Futures Jump As WaPo Sends Dollar Plunging

US stock futures gained, led by tech as news reports of Microsoft’s spending plans underscored the sustained demand for AI infrastructure (even though the same and more has been said about Facebook and yet the company’s massive capex spending plans have yet to materialize). S&P 500 futures were up 0.6%, set to rise for a second day after ending the longest losing streak since April on Friday; Nasdaq 100 futures advanced 1%, with chip giants Nvidia and AMD rising more than 2% in premarket trading. In Europe, the Stoxx 600 also edged higher, fueled by ASML’s biggest daily gain since October. The dollar, which recently traded at a more than two year high tumbled on a Wapo report that Trump aides are looking at targeting import taxes at certain industries, rather than across the board resulting in a less strict tariff regime (spoiler alert: not only is this fake news, if anything Trump will double down on tariffs and make them even stricter). The news sent both the dollar and treasuries higher, with the former slipping earlier ahead of a sale of three-year debt as well as auctions of 10- and 30-year notes later this week, with the 30-year yield climbing overnight to the highest since November 2023 before retracing the move. On today’s calendar we get the S&P service PMI, as well as factory/durable orders report.

In premarket trading, semiconductor stocks gained after Nvidia’s server assembly partner Foxconn reported faster-than-expected revenue growth on continuing demand for AI infrastructure, lifting chip names (Micron Technology (MU US) +3.9%, Advanced Micro Devices (AMD US) +3.0%, Nvidia (NVDA US) +2.04%, Broadcom (AVGO US) +1.9%). The news also boosted the Mag7 universe (Apple +0.777%, Nvidia +2.04%, Microsoft +1%, Alphabet +1.0%, Amazon +1.2%, Meta Platforms +0.8% and Tesla +1.4% all up in premarket trading). Here are some other notable premarket movers:

• Asana (ASAN US) shares climb 8.2% after an upgrade at Piper Sandler, with analysts noting that AI demand is set to boost software revenue.
• Boeing (BA US) shares rise 2.4% as Barclays upgraded to overweight from equal-weight, turning positive on the stock for first time since 2019.
• Citigroup (C US) shares gain 1.8% after Barclays upgraded the lender to overweight from equal-weight, taking a constructive view on bank stocks for 2025 as earnings-per-share growth accelerates and price-to-equity multiples expand.
• CommScope (COMM US) slip 4.9% after Raymond James downgraded the communications equipment company to underperform from market perform.
• Kenvue (KVUE US) shares rise 1.4% after Piper Sandler upgraded the consumer health company to overweight from neutral, noting a healthier margin trajectory.
• Paycor HCM (PAYX US) shares rise 1.7% after larger payroll processing company Paychex is said to be in advanced talks to acquire the company.
• ServiceTitan (TTAN US) shares edge 0.7% higher as analysts initiate coverage on the residential and commercial repair software company after its blockbuster market debut last month
• Vertiv (VRT US) shares rise 5.0% after Morgan Stanley initiates the power equipment provider at overweight, predicting US industrials’ earnings revisions to return to positive territory this year.

In a blog post on Friday, Microsoft announced it expects to spend $80 billion in 2025 on the construction of data centers for AI workloads, while Nvidia’s Taiwanese partner FoxConn reported faster-than-expected revenue growth. The news helped kickstart another tech meltup. Tech’s rebound “is a technical move after the year-end correction,” said Fares Hendi, portfolio manager for global equities at SG Prevoir in Paris. “Microsoft’s decision to raise capex in 2025 is probably helping momentum.”

US Treasuries erased the session’s losses following the Washington Post report. The 30-year rate climbed as much as four basis points to 4.85% earlier in the day, the most since November 2023, ahead of a $58 billion sale of three-year notes on Monday. Morgan Stanley strategists warned Monday that rising yields could pose a headwind to US stocks in the first half, and that rates are “the most important variable to watch” in early 2025. Ten-year yields have now surged around 50 basis points since early December to 4.60% as traders price in the possible inflationary effect of Trump’s policies. Any resurgence of price pressures would likely slow the pace of interest-rate cuts by the Federal Reserve. The US central bank has dialed back its expectations for easing in 2025, and markets now fully price just one reduction this year.

RBC Capital Markets LLC strategist Lori Calvasina expects that markets will soon get better clarity on Trump’s policies. “One of my core beliefs about politics and markets, whatever it is, you have to go through some temporary pricings, and those can be painful,” Calvasina told Bloomberg TV. “It tends to be rather short-term and then you move on.”

Later today, Federal Reserve Governor Lisa Cook will speak at a conference on law and microeconomics at the University of Michigan. Her colleague Tom Barkin, the Richmond Fed President, suggested on Friday his preference was to keep rates restrictive for longer.

European stocks edged higher, led by technology shares as Microsoft’s plan to spend $80 billion on AI data centers this year boosted the sector. Hon Hai earnings also aided sentiment. The Stoxx 600 added 0.2%.  European semiconductor stocks posted broad-based gains on Monday, following a rally in US peers on Friday. Microsoft’s commitment to invest further in data centers also hands a potential boost to companies helping to build cutting-edge AI chips. Here are some other notable premarket movers:

• Hermes shares rise as much as 2.4% after Stifel upgrades the luxury goods maker to buy from hold, citing the firm’s pricing power and its wealthy and loyal client base
• Sartorius and its Paris-listed unit Sartorius Stedim Biotech each climb more than 5% after JPMorgan placed both shares on positive catalyst watch ahead of this month’s 4Q results
• Imerys shares rise as much as 6.9% after the French building materials firm said the vast majority of claimants have accepted the plan of reorganisation under the Chapter 11 process for its North American talc subsidiaries
• TomTom shares advance as much as 7.6% after the navigation technology firm announced a partnership with geographic information system company Esri
• Novo Nordisk shares drop as much as 2.2% after analysts at Jefferies and Berenberg lowered their price targets, following last month’s trial results for experimental obesity medicine CagriSema, which failed to meet expectations
• Rolls-Royce shares fall as much as 4.6% as Citi removes its buy recommendation on the jet-engine maker for the first time since 2016, noting the stock is now close to fair value
• Unilever declines as much as 2%, the most since July, after RBC downgraded the consumer goods company to underperform from sector perform, saying that it lacks the “wherewithal” to sufficiently boost volumes enough to reach its 2% growth goal
• Royal Unibrew shares fall as much as 4.7% after the beverage maker was cut to equal-weight from overweight at Barclays on PepsiCo Inc.’s consolidation of its bottling network

Earlier in the session, Asian stocks traded in a narrow range as technology shares got a boost from Microsoft’s $80 billion data center pledge, while Japanese benchmarks fell as the market reopened after holidays. The MSCI Asia Pacific Index swung between gains and losses of less than 0.3%, with chipmakers including TSMC, SK Hynix and Samsung Electronics among the biggest boosts after Microsoft announced its spending plan for the year. Taiwanese and South Korean benchmarks led advances in the region, while Japanese shares declined in the first day of trading this year. Stocks in India also fell. The global tech rally is expected to continue as major firms ramp up artificial intelligence-related investments. Beyond this, Asian stocks face headwinds from uncertainty over potential US tariffs, a stronger dollar and increased geopolitical risk. Goldman Sachs cut its target for the MSCI Asia Pacific ex-Japan Index, anticipating lower earnings amid a challenging macro environment.

Chinese equities closed marginally lower, with upbeat services activity data offering little respite. Investors may have to wait longer for more support for the economy as the government is unlikely to “come out with stronger stimulus policy just before the Chinese New Year,” Hao Hong, partner and chief economist at GROW Investment Group, said on Bloomberg TV. China maintained its support for the yuan with the daily reference rate after the currency slumped past a key level on Friday. Services sector activity in the world’s No. 2 economy expanded at the fastest pace since May, a private survey showed on Monday, signaling improving domestic demand after Beijing’s stimulus blitz.

In FX, the dollar tumbled, underperforming all G-10 peers with the exception of the Japanese yen, on a report that Donald Trump’s aides are exploring targeting import taxes at certain industries, rather than across the board, suggesting that the dollar’s recent strength is more dependent on fiscal rather than monetary policy. Bloomberg’s gauge of the dollar fell the most since November. Japan’s yen also slumped after comments out of Japan overnight indicated that the central bank is nowhere close to hiking rates. The Canadian dollar got a lift from a Globe and Mail report that Prime Minister Justin Trudeau is likely to announce his resignation as leader of the Liberal Party this week. However, the gains in the loonie may be short-lived given the “bearish macro backdrop” for the currency, according to RBC Capital Markets.

In rates, early losses in Treasuries were quickly erased after Washington Post report detailing potential for Trump tariff plan to cover only “critical imports.” The dollar dropped sharply while Treasuries rose more gradually, leaving yields richer across maturities after an early cheapening move that sent long-end yields to a 14-month high. Supply is in focus as three-day coupon auction cycle begins Monday and around $50 billion of corporate bond offerings is expected this week, front-loaded by Thursday’s early close and December jobs data on Friday. Front-end Treasury yields remain lower by ~2bp with long-end yields little changed, leaving 2s10s and 5s30s spreads wider; 10-year, near flat at 4.60%, outperforms bunds and gilts by 2.5bp and 1bp on the day. A gusher of corporate bond issuance is anticipated this week, totaling around $50 billion and front-loaded ahead of Carter’s state funeral Thursday and the December jobs report

In commodities, gold slipped as Goldman said it no longer sees the metal reaching $3,000 an ounce by the end of the year, pushing the forecast to mid-2026 on expectations the Fed will make fewer rate cuts. Oil steadied near its highest level in almost three months as Saudi Arabia raised its official prices on signs of tightness in Middle Eastern crude markets.

The US economic data calendar includes December final S&P Global services PMI (9:45am) and November factory orders (10am); JOLTS job openings, ISM services and ADP employment change also are ahead this week. Fed speakers scheduled for the session include Cook at 9:15am; Barkin, Waller, Harker, Schmid and Bowman also due this week

Market Snapshot

• S&P 500 futures up 0.4% to 6,012.75
• STOXX Europe 600 up 0.2% to 509.33
• MXAP little changed at 181.33
• MXAPJ up 0.5% to 571.66
• Nikkei down 1.5% to 39,307.05
• Topix down 1.0% to 2,756.38
• Hang Seng Index down 0.4% to 19,688.29
• Shanghai Composite down 0.1% to 3,206.92
• Sensex down 1.5% to 78,019.22
• Australia S&P/ASX 200 little changed at 8,257.45
• Kospi up 1.9% to 2,488.64
• German 10Y yield up 2.5 bps at 2.45%
• Euro up 0.5% to $1.0356
• Brent Futures down 0.2% to $76.39/bbl
• Gold spot down 0.3% to $2,633.29
• US Dollar Index down 0.38% to 108.54

Top Overnight News

• Canadian PM Trudeau is likely to resign prior to the national caucus meeting on Wednesday, according to Canadian press. There were separate comments from a source familiar with Trudeau’s that the PM is increasingly likely to announce he intends to step down but has not made a final decision. Furthermore, Polymarket’s odds for Trudeau to resign before February surged to over 70% over the weekend from around 33% on Friday, while Globe & Mail columnist Lawrence Martin commented on X that “Everybody’s gearing up for Trudeau’s resignation announcement, expected by Monday
• US President-elect Trump urged his fellow Republicans in Congress to combine his priorities into one bill which would cut taxes, bolster border security and increase domestic energy production, writing “it will all be made up with tariffs, and much more, from countries that have taken advantage of the U.S. for years”. (Truth Social)
• Biden-Harris administration announces Arizona state University research park as the planned site for third chips for America R&D flagship facility.
• US National Security Advisor Sullivan says the US is finalizing steps to remove roadblocks in civil nuclear partnerships with Indian firms.
• US House Speaker Mike Johnson plans to pass a bill by May that will address Trump’s priorities — including border security and tax cuts — using reconciliation, which won’t need any Democratic votes. BBG
• President-elect Donald Trump’s aides are exploring tariff plans that would be applied to every country but only cover critical imports, three people familiar with the matter said — a key shift from his plans during the 2024 presidential campaign. WaPo
• New York became the first US city to launch a congestion charge zone on Sunday, according to FT.
• China’s main stock exchanges asked some large mutual funds to restrict stock selling at the start of the year, three sources familiar with the matter said, as authorities sought to calm markets heading into a tricky period for the world’s second-largest economy. RTRS
• China’s central bank has signaled its resolve to stabilize the yuan’s exchange rate, with a stronger tone taken during its latest policy meetings, as the Chinese currency looks to be directly affected by US president-elect Donald Trump’s policies. SCMP
• China’s Caixin services PMI for Dec comes in ahead of expectations at 52.2 (up from 51.5 in Nov and above the consensus forecast of 51.4). WSJ
• France’s 2025 budget will aim to narrow the deficit to between 5% and 5.5% of economic output, Finance Minister Eric Lombard said. BBG
• Ukraine is in an increasingly dire state as Russia captures territory at the fastest pace since the start of the invasion, with Moscow capitalizing on its greatest advantage: manpower. WaPo
• OpenAI’s Sam Altman says the company “is now confident” it knows how to build AGI (artificial general intelligence), and that 2025 could “see the first AI agents join the workforce and materially change the output of companies.” He added that OpenAI is “beginning to turn our aim beyond AGI, to superintelligence.” Sam Altman

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded mostly subdued following the lack of macro catalysts over the weekend and as participants digested the mixed signals from Chinese Caixin PMI data, while Japanese markets underperformed in their first trading session of 2025. ASX 200 failed to sustain early gains as strength in real estate and tech was offset by losses in materials and miners. Nikkei 225 retreated on return from the New Year holiday closures amid higher yields and after the US blocked Nippon Steel’s bid to take over US Steel, while a weaker currency failed to support the risk appetite as participants also braced for weak results from retailers including Fast Retailing and Seven & I Holdings. Hang Seng and Shanghai Comp were choppy following the somewhat mixed PMI data in which Chinese Caixin Services PMI data beat expectations, but the Caixin Composite PMI figure slowed, while comments late last week from the PBoC’s MPC, which recommended strengthening the intensity of monetary policy adjustments and said it will cut RRR and interest rates at the proper time, did little to spur demand.

Top Asian News

• China’s stock exchanges asked some mutual funds to restrict stock selling at the start of the year, according to Reuters sources.
• PBoC pledged more financial support for innovation and consumption, while it will encourage foreign capital to invest in domestic tech.
• PBoC is expected to ramp up offshore yuan bill sales in Hong Kong in January and has ample toolkits and experience to react to yuan depreciation, while China has the ability to keep the yuan basically stable at reasonable and balanced levels, according to PBoC-backed Financial News.
• BoJ Governor Ueda said the virtuous cycle strengthened gradually last year and he plans to increase interest rates with continued economic improvements but added the timing of an adjustment is dependent on economy and inflation, while Ueda added that momentum for wage increases is key and they must be vigilant to various risks in deciding timing for adjusting degree of monetary support.

European bourses are almost entirely in positive territory (ex-FTSE 100), with sentiment lifted by strength in Tech names. Bourses slipped a touch in early morning trade, but managed to stabilise and then head back to best levels where they generally reside. European sectors initially opened with a slight positive bias, but now displays a bit more of a mixed picture. Tech is by far the clear outperformer today, for a couple of reasons. Firstly, Foxconn reported strong December sales figures, helping to lift sentiment in the sector. Elsewhere, reports suggest that Microsoft plans to spend USD 80bln to build out AI this FY. US equity futures are entirely in the green, with slight outperformance in the tech-heavy NQ, taking impetus from the sectoral strength seen in Europe thus far. Microsoft plans to invest USD 80bln in FY25 to construct AI-capable data centres, with over half of this expenditure directed towards the US, CNBC reports. The investment is part of the company’s broader strategy to support AI advancements, including its partnership with OpenAI. Foxconn’s Q4 revenue hit a record USD 64.7bln (+15% Y/Y), exceeding estimates, driven by strong AI server demand. While consumer electronics, including iPhones, saw flat growth, Foxconn expects significant year-on-year growth in Q1 2025. NOTE: Foxconn denied reports that its chairman expressed positive outlook, that 2025 sales will trend upwards topping TWD 7tln, and said the company did not make any such financial forecasts.

Top European News

• The percentage of UK businesses planning to raise prices in the coming three months rose to about 55% from 39% as tax increases and higher wage costs caused confidence to slump, according to a survey of 5,000 businesses by the British Chambers of Commerce via FT.
• Austrian Chancellor Nehammer said coalition talks between the two largest centrist parties in Austria on forming a government without the far-right Freedom Party have collapsed, while he will stand down as Chancellor and leader of the People’s Party in the coming days. It was later reported that the Austrian President van der Bellen agreed to meet with far-right Freedom Party leader Kickl on Monday and that Conservative People’s Party (OVP) Secretary-General Stocker was named as interim party leader. Furthermore, Stocker expects far-right leader Kickl will be tasked with forming a government and said the OVP will take part in coalition talks with the far-right Freedom Party and take them seriously.
• Many Eurozone economists warned that the ECB has been too slow to cut interest rates to help the economy and 46% of the economists surveyed said the ECB had fallen behind the curve, according to a poll by FT.
• French Budget Minister reiterates there will be a “Special Tax” on the biggest companies; is convinced they can find a majority in parliament to get a budget through. The 2024 deficit will be “around” 6.1%; sees 2025 deficit in a 5-5.5% range

FX

• A subdued start to the week thus far with DXY continuing the downward action from Friday and falling further under the 109.00 level to print a current range between 108.43-109.06 (vs Friday’s 108.89-109.22 parameter). US Services & Composite PMI (Final) due, with Fed speak from Daly thereafter.
• EUR is firmer amid the broader Dollar weakness and clawing back some of last Thursday’s losses, with today’s range currently between 1.0296-1.0352 (vs Thursday’s best at 1.0372). Further support for the EUR was seen after the German state of Hesse reported December CPI at 2.7% Y/Y (prev. 2.0%).
• Weakness in JPY despite the softer Dollar but as a function of higher US yields, with Tokyo traders returning to the markets following their Christmas and New Year break. The pair was also unfazed by overnight comments from BoJ Governor Ueda who stated that he plans to increase interest rates with continued economic improvements but added the timing of an adjustment is dependent on the economy and inflation. USD/JPY resides in a 157.14-82 current range and eyes last Thursday’s peak at 157.84.
• Sterling is the top G10 performer this morning amid broader USD weakness alongside potential tailwinds from reports that the percentage of UK businesses planning to raise prices in the coming three months rose to about 55% from 39% as tax increases and higher wage costs caused confidence to slump, according to a survey of 5,000 businesses by the British Chambers of Commerce via FT. GBP/USD resides in a USD 1.2408-1.2491 parameter as it eyes last Thursday’s high at 1.2535.
• Antipodeans are both firmer amid the broader rise in high-beta FX, with Antipodeans also feeling tailwinds from higher base metals. Overnight, Antipodeans benefitted alongside the early strength in CNH after the PBoC continued to set a much stronger-than-expected yuan reference rate setting although the upside was limited and there was a relatively muted reaction to the varied Caixin PMI data.

Fixed Income

• USTs are pressured following the downside seen last week post-data and as the region awaits a hefty and frontloaded supply schedule. Furthermore, JGBs influenced overnight with the contract to a fresh low after remarks from Ueda who stated that he plans to increase interest rates with continued economic improvements but added the timing of an adjustment is dependent on the economy and inflation. As it stands, USTs are at lows of 108-12, matching the 30th December base with support from the session’s proceeding at 108-11+ and then the 108-06+ contract trough.
• Bunds are softer in-fitting with the above and as the region counts down to its own supply. Macro focus this morning has been on the Final PMIs, PMIs which were subject to upward revisions across the board sparking some modest pressure in EGBs. Furthermore, while most of the German State CPIs are scheduled for release later in the week after the mainland figure, the metric from Hesse came in much hotter than the prior for December Y/Y; which, if indicative, presents a further upward skew to the mainland numbers later today. Bunds are currently at a 132.22 low, a base which leaves just the contract trough at 132.00 from November as support.
• Gilts underperformed into its own PMI metrics, which saw modest downward revisions and helped to lift Gilts slightly off their base, though the benchmark was unable to reclaim the 92.00 mark or by extension test the opening 92.02 high. The referenced initial pressure stemmed from a British Chambers of Commerce survey which reported that 55% of UK businesses intend to lift prices in the next three months (prev. 39%) amid tax increases and elevated wage costs. Action which has pushed Gilts to a 91.78 base, within reach of the 91.64 contract low from December. As such, the UK’s 10yr yield is back towards highs of 4.65% from end-2024, levels which continue to pressure Chancellor Reeves’s headroom.
• Saudi Arabia mandates USD 3,6,10yr benchmarks, according to IFR. 3yr debt IPT at 120bps over UST. 10yr debt IPT at around 140bps over UST.

Commodities

• WTI and Brent are softer with prices failing to garner much support from the declining Dollar and overall positive risk tone in Europe, although APAC sentiment was mostly subdued. Geopolitical updates include reports that Israel wants to keep some sites outside the northern border in Lebanon indefinitely. Brent Mar sits in a USD 76.11-76.89/bbl parameter.
• Nat Gas is modestly softer intraday in fitting with the broader price action in energy. Some upticks were seen amid reports that European gas storage is depleting at the fastest rate since 2018, according to Bloomberg citing sources. Meanwhile, a major winter storm is reported to have hit the US, producing heavy snow and significant ice which is expected to last days, with some 30 states issuing weather alerts; US Nat Gas futures rose 9% intraday.
• Gold is subdued despite the softer Dollar in the run-up to this week’s risk events including the FOMC Minutes and NFP jobs data. Spot gold resides in a narrow USD 2,647.49-2,625.26/oz range after dipping under Friday’s USD 2,636.70/oz.
• Copper is on a firmer footing amid the softer dollar, Chinese Caixin Services PMI also has provided some tailwinds. 3M LME copper resides in a USD 8,781.50-8,913.00/t range.
• Saudi Aramco February Crude OSP: Arab light to US at + USD 3.50/bbl vs ASCI; Arab light to NW Europe at + USD 0.05/bbl to ICE Brent, via Aramco.
• Ukraine reportedly attempted to attack Zaporizhzhia nuclear power plant on January 5th with drones, according to Ifx citing Russian defence minister.
• US plans more sanctions on tankers carrying Russian oil, according to a source cited by Reuters.
• LNG tanker Coral Nordic will unload at Belgium’s Zeebrugge terminal on January 9th from Ruvys.
• German energy import Uniper’s (UN01 GY) CEO Mike Lewis said the company is working to protect its fleet of LNG tankers from seizure by nations friendly to Russia after it was hit with a EUR 14bln penalty by a Russian court in March as part of an international dispute with a subsidiary of Russian state-backed gas company Gazprom, according to FT.
• European gas storage depletes at the fastest rate since 2018, according to Bloomberg citing sources. Storage at 70% full on January 4th vs the 5yr seasonal average of 76%.
• Goldman Sachs cut its gold price forecast in which it sees the precious metal to reach USD 2,910/oz by year-end and pushed back its USD 3,000/oz target to mid-2026, citing slower-than-expected Fed easing.

Geopolitics: Middle East

• US President Biden notified Congress of USD 8bln arms sale to Israel, according to Axios.
• Hamas said it approved a list of 34 hostages presented by Israel to be exchanged in a ceasefire deal. However, it stated that any deal would depend on an agreement regarding a withdrawal and ceasefire, while it has not seen progress on issues regarding this, and Israeli PM Netanyahu’s office later stated that Hamas had not provided a list of hostage names.
• Saudi Foreign Minister met with US envoy Hochstein in Riyadh and discussed developments in Lebanon and regional issues.
• Syrian Foreign Minister Al-Shibani travelled to Doha to meet with senior Qatari officials.
• US is to ease aid restrictions for Syria in a limited show of support for the new government, according to WSJ.
• Iran will face a difficult year with the Trump administration which plans to increase sanctions on Iran, while the Trump administration sees Iran as still a threat to US allies and the Trump team is considering the option of air strikes to prevent Iran from building a nuclear weapon, according to WSJ.
• Israel wants to keep some sites outside the northern border in Lebanon indefinitely, via AJA Breaking.

Geopolitics: Ukraine

• IAEA said staff reported hearing loud blasts near Ukraine’s Zaporizhzhia Nuclear Power Plant on Sunday which coincided with reports of a drone attack on the plant’s training centre, while the IAEA has not been able to confirm any impact and noted that reports stated there were no casualties and no impact on any nuclear power plant equipment, according to Reuters.
• Ukrainian President Zelensky said security guarantees for Ukraine to end Russia’s war will only be effective if the US provides them and he needs to sit down with US President-elect Trump to decide how to stop Russian President Putin before Ukraine can enter talks with the Russian side. Zelensky also said Europe must also have a voice in deciding a course of action before Ukraine talks to Russia and that Putin will destroy Europe if the US leaves the NATO military alliance, while he noted that North Korea has provided Russia with 3.7mln artillery shells in the war and that 3,800 North Korean troops fighting Ukraine in Russia’s Kursk region have been killed or wounded so far. Furthermore, Zelensky separately commented that there were heavy Russian and North Korean losses in Russia’s Kursk region.
• Ukraine’s air force said on Sunday morning that it had downed 61 drones launched by Russia in an overnight attack.
• Russia’s Defence Ministry said Russian forces took control of the Nadiya settlement in Ukraine’s Luhansk region, while it also announced that Ukraine launched a counter-attack in Russia’s Kursk region.

Geopolitics: Other

• North Korea fired a suspected ballistic missile which was reported to have fallen shortly after and appeared to have landed outside of Japan’s exclusive economic zone, while the South Korea military said North Korea fired what appeared to be one intermediate-range ballistic missile.

US Event Caldendar

• 09:45: Dec. S&P Global US Services PMI, est. 58.5, prior 58.5
• 09:45: Dec. S&P Global US Composite PMI, prior 56.6
• 10:00: Nov. -Less Transportation, est. 0.3%, prior -0.1%
• 10:00: Nov. Cap Goods Ship Nondef Ex Air, est. 0.3%, prior 0.5%
• 10:00: Nov. Cap Goods Orders Nondef Ex Air, est. 0.1%, prior 0.7%
• 10:00: Nov. Factory Orders Ex Trans, prior 0.1%
• 10:00: Nov. Factory Orders, est. -0.4%, prior 0.2%
• 10:00: Nov. Durable Goods Orders, est. -0.4%, prior -1.1%

DB’s Jim Reid concludes the overnight wrap

Hope you all had a great weekend and welcome back to those returning to work today. If you’ve just got back, markets have had a fairly rough time since Christmas, with the S&P 500 down another -0.48% last week, whilst China’s Shanghai Composite saw its biggest weekly decline (-5.55%) since February. However, we did start to see a recovery on Friday, with the S&P 500 snapping a run of 5 consecutive daily declines with a +1.26% advance, whilst futures on the index are very slightly higher this morning with a +0.05% gain.

One factor helping to turn sentiment around on Friday was strong economic data out of the US, with the ISM manufacturing print up to a 9-month high of 49.3 in December (vs. 48.2 expected). Moreover, the new orders component ticked up to an 11-month high of 52.5. Plus that came just a day after the weekly initial jobless claims fell to their lowest level since April. So collectively, that helped to reassure investors that the US growth outlook was still robust into the new year.

Later in the session on Friday, we also got confirmation that Mike Johnson had been re-elected as Speaker of the House of Representatives in the new US Congress. On Friday, that had appeared in some doubt, as the Republicans only have a 220-215 margin over the Democrats following the election, and a few Republicans had been resistant to supporting Johnson. Indeed, two years ago it took former Speaker Kevin McCarthy a total of 15 ballots to be elected. For markets, the vote was also in focus because it was seen as the first test of how cohesive the narrow Republican majority would prove, and whether they’ll be able to enact Donald Trump’s second-term agenda, with his inauguration now just two weeks away. Indeed, this is the narrowest majority in the House of Representatives since the midterm election in 1930, so it’s quite a different situation to the start of Trump’s first term, when the Republicans initially had a 241-194 majority in the House.

In the meantime, we had comments from several different Fed speakers about the policy outlook over the weekend and on Friday. Generally, those comments have implicitly sounded quite cautious about the scale of further easing, which echoes the Fed’s hawkish shift in their December dot plot, where they only signalled 50bps of cuts for 2025. For instance, on Friday Richmond Fed President Barkin said he was “in the camp of wanting to stay restricted for longer.” Then over the weekend, San Francisco Fed President Daly said that inflation was still “uncomfortably above our target”, whilst Governor Kugler said that “we know the job is not done” with inflation still not at 2% yet. This backdrop has seen US Treasury yields move higher this morning, with the 30yr yield (+1.8bps) currently at 4.83%, which would be its highest closing level since November 2023. And this Wednesday coming up, we’ll get the minutes from the FOMC’s recent meeting in December, so it’ll be interesting to see how that debate unfolded given there was a dissenting vote.

As we look forward to the first full week of 2025, a key question for the Fed’s outlook will be how strong the US jobs report for December is, which is out this Friday. In terms of what to expect, our US economists are looking for nonfarm payrolls to grow by +150k in December. That would be beneath the +227k print in November, but that gain was boosted by a bounce back from previous weather disruption and the end of strikes. Indeed, a +150k print would basically be in line with the 6-month average, which is currently running at +143k. Otherwise, our economists see the unemployment rate ticking up a tenth to 4.3%.

Turning to Europe, the main focus this week will be the Euro Area flash CPI print for December, which is out tomorrow. This is an important one, as it comes amidst growing concern about European inflation, particularly with the recent rise in natural gas prices, along with the recent depreciation of the euro. On top of that, the December flash print from Spain last week was stronger than expected, so the backdrop hasn’t been too favourable, and both headline and core inflation for the Euro Area are widely expected to remain above the ECB’s 2% target. We’ve seen that have an impact in markets too, and last week saw the 10yr bund yield move higher for a 5th consecutive week.

Elsewhere in Europe, another thing to look out for will be the ongoing political situation in France and efforts to put together a new budget. That comes as last week saw the Franco-German 10yr spread widen by +4.8bps to 86.3bps, which is the widest it’s been since early December, back when the National Rally confirmed they would vote against Michel Barnier’s government. That underperformance was evident among other French assets last week, with the CAC 40 down -0.99%, in contrast to the +0.20% gain for the Europe-wide STOXX 600.

Staying on politics, it’s been reported by Canada’s Globe and Mail newspaper that Prime Minister Justin Trudeau is expected to resign as Liberal Party leader this week. Canada has to hold a federal election by October at the latest, and Trudeau’s Liberals are polling well behind the opposition Conservatives, with CBC’s poll tracker currently putting the Conservatives on 44%, and the Liberals on 21%. Trudeau has already faced calls from some Liberal MPs to resign, and his position came under further pressure last month after finance minister and Deputy PM Chrystia Freeland resigned from the cabinet.

Overnight in Asia, most of the major equity indices are trading lower, with the Nikkei (-1.49%) falling sharply as Japan’s markets reopen after the new year. That also comes as BoJ Governor Ueda confirmed their expectations to keep hiking rates, saying that “we will raise the policy interest rate to adjust the degree of monetary easing if economic and price conditions keep improving”. Elsewhere, Chinese equities have posted further declines, with the Shanghai Comp (-0.29%) and the CSI 300 (-0.29%) losing ground. However, South Korean equities have posted strong gains, with the KOSPI up +1.83% this morning.

Finally on the week ahead, US stock markets will be closed on Thursday for the funeral of former President Jimmy Carter, whilst bond markets will close early that day.