S&P Futures Drop As China AI Frenzy Sends Hong Kong Tech Soaring

Us equity futures are slightly lower with yields flat and the dollar lower as traders appear exhausted at the end of a rollercoaster week full of headlines on trade tariffs and rumors on Ukraine peace efforts, as well as a slew of earnings and further proof inflation isn't going away. As of 8:00am ET, S&P futures were down 0.2%, a modest retreat from Thursday’s near-record close; Nasdaq futures were also lower as Palo Alto Networks fell 6.1% in premarket while Airbnb jumped after beating expectations. Mag 7 are mostly flat to slightly lower, with the exception of TSLA’s +1.6% gain pre-market (GOOGL -0.2%, AMZN little changed, AAPL -0.2%, MSFT -0.2%, META -0.3%, NVDA -0.1% and TSLA +1.6%). Luxury stocks were a bright spot in Europe as Hermès rallied to a record after its holiday-season sales surged. Meanwhile, the China rally continues as a broader index of Chinese stocks trading in Hong Kong closed at a three-year high, as the nation’s growing AI capabilities bolster investor optimism over the market’s outlook. Yields are 1-2bp lower while the USD extends its losses on hopes that Trump’s tariff approach poses less of an upside risk to inflation. Commodities are mixed: energy and ags are higher, base metals are lower. The House Budget Committee advanced a budget resolution yesterday, a major first step towards Trump’s legislative agenda. Today, key macro focus will be the latest Retail Sales, which consensus expects to decline 0.2% MoM but the control group to rise by 0.3% MoM.

In premarket trading, Chinese stocks listed in the US rallied as a potential meeting between the nation’s top leaders and Alibaba co-founder Jack Ma bolstered confidence that Beijing could adopt a more supportive stance toward the private sector. Intel shares jumped 1.9%, putting the chipmaker’s stock on track for its biggest weekly gain on record. The stock has rallied more than 26% this week on reports of the US government possibly getting involved with a plan involving both Intel and TSMC. Here are some other notable premarket movers.

• Airbnb shares jump 14% after the home-rental company reported fourth-quarter results that beat expectations and gave an outlook that is seen as positive. Baird upgraded their recommendation on the stock to outperform, noting the “strong finish” to the year.
• Applied Materials shares fall 4.8% after the semiconductor equipment maker forecast second quarter net sales that fell short of the average analyst estimate. Analysts note that China restrictions were impacting the company’s sales forecast.
• Coinbase Global shares are 1.6% lower after the crypto exchange operator reported total revenue for the fourth quarter that beat estimates, with the company’s results powered by a rally in digital assets linked to President Donald Trump’s reelection.
• Moderna shares fall 4.6% after the drugmaker recorded another quarterly loss, aided by an unexpected charge for a canceled manufacturing contract.
• Nu Skin shares gain 24% after the beauty and wellness company issued a stronger-than-anticipated profit outlook for the year. Its fourth-quarter revenue also topped analysts’ expectations, though its annual sales forecast fell short.
• SoundHound AI, Serve Robotics and Nano-X Imaging shares tumble in premarket trading after Nvidia filed a 13F indicating that the chipmaker exited its stakes in the companies. Meanwhile, WeRide ADRs surge 107% and Nebius Group shares are up 6.1% after Nvidia revealed positions in the companies
• Palo Alto Networks shares fall 5.1% after the network security solutions company forecast third quarter adjusted EPS that came in lower than Wall Street’s expectations.
• Roku shares jump 15% after the streaming-video platform company reported fourth-quarter results that beat expectations. Analysts note that platform revenues in the quarter were very strong.
• Twilio shares drop 11% after the software firm’s first-quarter forecast fell short of estimates. Investors were disappointed that there wasn’t a guidance upgrade following a strong showing at a recent investor day. However, analysts were broadly positive on the update and raised their targets on the stock on hopes of further AI-fueled growth.
• Wynn Resorts shares rise 1.5% after the casino operator reported fourth-quarter adjusted earnings per share that beat consensus estimates. Analysts highlighted the company’s strong performances in Macau and Las Vegas.

After President Donald Trump proposed reciprocal tariffs on US trading partners, investors are taking some comfort from speculation that negotiations may blunt their eventual impact. Meanwhile, strategists at Bank of America Corp. said faster inflation in the US could actually prove positive for markets because it will force Trump to adopt less severe tariffs.

Wednesday’s hotter-than-forecast consumer price index reading prompted a brief pullback in stocks and bonds, but the price pressures are a “blessing in disguise,” BofA’s Michael Hartnett said in a note. They mean “Trump must go small not big on tariffs and immigration in coming months to avoid fanning a second wave of inflation.”

“The volume of news stories on tariffs has risen as you would expect, but the impact of those stories on the dollar is declining,” said Michael Metcalfe, head of macro strategy at State Street Global Markets. “In part, this likely reflects the fact that asset managers already have a significant overweight in the dollar and if anything in 2025 have been trimming positions.”

The work required to propose reciprocal levies will occur on a country-by-country basis and could take until April to complete, said Howard Lutnick, Trump’s nominee to lead the Commerce Department. The comments followed news that Trump had ordered his administration to consider reciprocal tariffs on numerous trading partners.

“The fact that Trump didn’t explicitly target Europe yesterday and left an April deadline to negotiate with him brings some relief,” said Karen Georges, a fund manager at Ecofi in Paris.

In Europe, the Stoxx 50 holds near record levels as speculation grows that new tariffs threatened by US President Trump could mainly be intended as a negotiating tool. Basic resources is Europe’s best-performing sub-group as iron ore prices briefly spiked to four-month highs after a powerful cyclone narrowly missed hitting the world’s main export hub in Australia. Corporate earnings are also playing a role with Hermes leading a rally in luxury stocks after its sales surged in the fourth quarter. Another drop in European natural gas prices provides a further tailwind as concerns about refilling storage sites have eased, while prospects for peace talks between Russia and Ukraine have emerged. Here are the most notable European movers:

• Hermès shares rise as much as 5% to a record high after the French maker of luxury goods saw 4Q sales beat expectations, with analysts pointing to strength across all divisions and geographies.
• Ubisoft shares edge higher by 0.7% as the video-game maker reported 3Q results and said its cost savings plan is tracking ahead of schedule.
• Huhtamaki shares rise as much as 7% to the highest level since July after the Finnish consumer packaging firm’s fourth-quarter earnings beat estimates.
• Tomra shares rise as much as 12% to a two-year high after the maker of recycling equipment reports fourth-quarter revenue growth, with Jefferies pointing to strength in its recycling and food units in particular.
• Norsk Hydro shares rise as much as 2%, erasing an earlier decline. Morgan Stanley called the Norwegian metals company’s Ebitda a small beat if costs from one-offs were excluded.
• Auto and pharmaceutical stocks underperform after US President Donald Trump ordered his administration to consider imposing reciprocal tariffs on numerous trading partners to rebalance trade relations.
• Fresenius Medical Care shares drop as much as 6.9% after US kidney dialysis peer DaVita reported 4Q results and gave an outlook for 2025 adjusted EPS that fell short of what analysts expected.
• Umicore shares slide as much as 7.2% after the Belgium-based specialty chemicals firm posted a miss on half-year revenues.
• CVC Capital shares fell 2% after the company said it remains “cautious” on the near-term outlook.
• 1&1 and its parent United Internet slump after reporting Ebitda well below estimates amid frustrated hopes for compensation payments related to a network outage in May.
• Wood Group shares drop as much as 33%, the most since November, after the UK energy engineer said a review by Deloitte identified material weaknesses and failures.

Earlier in the session, Asian stocks rose, headed for a third day of gains as a rally in Chinese tech shares resumed. Signs of a delay in US President Donald Trump’s tariffs also helped lift sentiment. The MSCI Asia Pacific Index rose as much as 0.7%, with Alibaba and Tencent among the biggest contributors. The regional benchmark was set to cap its fifth-straight weekly advance. A gauge of Chinese tech shares in Hong Kong rebounded more than 5% after profit-taking pressure emerged in the previous session. A broader index of Chinese stocks trading in Hong Kong closed at a three-year high, as the nation’s growing capabilities in artificial intelligence bolster investor optimism over the market’s outlook. Traders are also looking forward to further government stimulus from the Two Sessions coming up in March.

In FX, the Bloomberg Dollar Spot Index is down ~0.2% after its largest one-day fall since Jan. 20 on Thursday.  The Bloomberg Dollar Spot Index has dropped about 2.5% from February’s high as investors wind back bets that Trump is determined to ramp up global tariffs as part of his “America First” policy.  Elsewhere in currencies, the yen rose, while the pound hit its highest level against the dollar this year. The euro fluctuated after data showed unexpected growth in the euro area economy in the final quarter of 2024.

• NZD/USD rallied by 0.6% to 0.5711, leading G-10 gains against the dollar; New Zealand’s manufacturing industry expanded for the first time in almost two years
• GBP/USD rose as much as 0.2% to 1.2596, a fresh year-to-date high
• EUR/USD up 0.2% to 1.0488, marking a fourth day of gains; Euro-area economy managed to eke out growth at the end of last year after all

In rates, treasuries climb, outperforming peers, with US 10-year yields falling less than 1 bps to 4.52%.  US long-end yields are ~1bp cheaper, 2-year sector marginally richer on the day, steepening 2s10s curve by ~1.5bp, 5s30s by ~1bp; 10-year is little changed around 4.535%, with bunds and gilts relatively cheaper by 1bp and 3bp. Long-dated dollar swap spreads extended this week’s sharp widening move, reaching least inverted level in more than a year; 30-year tenor touched -68.3bp, ended Thursday at -69.5bp. European bond yields rise, with UK and German 10-year borrowing costs adding 1-2 bps each.

In commodities, oil prices advance, with WTI rising 0.3% to $71.50 a barrel. Spot gold adds $10 to around $2,938/oz, and near a record high, on track for a seventh week of gains — its longest run since August 2020. The precious metal has gained this year, powered by haven demand, setting successive records with potential to line up a test of $3,000 an ounce. Bitcoin rises 0.6% to just above $97,000.

The US economic data calendar includes January retail sales and import/export price index (8:30am), January industrial production (9:15am) and December business inventories (10am). Fed speaker slate includes Dallas Fed President Logan at 3pm.

Market snapshot

• S&P 500 futures little changed at 6,139.25
• STOXX Europe 600 up 0.1% to 554.36
• MXAP up 0.8% to 187.88
• MXAPJ up 1.1% to 593.07
• Nikkei down 0.8% to 39,149.43
• Topix down 0.2% to 2,759.21
• Hang Seng Index up 3.7% to 22,620.33
• Shanghai Composite up 0.4% to 3,346.72
• Sensex down 0.2% to 75,961.87
• Australia S&P/ASX 200 up 0.2% to 8,555.81
• Kospi up 0.3% to 2,591.05
• German 10Y yield little changed at 2.43%
• Euro up 0.2% to $1.0484
• Brent Futures up 0.5% to $75.39/bbl
• Gold spot up 0.3% to $2,937.79
• US Dollar Index down 0.42% to 106.86

Top Overnight News

• US President Trump signed an executive order to establish a Make America Healthy Again Commission and is scheduled to sign executive orders on Friday at 13:00EST/18:00GMT.
• President JD Vance said Thursday that the U.S. would hit Moscow with sanctions and potentially military action if Russian President Vladimir Putin won’t agree to a peace deal with Ukraine that guarantees Kyiv’s long-term independence. Vance said option of sending U.S. troops to Ukraine if Moscow fails to negotiate in good faith remain “on the table.” WSJ
• US Treasury Secretary Bessent said if tariffs create inflation, it would be a one-time slight increase, while he also commented that he was barred from looking at payment systems for a few days: Fox Business.
• US judge ordered the Trump administration to restore funds for foreign aid programs: Politico.
• US State Department said the plane carrying US Secretary of State Rubio to Munich experienced a mechanical issue and was forced to turn around.
• The Pentagon is preparing a list of potential cost cuts ahead of the DOGE teams arrival; some military sections are generating lists of weapons they have wanted to cancel but couldn't get political approval to do so: WSJ
• TikTok was restored to Apple and Google’s app stores following assurances from the DOJ that the US ban won’t be enforced for now. BBG
• Apple will overhaul its phones in China with AI features by the middle of this year, people familiar said. BBG
• China’s PBOC signaled potential policy changes to meet growing external challenges, pledging to keep supporting the yuan as trade frictions weigh on the currency. WSJ
• Chinese President Xi will chair a symposium focused on boosting the country’s private sector and prominent business leaders will be in attendance, including Alibaba’s Jack Ma. RTRS
• Taiwan’s president has pledged to boost investments in and purchases from the US in response to Trump’s global tariff threats and pressure on Taiwan’s semiconductor industry. The US trade deficit with Taiwan widened by $26.1bn to $73.9bn last year driven by demand for AI chips. FT
• Trump and Modi agree to work on a trade deal to resolve White House concerns about tariffs and other restrictions. WaPo
• The euro-area economy managed to eke out growth at the end of last year after all. Eurostat revised up its initial estimate to show GDP increased 0.1% in the fourth quarter. BBG
• The pentagon is preparing cost-cutting ideas (including scrapping/reducing certain weapons systems) as they wait for DOGE people to come to the Dept. of Defense, which could be as soon as today. WSJ

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were mostly higher following the positive handover from Wall St, where yields declined following the latest PPI data and stocks benefitted despite US President Trump's reciprocal tariff plan, as the delayed implementation provided optimism regarding negotiations. ASX 200 touched a record high with the index led by strength in gold miners, tech and some defensive sectors. Nikkei 225 bucked the trend and was pressured by recent currency strength although Sony, Nissan and Honda were among the biggest gainers in the index post-earnings. Hang Seng and Shanghai Comp were positive with continued strong momentum in Hong Kong amid a tech surge, although the gains in the mainland were only modest despite the PBoC's recent policy implementation pledges, while this week's open market operations resulted in a net weekly drain of around CNY 575bln.

Top Asian News

• Chinese Foreign Minister Wang said in a meeting with UK PM Starmer that China and the UK need to strengthen strategic communication and mutual trust, while they need to strengthen cooperation in climate change, AI, and green development. Wang also stated in a meeting with the UK Foreign Secretary that both sides will seek cooperation in financial services, clean energy and AI, while they reached a consensus on a roadmap for bilateral exchanges and cooperation. Furthermore, Wang stated that preparations are underway for dialogues on economy, trade, health, and industry.
• US President Trump said the TikTok deadline could be extended and he hopes to make a deal on TikTok, while they will make it worthwhile for China to approve the TikTok sale. It was separately reported that TikTok's CEO plans more streamlining as talks with the Trump team continue and it is working with a 'key person' in the Trump administration on the US ban issue.
• Japan's lower house voted to approve government nominee Junko Koeda for the BoJ board.

European bourses (Stoxx 600 U/C) began the session mostly lower, despite a stronger session in APAC trade overnight; though sentiment gradually improved as the morning progressed, to display a mixed picture thus far. Some modest pressure was seen in the complex after the Ukrainian President Zelensky said he does not think that the US has a plan for peace in Ukraine yet. European sectors are mixed, and aside from the top performer, the breadth of the market is fairly narrow. Basic Resources finds itself right at the top of the pile, lifted by gains in metals prices, given the positive risk tone in APAC trade overnight; particularly in China. Consumer Products follows behind, with the sector buoyed by strength in Luxury names after both Hermes (+3.5%) and Moncler (+1%) reported strong results.

Top European News

• EU is cutting back tech rules to boost AI investment, according to the bloc's digital chief cited by FT.

FX

• USD has extended on yesterday's selling pressure which was seen in response to President Trump's reciprocal tariff memorandum in which he pledged to impose levies on “every country” that America has a trade deficit with and took aim at countries using VAT against the US. US Retail Sales is due alongside, Industrial Production and Fed's Logan. DXY down as low as 106.82 (matching the January 18th low) vs. Thursday's 107.79 peak.
• EUR/USD is up for a fifth session in a row and ventured as high as 1.0486 vs. the sub 1.03 levels seen at the start of the week. Optimism has been spurred by recent trade developments and how thus far, the worst case scenario of immediate and far-reaching tariffs on the EU has been avoided. If EUR/USD is able to clear 1.05, the YTD peak from January 27th sits at 1.0532. The Single-currency did dip a touch off best levels following remarks via Ukrainian President Zelensky said he does not think that the US has a plan for peace in Ukraine yet.
• JPY is marginally firmer in what has been a choppy week for USD/JPY. Currently trading within a tight 152.39-153.15 range.
• Cable has printed a fresh YTD peak in the wake of the softer USD with a current session high at 1.2594. For UK-specific drivers, strength was also observed yesterday on account of a better-than-expected outturn for UK GDP. Next upside target for Cable comes via the 30th December high at 1.2607.
• Antipodeans are both firmer vs. the broadly weaker USD. AUD/USD has printed a fresh YTD peak at 0.6340 with the next upside target coming via the 17th December high at 0.6377.
• PBoC set USD/CNY mid-point at 7.1706 vs exp. 7.2739 (prev. 7.1719).
• SNB Governing Board Member Tschudin said maintaining price stability is the most important task for the SNB and inflation can be outside the 0-2% target temporarily with the medium-term development more important. She also stated SNB's policy toolbox includes the use of foreign exchange interventions and that negative interest rates remain an important policy instrument if needed.

Fixed Income

• USTs, and the complex generally, have been pulling back from yesterday’s 109-01 peak but haven’t fallen significantly thus far with the current low just a handful of ticks below at 108-26. Import/Export prices, Retail Sales and Fed's Logan are on the docket for today; alongside some other Tier 2 US data. Continued bearish action brings into play support a 108-10 and then 108-04 before the figure.
• Bunds are softer directionally in-fitting with the above as the macro focus points are broadly the same, but does find itself under slightly more pressure than its US peer. Pressure which, while over 20 ticks at most, is relatively modest in the context of recent sessions. EZ GDP Flash Estimate Q/Q was revised a touch higher, but ultimately had little impact on German paper. Today we await updates on Trump tariffs and US data.
• Gilts are underperforming modestly, tested the 93.00 mark to the downside vs. a 93.50 peak on Thursday which itself was getting close to Monday’s 93.71 WTD peak. Technically, if the pressure continues then we look to lows from earlier in the week between 92.86-31. On the flip side, after the mentioned WTD peak last Friday’s best was 93.87 and then a gap until 94.35 from the prior day.
• Most recently, benchmarks have been lifting off worst, but still remain in the red, as some of the commentary from the Munich conference is less constructive on a Ukraine-Russia breakthrough.

Commodities

• Crude is firmer, but only very modestly with action contained to slim USD 0.50/bbl parameters throughout the European morning. On the geopolitical front for the Middle-East to see if the hostage release proceeds as planned on Saturday. On that, Axios’ Ravid cited an Israeli official saying "It seems that the crisis has been postponed until next week".
• Elsewhere, US VP Vance, said the option of sending US troops to Ukraine if Russia fails to negotiate in good faith remains “on the table”, a remark the WSJ highlights is much tougher than the Defence Secretary earlier in the week who said the US wouldn’t pledge troops. WTI and Brent currently find themselves holding in the middle of USD 71.26-74/bbl and USD 74.96-75.56/bbl parameters.
• As it stands, and reflecting the ongoing progress towards a ceasefire and potential resumption of flows following that, March TTF is under continued pressure and below the EUR 50/MW mark and approaching lows from end-January when TTF was sub EUR 48/MW. No real reaction seen just yet from the latest Zelensky, Kremlin & US remarks around today's meeting between the US and Ukraine.
• Gold likely continues to benefit from front-loading action, exacerbating haven appeal, as Trump continues to make tariff announcements. At a USD 2938/oz peak which is just shy of Tuesday’s USD 2942/oz WTD best.
• Base metals are firmer and benefitting from the delayed implementation of Trump’s latest tariff updates. A delay which provides hope for deals and/or exemptions to be made in the days/weeks ahead

Geopolitics: Ukraine

• US Defence Secretary Hegseth says the shape of Ukrainian borders remains to be seen. Hegseth says cannot make an assumption that US presence in Europe will last forever.
• "Moscow says that Russian officials will not attend the Munich Security Conference because Russia has not been invited to the event, in contrast to what Trump said about meetings with Ukrainian and Russian officials.", via journalist Elster
• Ukraine President Zelensky says discussion with US President Trump was good and positive; adds that he does not think that the US has a plan for peace in Ukraine yet. Says he does not know about meeting with Russian side at the Munich conference; there will be talks with Russia after positions agreed with allies. Says as many as 3k North Korean troops could be deployed additionally to the Kursk front. Says he does not know about meeting with Russian side at the Munich conference; there will be talks with Russia after positions agreed with allies.
• US VP Vance is using the threat of sanctions and military action to push Russian President Putin into a Ukraine deal, according to WSJ. VP Vance says there are economic and military tools of leverage available to the US to use against Putin. President Trump is approaching negotiations openly, stating that everything is on the table to reach a deal. There is a deal that is going to come out of this that’s going to shock a lot of people.
• US VP Vance says will discuss the Ukraine conflict and how to bring it to a negotiated settlement.
• Ukraine finished work on draft minerals agreement and handed it over to the US side, via Reuters citing a delegation source; US side asked for time until later in the afternoon to work on it.
• Ukrainian President Zelenskiy and US Vice-President Vance meeting in Munich has been postponed to 16:00 GMT, according to Reuters citing sources
• US President Trump said officials from the US and Russia are to meet in Munich on Friday and Ukraine is also invited. Trump also stated that he had a good conversation with Russian President Putin the other day, while he added that the US is working with Ukrainian President Zelensky and that Russian Putin wants to make a deal but later commented that it is too soon to say what will happen in negotiations on Ukraine.
• Ukrainian President Zelensky's advisor said Ukraine does not plan talks with the Russian side at the Munich conference, while the adviser stated the US, Europe, and Ukraine need a common position before engaging in talks with Russia.

Geopolitics: Other

• Turkish President Erdogan says there are now signs of a ceasefire in Gaza despite the agreement.
• Chinese Defence Ministry said Australia deliberately provoked China in the South China Sea on February 11th and has spread false narratives, while it is "invading and breaking into the homes of others". It also stated that Australia must strictly restrain the actions of its front-line naval and air forces and avoid stirring up trouble in the South China Sea, as well as warned that Australia would only harm others and itself.

US Event Calendar

• 08:30: Jan. Retail Sales Advance MoM, est. -0.2%, prior 0.4%
  • Jan. Retail Sales Ex Auto MoM, est. 0.3%, prior 0.4%
  • Jan. Retail Sales Control Group, est. 0.3%, prior 0.7%
• 08:30: Jan. Import Price Index MoM, est. 0.4%, prior 0.1%
  • Jan. Import Price Index YoY, est. 1.9%, prior 2.2%
  • Jan. Export Price Index MoM, est. 0.3%, prior 0.3%
  • Jan. Export Price Index YoY, est. 1.4%, prior 1.8%
• 09:15: Jan. Industrial Production MoM, est. 0.3%, prior 0.9%
  • Jan. Capacity Utilization, est. 77.7%, prior 77.6%
  • Jan. Manufacturing (SIC) Production, est. 0.1%, prior 0.6%
• 10:00: Dec. Business Inventories, est. -0.1%, prior 0.1%

DB's Jim Reid concludes the overnight wrap

May I be the first to wish many of you a happy Valentine's Day this morning. How are my wife and I celebrating this most romantic of days? Well she's going to a spa weekend in Bath with some friends and I'm babysitting, or what some people refer to as "parenting". Wish me luck.

It was a love-in for markets yesterday with bonds and equities rallying following better-than-expected inflation data and news that details on reciprocal tariffs would not come before April. This led to a revival of hopes that the Fed would still cut rates this year, particularly after the more hawkish fears post the upside surprise in the CPI report the previous day. That meant the 10yr Treasury yield fell -9.5bps to 4.53%, whilst the US 2yr inflation swap (-2.1bps) also fell back a bit, coming off its highest level in almost two years. And with investors becoming more relaxed on inflation again, the S&P 500 was up +1.04%, closing less than 0.1% beneath its all-time high last month.

The stock rally gathered more steam after Trump’s press conference unveiling reciprocal tariff plans which was light on immediate specifics. Specifically, the President ordered “to investigate the harm to the United States from any non-reciprocal trade arrangements adopted by any trading partners” and propose remedies. In determining of reciprocal tariffs against individual trading partners, Trump’s memo also mentioned countries’ use of non-trade barriers and VAT taxes. Such a country-by-country process should inevitably take some time and Commerce Secretary nominee Lutnick said that investigations would complete by April 1 and remedies could be implemented immediately after. In the meantime, questions whether this tariff threat will be used as a negotiating tool are likely to linger. Separately, Trump said that tariffs on cars above the reciprocal tariffs would also be coming soon. Still, the combination of limited tariff news and lower yields led to the broad dollar index (-0.83%) falling to its lowest since mid-December.

So this did little to derail the bond rally that had emerged earlier after the release of the US PPI inflation data for January. On the face of it, the headlines weren’t overly positive, as PPI came in at +0.4% for the month (vs. +0.3% expected). However, the components of the PPI such as healthcare and air fares that feed into PCE (which is the Fed’s preferred measure of inflation) came in softly. So that led US Treasuries to rally across the curve, because the view was that this unwound some of the upside surprise we got from the CPI the previous day. As a result, futures raised the likelihood of a rate cut by the Fed’s June meeting to 45%, up from 37% the previous day, even if that's still lower than the 58% probability before CPI.

All-in-all, this backdrop proved to be pretty favourable for US equities, with the S&P 500 (+1.04%) closing just -0.06% beneath its record high from January 23. The advance was led by the Magnificent 7, which surged +1.85%. But the rally broadened amid the limited news on tariffs, with all 11 major S&P 500 sector groups higher on the day and the small cap Russell 2000 up +1.17%. The gains were also helped by the supportive macro backdrop, as the initial weekly jobless claims fell to 213k in the week ending February 8 (vs. 216k expected), which pushed the 4-week moving average down to 216k. Moreover, the continuing claims for the week ending February 1 fell back to 1.850m (vs. 1.882m expected).

Otherwise yesterday, financial assets were still reacting to the developments around Ukraine, given President Trump had said that negotiations would open with Russia. So that led to a fresh outperformance for European equities, with the STOXX 600 (+1.09%) and the DAX (+2.09%) both powering forward to new records. Indeed, the DAX’s advance already leaves it up +13.58% for the year, cementing its position as the best performing major equity index of 2025. And in Ukraine itself, the country’s dollar bonds continued to surge yesterday, with the 10yr yield coming down to a near three year low of 12.56%. Watch out for headlines on this from the annual Munich security conference that starts today.

Elsewhere in Europe, there was some better-than-expected data from the UK yesterday, as Q4 GDP unexpectedly grew by +0.1% (vs. -0.1% expected). So that led investors to dial back the likelihood of another rate cut at the Bank of England’s next meeting in March, with the probability of a cut now down to 17%, from around 25% before the data. Nevertheless, gilts moved in line with the broader rally across the continent, with yields on 10yr bunds (-5.9bps), OATs (-8.5bps), BTPs (-7.0bps) and gilts (-5.3bps) all experiencing a decent decline on the day. The moves were further supported by declines in European natural gas futures (-3.77%), which fell after Bloomberg reported that Germany had called for exemptions from the EU’s targets for storage filling. In fact, natural gas futures are now down -12.5% from their 2-year high on Monday.

Those overnight gains on Wall Street are also echoing across Asian equity markets with the Hang Seng (+2.24%) leading gains, and getting closer to topping its near three year highs back in October. Elsewhere, the CSI (+0.70%) and the Shanghai Composite (+0.25%) are also edging higher as enthusiasm around DeepSeek continues to buoy Chinese technology shares. Meanwhile, the KOSPI (+0.48%) and the S&P/ASX 200 (+0.31%) are also trading in positive territory while the Nikkei (-0.61%) is bucking the regional trend. S&P 500 and NASDAQ 100 futures are both trading around a tenth of a percent higher.

Early morning data showed that South Korea’s unemployment rate hit 2.9% in January, easing from its three-year high of 3.7% the month before (3.2% expected). However, much of this was due to the government front loading a jobs support program so the underlying picture is less healthy. In FX, the Japanese yen (+0.10%) is strengthening for the second consecutive session trading at 152.65 against the dollar following President Trump’s decision to postpone the implementation of reciprocal tariffs.

To the day ahead now, and there are several US data releases, including retail sales, industrial production and capacity utilization for January. Otherwise, we’ll hear from the Fed’s Logan. And the Munich Security Conference will get underway.