Global Stock Rally Fades As Ukraine Talks Continue, Focus Turns To Jackson Hole

Futures are flat ahead of consumer-sector earnings kicking off today, starting with a miss by Home Depot this morning. As of 8:00am ET, S&P futures were unchanged while Nasdaq futures drop 0.1% as Mag7 names are mostly lower ex-NVDA. Semis are mostly weaker ex-INTC which gained more than 6% on news SoftBank would invest $2 billion in the chipmaker and the US would take a 10% stake. Defensives are slightly outperforming Cyclicals. Europe’s Stoxx 600 rose 0.5% as signs of progress toward a peace settlement in Ukraine lifted sentiment. The dollar nudged lower. Treasuries eked out gains after S&P Global Ratings affirmed its AA+ long-term rating for the US, with the 10-year rate falling one basis point to 4.32%. Commodities are weaker dragged lower by energy despite strength in precious and Ags. BBG flags a trade escalation from Friday where Trump expanded the metals tariffs to more than 400 consumer goods, including baby gear, and there is no exemption for goods already in transit; the article states this impacting $328bn of goods based on 2024 trade levels vs. $191bn before the expansion and is more than 6x levels from 2018. Today’s macro data focus is on housing starts and building permits; XHB has lagged SPX YTD by 138bp but has outperformed the SPX by 912bp over the last month.

In premarket trading, Mag 7 stocks are mostly lower (Nvidia +0.3%, Tesla -0.2%, Microsoft -0.05%, Alphabet -0.2%, Apple -0.2%, Amazon -0.2%, Meta -0.3%).

• Fabrinet (FN) falls 8% after the optical device maker said it expects to see a sequential dip in datacom segment revenue in its fiscal 1Q, citing supply constraints for some critical components.
• Home Depot (HD) shares reversed a 2% drop after a closely watched sales measure missed estimates last quarter, suggesting consumers are holding back on major purchases.
• Intel (INTC) is up 5% after SoftBank Group Corp. agreed to buy $2 billion of the chipmaker’s stock.
• Iovance (IOVA) jumps 15% after the biotech said Health Canada approved Amtagvi to treat certain patients with unresectable or metastatic melanoma.
• Nexstar Media Group (NXST) rises 2% after agreeing to acquire all outstanding shares of Tegna (TGNA) for $22 per share in a cash deal valued at $6.2 billion. Tegna shares are up 3%.
• Opera Limited (OPRA) rise 3% after the software firm boosted its revenue guidance for the full year; the guidance beat the average analyst estimate.
• Palo Alto Networks (PANW) gains 6% after the security software company reported fourth-quarter results that beat expectations and gave a strong outlook.
• Peabody Energy (BTU) rises 7% after deciding to walk away from a $3.8 billion deal to buy Anglo American Plc’s steelmaking coal business following a fire at an Australian mine.
• Viking Therapeutics (VKTX) slumps 35% after the company announced top-line results from the Phase 2 clinical trial of its oral obesity drug.

The global stock rally has stalled as investors await new twist and turns in the Ukraine drama, awaited this Friday’s Jackson Hole symposium where Jerome Powell is set to unveil a new policy framework (and usher in a September rate cut), and watched earnings from the biggest US retailers. Money markets are currently betting the Fed will deliver its first rate cut for the year in September, as labor-market weakness outweighs inflation risks, with another move expected before year-end. Oil slipped as traders weighed the outlook for an end to the conflict in Ukraine and a potential future supply increase of Russian crude. Brent fell below $66 a barrel, extending a decline for the month to around 9%.

“With much of it priced in already, equities may need a new catalyst,” said Ipek Ozkardeskaya, a senior analyst at Swissquote Bank. “August through October is seasonally soft, and rising long-term bond yields could tempt investors to pocket recent gains.”

In other corporate news, Nvidia is said to be preparing a more powerful chip for China, according to Reuters. Apple is said to be expanding iPhone production in India as it seeks to lessen its reliance on China for US-bound models, Bloomberg News reported. The company is producing all four iPhone 17 models in India ahead of their debut next month, marking the first time that all new variations will ship from the South Asian country from the get-go. Tesla priced its updated, six-seat Model Y sport utility vehicle in the same range as local rival Li Auto’s extended-range L8 model, to win over middle-class families in China’s hyper-competitive market. Shein is said to be considering moving its base back to China to help sway Beijing authorities to sign off on its plans to go public.

In Europe, the Stoxx 600 climbed 0.6% to its highest level since March after Bloomberg reported US and European officials have started work on a Ukraine’s security plan. That is expected to include a package of guarantees that will open a path to a landmark meeting between presidents Vladimir Putin and Volodymyr Zelenskiy. Sweden’s Ambea and Sweco are among the biggest outperformers, on earnings and a broker upgrade, respectively. Defense stocks drop on Ukraine news, while London- and Warzaw-listed stocks exposed to the war-torn country gain. Here are the biggest movers Tuesday:

• Ambea gains as much as 9.5% after the Swedish care provider reported net sales for 2Q that beat the average analyst estimate. DNB Carnegie says the report shows “continued strong momentum” for the company
• Sweco gains as much as 5.2%, to the highest in more than a month, after DNB Carnegie reinstated coverage of the Swedish engineering consultancy with a price target just shy of the current Street-high
• Huber+Suhner shares rise as much as 9.8% to a record after the Swiss electrical components firm reported Ebit for the first half-year that beat estimates. Vontobel sees consensus estimates moving upward
• Shares in Ukraine-exposed companies surge in Warsaw and London amid revived hopes of a peace deal after Ukrainian President Zelenskiy and European leaders met US President Trump on Monday
• Odfjell Drilling gains as much as 11% and reaches a new all-time high after reporting second-quarter results. DNB Carnegie said the Norwegian offshore drilling firm’s report showed “continued strong performance”
• Applied Nutrition shares rise as much as 12%, the most on record, after the health supplements company said it anticipates revenue to be ahead of market expectations
• European defense companies’ shares are lower Tuesday amid prospects for a potential meeting between Ukrainian President Volodymyr Zelenskiy and Russian President Vladimir Putin
• DocMorris drops as much as 14% following the Swiss-based online pharmacy company’s first-half results. Analysts note that a significant step-up will be required in the second half to achieve the unchanged guidance
• Coloplast falls as much as 3.7%, the most in a month, after the Danish wound and ostomy care group reported disappointing third-quarter earnings, with sales and profit missing consensus estimates
• International Workplace shares slide as much as 18%, the most in three years, after guiding that full-year earnings are likely to come in toward the lower end of the range expected by analysts due to investments
• Basilea shares give up initial gains and head lower as much as 6.5% after the Swiss bio-pharmaceutical company reported results that ZKB analysts said showed a “disappointing” cashflow performance
• Skan shares fall as much as 12%, the most since July 2021, after the health care supplier reported weaker-than-expected results for the first half of 2025, with the Ebitda dropping to CHF0.9 million ($1.1 million)

Earlier in the session, Asian stocks declined for a second day, with South Korea and Australia leading losses, as markets take a breather after an extended rally. The MSCI Asia Pacific Index fell 0.2%, with Sydney-listed biotech CSL the biggest drag as it posted the worst decline on record after disappointing earnings. Equities also dropped in tech-heavy Hong Kong and Taiwan, while benchmarks advanced in Singapore, Malaysia and Vietnam. A gauge of Chinese equities reversed early gains after notching a record close Monday. Sentiment remains bullish, as gains from institutional money chasing these stocks bolster sentiment toward emerging markets and the broader Asian region. Indian shares also moved higher, on track for a fourth session of gains amid thawing relations with China and expectations of a boost in consumption from planned tax cuts.

In FX, the Bloomberg Dollar Spot Index is flat while the Swedish krona takes top spot among G-10 peers, rising 0.3% against the greenback.

Treasuries eked out gains after S&P Global Ratings affirmed its AA+ long-term rating for the US, with the 10-year rate falling one basis point to 4.32%. Treasury auctions resume Wednesday with $16 billion 20-year new issue; an $8 billion 30-year TIPS reopening is slated for Thursday.

In commodities, Brent crude futures fell 1% to near $66 a barrel extending a decline for the month to around 9%, as traders weighed the outlook for an end to the conflict in Ukraine and a potential future supply increase of Russian crude. European natural gas futures are down 0.4%.

Looking at today’s calendar, the data slate includes July housing starts and building permits (8:30am New York time). Fed speaker slate includes Governor Bowman (10am and 2:10pm).

Market Snapshot

• S&P 500 mini little changed
• Nasdaq 100 mini little changed
• Russell 2000 mini -0.2%
• Stoxx Europe 600 +0.5%
• DAX +0.4%
• CAC 40 +0.8%
• 10-year Treasury yield little changed at 4.33%
• VIX little changed at 14.96
• Bloomberg Dollar Index little changed at 1205.06
• euro +0.1% at $1.1675
• WTI crude -1.1% at $62.75/barrel

Top Overnight News

• President Trump on Monday urged Ukrainian President Volodymyr Zelensky and Russian President Vladimir Putin to meet face to face with him at a peace conference in a long shot U.S.-led bid to end the 3½-year-long war in Ukraine. Bloomberg reports that a summit between Putin and Zelenskiy may take place within two weeks, but the Kremlin has yet to confirm. WSJ, BBG
• S&P Global Ratings has affirmed the credit ratings of the U.S., saying it expects robust revenues from the Trump administration’s newly instituted tariff regime to help offset the expected fiscal deterioration resulting from recent legislative changes. WSJ
• Ukraine will promise to buy $100bn of American weapons financed by Europe in a bid to obtain US guarantees for its security after a peace settlement with Russia. FT
• Intel jumped premarket (INTC +5.8% pre) after SoftBank agreed to invest $2 billion, paying $23 per share — a slight discount to Intel’s last close. The deal would amount to about a 2% stake in the chipmaker. BBG
• NVDA is developing a new AI chip for China based on its latest Blackwell architecture that will be more powerful than the H20 model it is currently allowed to sell there, two people briefed on the matter said. RTRS
• Trump’s tariff war is speeding Beijing’s trade and investment drive into developing nations, potentially paving the way for a China-led trade order, S&P Global said. BBG
• Japan’s 20-year bond auction saw weaker demand than previous months, as investors remained wary of long-term debt given risks from rising spending and tax cuts. BBG
• Apple Inc. is expanding iPhone production in India at five factories, including a pair of recently opened plants, as it seeks to lessen its reliance on China for US-bound models. BBG

Trade/Tariffs

• Brazil’s government submitted its response to the US Section 301 investigation and said it urges the USTR to reconsider the initiation of the Section 301 investigation and to engage in constructive dialogue. It was separately reported that Brazil’s Finance Minister Haddad said Brazil is deadlocked with the US over 50% tariffs and reduction in high levies depends on Washington being open to talks, according to FT.
• India exempted import duty on cotton between August 19th to September 30th, according to a government order.
• Japan-India framework to focus on chips, mineral resources, and AI, according to reports citing Nikkei

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded mixed following the ultimately flat performance stateside amid a lack of fresh macro catalysts, as focus centred on geopolitical updates and amid cautiousness ahead of Powell’s speech at Jackson Hole on Friday. ASX 200 pulled back from record highs with heavy losses in healthcare as CSL shares fell by a double-digit percentage after the announcement to spin-off its flu vaccine business and cut 15% of its workforce, while tech was at the other end of the spectrum and miners also gained post-BHP earnings despite the mining giant reporting a 26% drop in FY underlying profit. Nikkei 225 swung between gains and losses after failing to sustain the initial upward momentum that had lifted the index to a fresh record high. Hang Seng and Shanghai Comp kept afloat following a firm liquidity effort by the PBoC which injected CNY 580bln through its 7-day reverse repo operation, while there were also comments on Monday by Chinese Premier Li who said the nation should consolidate and expand the positive trend in the economy, as well as stabilise market expectations and should continue to stimulate consumption potential.

Top Asian News

• China’s Foreign Minister Wang Yi held talks with his counterpart in India and said their countries should establish a correct strategic understanding, as well as regard each other as partners and opportunities, not as rivals or threats, while he added that China is ready to uphold the principle of cordiality and mutual benefit.
• China Jan-July Fiscal Revenue +0.1% Y/Y; Expenditures +3.4% Y/Y.
• XPeng (9868 HK) Q2 (CNY) Adj. EPS -0.20 (exp. -0.36, prev. -0.19 Y/Y), Revenue 18.27bln (exp. 18.11bln); Q3 deliveries: Vehicles to be between 113-118k.
• Russian Defence Ministry says they have conducted strikes on oil refinery supplying fuel to Ukrainian armed forces, according to Ifax.

European bourses (STOXX 600 +0.4%) opened modestly firmer across the board, with cautious optimism stemming from the recent US President Trump/Ukrainian President Zelensky/EU Leaders meeting. On that, Trump described it as a very good meeting, while he also called Russian President Putin to begin arrangements for a Putin-Zelensky meeting, which would be followed by a trilateral meeting with Trump. Reportedly, security agreements were discussed; on territorial developments, Zelensky suggested it would be a discussion between Ukraine and Russia. As the morning progressed, stocks have gradually climbed higher and currently sit at highs. European sectors hold a positive bias, but the breadth of the market is fairly narrow. Consumer Products takes the top spot, joined closely by Basic Resources and Retail; nothing really company-specific is driving the upside in these sectors, but largely benefiting from the slightly positive risk tone.

Top European News

• UK’s ONS says Friday’s scheduled retail sales data release has been delayed until September 5th

FX

• DXY is relatively rangebound this morning with a slight negative bias and price action contained to either side of the 98.00 mark. Currently in a narrow 97.99-98.32 parameter vs Monday’s 97.77-98.19 range. The theme over the last couple of days has been geopolitics, with deliberations over the Russia-Ukraine war in Washington concluding for now. Overall, there has been no breakthrough in Monday’s discussions, although talks may advance with a possible Zelensky–Putin meeting in two weeks, their first since the war began. Despite the mild optimism, betting markets remain pessimistic, with Polymarket pointing to a 38% chance of a Russia-Ukraine ceasefire this year.
• EUR/USD is holding a mild upward bias after finding support at its 50 DMA (1.1641) following Monday’s slide under 1.1700, with very little newsflow from the bloc aside from the comments from various European leaders following the multilateral meeting on Ukraine at the White House. EUR/USD resides in a current 1.1640-1.1685 range with the 50 DMA at 1.1641.
• Modest gains in the JPY, albeit in tandem with USD weakness, with little in terms of fresh catalysts from Japan. USD/JPY trades in either side of 148.00 in a 147.53-148.11 parameter, vs Monday’s 147.06-147.99 range, with the 50 DMA at 146.60 and the 200 DMA at 149.22.
• GBP continues to struggle for direction as newsflow from the UK remains very quiet, although there were reports that UK Chancellor Reeves is considering replacing stamp duty with a new property tax. GBP/USD trades in a 1.3486-1.3529 range (vs Monday’s 1.3501-1.3568), with the 50 DMA at 1.3501 today.
• Antipodeans are essentially flat vs the Dollar today, continuing the tentative risk tone seen in overnight trade.
• PBoC set USD/CNY mid-point at 7.1359 vs exp. 7.1846 (Prev. 7.1322)

Fixed Income

• A contained start to the day for USTs after the pressure that began towards the end of the European day and intensified into the mid-US morning. The pullback occurred as the White House meetings got underway and, ultimately, as the tone from the meeting was a positive one with progress made towards a trilateral summit and then security guarantees. On the guarantees, they are seemingly set to be formed of a coalition of the willing, which will be coordinated by the US. Currently, USTs are at a 111-15 trough, near enough unchanged on the session. If USTs conform to the bearish bias in EGBs, then Monday’s 111-13+ base is the first focal point before a bit of a gap until 110-23+ from the first week of August.
• As mentioned above, EGBs were slightly softer at this moment in time. Lower by as much as 10 ticks at worst. Pressure is seemingly a function of two bearish supply-side factors: 1) upcoming issuance, with Germany selling EUR 4.5bln of 2030 debt; 2) the funding security guarantees for Ukraine. Currently, the low point is 128.73. If we return to and move below this, Monday’s 128.70 base and then last week’s 128.64 trough comes into view. The German 2030 auction was well received, drawing a better-than-prior b/c – which helped to flip Bunds into positive territory.
• Gilts trade similar to Bunds but modestly underperforming. Thus far, to a 90.43 base with downside of just over 15 ticks at most. Taking out Monday’s 90.52 base and bringing levels from May into view. Given this, the UK 10yr yield is at a fresh WTD peak of 4.76%, approaching 4.69% from end-May.
• UK sells GBP 1.6bln 1.125% 2035 I/L Gilt: b/c 3.1x (prev. 3.35x) & real yield 1.728% (prev. 1.588%).

Commodities

• Crude oil trades softer following the Washington confabs between the US, Ukraine, EU, and NATO. Overall, there has been no breakthrough in Monday’s discussions, although talks may advance with a possible Zelensky–Putin meeting in two weeks, their first since the war began. The main obstacle remains Russia’s demand for full control of Donetsk and Luhansk, which Ukraine rejects. WTI currently resides in a 62.05-62.68/bbl range while Brent sits in a USD 66.58-66.02/bbl range.
• Mostly flat trade across precious metals amid quiet markets and with little fallout seen in the yellow metal from the deliberations on Russia-Ukraine, as traders await a clearer hint of what will result from the talks. Price action this morning sees the precious metals complex eking mild gains, with spot gold trading under its 50 DMA (3,349.61/oz) in a USD 3,326.28-3,341.88/oz range.
• Flat/mixed trade across base metals amid the broader tentative mood across the markets. 3M LME copper prices reside in a USD 9,739.40-9,782.00/t range.
• Equinor (EQNR NO) preparations for start up of Norway’s Hammerfest LNG terminal after outage are underway.
• Ukraine’s Energy Ministry says Russian attacks damaged gas transport infrastructure.
• Germany sells EUR 3.424bln vs exp. EUR 4.5bln 2.20% 2030 Bobl: b/c 1.90x (prev. 1.50x), average yield 2.32% (prev. 2.28%) & retention 23.19% (prev. 24.24%).

Geopolitics

• US and Europe to work immediately on Ukraine security guarantees, via Bloomberg.
• Poland PM Tusk will take part in meeting of the Coalition of the Willing at 11:00BST/06:00EDT, according to a spokesperson.
• Ukraine Foreign Minister says future trilateral leaders meeting can bring a breakthrough on the path to peace.
• US President Trump posted that he had a very good meeting with Ukrainian President Zelensky and European leaders, which ended in a further meeting in the Oval Office and during the meeting, they discussed security guarantees for Ukraine, which would be provided by the various European countries with coordination with the US. Trump added everyone is very happy about the possibility of peace for Russia and Ukraine, and at the conclusion of the meetings, he called Russian President Putin and began the arrangements for a meeting, at a location to be determined, between President Putin and President Zelensky. Furthermore, Trump said after that meeting takes place, they will have a trilateral between Trump, Putin and Zelensky, as well as noted that this was a very good, early step for a war that has been going on for almost four years and that VP Vance, Secretary of State Rubio, and Special Envoy Witkoff are coordinating with Russia and Ukraine.
• Russia’s Kremlin said US President Trump and Russian President Putin held a phone call which lasted 40 minutes and they discussed the idea of exploring the possibility of raising the level of Russian and Ukrainian representatives in the negotiations, while Putin warmly thanked Trump for the hospitality and well-organized meeting in Alaska, as well as for progress achieved at the summit. Furthermore, Putin and Trump spoke in favour of the continuation of direct talks between the Russian and Ukrainian delegations, while they agreed to continue close contact with each other on the Ukrainian crisis and other issues.
• Ukrainian President Zelensky said we need not a pause in the war, but real peace and territorial issues will be decided between Russia and Ukraine. Zelensky said he discussed security guarantees with Trump and European leaders, and received an important signal from the US on being part of security guarantees and help in coordinating it. Furthermore, he said the US offers to have a trilateral meeting as soon as possible and that Ukraine is ready for any format to meet with Putin.
• Ukraine reportedly offered a USD 100bln weapons deal to US President Trump in an effort to win security guarantees, according to the Financial Times citing documents laying out Kyiv’s proposal to Trump at the White House meeting.
• US Secretary of State Rubio told Fox News that they will work with European allies and non-European countries to build security guarantees for Ukraine. Rubio said he was in the room when Trump and Putin spoke, while he added that Trump suggested to Putin that he meet with Zelensky.
• NATO Secretary General Rutte said it was a very successful day in Washington where security guarantees were discussed and more details on security guarantees will be discussed in the coming days, while he added it is a breakthrough that the US will get involved and they are discussing some Article 5-type arrangement.
• European Commission President Von der Leyen said after the White House meeting that they are here as allies and friends for peace in Ukraine and in Europe, while she added this is an important moment as they continue to work on strong security guarantees for Ukraine.
• German Chancellor Merz that he feels these are decisive days for Ukraine and is not sure if Russian President Putin will have the courage to come to a summit with Zelensky present, while he added that expectations were not only met but were exceeded from this meeting. Merz also stated that US President Trump spoke with Russian President Putin and agreed that a Putin-Zelenskiy meeting will happen within two weeks, while the location is yet undecided, and that will be followed by a three-way meeting involving Trump.
• Finland’s President Stubb said they agreed on security guarantees and steps forward, as well as noted that talks were constructive and the Coalition of the Willing has already worked on security guarantees which they will build upon. Stubb also stated there is nothing concrete about US participation in security guarantees and that US President will inform them, with details of security guarantees to be ironed out in the next week or so.
• Debris from a destroyed Ukrainian drone sparked a fire at an oil refinery and hospital in Russia’s Volgograd, according to the regional administration.
• North Korea leader Kim said joint US-South Korea military drills show willingness for war provocation, while he also stated that the security environment requires North Korea to expand its nuclear armament rapidly.
• „Israeli media: The Chief of Staff will present today to the Minister of Defense the plan to occupy Gaza City”, according to Al Arabiya.

US Event Calendar

• 8:30 am: Jul Housing Starts, est. 1297k, prior 1321k
• 8:30 am: Jul P Building Permits, est. 1385.5k, prior 1393k

Central Banks

• 10:00 am: Fed’s Bowman Speaks on BTV
• 2:10 pm: Fed’s Bowman Speaks at Wyoming Blockchain Symposium 2025

DB’s Jim Reid concludes the overnight wrap

Geopolitical headlines continued to dominate yesterday, as Ukrainian President Zelenskiy and several other European leaders met President Trump at the White House. The main news is that Trump is now seeking to arrange a meeting between Putin and Zelenskiy, and he posted afterwards on Truth Social that he called Putin and “began the arrangements for a meeting” between the two. Zelenskiy said he was ready for these talks, but the Kremlin hasn’t committed to such a meeting yet, with Putin’s aide Ushakov making more ambiguous comments last night that they had “discussed the idea of raising the level of Russia’s and Ukraine’s representatives”.

The other major topic in yesterday’s talks were security guarantees for Ukraine, with Trump posting afterwards that “Guarantees would be provided by the various European Countries, with a coordination with the United States of America.” Zelenskiy called the US promises “a major step forward” and added that security guarantees for Ukraine could be formalised on paper within the next 10 days. That call for progress was echoed by others, and NATO Secretary General Rutte said that “Today was really about security guarantees, US getting more involved there, and all the details to be hammered out over the coming days”. Separately, the FT reported that to help secure those security guarantees, Ukraine had offered to buy $100bn of American weapons financed by Europe.

However, there were some differences between the US and the European countries. For instance, Trump said that a ceasefire was not needed to negotiate a resolution but France’s President Macron and Germany’s Chancellor Merz favouring a ceasefire before further talks. Zelenskiy said Ukraine would not insist on a ceasefire as a pre-condition for talks. But overall the meetings struck a constructive tone and we saw positive comments from European leaders following the meeting, with the UK’s Prime Minister Starmer saying he was “very pleased” with the outcomes.
The talks didn’t deliver decisive progress, but DB’s Peter Sidorov published a note this morning (link here) where he says that this marks the start of serious talks, with the prospect for peace better than they were earlier in the year. Nevertheless, there are still major obstacles in his view – most notably in terms of the gap over territorial issues and on agreeing credible security guarantees for Ukraine that would also be accepted by Moscow.

Against that backdrop, there hasn’t been a big market reaction in response to the talks. European equity futures are up a bit overnight, with those on the Euro STOXX 50 up +0.15%, whilst DAX futures are up +0.12%. Brent crude oil prices are also down -0.66% this morning to $66.16/bbl, but that follows a +1.14% increase yesterday which occurred as the prospects of a ceasefire appeared to diminish. So overall, the meetings haven’t led to an obvious shift in market pricing, although European equity futures are outperforming their US peers this morning, with those on the S&P 500 down -0.18%.

Meanwhile in Asian markets overnight, we haven’t seen many big moves for equities across the major indices. In Japan, the Nikkei (-0.15%) has slipped back a bit, which comes amidst weak demand at a 20yr bond auction that’s reminded investors about ongoing fiscal concerns. Bond yields have moved higher overnight as well, with the 10yr Japanese yield up +3.4bps to 1.59%. Meanwhile in South Korea, the KOSPI (-0.51%) has also lost ground for a second day running, falling to its lowest level in over two weeks. But there’s been a stronger performance for Chinese equities, with the Shanghai Comp (+0.30%) on track for its highest close since 2015, whilst the CSI 300 (+0.13%) is on course for its highest close since October.

Before the various geopolitical developments, there were some interesting moves in US Treasury markets yesterday as well, driven by growing doubts about how quickly the Fed would end up cutting rates over the months ahead. Those moves continued the trend which began last Thursday, back when the US PPI release showed producer prices rising at the fastest monthly pace since March 2022. And importantly, those concerns have lingered over recent days, given that inflation is still above the Fed’s target and expected to remain there given the tariff impact that’s filtering through. Moreover, broader measures of financial conditions are still fairly accommodative, and US IG spreads closed at their tightest since 1998 on Friday, where they remained after yesterday’s session as well.

That line of thinking meant that futures dialled back their expectations for Fed rate cuts this year. For instance, the amount of cuts priced in by the December meeting was down -1.4bps on the day to 53bps. So that’s down from 64bps last Wednesday before we had the PPI report, which demonstrates the scepticism about the Fed’s ability to rapidly cut rates at the next few meetings. In turn, that helped to drive a rise in Treasury yields across the curve, with the 2yr yield up +1.3bps to 3.76%, whilst the 10yr yield was up +1.5bps to 4.33%. There was also some fresh curve steepening, with the 5s30s curve up +0.5bps yesterday to its steepest since late-2021, at 108.5bps.

Meanwhile in the UK, there was a similar selloff for gilts as investors dialled back their expectations for rate cuts from the Bank of England. Indeed, a rate cut by the December meeting was down to just a 54% probability by the close, and at one point it fell to just 45%, so for market pricing at least, another rate cut this year was seen as unlikely. As with Treasuries, that helped to drive yields higher across the curve, and the 30yr gilt yield (+4.7bps) ended the day at a post-1998 high of 5.61%, whilst the 10yr yield (+4.1bps) rose to its highest since May, at 4.74%. However, it was a different story in the rest of Europe, with yields moving lower across the continent. So yields on 10yr bunds (-2.5bps), OATs (-2.1bps) and BTPs (-3.3bps) all moved lower, whilst the 30yr German yield (-1.1bps) moved off of its post-2011 high from Friday as well.

Equities also put in a subdued performance, with the S&P 500 (-0.01%) narrowly losing ground for a second day running. The Magnificent 7 (-0.16%) saw a modest decline while Intel (-3.66%) was the second-worst performer in the S&P amid reports that the Trump administration was in discussions to take a 10% stake in the company. And overnight we then heard that SoftBank agreed to buy $2bn of Intel stock at a small discount to the last closing price. More broadly, matters weren’t helped by the more hawkish rates re-pricing, and weak data further dampened sentiment, as the NAHB’s housing market index unexpectedly fell to 32 in August (vs. 34 expected). However, there were some brighter spots, and the small-cap Russell 2000 (+0.35%) posted a steady advance. And over in Europe, the STOXX 600 (+0.08%) just about inched up to its highest level in nearly three months.

To the day ahead now, and data releases include US housing starts and building permits for July, along with Canada’s CPI for July. Otherwise from central banks, we’ll hear from the Fed’s Bowman, and earnings releases include Home Depot.