Фьючерсы и ставки остаются неизменными в преддверии важного отчета по индексу потребительских цен

US equity futures are flat, with yields and the dollar modestly higher ahead of this morning’s US CPI reports (full preview here). As of 8:00am ET, S&P futures are unchanged, while Nasdaq futures rise 0.2% with Mag 7 stocks mostly flat, except for a big swing in TSLA premarket which now trades trades +1% after sliding -2% earlier amid rising competition from BYD. European stocks are at a third consecutive record high, supported by positive earnings news. An index of Asian shares advanced. Treasury yields edged higher, with the 10-year adding a basis point to 4.55% as the US Dollar ticks higher; Powell’s testimony yesterday was largely in line with January FOMC and current market pricing (no urgency for the Fed to cut). Commodities are mostly lower; WTI -1.1%; Copper -0.9%. Today, the key macro focus will be CPI (our preview as well as JPM and Goldman’s scenario analysis are here), with the market very much on edge: according to JPM, option markets anticipate a 1.2% swing in the S&P today, the biggest in over a year. Powell’s testimony at the House, CSCO earnings and any update from Trump on his reciprocal tariffs plan

In premarket trading, Super Micro Computer (SMCI) jumps 10% after giving an aggressive long-term revenue outlook and saying it “believes” it will meet a Nasdaq Inc. deadline to file audited financial results. Tesla is leading gains for the Magnificent Seven (GOOGL -0.1%, AMZN -0.2%, AAPL +0.06%, MSFT -0.1%, META +0.2%, NVDA +0.3% and TSLA +2.2%). Here are some other notable premarket movers:

• Confluent (CFLT) gains 14% after the application software company reported fourth-quarter results that beat expectations and gave an outlook that is seen as positive.
• CVS Health (CVS) jumps 10% after its fourth-quarter profit beat Wall Street expectations, a sign of improving performance for the company whose insurance and drugstore units have been under pressure.
• Edwards Lifesciences (EW) gains 4% after the maker of heart valves provided a 1Q profit forecast range with a midpoint that beat estimates.
• Freshworks (FRSH) rises 6% after the application software company reported 4Q results above street estimates.
• Gilead Sciences (GILD) gains 4% after the biopharmaceutical company’s 2025 guidance beat analysts’ estimates.
• Kraft Heinz (KHC) declines 3% after providing 2025 adjusted earnings per share guidance that missed the average analyst estimate.
• Lyft (LYFT) falls 13% after giving a disappointing outlook for first-quarter gross bookings, warning that cold weather has hurt demand for ride hails and bike rentals.
• OneStream (OS) tumbles 19% after the application software company reported a sequential slowdown in key metrics including annual recurring revenue and billings growth.
• Teradata (TDC) falls 13% after the infrastructure software company gave a weaker than expected outlook, dashing analyst hopes for signs of a more pronounced recovery.
• Upstart (UPST) soars 26% after the AI lending marketplace reported stronger than expected fourth-quarter results and provided an upbeat outlook.

The stakes for markets are high going into Wednesday’s consumer price index numbers. Economists expect core CPI excluding food and energy to rise 0.3% from the previous month in January, picking up from an increase of 0.2% in December. This corresponds to a year-over-year rate of 3.1%.

“We have to watch 10-year Treasury yields very carefully,” said Kenneth Broux, a strategist at Societe Generale in London. Hotter-than-expected inflation could easily push the yield to 4.60% “and the whole risk-on trade will be back on hold,” he said.

As noted last night, the trading desk at JPMorgan’s Market Intelligence team estimates the S&P 500 will fall as much as 2% should the January consumer price index reading show an increase of 0.4% or more from the previous month.

• 0.40% or higher. This first tail outcome would likely be driven by a spike in Shelter as well as seeing some parts of Core Goods flipping from deflationary to inflationary (HH, Medical, and Alcohol). Expect the bond market to react violently as it shifts its view to Fed Funds not being restrictive and the most likely next action of the Fed to be a hike rather than a cut. The move in bond yields would pull the USD higher, further pressuring stocks. Look for NDX to outperform SPX and RTY to underperform. Odds 5.0%; SPX loses 1.5% – 2%.
• Between 0.33% – 0.39%. This outcome is likely driven more by hotter goods than services with a more muted reaction in the bond market but similar reaction on stocks. This print is unlikely to fully eliminate all cut expectations for FY25, but likely pushed implied probabilities to be a coin flip as to whether we get one cut in FY25. As of Friday, 37.5bps worth of cuts are being priced into the bond market. Odds 25.0%; SPX loses 75bps – 1.5%.
• Between 0.27% – 0.33%. The base scenario which shows a mild increase MoM but is aligned with the trend seen since September which is an inflection higher in inflation that is trending higher with improved growth/hiring, albeit at a potentially softer rate. Look for bond yields to remain range-bound and for a positive outcome for stocks. The upper range is not quite Goldilocks but given the resilience of the market YTD stocks likely push higher led by RTY. Odds, 40.0%; SPX loses 25bps to gains 1%.
• Between 0.21% – 0.27%. This is Goldilocks especially if we combine this with a stronger Retail Sales number. Look for the market to fully price in 2x cuts this year and for Equities to respond favorably led by SMid-caps. Odds 25.0%;
• SPX gains 1% – 1.5%.
• 0.20% or lower. The other tail outcome, potentially achieved by a stepdown in Shelter as Core Goods flips back to being net deflationary. Bond yields bull steepen in this scenario leading to material outperformance by RTY versus SPX. USD likely has a negative reaction aiding EM Equities which likely outperform RTY. Odds 5.0%; SPX gains 1.25% – 1.75%.

“Expect the bond market to react violently as it shifts its view to Fed Funds not being restrictive and the most likely next action of the Fed to be a hike rather than a cut,” the team led by Andrew Tyler wrote in a note. “The move in bond yields would pull the USD higher, further pressuring stocks.”

The CPI figures are due shortly before the second half of a two-day testimony marathon for Fed Chair Jerome Powell, who yesterday told lawmakers the central bank is in no rush to adjust rates again.

“Until we get greater clarity on the medium-term inflation trends, bond yields are likely to remain sticky,” said Daniel Murray, Zurich-based chief executive officer of EFG Asset Management. “It is also clearly impacting equity investor sentiment, in particular in the US, where the combination of more hawkish rate expectations alongside tariff uncertainty has contributed to a rangebound market.”

Europe’s Stoxx 600 rises for a third day, setting a new intraday record in the process, boosted by solid earnings. Food and beverage is the strongest sector, boosted by Heineken’s 13% rally – the most since 2008 – after the drinkmaker reported full-year results that were ahead of consensus and announced a €1.5 billion share buyback. ABN Amro Bank jumped more than 8% after its net interest income topped forecasts. Energy stocks provide a drag as they track a fall in oil. Here are Europe’s biggest movers:

• Deutsche Boerse shares rise as much as 1.9%, briefly hitting a fresh high, after the company reported solid earnings and announced a new surprise €500m share buyback.
• Heineken shares soar as much as 13%, the steepest intraday advance since 2008, after the brewer reported FY results that came in ahead of estimates and announced a €1.5 billion share buyback.
• ABN Amro shares advance as much as 8.9%, hitting the highest intraday level since September 2019, with net interest income beating estimates.
• Barratt Redrow shares advance as much as 9.4%, the most since 2020, after the UK housebuilder said it expects annual adjusted pretax profit to be at the upper end of expectations.
• Lufthansa shares rise as much as 4.6% after the German flag carrier was upgraded to outperform at Bernstein, while British Airways owner IAG was cut to market perform.
• TeamViewer shares climb as much as 6.2% after the German software firm reported 4Q Ebitda that beat estimates. 2025 guidance met the expectations of JPMorgan and Morgan Stanley analysts.
• Ahold Delhaize shares fall as much as 2.9% after the company reported 4Q results. While the results were in line with expectations, analysts flagged the US adjusted operating margin miss.
• Aker BP shares decline as much as 2.4%, the largest drop in three weeks, after the Norwegian oil producer provided 2025 production guidance that Pareto says was “a little soft.”
• Randstad shares drop as much as 6.2% after the recruitment company delivered a “messy” update containing higher-than-expected one-off costs, according to analysts.
• Carl Zeiss Meditec shares drop as much as 7.4%, the most in two months, with analysts noting weaker-than-expected Ebita that overshadowed the German health-care supplier’s revenue beat.
• Alior Bank shares fall as much as 3.2% and Budimex as much as 3.1% in early Warsaw trading after MSCI announced deletion of both companies from its main indexes, effective as of Feb. 28 close.
• Close Brothers shares fall as much as 4.1% after the financial services company said it expects to set aside up to £165 million in 1H 2025 following a regulatory probe into its auto lending business.

Earlier in the session, Asian stocks rose, led by gains in Chinese and Hong Kong shares on continued optimism about artificial intelligence, offsetting concerns over the Federal Reserve’s interest-rate policy. The MSCI Asia Pacific Index was up as much as 0.4%, with Alibaba and Tencent among the biggest boosts. An index of Chinese tech shares listed in Hong Kong advanced 2.7%, aided by a report that Alibaba is working with Apple on AI features. Investors are increasingly bullish on the outlook for Chinese equities as enthusiasm for DeepSeek and other AI developments spurs a fundamental rethink of the market’s attractiveness. For the broader region, sentiment was more downbeat Wednesday after Jerome Powell indicated the Fed is in no rush to cut interest rates, as economic data remains solid. Elsewhere, Indonesia’s key equity gauge rebounded after falling to a three-year low on Tuesday. Taiwanese shares underperformed the region.

In FX, the Bloomberg Dollar Spot Index is up 0.1%. The Japanese yen is the weakest of the G-10 currencies amid tariff concerns, falling 0.8% against the greenback and pushing USD/JPY to ~153.65. The Japanese government asked Trump on Wednesday to exempt the nation’s companies from his fresh tariffs. The Swiss franc outperforms with a 0.2% gain.

In rates, treasury yields are marginally cheaper across the curve with bunds and gilts lagging slightly as traders await January CPI data at 8:30am New York time and Powell’s testimony to House Financial Services panel at 10am. US 10-year yield is ~1bp higher on the day near 4.55% with bunds and gilts lagging by an additional 1.5bp and 1bp in the sector; curve spreads are narrowly mixed after steepening over past two sessions. Busy event slate also includes $42 billion 10-year note sale at 1pm, following strong demand for Tuesday’s 3-year note auction.

In commodities, Brent crude futures drop 1% to $76.30 a barrel. Spot gold falls $17 to around $2,880/oz.

US economic data calendar includes January CPI report (8:30am) and federal budget balance (2pm). Fed speaker slate includes Powell testimony to the US House Committee on Financial Services (10am), Bostic (12pm) and Waller (5:05pm).

Market Snapshot

• S&P 500 futures down 0.2% to 6,080.50
• STOXX Europe 600 up 0.2% to 548.02
• MXAP up 0.3% to 185.08
• MXAPJ up 0.8% to 584.79
• Nikkei up 0.4% to 38,963.70
• Topix little changed at 2,733.33
• Hang Seng Index up 2.6% to 21,857.92
• Shanghai Composite up 0.9% to 3,346.39
• Sensex down 0.2% to 76,145.08
• Australia S&P/ASX 200 up 0.6% to 8,535.26
• Kospi up 0.4% to 2,548.39
• German 10Y yield little changed at 2.45%
• Euro up 0.1% to $1.0373
• Brent Futures down 0.9% to $76.32/bbl
• Brent Futures down 0.9% to $76.32/bbl
• Gold spot down 0.3% to $2,889.78
• US Dollar Index little changed at 107.98

Top Overnight News

• President Trump’s team is working to impose as soon as this week reciprocal tariffs on nations that have slapped levies on U.S. exports, using executive action to bring to life a far-reaching proposal from his first term that never came to fruition. WSJ
• US President Trump’s advisers reportedly eye bank regulator consolidation and are said to discuss consolidating bank regulators’ OCC and FDIC, according to WSJ.
• Trump administration officials are discussing plans to curtail and combine the power of banking regulators. After closing and halting the CFPB, the White House is now looking at whether other bank regulators can be consolidated (Fed, OCC, FDIC, Treasury). WSJ
• The White House plans to nominate Jonathan McKernan to lead the CFPB full-time and Jonathan Gould to lead the OCC, according to Punchbowl.
• US President Trump is lined up to attend a Saudi-backed conference in Miami this month: Reuters
• Fed’s Williams (Vice Chair) said monetary policy is well positioned to achieve Fed goals and the US economy is in a good place, while inflation expectations are well anchored and the US unemployment rate should stay between 4% to 4.25%. Williams also stated that the US is to grow by around 2% this year and next, while inflation is to hang around 2.5% this year and 2% in the coming years. Furthermore, Williams said it is hard to determine if uncertainty is weighing on the economy, as well as noted that monetary policy is where it should be and monetary policy remains appropriately restrictive.
• China’s purchases of chipmaking equipment are set to decline this year after three years of growth, as the industry grapples with overcapacity and faces greater constraints from U.S. sanctions, a consultancy said on Wednesday. RTRS
• Australia is “killing” the US aluminum market, a Trump adviser said, in a potential blow to its efforts to secure an exemption. Japan asked Trump to exclude its firms from levies. BBG
• Eurozone considers imposing a temporary cap on local gas prices amid a record gap compared to the US. European natural gas prices traded at the highest in more than two years this week, in part due to low temperatures and a lack of wind that has stalled renewable energy production. FT
• Chancellor Rachel Reeves and the UK government are coming under pressure to either cut spending or raise taxes as growth undershoots expectations. FT
• The UK economy may have shrunk in the fourth quarter, with economists expecting GDP fell 0.1% following a stagnant third quarter. The BOE estimates there is a 40% chance that Britain is already in a technical recession. BBG
• US crude inventories jumped by 9 million barrels last week, the API is said to have reported. That would be the biggest increase in a year if confirmed by the EIA today. The market will be watching official figures to see if inflows from Canada climbed further. BBG

Tariffs

• US Trump aide Navarro is said to be the leading advocate for the reciprocal-tariffs, WSJ sources said; which could also go beyond simply matching other nations’ tariffs to take into account nontariff trade barriers. Potentially leaves Japan, Europe, and China on the hook for higher tariffs.
• US President Trump responded „We’ll see” when asked if reciprocal tariffs are still coming on Wednesday.
• White House said 25% steel tariffs would stack on other levies, according to Canadian press cited by Reuters.
• Japanese Industry Minister Muto said they requested the US to exclude Japan from steel and aluminium tariffs, while Finance Minister Kato said they will assess the impact of US tariffs on the Japanese economy and respond appropriately.
• The first conversation between European Commission President von der Leyen and US VP JD Vance yesterday was said to be „very constructive” and focused on areas where interests aligned, according to sources cited by the FT.
• US President Trump will sign executive orders at 14:30 EST (19:30 GMT), via Punchbowl.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were ultimately mixed with price action somewhat choppy following the similar performance stateside in the aftermath of Trump’s recent tariff announcements and with US CPI data on the horizon. ASX 200 traded higher as strength in the top-weighted financial sector and the industrials atoned for the losses in tech, while participants digested key earnings releases including from Australia’s largest bank and most valuable company, CBA. Nikkei 225 advanced on return from yesterday’s holiday closure amid recent currency weakness but momentarily pared all of its gains amid rising yields and tariff-related uncertainty. Hang Seng and Shanghai Comp were varied with outperformance in Hong Kong led by strength in tech stocks including Alibaba after reports that Apple partnered with Alibaba to develop AI features for iPhone users in China, while SMIC benefitted after it posted stronger-than-expected revenue and guided revenue growth. Conversely, the mainland was contained with price action choppy amid ongoing trade frictions and the PBoC’s liquidity effort.

Top Asian News

• BoJ Governor Ueda said they will conduct monetary policy appropriately to achieve the 2% target and will monitor the impact of US tariff and immigration policies. Ueda said the pace of monetary adjustment should depend on economic situations and he is aware that rising inflation, including fresh foods, is having a negative impact on households, while he added there could be risks that rising prices of fresh foods may not be temporary and could affect people’s sentiment.

European bourses are generally modestly firmer, despite a mixed handover from the APAC session. European sectors hold a positive bias; Real Estate takes the top spot, propped up by post-earning strength in homebuilder Barratt Redrow (+5.6%). Heineken (+11.4%) jumped at the open after the co. beat on profit and announced a share buyback. Energy is the clear laggard, given the weakness in oil prices today.

Top European News

• ECB’s Holzmann said lowering rates by 50bps increments this year would „not be a wise move”
• Riksbank’s Bunge said inflation outcome for Jan was higher than expected, but the reasons for this are not known and figures should be interpreted with caution

FX

• DXY is steady ahead of upcoming US CPI data whereby core M/M CPI is expected to tick higher to 0.3% from 0.2%, Y/Y nudge lower to 3.1% from 3.2%, headline M/M is seen falling to 0.3% from 0.4% and Y/Y is expected to hold steady at 2.9%. Elsewhere, today sees Powell address The House. Bostic and Waller are also due (latter is speaking on Stablecoins). DXY is back below the 108 mark and in close proximity to its 50DMA at 107.95.
• EUR is stronger vs. the USD for a third consecutive session. However, it remains to be seen how durable the recent uptick will be given the Eurozone’s uncertain growth outlook, easing bias at the ECB and vulnerability of the Eurozone to tariff action from the Trump administration. ECB’s Nagel is due to speak on the natural rate later today. EUR/USD has been as high as 1.0379 but is yet to breach yesterday’s 1.0381 peak.
• JPY is the clear laggard across the majors, potentially a factor of the relatively higher yield environment. Japanese-specific drivers have been on the light side asides from some non-incremental remarks from BoJ Governor Ueda overnight who stated that the pace of monetary adjustment should depend on the economic situation and he is aware that rising inflation, including fresh foods, is having a negative impact on households. USD/JPY is now back above its 200DMA at 152.70 with a current session peak at 153.88. Focus is now on a test of 154.
• GBP is steady vs. the USD with the lone highlight on today’s UK calendar coming via a speech by MPC member Greene at 15:00GMT. Greene’s remarks will follow those yesterday of dovish dissenter Mann who gave her reasoning behind her dovish dissent at the last meeting but noted her “active rate policy does not mean cut, cut, cut” and suggested she may not opt for another 50bps cut at the next meeting. Cable briefly popped above yesterday’s 1.2454 peak but ran out of steam ahead of the 50DMA at 1.2476.
• Antipodeans are both marginally softer in quiet trade for the antipodes. AUD/USD is pausing for breath after two consecutive sessions of gains which has brough the pair above its 50DMA at 0.6271 but failed to sustain a move above the 0.63 mark with a current session peak at 0.6309.
• PBoC set USD/CNY mid-point at 7.1710 vs exp. 7.2971 (prev. 7.1716).

Fixed Income

• USTs are steady ahead of upcoming US CPI data. An in-line report could cement the markets view of inflation stickiness given that the most recent Fed statement did not include language that inflation had made progress to its 2% goal. On the trade front, WSJ reports that reciprocal tariffs could go beyond simply matching other nations’ tariffs to take into account nontariff trade barriers. For the docket today; US 10yr supply, and Fed speak from Bostic, Waller and Powell. After printing a base at 4.40% on 5th February, the US 10yr yield has been up for 5 sessions in a row and ventured as high as 4.556% today.
• Bunds are lower by around 20 ticks. German yields are higher once again after a strong showing yesterday which Rabobank attributes to a glut of (particularly sovereign) issuance given an absence of any market moving type newsflow (including a lack of fresh EZ data or a shift in tone from central bank speakers). EZ-docket is fairly light, but ECB’s Nagel is due; US CPI will take focus. German 2054/2050 lines passed without issue, sparking little move in German paper.
• Gilts marginally higher after yesterday’s session of losses. The lone highlight on today’s UK calendar coming via a speech by MPC member Greene at 15:00GMT. Mar’25 Gilts are currently sat just below the 93.00 mark with the corresponding 10 year yield holding above the 4.5% mark.
• Germany sells EUR 1.189bln vs exp. EUR 1.5bln 2.50% 2054 Bund and EUR 0.795bln vs. Exp. EUR 1bln 0.00% 2050 Bund.

Commodities

• A soft session for the crude complex today, giving back some of the geopolitical-induced upside in the prior session; but underlying tensions still remain unresolved regarding US-Israel and Gaza. Although Journalist Kais did report that there is „some optimism” about reaching a solution. Brent currently trades at the bottom end of a USD 76.22-91/bbl range.
• Spot gold is a little lower today, currently off by around USD 5.00/oz; price action has been very rangebound and contained within a USD 2883.79-2900.75/oz confine.
• Mixed trade in base metals with markets cautious ahead of US CPI and potential Trump reciprocal tariffs. 3M LME copper resides in a USD 9,347.85-9,416.00/t range this morning.
• EU considers a temporary gas price cap to counter diverging costs with the US, although the proposal has spurred backlash from the industry which warned it could damage trust, according to FT.
• Vitol CEO said European LNG prices are reaching levels where demand is going to start to be impacted. EU government intervention will be required to ensure adequate winter LNG supplies.
• UAE Energy Minister said „I don’t think that Deepseek’s AI advancement will hit demand for Nuclear energy”. There will be huge demand for energy, probably greener, to supply data centres. „Optimistic that we will have sufficient energy to supply the AI boom”. Ensuring market stability to benefit of producing and consuming nations is very hard, especially with OPEC’s shrining market share.
• Russian Deputy PM Novak says it fully complied with OPEC+ oil cuts deal in January and will do the same in February. Expects to keep or increase oil refining throughout in 2025. There is no discussion of gas swaps with Azerbaijan for exports to Europe via Ukraine.

Geopolitics: Middle East

• Journalist Kais said „Qatar and Egypt are in contact with the US on the [Ceasefire] issue, and there is some optimism about reaching a solution”, citing mediating sources.
• Iran’s Supreme leader Khamenei said Tehran should further continue improving it’s defence sector, accuracy of Iranian missiles should be further improved.
• „Syrian sources: The Israeli army penetrates into the town of „Saida Golan” in the southern countryside of Quneitra”, via Sky News Arabia.
• „The [Israeli] negotiating team advised cabinet ministers to resolve the crisis with Hamas and not to allow the deal to collapse”, according to Israeli sources via Al Jazeera.
• US Secretary of State Rubio said if Hamas does not abide by the agreement by Saturday, he thinks Israel will intervene again, while he added that Trump wants to get all detainees out of the Gaza Strip at once and that Hamas violates the ceasefire agreement in the Gaza Strip, according to Asharq News.
• Egypt plans to offer a comprehensive proposal to rebuild Gaza while ensuring Palestinians remain on their land and looks forward to cooperating with US President Trump to achieve a comprehensive and just peace in the region. Egypt also affirmed the rejection of any proposal to allocate land to Gaza residents.

Geopolitics: Ukraine

• Russia’s Kremlin said Russia will never discuss swapping Ukrainian territory it controls or area Ukraine holds in the Kursk region.
• Russian Deputy Chairman of the Security Council Medvedev said „we can have peace through strength” and Russian showed strength with missiles and drone strikes on Kyiv (Ukraine).
• Ukrainian President Zelensky stated in a recent interview with AFP that he is willing to swap Russian territory captured by Ukraine in the Kursk region for Ukrainian territory captured by Russia in the east in a negotiated peace settlement to end the ongoing war.
• Russian air attack sparked fires in two Kyiv districts, according to the head of Kyiv’s military administration. Furthermore, Ukrainian President Zelensky’s aide said Russia carried out a missile strike on Kyiv, while the city mayor said emergency services were called to several districts.
• US President Trump said on Truth that he will send US Treasury Secretary Bessent to Ukraine to meet Zelensky, while he added the war must end and will end soon. It was separately reported that White House National Security Adviser Waltz said they are moving in the right direction to end the brutal and terrible war in Ukraine.

Geopolitics: Other

• US Navy confirmed two US warships carried out a north-to-south Taiwan Strait transit and said it was routine, while China’s military organised its naval and air force to monitor US ships crossing the Taiwan Strait from Feb. 10th-12th.
• China’s Taiwan Affairs Office said it resolutely opposes and will never allow any foreign interference, while it has full confidence and sufficient ability to safeguard national sovereignty and territorial integrity. It also said the US should prudently and properly handle Taiwan-related issues and not send wrong signals to independence separatist forces.
• China’s Coast Guard conducted a 'rights defence’ patrol in the 'territorial waters’ of the Diaoyu/Senkaku Islands on Wednesday, according to state media.

US Event Calendar

• 07:00: Feb. MBA Mortgage Applications 2.3%, prior 2.2%
• 08:30: Jan. CPI MoM, est. 0.3%, prior 0.4%
• 08:30: Jan. CPI YoY, est. 2.9%, prior 2.9%
• 08:30: Jan. CPI Ex Food and Energy MoM, est. 0.3%, prior 0.2%
• 08:30: Jan. CPI Ex Food and Energy YoY, est. 3.1%, prior 3.2%
• 08:30: Jan. Real Avg Hourly Earning YoY, prior 1.0%, revised 1.2%
• 08:30: Jan. Real Avg Weekly Earnings YoY, prior 0.7%, revised 0.5%
• 14:00: Jan. Federal Budget Balance, est. -$94.8b, prior -$86.7b

DB’s Jim Reid concludes the overnight wrap

I’m waking up in Paris this morning and will be waking up in a hospital in London later tonight after brief sedation post another back injection. I’m on last chance saloon before back fusion surgery that I’m trying to delay until the autumn. One of my discs in my lower back has slowly collapsed with no room for the nerve which is therefore consistently compressed. As such I’ve had constant sciatica for the last 3-4 years. I work on my core 4-5 days a week, have done countless physio sessions, numerous injections, and had a slightly simpler back operation 2 years ago. Nothing works. If anyone has experience of fusion surgery or any last-minute advice on how to avoid it I’d be interested to hear but I’ve tried most things non-surgical. Difficult to reallign a disc that’s old and out of shape! The good news is that I’ve still managed to play to a 2.5 golf handicap in spite of the pain. The bad news is I’ll be potentially off golf for 6 months when I have the op. I’m inspired by the fact that Tiger Woods won the Masters two years after fusion surgery! My equivalent will be the Worplesdon Golf Club Over 50s Cup in 2026!

Talking of 2026, markets have been getting slightly more concerned in recent days as to where inflation will be next year. We’ll know a little more about the near term direction of travel today with US CPI out later. Ahead of that bonds have continued to sell off from their 2025 yield lows seen last week. There were a few catalysts yesterday but comments from Fed Chair Powell, who said that “we do not need to be in a hurry to adjust our policy stance” were a factor even if that’s what we expected him to say. But on top of that, a fresh rise in energy prices and the prospect of retaliatory tariffs from the EU led to anxiety that inflation would keep lingering above target for some time. Indeed, the US 2yr inflation swap (+4.2bps) closed at its highest in nearly two years, at 2.796%.

This backdrop makes it an interesting day to get the US CPI print for January, which will offer the first big clue on inflation in 2025. Today’s report is getting a decent amount of attention, in part because last January’s report saw a strong upside surprise, so the fear is we could get another new year uptick that upsets market expectations for the Fed to still cut this year. That’s particularly the case because recent data has leant in a more hawkish direction, with the 3m annualised rate of CPI already running at +3.9% in December, whilst the 6m rate was at +3.0%.

In terms of what to expect, our US economists are looking for monthly headline CPI at +0.31%, which would keep the year-on-year rate at +2.9%. Then for core CPI, they’re looking for a monthly +0.28% print, with the year-on-year rate ticking down a tenth to +3.1%. The other key thing to look out for will be the annual revisions to the seasonal adjustment factors, which could affect the last 5 years of data. Last year the revisions didn’t change the picture much at all, but two years ago they showed that inflation wasn’t slowing as rapidly as we thought, so that shifted attitudes in a more hawkish direction. For more details, see our US economists’ full preview here and how to sign up for their immediate reaction webinar.

Ahead of that, the main story yesterday came from Fed Chair Powell, who was delivering his semiannual testimony before the Senate Banking Committee. As discussed above, his main comment was that the Fed didn’t need to be in a hurry, and he also said that if “the economy remains strong and inflation does not continue to move sustainably toward 2 percent, we can maintain policy restraint for longer.” Otherwise, there wasn’t too much in the way of headlines. Note that Powell speaks before the House Financial Services Commitee today in the second of his semi-annual double bill in Congress. Normally the second act doesn’t get as many headlines but there’s a chance today’s CPI may solicit a slightly different tone or encourage different questions. All depends on where the release is relative to expectations.

While we wait for this, there was fresh news on the tariff front as the EU said that US tariffs on metals would “trigger firm and proportionate countermeasures.” The US tariffs don’t come into effect until March 12, so in theory that could offer time for a delay or a deal to be reached, as happened with Canada and Mexico last week. But for markets, the concern is this is going to lead to higher inflation on both sides of the Atlantic. And that sentiment was exacerbated by another rise in energy prices yesterday, with Brent crude oil (+1.17%) moving up for a 3rd day running to $76.76/bbl.

All that helped lead to a significant sovereign bond selloff yesterday, particularly in Europe. For instance, yields on 10yr bunds rose +6.8bps to 2.43%, which is their biggest daily increase of 2025 so far, albeit a good 22bps off the YTD highs in the first half of January. Similarly, yields on 10yr gilts (+5.1bps), OATs (+12.1bps) and BTPs (+8.0bps) all jumped higher as well. And in the US, Treasury yields rose across the curve, with the 2yr yield up +1.0bps to 4.28%, whilst the 10yr yield was up +3.9bps to 4.535% (4.545% in Asia). The steepening came amid strong demand for near-dated US government bonds, as the US Treasury’s $58 billion auction of 3-year notes saw a record low 10.2% primary dealer award.

Investors also dialled back the likelihood of Fed rate cuts, with the probability of a rate cut by June ticking down to 59%, from 63% the previous day. This comes amid another spate of Fed speakers preaching patience. New York Fed Reserve President Williams yesterday said he expects inflation will continue to move toward the bank’s stated 2% target, “but it’s important to note that the economic outlook remains highly uncertain, particularly around potential fiscal, trade, immigration and regulatory policies.” He still had a year-end inflation target of 2.5%, with the 2% goal arriving “in the coming years”. Cleveland Fed President Hammack, a non-voter this year who dissented the cut in December, said she would keep rates steady to study new government policies and wait for further evidence of lower price pressures.

For equities, there was a more robust performance over the last 24 hours, particularly in Europe. For instance, the STOXX 600 (+0.23%), the DAX (+0.58%) and the FTSE 100 (+0.11%) all moved up to record highs. That cements the DAX as the strongest-performing major index of 2025, having risen by +10.69% since the start of the year, and making it the strongest start to a year by this point since 2012. Meanwhile in the US, the S&P 500 (+0.03%) was basically flat, but it still remained less than 1% beneath its all-time high from January. Autos (-5.82%) were a major laggard yesterday primarily due to TSLA (-6.34%) underperforming as Chinese competitor BYD announced plans for self-driving technology to become standard in their cars. This latest slide means the automaker is down -31.5% from all-time highs reached in mid-December. Autos were also under pressure as reports circulated that Ford (down -0.32% yesterday, -6.97% YTD) CEO Jim Farley will be meeting with lawmakers in DC today in order to argue against the spectre of tariffs which are weighing on the industry.

Asian equity markets are mostly higher with the Hang Seng (+1.56%) leading gains in the region as Chinese tech, and EV stocks are surging amid AI hype. Meanwhile, the Nikkei (+0.18%) is edging higher after returning from a holiday with the KOSPI (+0.22%) and the S&P/ASX 200 (+0.51%) also up. Elsewhere, mainland Chinese stocks are bucking the regional trend with the CSI (-0.12%) and the Shanghai Composite (-0.01%) swinging between gains and losses. US futures are down around a tenth of a percent.

In stock specific news, Alibaba Group shares jumped more than 8%, hitting a four-month high on reports of a strategic partnership with Apple Inc to develop artificial intelligence (AI) features for iPhones in China. BYD Co. (+5.5%) has surged to a new record after the self-driving news we discussed above.

In FX, the Japanese yen (-0.76%) continues to lose ground for the third consecutive day trading at a 1-week low of 153.65 against the dollar due to reciprocal tariff uncertainty. Yen’s underperformance is in contrast from last week when the currency had strengthened for four straight sessions on rising bets that the BOJ will raise rates again this year. This morning, overnight index swaps (OIS) are suggesting a 77% chance of a BOJ rate hike by July and fully pricing in a rate hike by October.

There wasn’t much data yesterday, although in the US, the NFIB’s small business optimism index fell a bit more than expected in January. That was down to 102.8 (vs. 104.7 expected), moving off its 6-year high in December. Otherwise, the French unemployment rate was down to 7.3% in Q4 (vs. 7.5% expected).

To the day ahead now, and data releases include the US CPI print for January, and Italian industrial production for December. From central banks, Fed Chair Powell will be speaking before the House Financial Services Committee, and we’ll also hear from the Fed’s Bostic and Waller, the ECB’s Elderson and Nagel, and the BoE’s Greene.