Фьючерсы стабильны перед индексом цен производителей и взаимными тарифами

Futures are flat, Europe’s Stoxx 600 slipped from session highs and the euro gave up an earlier advance against the dollar sparked by hopes for a Ukraine war ceasefire, after President Donald Trump signaled he’s about to announce reciprocal tariffs on trading partners, just as we warned last night he would. As of 8:00am ET, S&P futures are down 0.1% while Nasdaq futures rise by a similar percentage even as Chinese technology stocks saw a dramatic intraday turnaround to finish lower. TSLA is up 2.2% pre-market with the rest of Mag 7 largely unchanged this morning; CSCO rose 6.8% on the back of a higher revenue forecast. Bond yields are 2-3bp lower, while the USD reversed an earlier loss. Commodities are mostly lower: WTI and aluminum are -1.5% and -0.9% lower, respectively. Today, the macro focus will be PPI and any updates on Trump’s reciprocal tariff plan which the president said in a social media post will be announced on Thursday. Futures contracts on the S&P 500 and Nasdaq 100 erased early gains, while

While the main economic event of the day will be the January PPI (expected at 0.3% MoM and 3.3% YoY for both headline and core), traders will be focused instead on the latest front in Trump’s trade war after the president said in a Truth Social post the new levies will be announced on Thursday.

In premarket trading, Apple leads losses for the Mag7 as Tesla shares are up, putting the stock on track to extend gains after snapping a five-session streak of losses( Apple -0.4%, Nvidia, Alphabet, Amazon, Meta Platforms were edging lower, while Tesla +2.3%). Reddit shares tumbled as much as 18% after the social network reported fewer-than-expected daily active users. Jefferies said the user miss raises growth questions. Here are some more premarket movers:

• 10X Genomics shares sink 8.3% in premarket trading after the maker of biological-research equipment forecast revenue for 2025, without accounting for impact from the National Institutes of Health’s decision to put a cap on how much research institutions can charge the government. Analysts trim their price targets citing uncertainty and risks to the firm’s guidance.
• Albemarle shares rise 3.1% in premarket trading after the lithium producer reported adjusted Ebitda for the fourth quarter that was better than Wall Street’s expectations. Analysts also see the firm reaching breakeven free cash flow in 2025.
• Aspen Aerogels shares plunge as much as 34% in US premarket trading after the thermal insulation products maker’s first-quarter guidance fell short of expectations and it refrained from giving a full-year outlook. Analysts said this impacted the company’s visibility, and raised questions over orders from its client General Motors.
• Deere shares fall as much as 8.7% in premarket trading on Thursday as the tractor maker maintained its outlook as a slumping agriculture sector continues to hit farm machinery tractor sales.
• Dutch Bros shares soar 24% in premarket trading after the drive-thru coffee chain’s total revenue forecast for 2025 exceeded analyst estimates. Additionally, the company reported fourth-quarter comparable sales that topped consensus.
• Fastly shares fall as much as 21% in US premarket trading after the infrastructure software company’s outlook for the year disappointed, with analysts pointing to a hit from investments. However, some brokers noted that the guidance could be conservative given it doesn’t include US revenues from customer TikTok.
• HubSpot shares rise as much as 5.7% in premarket trading after the software company reported fourth-quarter results that beat expectations. KeyBanc upgrades the stock saying “there are a few indicators that 2025 could see material upside.”
• Kraft Heinz shares fall 1.3% in premarket trading after BofA downgraded the packaged-food company to underperform from buy, saying its organic sales are trending in the wrong direction.
• MGM Resorts shares jump 9.2% in premarket trading after the gaming and entertainment company reported fourth-quarter adjusted earnings per share that came ahead of estimates.
• Paycom Software shares are up 2.9% in premarket trading, after the company reported fourth-quarter results that beat expectations and gave an outlook analysts see as encouraging. It also named a new CFO.
• Robinhood Markets shares jump 16% in premarket trading after the retail brokerage reported fourth-quarter net revenue that topped expectations, with cryptocurrency revenue soaring as the US election fueled trading in digital assets.
• Target and Macy’s shares fall in premarket trading after Gordon Haskett downgraded the stocks in anticipation of lackluster first-quarter and full-year forecasts from retailers reporting earnings in the coming weeks.
• Trade Desk shares plummet 27% in premarket trading Thursday after the advertising technology company gave a first-quarter forecast that is weaker than expected. It also reported its fourth-quarter results, and said it is “disappointed that we fell short of our own expectations in the fourth quarter.”
• Upwork shares are down 1.4% in premarket trading, after the provider of online recruitment services reported its fourth-quarter results and gave an outlook. While analysts are broadly positive, they note ongoing macro headwinds.

The EUR reversed most of its gains after it climbed earlier as much as 0.6% on optimism that US-Russia talks could end the Ukraine war. Oil fell on speculation that risks to Russian supply may ease (it won’t according to JPM), and Ukraine dollar bonds rose the most among emerging-market peers. On Wednesday, Trump agreed in a phone call with Russian President Vladimir Putin to start negotiating an end to the war in Ukraine. Trump revealed the conversation — his first publicly announced contact with Putin since retaking the US presidency — on social media.

“No concrete announcements, but the market reacted to the fact that discussions are starting,” said Georgios Leontaris, chief investment officer for EMEA at HSBC Global Private Banking. “There is still a long way, there is a lot to talk about. But the fact that the discussions are starting was reflected in the pricing of European assets.”

Aside from tracking developments over tariffs and Ukraine, Wall Street is preparing for a fresh batch of US economic data including initial jobless claims and producer-price inflation. Wednesday’s hot consumer price index numbers forced traders to push out bets on the next Federal Reserve interest-rate cut to December.

“An end to the conflict could eliminate war-related costs, particularly in energy, reduce uncertainty, and potentially boost business confidence and investment—crucial for Europe’s largest economies,” said Susana Cruz, a strategist at Panmure Liberum. “While sectors like defense might face a temporary selloff, this is likely to correct over time, as recent conflicts have underscored the need for increased defense spending.

European markets rose again, on pace for a 4th consecutive record high, as energy prices dropped on optimism about a possible end to the Ukraine war. The Stoxx 600 rose 0.7% and is on course for another record close. UK stocks underperform peers as earnings provide a drag while a stronger than expected GDP print reduced odds of a rate cut. Shares of Unilever, British American Tobacco and Barclays are down after their respective updates. Here are the most notable European movers:

• Nestle shares advance as much as 6.5%, the biggest intraday advance since February 2009, after the food giant reported fourth-quarter sales growth and second-half margin that beat estimates.
• Siemens shares rise as much as 7.3% to a record after the German industrial giant’s 1Q results beat estimates, with analysts encouraged by improving orders for Digital Industries automation products.
• Adyen shares jump as much as 14%, to the highest since August 2022, after the payments company reported net revenue that beat estimates and a better take rate.
• EssilorLuxottica shares rise as much as 3% to a record high after the Ray-Ban maker’s fourth-quarter sales beat estimates thanks to tech-enabled products like smart glasses.
• Legrand shares surge as much as 9%, the most in five years, after the company reported revenue and profits for the full year that beat consensus, with activity strong in North America and data centers.
• Geberit shares gain as much as 3.1% after Berenberg upgraded the Swiss building materials firm to buy from hold, and raised its price target on the stock by almost 20%.
• Thyssenkrupp shares rise as much as 11% after the German steel producer posted what Citi called better-than-expected results, with the firm set to be a key beneficiary of possible Ukrainian peace talks.
• Delivery Hero shares jump as much as 6.8% after the food delivery firm reported FY results ahead of estimates, with growth at other regions offsetting a steeper slump in its core market South Korea.
• Unilever shares drop as much as 6.1% in London, the biggest intraday drop since January 2022, after the consumer goods company’s management flagged a “slow start” to 2025.
• British American Tobacco shares fall as much as 8.5%, the most in more than a year, after the company’s FY25 guidance for revenue growth came in below consensus estimates.
• Neste shares drop as much as 14%, touching the lowest intraday since 2016, after reporting an adjusted net loss, while analysts had been expecting a profit.
• Swisscom shares fall as much as 3.1%, the most since October, after the telecom firm reported a softer 4Q24 in Switzerland despite a strong finish for Fastweb.

Asian stocks headed for a second day of gains as traders largely shrugged off stronger-than-expected US inflation data. Hong Kong shares fell as traders took profit after recent advances. The MSCI Asia Pacific Index rose as much as 1.4% before paring, with Alibaba and SK Hynix among the biggest boosts. Japanese and South Korean stocks were among the best performers in the region. A gauge of Chinese tech shares in Hong Kong erased earlier gains in the session to fall almost 1%, after the index became overbought on optimism for the nation’s artificial intelligence development. Alibaba shares briefly touched the highest level in about three years before pulling back. The positive sentiment in Asia came even as stronger-than-expected US inflation data eroded bets for more Federal Reserve interest-rate cuts this year. Traders were instead focused on US-Russia talks to end the war in Ukraine.

In FX, the Bloomberg Dollar Spot Index falls 0.2%. The pound rose after Britain registered unexpected economic growth at the end of 2024. Gross domestic product rose 0.1% in the fourth quarter, an acceleration from the flat performance in the third quarter. It was better than the 0.1% fall expected by economists and the Bank of England. The euro rises 0.3% and back above $1.04.

In rates, treasuries rose across the curve, a day after their biggest selloff since December, supported by lower oil prices and bigger rally in bunds during European morning. Both markets also drew support from US President Trump’s social media post saying by reciprocal tariffs will be announced Thursday. US yields are 1bp-3bp richer across maturities with the curve flatter, 2s10s and 5s30s spreads each by about 1bp; 10-year near 4.59% trails Germany’s by ~1.5bp. Gilts lag their European counterparts as traders trim their Bank of England interest-rate cut bets after the UK registered unexpected growth at the end of 2024. Treasury coupon auction cycle concludes with $25b 30-year bond sale at 1pm; demand was soft for Wednesday’s 10-year note auction, which tailed by almost 1bp. WI 30-year yield at ~4.795% is ~12bp richer than January’s auction result.

In commodities, WTI crude oil futures are down 1.1% after a 2.7% drop Wednesday while Brent crude futures are also down 1.3% to ~$74 a barrel. European natural gas prices drop ~5%. Spot gold climbs $15 to $2,919/oz.

US economic data calendar includes January PPI and initial jobless claims (8:30am). Fed speaker slate empty for the session.

Market Snapshot

• S&P 500 futures little changed at 6,068.75
• STOXX Europe 600 up 0.3% to 549.61
• MXAP up 0.6% to 185.85
• MXAPJ up 0.1% to 585.72
• Nikkei up 1.3% to 39,461.47
• Topix up 1.2% to 2,765.59
• Hang Seng Index down 0.2% to 21,814.37
• Shanghai Composite down 0.4% to 3,332.48
• Sensex little changed at 76,146.30
• Australia S&P/ASX 200 little changed at 8,539.95
• Kospi up 1.4% to 2,583.17
• German 10Y yield little changed at 2.47%
• Euro up 0.3% to $1.0415
• Brent Futures down 1.0% to $74.46/bbl
• Gold spot up 0.3% to $2,913.74
• US Dollar Index down 0.22% to 107.70

Top Overnight News

• Trump’s Ukraine plans may cost European allies more than $3 trillion over 10 years to protect the country and expand their militaries, Bloomberg Economics said. Regional leaders, blindsided by his call with Vladimir Putin, insisted they shouldn’t be sidelined. BBG
• About 75,000 federal employees — or 3% — signed up for Trump’s voluntary resignation program, falling short of the 5% to 10% the White House hoped for and increasing the probability of deeper mass firings. BBG
• US Senate Budget Committee Chair Graham’s budget proposal could go to the Senate floor sometime the next couple weeks, via Punchbowl citing comments from Senate Majority Leader Thune.
• The EU hopes to avert a damaging trade war with the U.S. over impending metals tariffs by prioritizing negotiations rather than retaliatory countermeasures, EU officials signaled on Wednesday in a meeting to discuss the response to 25% tariffs on steel and aluminum imports. RTRS
• China’s property market shows signs of stabilizing, with land plots in key cities selling at high premiums and policymakers expected to continue supportive measures, the Economic Information Daily reported. BBG
• Japan’s PPI rose a more-than-expected 4.2% year on year in January. The Philippine central bank unexpectedly kept its benchmark rate unchanged, but signaled plans to cut lenders’ reserve requirement ratio in the first half by 200 bps. BBG
• Indian Prime Minister Narendra Modi will come bearing gifts when he meets Donald Trump on Thursday, hoping concessions on tariffs, fresh business deals and the prospect of cooperation on China will win the U.S. president’s favor. RTRS
• Israel is considering a “significant” strike against Iran’s nuclear facilities according to American intelligence assessments, as the IDF looks to capitalize on Tehran’s weakened state. WSJ
• Hamas said it’ll release Israeli hostages per the schedule agreed on under the Gaza ceasefire deal. BBG
• Apple’s iPhones will use Alibaba Group Holding Ltd’s AI technology, affirming reports the e-commerce pioneer had scored a coveted role in helping power the iPhone in the world’s top mobile arena. BBG

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded somewhat mixed albeit with a mostly positive bias among the major indices following the two-way price action across global markets owing to hot US CPI data and geopolitical optimism. ASX 200 touched a record high with advances led by the mining sector following results from South32 and Northern Star. Nikkei 225 climbed on the back of recent currency weakness despite the firmer-than-expected PPI data from Japan. Hang Seng and Shanghai Comp saw mixed price action as the Hong Kong benchmark extended its recent strong upward momentum, while the mainland traded cautiously as participants continued to await Trump’s reciprocal tariffs.

Top Asian News

• PBoC releases Q4 policy implementation report: Will implement appropriately loose monetary policy. Will adjust and optimise policy strength and pace at the appropriate time. Will revitalise stock of financial resources and improve efficiency of capital use. Will give full play to decisive role of markets in formation of exchange rates. Enhance the resilience and stabilise FX market expectations while strengthening market management. Will use policy tools including interest rates and RRR.
• US private equity groups invested billions of dollars in data centres serving ByteDance, according to FT.
• Nissan (7201 JT) 9M Net Profit 5.15bln (-98.4% Y/Y), 2024/25 forecast loss JPY 80bln. Cuts FY operating income to JPY 120bln (prev. JPY 150bln); Sees FY24/25 China sales of 697k (prev. 690k), North America Sales reaffirmed.

European bourses (Stoxx 600 +0.4%) are mostly firmer as market digest the constructive commentary from Trump surrounding the potential of Russia-Ukraine peace talks; though indices have cooled a touch off highs as traders await US PPI and then President Trump who is set to sign executive orders at 18:00 GMT. European sectors hold a strong positive bias, with the clear winners/losers associated with recent remarks out of the US. Energy underperforms given the slump in oil prices, as markets digest comments via Trump who said peace negotiations with Russia is to start „immediately” – this also weighed on the Defense sector; downside which has since pared as traders focus on comments via US Defense Secretary Hagseth who called for higher defence spending.

Top European News

• BoE Chief Economist Pill said he expects further rate cuts but urges caution on cutting interest rates and said the disinflation process is not yet complete, while he added that the BoE wage deal intentions survey shows the job is not done. Pill also commented that US trade tariffs could have substantial effects and the risk of second-round effects from the 2025 inflation hump is lower than after COVID.
• ECB sources „confirm growing confidence in disinflation, partly due to further economic weakness”, via Econostream; ‘I cannot see anything beyond March. Nothing. Nothing at all. Agree that likelihood of inflation going below 2% has risen lately. Market pricing is not unreasonable’ if projections keep materialising”.
• German Economy Ministry Report say noticeable economic recovery is not yet evident at the beginning of the year; still no sign of turnaround in the industrial economy, concerns about job security and ongoing political uncertainties to hinder a recovery.
• French Public Audit Office says debt service payments are set to increase to 3.2% of GDP by 2029, will need to reduce annual spending by EUR 110bln to achieve deficit target of 3% of GDP in 2029.

FX

• DXY is on the backfoot after struggling to hold onto post-CPI gains yesterday. USD faded it’s initial surge to 108.52 after being outmuscled by the EUR in the wake of comments from President Trump that he had a „highly productive” phone call with Russian President Putin, and they agreed to have their respective teams start negotiations immediately. Additionally, Trump’s lack of signing of reciprocal tariffs yesterday has also acted as a headwind for the USD. Albeit, it is worth noting that he is due to sign another round of executive orders at 18:00GMT. Today’s docket includes weekly claims data and PPI.
• EUR is one of the better performers vs. the USD with EUR/USD now up for a fourth session in a row after starting the week out just below the 1.03 mark. Gains stem via Trump refraining from signing reciprocal tariffs, as well as positive developments regarding Russia/Ukraine peace talks. EUR/USD is back above its 50DMA at 1.0396 and eyeing the Feb high at 1.0442.
• JPY is attempting to claw back some of the lost ground vs. the USD which has brought USD/JPY from a 150.92 base last Friday to a peak at 154.80 yesterday. JPY benefits via the softer Dollar as well as firmer-than-expected outturn for Japanese PPI metrics overnight. USD/JPY has been as low as 153.91 today but is still some way above its 200DMA at 152.72 and Wednesday’s low at 152.39.
• GBP is firmer vs. the USD and steady vs. the EUR. Today’s main macro event for the UK has come via a better-than-expected outturn for UK GDP which saw the December M/M print at 0.4% vs. Exp. 0.1%, leaving the Q4 print at 0.1% vs. Exp. -0.1%. As it stands, markets fully price the next cut in June with a total of 55bps of easing seen by year-end. Cable is back above its 50DMA at 1.2472 but sub-the Feb peak at 1.2549.
• Antipodeans are both softer vs. the USD and unable to benefit from the broad-based weakness seen in the dollar as participants still await the touted US reciprocal tariffs. AUD’s exposure to China is currently acting as a greater source of price action as opposed to domestic events.
• PBoC set USD/CNY mid-point at 7.1719 vs exp. 7.3000 (prev. 7.1710).

Fixed Income

• USTs are gradually lifting off the CPI-driven 108-04 WTD trough. As such, USTs find themselves comfortably in the green and around 10 ticks above that mark at best. Ahead, weekly claims prints alongside PPI though the jobs metrics do not coincide with the BLS period. Thereafter, 30yr supply due and in focus after the 10yr tailed by 0.9bps and the b/c came in softer than the prior and six-auction average.
• Bunds are firmer, also picking themselves up from their 132.10 US CPI-driven WTD low. However, and similarly to USTs, they have only managed to lift modestly from this to a current 132.38 session high; with the constructive geopolitical risk tone seemingly preventing a more pronounced move just yet in Europe. On this, some modest pressure was seen around reports in AFP that there is progress towards ending the Gaza truce crisis. Before that, no reaction to unrevised German inflation data or any pronounced follow through from UK data. ECB’s Nagel is due. Bunds currently at the session’s best at 133.43.
• Gilts are firmer, following the above. Gapped lower by nine ticks to a 92.36 low as the benchmark reacted to December/Q4 GDP data. Releases which were stronger than expected across the board and serve to provide the Chancellor with some much needed positive growth news after recent reports around the OBR. The release modestly tempered BoE cut expectations with 50bps no longer priced by September.
• Italy sells EUR 5.75bln vs exp. EUR 4.75-5.75bln 2.70% 2027, 3.15% 2031 & 3.45% 2031 BTP

Commodities

• The weakness in the crude complex continues after retreating yesterday amid reports that US President Trump conducted calls with Russian President Putin and Ukrainian President Zelensky about ending the war. Further downside was seen following reports the parties (Israel/Hamas) have come to an understanding, and the ceasefire agreement will be implemented; this was subsequently denied by Israeli PM Netanyahu’s Office. Brent trades towards the bottom of a USD 74.06-75.05/bbl parameter.
• Spot gold gradually edged higher overnight after rebounding from yesterday’s trough to back above the USD 2,900/oz level, while the recent fluctuations in the precious metal coincided with the swings in the greenback. Spot gold trades in a USD 2,900.54-2,922.88/oz parameter.
• Mixed trade across base metals as traders juggle the Russia-Ukraine market optimism with the looming reciprocal tariffs poised to be announced. 3M LME copper currently resides in a current 9,440.95-9,518.55/t range.
• IEA OMR: raises 2025 world oil demand growth forecast to 1.1mln BPD (prev. 1.05mln BPD). Fresh US sanctions on Russia and Iran roiled markets at the start of the year but they have yet to materially impact global oil supply. Iranian crude oil exports are only marginally lower while Russian flows, so far, continue largely unaffected.
• Russia’s Kremlin says Russian President Putin and US President Trump discussed the energy sector.

Geopolitics: Ukraine

• Ukraine Foreign Minister says NATO membership remains a strategic objective of Ukraine.
• Russia’s Kremlin says sanctions were not discussed on US President Putin and US President Trump’s call, Issue of recognition of Crimea and other territories was not raised on Putin-Trump callContacts will continue with Trump team. Focused on preparing a personal meeting with Trump, will need to wait for a time and place for such meeting.
• Chinese officials in recent weeks have floated a proposal to the Trump team through intermediaries to hold a summit between US President Trump and Russian President Putin and to facilitate peacekeeping efforts in Ukraine after an eventual truce, according to WSJ.
• Germany, France, the UK, the European Commission, and others express readiness to enhance support for Ukraine and commit to its independence, while it was separately reported that UK Defence Minister Healey said it is for Ukraine to decide when to begin negotiations and on what terms.
• Romanian Defence Ministry said radar detected drone breaches of its territory in Russian overnight attack on Ukraine.

Geopolitics: Middle East

• Israeli PM Netanyahu’s Office says the reaching of understandings with Hamas is „Fake-News”, according to Al Arabiya.
• „Al Jazeera sources: A statement will be issued shortly confirming the consensus on the commitment of the parties to implement the ceasefire agreement”, according to Al Jazeera.
• „Israel’s Channel 12 on official sources: After signals we received about Hamas’ commitment to the deal, we are committed to the agreement”, according to Al Jazeera
• US intelligence agencies concluded during the final days of the Biden administration that Israel is considering significant strikes on Iranian nuclear sites this year and is aiming to take advantage of Iran’s weakness, according to WSJ. It was separately reported that Israel is likely to attempt a strike on Iran’s nuclear program in the coming months in a pre-emptive attack that would set back Tehran’s program by weeks or perhaps months, according to Washington Post citing a US intelligence report.
• „AFP quoting a source: Progress towards ending the crisis related to the Gaza truce”, according to Sky News Arabia.

Geopolitics: Other

• South Korea said North Korea is removing a facility at Mount Kumgang meant for meetings between separated families, according to Yonhap.
• US Defence Secretary Hagseth says 2% defence spending is not enough; ultimately 5%/GDP as defence spending is critical.

US Event Calendar

• 08:30: Jan. PPI Final Demand MoM, est. 0.3%, prior 0.2%
• 08:30: Jan. PPI Ex Food and Energy MoM, est. 0.3%, prior 0%
• 08:30: Jan. PPI Final Demand YoY, est. 3.3%, prior 3.3%
• 08:30: Jan. PPI Ex Food and Energy YoY, est. 3.3%, prior 3.5%
• 08:30: Feb. Initial Jobless Claims, est. 216,000, prior 219,000
• 08:30: Feb. Continuing Claims, est. 1.88m, prior 1.89m

DB’s Jim Reid concludes the overnight wrap

Markets saw a moderate selloff yesterday, as an upside surprise for US inflation saw investors price in fewer rate cuts for the rest of the year. However, the news that the US and Russia were set to start negotiations over Ukraine saw those losses pared back, with the Euro spiking and oil prices falling after those headlines came through. But even so, that wasn’t enough to counteract the impact of the CPI report, which featured the strongest monthly print for core CPI since April 2023. In turn, that saw the 10yr Treasury yield (+8.6bps) post its biggest daily jump of 2025 so far, moving up to 4.62%. And it brought back uncomfortable echoes of last year, when a strong January inflation print was then followed by further upside surprises over the rest of Q1.

In terms of the details of the release, headline CPI came in at +0.47% in January (vs. +0.3% expected), which pushed the year-on-year rate up to +3.0% (vs. +2.9% expected). Moreover, there are growing signs that strong print isn’t just a blip, and in the most recent 3 months, CPI was running at an annualised +4.5% pace. Bear in mind that’s the strongest 3m rate since November 2022, so this really isn’t in a zone where the Fed can relax. Meanwhile for core CPI, that came in at +0.45% on the month (vs. +0.3% expected), pushing the year-on-year rate up to +3.3% (vs. +3.1% expected). This pattern of upside surprises in January has been a consistent theme over recent years, which is something Jim looked at in his chart of the day yesterday (link here). It shows how upside surprises for core CPI have been much more likely in H1 than H2, with January seeing the most upside surprises of any month.

With that release in hand, investors became increasingly alarmed about inflation risk, which has already been mounting over recent weeks. That’s been driven by several factors, including higher commodity prices, the prospect of higher tariffs, along with more resilient growth data. Indeed, we put in a note last month (link here) on how we’re currently experiencing the sort of conditions that have historically led to inflation spikes, as you’ve got several long-term forces interacting with more recent inflationary trends. And only yesterday, the 2yr inflation swap rose +3.4bps to 2.83%, which is the highest since March 2023, just before SVB’s collapse and the regional bank turmoil led to fears of another slowdown.

In terms of the Fed, the CPI release saw investors significantly dial back their expectations for rate cuts this year. For instance, the likelihood of a cut by the June meeting was down to just 37% by the close, having been at 59% the previous day. And looking further out, just 28bps of cuts were priced by the December meeting, or in other words, a bit over one 25bp rate cut. Meanwhile, Fed Chair Powell spoke before the House Financial Services Committee, where he said “we’re close, but not there on inflation”, and that “we want to keep policy restrictive for now”. We also heard from Chicago Fed President Goolsbee who said that the latest inflation numbers were “concerning” but that it was “just one month” of data. And Atlanta Fed President Bostic commented that “until we have more clarity” on policy changes by the new administration, “it’s going to be impossible to make a judgment about where our policy should go”.

As investors priced in higher inflation and a more hawkish Fed, US Treasuries sold off sharply across the curve yesterday. That meant the 10yr yield (+8.6pbs) was up to 4.62%, marking its biggest daily jump of 2025 so far. The moves were driven by higher real yields, with the 10yr real yield (+8.7bps) back up to 2.15%. And at the front end of the curve, the 2yr yield was up +7.2bps at 4.35%. Over in Europe it was much the same story, albeit to a lesser extent, with yields on 10yr bunds (+4.7bps), OATs (+3.2bps) and BTPs (+3.1bps) all moving higher. However, yields have reversed slightly overnight, with the 10yr Treasury yield down -1.0bps this morning to 4.61%.

Equities took a hit after the inflation surprise, but those losses had been largely pared back by the close. For instance, the S&P 500 initially fell -1.08% at the open, but was only down -0.27% by the close, which means it’s still only -1.09% beneath its all-time high back in January. However, there was a significant divergence between small-caps and mega-caps, with the small-cap Russell 2000 down -0.87%, whilst the Magnificent 7 only fell -0.18%. And over in Europe there was continued strength, with the STOXX 600 (+0.11%) paring back its post-CPI losses to reach another record high, with records for the FTSE 100 (+0.34%) and the DAX (+0.50%) as well. Looking forward, that equity recovery has continued overnight, with S&P 500 futures currently up +0.24%.

Staying on Europe, there were several headlines regarding Ukraine yesterday, as President Trump had a call with Russian President Putin. Trump said that the two “agreed to have our respective teams start negotiations immediately”, whilst US Defense Secretary Hegseth said that a return to Ukraine’s pre-2014 borders was an “unrealistic objective”, and that the US did not believe “that NATO membership for Ukraine is a realistic outcome of a negotiated settlement.” The prospect of negotiations saw the Euro spike by about half a percent to $1.043 as those headlines came through, whilst Brent crude oil prices fell -2.36% yesterday to $75.18, with the move lower also helped by the weekly EIA data showing a larger-than-expected rise in US crude inventories. European equity futures are also performing strongly this morning, with those on the DAX up +0.94%.

Overnight in Asia, markets have put in a strong performance for the most part, with gains for the Nikkei (+1.47%), the KOSPI (+1.12%) and the Hang Seng (+1.71%). The exception to that has been mainland Chinese equities, where the CSI 300 (-0.09%) and the Shanghai Comp (-0.06%) are both slightly lower. In the meantime, 10yr Japanese government bond yields are up to 1.35% this morning, their highest since 2011. That follows the PPI data for January, which came in above expectations at +4.2% (vs. +4.0% expected), which is its fastest pace since June 2023.

To the day ahead now, and US data releases include the PPI reading for January and the weekly initial jobless claims. Meanwhile in Europe, there’s the UK GDP print for Q4 and Euro Area industrial production for December. Otherwise from central banks, the ECB will publish their Economic Bulletin, and we’ll hear from the ECB’s Cipollone and Nagel.