US Futures Slide As Nvidia Keynote Disappoints And FOMC Decision Looms

One day after we asked if Jensen Huang's keynote speech at the NVDA GTC presentation would be a "sell the news" event, the answer is yes, because this morning US stock futures have slumped, after the AI chip giant's CEO disappointed markets by not revealing anything that the market wasn't already expecting. As a result, as of 7:50am, S&P futures were trading at session lows, down 0.5%, with Nasdaq futures sliding 0.6% and bitcoin dumping after an overnight fat-finger sent the crypto briefly to $8,900. And now that the BOJ has finally exited negative rates after a decade of with all eyes on the Federal Reserve’s policy meeting for clues on the rates outlook. Bizarrelly, the BOJ's historic rate hike has sent the yen sliding and thus, the dollar higher with 10Y yields unchanged around 4.32%. Commodities are flat with metals outperforming and Brent crude trading near a five month high of $87. Today’s macro data focus will be on housing data with an update on TIC flows.

In premarket trading, NVDA stock was down and Mag7 names were mixed with semis lower, despite a price target increase by Goldman which now expects NVDA to trade at $1000 in 12 months, up from $875 (full note available to pro subs).

Elsewhere, cryptocurrency-linked stocks dropped as Bitcoin extended a retreat following a record daily outflow from the doomed GBTC ETN which may have precipitated yesterday's crypto rout, offset however by another BTFD burst in the Blackrock IBIT ETF. Among the bigger movers, Coinbase Global -5%, Riot Platforms (RIOT) -5%, Marathon Digital (MARA) -7%,

Here are some other notable premarket movers:

• Beyond Meat falls 5% after the plant-based protein company filed a $250 million mixed securities shelf registration.
• Caleres slips about 2% after the retailer reported a decline in Famous Footwear comparable sales and issued weaker-than-expected first-quarter guidance.
• Crinetics Pharmaceuticals rises 14% after saying its once-daily oral paltusotine achieved the primary and all secondary endpoints in the Phase 3 PATHFNDR-2 study in acromegaly patients.
• Fusion Pharma (FUSN) soars 100% after AstraZeneca agreed to buy the biotech company for as much as $2.4 billion.
• National CineMedia (NCMI) jumps 24% after the company announced a $100 million share buyback and reported fourth-quarter earnings per share that beat consensus estimates.
• Nvidia (NVDA) slips 1% as analysts noted that its much-anticipated AI event had no major surprise announcements.
• StoneCo (STNE) drops 9% after the digital payments firm announced its co-founder André Street would leave his position as chairman. The company also reported fourth-quarter payment volume that came below consensus expectations.

Finally, one month after we asked when Supermicro would sell stock to take advantage of its ridiculous stock price...

... we got the answer this morning when Super Micro Computer announced an offering to sell 2 million shares of common stock, sending the stock tumbling 8%.

Turning to the main overnight event, the yen paradoxically tumbled after the Bank of Japan brought an end to the world’s last negative interest-rate policy and emphasized that financial conditions will remain easy. The BOJ’s first hike in 17 years had been widely expected and Governor Kazuo Ueda struck a neutral tone at a news conference, saying there’s still a chance its inflation goal will not be hit. While the central bank scrapped its yield curve control program, it also pledged to keep buying long-term government debt.

“It’s a very, very dovish hike, as dovish hike as they come,” said Frederic Neumann, HSBC’s chief Asia economist, said on Bloomberg Television. Japanese bonds gained and the Topix closed at the highest since 1990 because the yen dropped 0.9% versus the dollar to 150.43, usually the opposite of what happens after a rate hike, and effectively dooms the BOJ to panic hiking as the plunging yen means Japan's inflation troubles will only get worse.

In a busy week for central bank decisions, attention now shifts to the Federal Reserve’s meeting on Wednesday, where investors will be focused on the US central bank’s projections — the dot plot — to gauge how many rate cuts policymakers are expecting to deliver this year.

“We are now thinking perhaps we get slightly higher dots — could we see fewer cuts being priced in?” said Andrea DiCenso, co-portfolio manager at Loomis Sayles, in an interview with Bloomberg TV. “We are seeing less than potentially three cuts priced into the market.”

European stocks are little changed following three straight days of declines. Energy and auto shares are outperforming and countering losses in utilities and consumer products. Investor confidence in Germany’s economic outlook jumped to the highest in more than two years, driven by expectations that the European Central Bank is ready to cut interest rates in the coming months. ECB President Christine Lagarde is due to speak Wednesday. Here are the most notable European movers:

• Unilever gains as much as 6% in London on news it plans to separate its ice cream business, including brands such as Ben & Jerry’s, as the UK consumer-goods conglomerate streamlines its business.
• Hannover Rueck rises as much as 4.2% as RBC boosts its price target on the German insurer to a Street-high on scope for continued “best-in-class” return of equity.
• Hemnet gains as much as 6.8% after Jefferies double-upgraded the property platform in a note that analysed the impact of Costar’s entry into the European market.
• Close Brothers jumps as much as 17%, the most since 2009, after the British merchant banking group presented 1H results which beat estimates. Shares are still down about 52% year to date.
• HelloFresh falls as much as 5.4% as Barclays downgraded the stock to equal-weight, citing a lack of stabilization in new customer additions in the company’s meal-kit business.
• Richemont and Swatch fell as data showed Swiss watch exports fell in February due to underlying deceleration in the US, China and Hong Kong.
• Atos shares drop as much as 25%, hitting a record low, after the debt-laden French IT firm said talks to sell its BDS unit to Airbus have ended.
• Moncler falls as much as 3.4% after an offering of up to 3.23 million shares by Carlo Rivetti’s Grinta priced at €67 apiece, representing a 3.2% discount to the last close.
• Fraport falls as much as 6.9% after the airport operator’s guidance for 2024 Ebitda and free cash flow left analysts wanting more, with Morgan Stanley saying guidance is “light.”
• Lottomatica falls as much as 6% after Gamma Intermediate completed a placing of 20 million shares in the gambling operator at €10.90 apiece, representing a 7.5% discount to the last close.

Earlier in the session, Asian stocks traded mixed as markets digested the first of this week's central bank announcements.

• Hang Seng and Shanghai Comp. lagged with the Hong Kong benchmark dragged lower by weakness in tech stocks as the EU mulls joining the US in reviewing risks of Chinese legacy chips and is flagging potential risks to national security and supply chains.
• Nikkei 225 was underpinned after a widely telegraphed and dovish exit from NIRP, YCC and ETF/J-REIT buying which a Nikkei source report had flagged, while the central bank also announced its monthly bond purchase intentions and said it will make nimble responses with JGB purchases and could increase the amount of JGB buying or conduct fixed-rate operations in the event of a rapid rise in yields.
• ASX 200 finished with mild gains after a lack of hawkish surprises at the RBA policy announcement in which it kept rates unchanged and reiterated that the Board remains resolute in its determination, while there was also a slight tweak in its language as guidance around further tightening was softened.

In FX, the Bloomberg Dollar Spot Index rose 0.4% with Wednesday’s Fed decision now firmly in focus as the yen tumbles despite the BOJ's first rate hike in nearly two decades. USD/JPY rises as high as 150.60 after BOJ’s decision. AUD/USD falls under mid 0.65-0.66 as traders price in greater probability of a RBA rate cut this year following its policy decision. NZD/USD falls to hold under 0.61. The New Zealand dollar is sold by leveraged funds after comments from the NZ Treasury saying the economy is in a “severe economic slowdown,” according to Asia-based FX traders, who say the Aussie is also weighed by the news. EUR/USD remains under 1.09 while GBP/USD drifts down toward 1.27. The Bloomberg Dollar Spot Index falls for the fourth day

In rates, treasuries climb, with US 10-year yields falling 1bps to 4.31%. US rates had little reaction to Bank of Japan’s first interest-rate hike since 2007, which was anticipated, remaining near year-to-date highs ahead of 20-year bond auction at 1pm New York time. Front-end yields are lower by ~2bp, steepening curve spreads by around 1bp vs Monday’s closing levels; 10-year at around 4.31% is ~1bp richer on the day with gilts outperforming by 4bp in the sector. Bunds and gilts are also in the green with UK yields down 3bp-4bp. Treasury auctions resume with $13b 20-year bond reopening at 1pm; WI yield at around 4.562% is above auction stops since November and ~3bp cheaper than February’s result.

In commodities, oil prices decline, with WTI falling 0.3% to trade near $82.50. Spot gold falls 0.3%.

Bitcoin drops ~6% to near $63,000.

Looking at today's economic data calendar we get February housing starts/building permits (8:30am) and January TIC flows (4pm). There are no Fed speakers scheduled before March 20 policy decision

Market Snapshot

• S&P 500 futures down 0.5% to 5,189
• STOXX Europe 600 little changed at 503.87
• MXAP down 0.5% to 175.29
• MXAPJ down 1.0% to 529.89
• Nikkei up 0.7% to 40,003.60
• Topix up 1.1% to 2,750.97
• Hang Seng Index down 1.2% to 16,529.48
• Shanghai Composite down 0.7% to 3,062.76
• Sensex down 1.0% to 72,004.06
• Australia S&P/ASX 200 up 0.4% to 7,703.23
• Kospi down 1.1% to 2,656.17
• German 10Y yield little changed at 2.45%
• Euro down 0.2% to $1.0846
• Brent Futures down 0.2% to $86.68/bbl
• Gold spot down 0.5% to $2,150.05
• US Dollar Index up 0.35% to 103.94

Top Overnight News

• Japan’s BOJ hiked rates (as was widely expected) from -0.1% to 0-0.1%, although the accompanying language had a dovish tone, with the central bank ensuring that accommodative policy would be maintained for the time being. The YCC (yield curve control) policy was formally ended, although the BOJ said it would still purchase about the same amount of government bonds each month. The BOJ will discontinue buying equity ETFs and REITs. FT
• Chinese factories are flooding global markets with cars, appliances, computer chips and electronics, setting the stage for a fresh round of trade tensions with the United States and Europe, economists said. WaPo
• The ECB will be in position to discuss an interest rate cut in June, Vice President Luis de Guindos said on Tuesday, joining a long list of policymakers putting the June 6 meeting on the table for a potential start of policy easing. RTRS
• European luxury stocks see some pressure following soft Swiss watch export numbers (Swiss watch exports fell 3.8% Y/Y in Feb vs. +3.2% in Jan). BBG  
• Indian oil refiners are on track to take the most American crude in almost a year after tighter enforcement of US sanctions crimped trade with Russia and forced processors to look elsewhere for supply. BBG
• The EU is preparing to levy tariffs on grain imports from Russia and Belarus to placate farmers and some member states, the first restriction on food products since Moscow’s full-scale invasion of Ukraine. FT
• Saudi Aramco’s CEO warned that the global drive to phase out oil and gas is a dangerous fantasy that’s bound to fail as there aren’t any credible alternatives to fossil fuels. CNBC
• MSFT schedules an AI event for Mon May 20 (right before the Build conf. May 21-23) at which it will discuss the firm’s AI vision across hardware and software. The Verge
• NVDA unveiled its (much-anticipated) new Blackwell platform, the successor product to Hopper. Blackwell contains 6 new technologies and will enable AI training and real-time LLM inference for models scaling up to 10 trillion parameters. Among the many organizations expected to adopt Blackwell are Amazon Web Services, Dell Technologies, Google, Meta, Microsoft, OpenAI, Oracle, Tesla xAI. RTRS

BOJ

• BoJ changed its monetary policy framework in which it ended negative interest rate policy and abandoned YCC, while it will guide the overnight call rate in the range of 0%-0.1% and apply 0.1% interest to all excess reserves parked at the central bank. BoJ also announced to end ETF and J-REIT purchases, as well as gradually reduce the amount of purchases of commercial paper and corporate bonds whereby it will discontinue purchases of CP and corporate bonds in about one year. However, it stated that it will continue roughly the current amount of JGB buying and it expects to maintain an accommodative monetary environment for the time being. Furthermore, the BoJ announced its planned bond purchases and stated that in case of a rapid rise in long-term rates, it will make nimble responses with JGB purchases and could increase the amount of JGB purchases or conduct fixed-rate purchase operations of JGBs, while it will provide loans under Fund Provisioning Measure to stimulate bank lending with an interest rate of 0.1% and a 1-year duration.
• BoJ PRESS CONFERENCE: Governor Ueda says BoJ has confirmed the virtuous cycle of wages and prices; Accommodative financial conditions will be maintained for the time being. Click here for full commentary.
• Japanese Finance Minister Suzuki says the government's view of the economy is the same as that of the BoJ; closely monitoring the economy and financial markets, including FX after the BoJ decision.
• Japan's Business Lobby Keidanren Chief says the appropriate decision was taken at the appropriate time, when asked on the BoJ announcement; does not think USD/JPY at 150 reflects Japan's economic fundamentals; Yen should be firmer considering fundamentals.
• Japan PM Kishida believes it is appropriate that accommodative monetary environment is maintained; did not discuss current issues with BoJ's Ueda

A more detailed analysis of markets from Newsquawk

APAC stocks traded mixed as markets digested the first of this week's central bank announcements. ASX 200 finished with mild gains after a lack of hawkish surprises at the RBA policy announcement in which it kept rates unchanged and reiterated that the Board remains resolute in its determination, while there was also a slight tweak in its language as guidance around further tightening was softened. Nikkei 225 was underpinned after a widely telegraphed and dovish exit from NIRP, YCC and ETF/J-REIT buying which a Nikkei source report had flagged, while the central bank also announced its monthly bond purchase intentions and said it will make nimble responses with JGB purchases and could increase the  amount of JGB buying or conduct fixed-rate operations in the event of a rapid rise in yields. Hang Seng and Shanghai Comp. lagged with the Hong Kong benchmark dragged lower by weakness in tech stocks as the EU mulls joining the US in reviewing risks of Chinese legacy chips and is flagging potential risks to national security and supply chains.

Top Asian News

• RBA kept its Cash Rate Target unchanged at 4.35%, as expected, while it reiterated that the Board remains resolute in its determination to return inflation to the target and inflation continues to moderate but remains high. RBA stated the board is not ruling anything in or out on interest rates (prev. a further increase in interest rates cannot be ruled out) and data is consistent with continuing excess demand in the economy and strong domestic cost pressures, both for labour and non-labour inputs. Furthermore, it noted that higher interest rates are working to establish a more sustainable balance between aggregate demand and supply in the economy and the board expects that it will be some time yet before inflation is sustainably in the target range.
• RBA Governor Bullock said they are making progress in the fight against inflation but reiterated inflation remains high and noted recent data suggests they are on the right track and they are keeping a keen eye on employment numbers. Bullock stated that risks to the outlook are finely balanced and war isn't won yet on inflation, while she noted the change of statement language is in response to data.
• Chinese Foreign Minister Wang Yi said during a visit to New Zealand that China is ready to work with New Zealand to implement an upgraded version of the China-New Zealand FTA and the two sides should launch negotiations on a negative list of service trade as soon as possible to push bilateral cooperation to a new level. Furthermore, he stated that China-New Zealand relations maintain a leading position among China's relations with developed countries, while it was also reported that New Zealand PM Luxon intends to visit China in the coming months following this week's meetings with China's Foreign Minister.
• China State Council issues action plan to make greater efforts to attract and utilise foreign investments; plan is to expand market access and raise the level of liberalisation of foreign investment
• Tencent Music Entertainment Group (TME) Q4 2023 (USD): EPS 0.12 (exp. 0.14), Revenue 0.97bln (exp. 0.93bln).
• Xiaomi (1810 HK) Q4 (CNY): Revenue 73.24bln (exp. 72.51bln); Adj. Net 4.91bln (exp. 3.77bln).

European bourses, Stoxx600 (+0.1%) began the session on a mixed footing though have caught a slight bid in recent trade, and reside near session highs; the AEX (+0.4%) outperforms, lifted by gains in Unilever (+4.5%). European sectors are mixed; Energy takes the top spot, with Crude just off recent highs whilst Consumer Products and Services is hampered by broader weakness in Luxury names, after weak Chinese price action overnight. US equity futures (ES -0.1%, NQ -0.1%, RTY -0.3%) are modestly lower, with mild underperformance in the RTY as it continues the prior day's weakness.

Top European News

• ECB's Centeno said cutting rates may help prevent a recession.
• ECB's de Guindos says "looking at recent inflation developments, we can see a very clear disinflationary process. This is reflected in both headline and core inflation readings; will have more information in June".
• ECB's De Cos says in June we could start cutting rates but it is conditional on data
• SNB: Identifies a need for action with capital regulations. Regarding AT1 instruments, the aim should be to strengthen their contribution through a timely suspension of buybacks/interest payments alongside a conversion into CET1 capital earlier

FX

• DXY is boosted by the post-BoJ softness in the JPY. DXY has reached a high of 104.06, bringing into play the March peak of 104.29 into view.
• EUR is swept up by the broadly firmer USD as the pair pulls back from a 1.0906 peak yesterday. If the descent continues, support comes via the 200DMA at 1.0838. EUR downside came to a halt on firm German ZEW metrics.
• GBP is softer vs. the USD. Cable is resting on its 50DMA at 1.2683 with UK-specifics lacking ahead of CPI metrics tomorrow and the BoE on Thursday.
• JPY is the laggard across the majors despite the BoJ ending NIRP. The move was widely expected and despite Ueda opening the door to further hikes, markets expect any hiking campaign by the Bank to be a shallow one. USD/JPY up to 150.69 at best.
• Antipodeans are both faring poorly vs. the USD. AUD eyeing a test of 0.65 to the downside where a large option expiry lies and bids are expected; the RBA kept its Cash Rate Target unchanged at 4.35%.
• PBoC set USD/CNY mid-point at 7.0985 vs exp. 7.2056 (prev. 7.0943).

Fixed Income

• Bunds are firmer after being incrementally softer on Monday. Newsflow has been dominated by the BoJ but read-across to EGBs is ultimately limited; EGBs saw modest upside following the better-than-expected German ZEW figures, with Bunds printing highs at 131.89.
• USTs are following EGBs and holds around the 110-00 mark. 20yr supply takes attention ahead of the FOMC on Wednesday.
• Gilt price action is in-fitting with EGBs; Gilts caught a bid following the UK auction and in tandem with a lift in EGBs post-ZEW, currently at 98.90.
• The BoJ's exit from NIRP & YCC saw an initial dip in JGBs and sent the accompanying 10yr yield back to its earlier session high of 0.77%. Thereafter, JGB price action was volatile before settling around 145.60. A pullback which occurred as some of the dovish elements were digested.
• EU opens books to sell EUR-denominated Feb 2050 green NGEU bonds; guidance +82bps to mid-swap; to sell EUR 6bln.
• Order for the new Italian 10yr I/L BTP are in excess of EUR 35bln, according to leads; spread a +23bps over the maturing May 2023 BTP.
• UK sells GBP 2bln 4.75% 2043 Gilt: b/c 3.41x (prev. 3.62x), average yield 4.467% (prev. 4.391%), tail 0.4bps (prev. 0.2bps)

Commodities

• Subdued trade across the crude complex this morning, with prices taking a breather after yesterday's rise; Brent meanders around USD 86.75/bbl after printing a high above USD 87/bbl yesterday.
• Mild downward bias across precious metals amid a firmer Dollar with little reaction to the BoJ overnight as traders gear up for the FOMC and then the BoE; XAU hovers just above USD 2,150/oz.
• Base metals are softer across the board amid the stronger Dollar and following weak Chinese trade overnight.
• UBS sees Brent likely trading between USD 80-90/bbl range this year, with end-June forecast of USD 86/bbl; extension of voluntary OPEC+ cuts for another three months will likely keep oil market underpinned in Q2 2024.

Geopolitics: Middle East

• Israeli PM Netanyahu said he spoke with Biden about achieving goals in the Gaza war while providing needed humanitarian aid, while it was also reported that President Biden reiterated 'deep concerns' about Israel conducting ground operations in Rafah during the call with Israeli PM Netanyahu.
• Israeli officials said PM Netanyahu narrowed the mandate of the negotiating delegation and set red lines for what they can accept, according to Axios.
• US military said it destroyed seven anti-ship missiles and three unmanned aerial vehicles in Houthi-controlled areas of Yemen, while Houthi media reported six US-British raids near Hodeidah, Yemen, according to Al Arabiya.
• Syrian army ground defences confronted targets in the sky of Damascus and state media reported that Israeli airstrikes were targeting the countryside of Syria's Damascus.
• "Israeli official to the broadcaster: The talks in Doha were positive and we expect difficult, complex and long negotiations", according to Sky News Arabia.

US Event Calendar

• 08:30: Feb. Building Permits MoM, est. 0.5%, prior -1.5%, revised -0.3%
• 08:30: Feb. Housing Starts MoM, est. 8.2%, prior -14.8%
• 08:30: Feb. Building Permits, est. 1.5m, prior 1.47m, revised 1.49m
• 08:30: Feb. Housing Starts, est. 1.44m, prior 1.33m
• 16:00: Jan. Total Net TIC Flows, prior $139.8b
• 16:00: Jan. Net Foreign Security Purchases, prior $160.2b

DB's Jim Reid concludes the overnight wrap

I've been back from Asia for three days now but I continue to fall asleep in front of the telly every night, get prodded by my wife on the sofa, and then wake up bright awake 90 minutes before my alarm in the morning. Today was one of those days that it was useful as I got to see the first BoJ hike in 17 years live this morning. So far their policy moves are pretty much as leaked over the last few days so there are no real surprises. They lifted rates from -0.1% to a range of 0-0.1%. They also scrapped YCC and ended ETF and REIT purchases but these programs had been pretty dormant of late. They are continuing JGB purchases at the same rate for now but, according to our Japanese economist Kentaro Koyama, the fund supplied through the Loan Support Program (similar to the TLTRO, with a current balance of JPY81 trillion yen) will decrease going forward given the conditions for the program have become stricter. As a result, the monetary base and the BoJ's balance sheet will decline going forward.

Forward guidance is a bit dovish, according to Kentaro. In the statement, the bank says that it anticipates that accommodative financial conditions will be maintained for the time being given the current outlook for economic activity and prices. In our view, this does not exclude policy rate hikes in the near future and could change depending on the economic and inflation outlook. So all paths are open. We will see what the press conference brings.

Against this well flagged move, the Japanese yen (-0.78%) is weakening, trading above 150 again for the first time in two weeks while 10yr JGB yields (-2.6bps) have moved lower to 0.74%. So for now, it's buy the rumour and sell the fact. The house view is that the market is underestimating where terminal rates might end up in Japan but that it will be a steady process discovering that.

Separately, the Reserve Bank of Australia (RBA) kept the benchmark rate at 4.35%, a 12-year high for the third meeting in a row, aligning with broad market expectations. In its post-meeting statement, the RBA indicated that it can’t rule out the possibility that interest rates will need to be raised further while acknowledging that inflation is moderating, consistent with its latest forecasts but remains too high and that the "economic outlook remains uncertain". In response, the Aussie dollar (-0.50%) is losing ground, trading at a two-week low of 0.6527 versus the dollar with the policy-sensitive 3yr government bond yield dropping -5.3bps to 3.69% as I check my screens.

In terms of wider Asia moves, the Nikkei (+0.36%) is reversing initial losses as the Yen falls, with the S&P/ASX 200 (+0.36%) also edging higher while the KOSPI (-1.15%), the Hang Seng (-1.06%), the CSI (-0.31%) and the Shanghai Composite (-0.17%) are lower. S&P 500 (-0.13%) and Nasdaq (-0.27%) futures are lower with 10yr UST yields ticking down -1bps to 4.31%.

Ahead of the BoJ decision, US markets put in a strong performance yesterday, with the S&P 500 (+0.63%) bouncing back from two small weekly declines. That was driven by the Magnificent 7 (+2.00%), particularly after the news came through that Apple (+0.64%) was in talks to use Google’s Gemini for new iPhone features, meaning that Alphabet (+4.60%) saw its best daily performance in over three months. But even outside of big tech, risk appetite remained mostly firm among investors, as the equal-weighted S&P 500 (+0.28%) also rose, whilst US HY spreads closed at their tightest level in over two years. The small cap Russell 2000 was a notable underperformer, down -0.72%.

The main point of caution came on the inflation side, with investors becoming increasingly concerned about how persistent it’s been proving. For instance, 1yr US inflation swaps (+1.5bps) closed at their highest level since October, at 2.64%. And there were fresh signs of price pressures elsewhere, as Brent crude oil prices (+1.82%) rose to $86.89/bbl, which is their highest level since the end of October and up +12.8% YTD.

With this backdrop, markets’expectations for near-term rate cuts continued to inch lower, with pricing of a rate cut by June down to 60% for the Fed and to 80% for the ECB, in both cases the lowest since last October. Markets had priced a 90% likelihood of an ECB June cut as recently as Thursday, so that’s a notable move considering how much ECB commentary has coalesced around June as the most likely timing for a first cut. On a related topic, overnight Peter Sidorov published a report diving into the state of the credit cycles across the US and Europe, and discussing what implications these have for the economic outlook and prospects for rate cuts on both sides of the Atlantic.

The pro-inflationary risk-on tone meant that US Treasuries continued to sell off across the curve, and both the 2yr yield (+0.4bps) and the 10yr yield (+1.8bps) closed at their highest level since November, leaving the 10yr yield at 4.325%. Both 2yr and 10yr yields have risen for the past six sessions, the longest such run since May 2023. These sovereign bond losses were echoed in Europe, with yields on 10yr bunds up +1.8bps, whilst the 2yr German yield (+0.3bps) hit its highest level since November, at 2.95%. That said, it wasn’t all bad news for European sovereigns, as there was a narrowing in spreads in line with the broader risk-on move. For example, the spread of Italian 10yr yields over bunds tightened by -3.6bps to 1.22%, the lowest since November 2021.

For equities, there was a rather different pattern in Europe, as the STOXX 600 ended the day -0.17% lower. That marked a 3rd consecutive daily decline for the index, and there were larger losses for Swedish equities, with the OMX Stockholm 30 down -1.14%. Elsewhere, there wasn’t a massive amount of movement, however, with the FTSE 100 (-0.06%), the CAC 40 (-0.20%) and the DAX (-0.02%) all seeing little change.

Lastly, there wasn’t much data yesterday, although we did get the NAHB’s housing market index from the US for March. That rose to 51 (vs. 48 expected), which marks a 4th consecutive monthly gain for the index.

To the day ahead, and data releases include Canada’s CPI for February, US housing starts and building permits for February, and in Germany there’s the ZEW survey for March. From central banks, we’ll hear from ECB Vice President de Guindos, and the ECB’s de Cos.