -5.1%: Q1 beat, attention on slowing smartphone demand.
• ArcelorMittal (MT NA) +5.7%: Q3 soft Y/Y, expects higher demand in FY25 Y/Y.
• AstraZeneca (AZN LN) +5.3%: Q4 Beat.
• Hannover Re (HNR1 GY) -1.2%: FY mixed, confirms guidance.
• ING (INGA NA) -2.5%: Q4 mixed, NII beat.
• Maersk (MAERSKB DC) +8.5%: Q4 & FY24 beat.
• Pernod Ricard (RI FP) +2.6%: H1 miss, cuts FY guidance given China and US challenges.
• Siemens Healthineers (SHL GY) +5.9%: Q1 beat, affirms guidance.
• SocGen (GLE FP) +9.4%: Q4 beat, EUR 872mln buyback.
• Volvo Car (VOLCARB SS) -8.7%: Q4 Revenue beat, expects a continued weak market in 2025.
• Linde PLC (LIN) Q4 2024 (USD): adj. EPS 3.97 (exp. 3.93), Revenue 8.3bln (exp. 8.4bln)

A more detailed look at global markets courtesy of Newsquawk

APAC stocks followed suit to the gains on Wall St where sentiment was underpinned amid a softer yield environment and the lack of trade war escalation. ASX 200 outperformed with the index led higher by strength in financials, consumer discretionary and gold-related stocks. Nikkei 225 advanced at the open and reclaimed the 39,000 level but then briefly pared the majority of the gains owing to yen strength and comments from hawkish BoJ board member Tamura. Hang Seng and Shanghai Comp conformed to the constructive mood in the region amid a lack of major escalation on the trade front with the US Postal Services flip-flopping on suspending parcels from Hong Kong and China, while China initiated a WTO dispute complaint regarding US tariffs although this was as previously announced. SK Innovation (096770 KS) - Expects about KRW 6tln in capex this year, adds a delay in EV market demand growth recovery is expected in the short term due to the Trump administration and automakers recalibrating their electrification business.

Top Asian news

• BoJ Board Member Tamura said they need to raise rates in a gradual and timely manner and that a 0.75% rate would still be negative in real terms, while he added the BoJ must raise rates to levels deemed neutral on a nominal basis which is at least around 1% and must raise rates to at least around 1% in the latter half of fiscal 2025. 
• Tamura said he personally does not think BoJ's past massive monetary easing had a positive effect as a whole given its strong side effects and they must scrutinise whether prolonged monetary easing could cause problems such as excessive yen falls and housing price spikes. 
• Furthermore, he said the BoJ shouldn't persist in achieving 2% inflation as long as Japan is experiencing moderate price rises, as well as commented that he has no preset idea about the pace of interest rate hikes and the pace of interest rate hikes may not necessarily be once every half year.

European bourses (Stoxx 600 +0.7%) began the session modestly firmer across the board, and continued to climb higher as the morning progressed. European sectors hold a strong positive bias, with only a couple of industries in the red with losses minimal. Basic Resources is the clear outperformer in Europe today; Anglo American (+4%) after its Q4 Production Update. Healthcare is lifted by post-earning strength in AstraZeneca (+4.9%).

Top European News

• UK PM Starmer wants to "axe Rachel Reeves in bombshell reshuffle", according to Express. "In a shock move, the Prime Minister is considering moving Home Secretary Yvette Cooper to the Treasury to boost the country’s economic fortunes". "Insiders say an 'active process is going on' as Sir Keir considers how and when to execute a reshuffle, which is most likely to happen in the Spring".
• ECB's Cipollone says there is still room for adj. rates downward. US tariffs on China could force the dumping of goods in Europe, weighing on growth and inflation. Soft landing remains the main scenario, no recession seen.
• UK Citi/YouGov inflation survey: 12-month ahead 3.5% (prev. 3.7%), 5-10 years ahead 3.7% (prev. 3.9%)

FX

• DXY is firmer vs. all peers after a run of three negative sessions for the DXY, spurred on by greater optimism on the trade front, which brought US yields lower. Today sees the release of weekly claims figures and remarks from Fed's Waller, Daly and Jefferson. DXY holds around the 108 handle with a session high at 108.05.
• EUR/USD has made its way back onto a 1.03 handle after venturing as high as 1.0442 yesterday. ECB's Cipollone highlighted that US tariffs on China could force the dumping of goods in Europe, weighing on growth and inflation. 1.0357 is the current session low with not much in the way of support until the 1.03 mark.
• JPY is on the backfoot vs. the USD but to a lesser extent than peers on account of hawkish comments from BoJ hawk Tamura overnight who put forward his view that the Bank needs to raise rates to at least around 1% in the latter half of fiscal 2025. USD/JPY went as low as 151.82 overnight (lowest since 12th Dec) but has since returned to a 152 handle.
• GBP is softer vs. the USD and to a lesser extent the EUR in the run-up to today's BoE policy announcement. Expectations are for a 25bps rate cut via an 8-1 vote split. Attention will be on any tweaks to forward guidance and how macro projections in the accompanying MPR indicate how loose/tight the MPC views current policy. Cable has made its way back onto a 1.24 handle and back below its 50DMA at 1.2498.
• Antipodeans are both on the backfoot vs. the USD in quiet newsflow as a run of three consecutive sessions of gains comes to a halt.
• PBoC set USD/CNY mid-point at 7.1691 vs exp. 7.2535 (prev. 7.1693).
• Reuters Poll: Short bets on the KRW, MYR & THB at lowest since October 31st, bearish bets on INR at highest since mid-July 2022.

Fixed Income

• USTs are in the red, weighed on overnight in tandem with JGBs on hawkish commentary from BoJ’s Tamura (hawk) who stated they must raise rates to at least around 1% in the latter half of FY25. More broadly, the benchmark is trimming some of the upside seen on Wednesday with yields picking back up after their pullback. Thus far, USTs down to a 109-16 base vs Wednesday’s 109-29 peak; if the move extends, support factors at 109-02 before the figure and then 108-25+. US Jobless Claims, Challenger Layoffs and a few Fed speakers due.
• Bunds are in the red and spent much of the morning towards the 133.14 session low. Pressure which comes as the complex unwinds some of the pullback in yields that was a feature of yesterday’s session for global benchmarks. Aside from Construction PMIs, docket has been light; currently trading around 133.41 vs peak at 133.53.
• Gilt downside in-fitting with peers, but to a much lesser extent as we count down to the BoE, Newsquawk preview available. A poor set of data and general lifting in the fixed income complex has brought Gilts just into the green. Gilts were pulled off lows by a particularly dire UK Construction PMI for January. A release which saw Gilts jump from 93.55 to 93.70 and thereafter to a 93.84 peak, which then continued to make a session high at 93.93. Thereafter, it was reported that PM Starmer is said to be considering removing Chancellor Reeves and replacing her with current Home Secretary Cooper.
• On Wednesday, PM Bayrou survived (as expected) the two censure motions against him which means the 2025 Budget has now passed the National Assembly. However, there are still numerous hurdles to parts of the budget ahead. The passing was well received with the OAT-Bund 10yr yield spread dipping below 70bps yesterday evening and again this morning. However, OATs thereafter found themselves the modest EGB underperformer with the spread widening back to near 73bps ahead of chunky supply, which was well received and sparked an EGB rally with the spread narrowing back to 70bps.
• Spain sells EUR 6.19bln vs exp. EUR 5.5-6.5bln 2.40% 2028, 3.10% 2031, 4.00% 2054 Bono & EUR 0.57bln EUR 0.25-0.75bln 1.15% 2036 I/L.
• France sells EUR 13bln vs exp. EUR 11-13bln 3.20% 2035, 1.25% 2036, 1.25% 2038, and 3.25% 2055 OAT Auction.

Commodities

• Modest upside in crude benchmark after the sell-off yesterday. Action this morning wasn't dictated by any fresh macro headlines, although crude experienced a few upticks and broke out of overnight ranges in the first half of the European session as volumes picked up. Brent Apr resides in a USD 74.60-74.98/bbl parameter.
• Soft trade across precious metals amid a more constructive risk tone but also alongside a surging dollar. Spot gold resides in a USD 2,848.97-2,873.34/oz range.
• Mixed trade across base metals despite the firmer Dollar but amid the mostly constructive risk sentiment across the broader market. 3M LME copper resides in a USD 9,267.85-9,356.00/t.
• Qatar sets March marine crude OSP at Oman/Dubai + USD 2.9/bbl; land crude OSP at Oman/Dubai + USD 2.75/bbl
• Citi lifts its 2025 average forecast for Gold to USD 2900/oz (prev. 2800/oz); 0-3month target upgraded to USD 3000/oz, 6-12 target maintained at USD 3000/oz.
• Oil and gas traders likely to seek waivers from China over tariffs that Chinese govt plans to impose on US crude and LNG, according to Reuters sources.
• Japan is reportedly seeking exemptions from steel import tariff being considered by India, according to Reuters sources, citing Chinese overcapacity.

Geopolitics: Middle East

• Israeli occupation forces stormed Balata refugee camp east of Nablus in the West Bank, according to Al Jazeera.
• Israeli PM Netanyahu questioned what was wrong with the idea of allowing Gazans to leave, while he added that the idea should be pursued and done.

Geopolitics: Other

• US Defense Secretary Hegseth held a call with Panama's President Mulino and they agreed to expand cooperation between the US military and Panama's security forces. It was separately reported that the State Department announced that US government vessels can now transit the Panama Canal without charge fees although the Panama Canal Authority later said it has not made any changes to charge fees.

US Event Calendar

• 07:30: Jan. Challenger Job Cuts -39.5% YoY, prior 11.4%
• 08:30: Feb. Initial Jobless Claims, est. 213,000, prior 207,000
• 08:30: Jan. Continuing Claims, est. 1.87m, prior 1.86m
• 08:30: 4Q Nonfarm Productivity, est. 1.2%, prior 2.2%
• 08:30: 4Q Unit Labor Costs, est. 3.4%, prior 0.8%

DB's Jim Reid concludes the overnight wrap

It’s that time of the year…. I took my first hay fever tablet yesterday as the itchy eyes begun. Since I moved out of polluted London 15 years ago and into the country, I’ve gone from having no allergies to having terrible ones every year, always starting some time between mid January and mid February. Let's hope the drugs work this year.

After a severe allergic reaction on Monday after the tariff news, markets continued to be relatively sedated yesterday as investors continued to price out the chance of aggressive tariffs, whilst the ISM services index showed inflationary pressures were weaker than expected. That meant the US dollar (-0.35%) continued to fall, reaching its lowest level in the last week, and the prospect of lower inflation also helped to bring down Treasury yields, with the 10yr yield (-9.4bps) down to 4.42%. On that around the time of the US close Treasury Secretary Bessent said in an interview with FOX that while President Trump wanted lower rates, they were both focused on the 10yr yield not the Fed policy rate, adding that policies to boost energy supply and reduce the budget deficit would help achieve this. He implied that the "jumbo rate cut", referring the 50bps cut in September, helped create the bond sell-off. So this was an important interview and all other things being equal will encourage a flattening bias. However as Bill Clinton's political advisor James Carville famously said back in 1993 when referring to the afterlife "... I want to come back as the bond market. You can intimidate everybody". So this is new important news that shows the Trump administrations' attitude to monetary policy and yields. However at the end of the day their fiscal and supply side policies and how they impacts growth, supply and inflation will still be the most important.

In terms of more detail on what drove the moves yesterday, the ISM services print added fuel to the bond rally, as the prices paid component fell back to 60.4, after spiking to 64.4 the previous month. Remember that the release a month ago was one of the main factors in turbocharging the bond selloff, so the fact we saw a pullback came as a relief to investors. Moreover, the headline indicator fell to 52.8 (vs. 54.0 expected), so that also helped to alleviate concerns about demand pressure, and whether the Fed might have to hike rates in the months ahead. Indeed, the Atlanta Fed’s GDPNow tracker took down their Q1 estimate from an annualised 3.9% to 2.9% after the various releases, suggesting the economy was still doing well, but not seeing a noticeable acceleration either.

So that helped investors to dial up their expectations for rate cuts this year, with 47bps now priced by the December meeting, up +2.3bps, and having briefly reached a full 50bps intra-day. A partial reversal later on came in part as Chicago Fed President Goolsbee said that “If we see inflation rising or progress stalling in 2025, the Fed will be in the difficult position of trying to figure out if the inflation is coming from overheating or if it’s coming from tariffs”. Goolsbee had been one of the more sanguine FOMC voices on inflation in the past year so it’s a notable comment for how Fed might be thinking about tariff risks. Later in the evening, we heard from Fed Vice Chair Jefferson that the Fed can remain patient with the economy in a good place. Overall, the view that the Fed would still cut rates in 2025 helped the 2yr yield fall -2.6bps to 4.19%.

Equities also took part in a more positive mood, even as the Magnificent 7 were down -1.47% after Alphabet’s (-7.29%) earnings after the previous day’s close. Note that Amazon are the sixth Mag-7 to report tonight while we wait until February 22nd for Nvidia to complete the set.

Talking of which, it was not all bad news for the tech mega caps, with Nvidia (+5.21%) posting a strong advance after Super Micro Computer announced that its new AI data centres using Nvidia's new Blackwell chips were ready to ship. But the overall equity gains were broad-based, with the S&P 500 up +0.39% as more than two-thirds of its constituents were higher on the day. Europe also held up well, with the STOXX 600 up +0.47%, whilst Spain’s IBEX 35 (+1.32%) outperformed thanks to a surge from Santander (+8.29%).

While yesterday saw a breather from the tariff headlines, Peter Sidorov on my team published a note looking at the lessons we can draw from the opening salvo of the new trade war over the past week and the potential implications going forward, including a review of who is most exposed to US tariff risks.

Looking forward, one of the main highlights today will be the Bank of England’s policy decision at 12:00 London time. They’re widely expected to cut rates by 25bps, taking the policy rate down to 4.5%, which would be their third rate cut of this cycle. However, recent weeks have seen quite a bit of volatility in UK markets, and this is the first decision since the bond selloff in early January, where the 30yr gilt yield hit its highest since 1998. Indeed, at the height of the pound’s slump, there had been speculation about whether the BoE would cut at all at this meeting. However, since the downside surprise in the latest CPI release, market expectations have converged around another 25bp rate cut. For today, our UK economist is expecting an 8-1 vote in favour of a rate cut, but expects them to retain as much flexibility as possible. See his full preview here for more info.

Ahead of the BoE’s decision, gilts and other European sovereign bonds put in a strong performance yesterday. In fact for gilts, it was the biggest decline in the 10yr yield (-8.5bps) since the CPI release three weeks earlier, taking it down to 4.44%. That was echoed across Europe, where yields on 10yr bunds (-3.2bps), OATs (-2.8bps) and BTPs (-4.4bps) all fell back. That said, the declines were mostly limited to the long-end, with the 2yr German yield actually up +0.5bps, which came as the ECB’s Lane said that getting inflation to settle at target “might take longer than expected”.

This morning in Asia markets are higher across the board with the the Shanghai Composite (+0.86%), KOSPI (+0.78%) and Hang Seng (+0.65%) reversing their previous session losses. Elsewhere, the Nikkei (+0.49%) is also higher. US equity futures are up around a quarter of a percent.

Early morning data showed that Australia’s trade balance rose less than expected in January, shrinking to A$5.09 bn (v/s +$6.5bn) as imports surged, and exports came in sharply below estimates amid weak demand from China.
In FX, the Japanese yen (+0.26%) continues to gain ground for the fourth straight session trading at 152.20 against the dollar, its highest level since December 12 amid growing acceptance that the BOJ would keep raising interest rates. Those moves have come following hawkish comments from BOJ’s board member Tamura Naoki stating that the central bank must raise rates at least to around 1% in the latter half of fiscal 2025.

Looking at yesterday’s other data, we got the ADP’s report of private payrolls from the US, which comes ahead of tomorrow’s jobs report. That was stronger than expected at 183k (vs. 150k expected), but the number was in the tight range it’s stayed in over the last 6 months, suggesting that the labour market was still in decent condition.

To the day ahead now, and one of the main highlights will be the Bank of England’s policy decision. Central bank speakers will include BoE Governor Bailey, BoC Governor Macklem, the ECB’s Nagel and Escriva, and the Fed’s Waller and Logan. Otherwise, data releases include the weekly initial jobless claims from the US, Euro Area retail sales for December and German factory orders for December. Finally, earnings releases include Amazon.