Futures Flat After Nvidia Sparks Biggest Rally In Over A Year

US equity futures were poised for a muted end to the week after Thursday’s blowout rally which sent the S&P over 2.1% higher, its biggest one-day gain since Jan 2023, after Nvidia’s blowout earnings rekindled global euphoria about artificial intelligence (even as Google demonstrated just how racist and useless it actually is) and pushed the S&P to its highest close on record, while also sending European and Japanese markets to all time highs. At 8:00am, S&P 500 futures were unchanged while Nasdaq 100 contracts slipped 0.2% – even as NVDA rose above $800 to sport a $2 trillion market cap – after soaring 3% yesterday. Treasury yields dropped with the 10Y sliding 3bps to 4.30% and the dollar extending its losses, as oil and bitcoin also reversed recent gains. The US economic data calendar is empty for the session, while no Federal Reserve members are scheduled to speak

In premarket trading, Nvidia rose 2.1% extending Thursday’s 16% jump, and set to surpass a $2 trillion market cap when it opens. Block was quoted 13% higher as the payments technology company’s results and outlook beat estimates. Intuitive Machines was set for a 45% surge after the startup’s spacecraft landed on the Moon. By contrast, Booking Holdings gave a disappointing forecast and reported headwinds from the war in Israel, sending its shares down 8.5%. Here are some other notable permarket movers:

• Applied Optoelectronics sinks 37% after the maker of fiber-optic networking products posted a surprise drop in revenue in the fourth quarter.
• Block Inc. rallies 16% after the payments technology company raised its forecast for adjusted Ebitda for 2024.
• Booking Holdings slips 8.1% after giving a disappointing forecast for travel reservations and gross bookings, with the war in Israel and currency fluctuations weighing on results.
• Carvana soars 30% after the used-car retailer topped Wall Street’s profit expectations in the final months of 2023 and said it expects improved earnings this quarter.
• Fluence Energy advances 7.6% as JPMorgan raises its recommendation on the energy-storage company to overweight, saying Thursday’s selloff triggered by a short report was overdone.
• Maravai LifeSciences climbs 30% after its revenue outlook for the year topped the average analyst estimate.
• MercadoLibre falls 6.7% after recording earnings per share for the fourth quarter that fell short of Wall Street’s estimates for the e-commerce company.

With S&P futures trading around 5,100 Investors are taking a breather after two rampy weeks as they weigh optimism about corporate earnings and US economic resilience against elevated valuations and hawkish signals from the Federal Reserve.

“We continue to remain of the view that the secular bull market remains firmly intact,” said strategist Mathieu Racheter at Julius Baer. “While the risk of a short-term market pullback has increased, as several sentiment and positioning indicators have shot up above the historical normal levels again, we would use any weakness as opportunity to increase the exposure to equities.”

“The speed of the tech rally has left investors wondering whether to take profits,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. “While we see merit in re-balancing portfolios, we believe that retaining strategic exposure to US large-cap technology is important, and the rise in tech stocks could go further still.”

The Stoxx Europe 600 index rose 0.1% and was headed for a fifth weekly gain, amid mixed earnings after also closing at a record on Thursday. The automotive and chemicals sectors the biggest outperformers, the latter on German chemicals giant BASF’s latest results. The telecommunications subindex is the worst performer after Deutsche Telekom reported disappointing earnings. UK-based lender Standard Chartered Plc climbed more than 8% after unveiling a profit beat and share buyback. German insurer Allianz SE declined after non-life insurance earnings missed analysts’ expectations. Deutsche Telekom AG, Europe’s largest telecommunications operator, slipped after a miss in non-US earnings.Here are the most notable European movers:

• Standard Chartered rises as much as 8.4% following the bank’s fourth-quarter adjusted pretax profit beat, with analysts highlighting lower loan losses as well as a $1 billion buyback
• BASF climbs as much as 4.0% after announcing deepened cost cuts and releasing results that pointed to a future rebound in earnings, with som analysts reckoning the weakness in volumes has bottomed out
• Italian banking stocks climb in Milan trading on renewed speculation of possible consolidation in the industry, after newspaper Il Foglio reported that unnamed investment banks are studying the sector
• Magyar Telekom jumps as much as 4.4% to highest since 2009 after Hungary’s largest telecommunications company issued strong guidance especially for Ebitda AL, a key metric in the sector, Erste says
• Mercedes-Benz shares rise as much as 2.3%, building on Thursday’s gains, after Barclays upgraded the German carmaker to overweight in light of the “compelling” increase in shareholder returns
• Deutsche Lufthansa shares fall as much as 4.8%, the biggest intraday drop since December, after the group reshuffled its executive board, with the exit of its CFO seen as a negative
• Allianz falls as much as 3.8%, the most since May, as underlying weaknesses in the German insurance group’s fourth-quarter result overshadowed a profit jump and higher dividends
• Hensoldt falls as much as 8.7% after releasing results that failed to inspire enthusiasm. Oddo analysts say the company’s unchanged guidance could have disappointed investors
• Deutsche Telekom shares fall as much as 2.6% after the telecom operator reported Ebitda slightly below estimates, a result of lower rental sales registered in the group headquarters segment, according to analysts
• Trainline shares fall as much as 2.7% after the train ticketing platform was downgraded to neutral by UBS, citing a lack of near-term catalysts, even as the long-term prospects for the firm look solid

The Bloomberg Dollar Spot Index extended declines into a fifth day, on course for the first weekly drop in 2024. Almost all developed-nation peers advanced on Friday, with the exception of Norwegian krone, which is the most volatile G-10 currency this week and under-performs peers. The Australian and New Zealand dollars briefly gave up gains following Waller’s comments before bouncing back after China reported slower declines in home prices in January.  Fed Governor Christopher Waller said January’s jump in consumer prices warrants caution in deciding when to start cutting interest rates. That’s after Fed Vice Chair Philip Jefferson and Governor Lisa Cook made clear they want more evidence that inflation is headed back to their 2% target before lowering borrowing costs.

Earlier in the session, Asian stocks were on track for a fifth straight week of gains as investors took heart from Beijing’s recent market rescue efforts, which have spurred a strong rebound in Chinese shares. The MSCI Asia Pacific Index was set for a 1.3% increase this week and headed for its longest winning streak in a year. Trading on Friday was largely range bound as Japan was shut for a holiday after surpassing a historical high reached more than three decades ago. The upbeat sentiment in Asia comes as Chinese authorities took further steps to restore investor confidence, including restrictions on equity net sales, stock purchases by state funds and a clampdown on quant trading. Chinese stocks as a result posted their longest run of gains since July 2020 in the mainland, while a measure in Hong Kong edged closer to erasing losses this year.

In rates, treasuries are slightly cheaper across the curve with losses led by the front and belly, adding to recent flattening pressure seen on 2s10s and 5s30s spreads. Treasuries are cheaper by up to 2bp across the 2-year out to the 7-year sector with 2s10s, 5s30s spreads flatter by 0.3bp and 1.2bp on the day; 10-year yields drop by 2bps to 4.305%, with bunds and gilts slightly outperforming in the sector. Friday’s US session is set to be quiet for scheduled events, with the focus on potential deal hedging by corporates and supply pressure ahead of Monday’s Treasury auction. According to Bloomberg, the dollar issuance slate is empty and follows Thursday’s five-deal $19.7b calendar led by AbbVie pricing $15b across seven tranches. Issuers paid less than 1 basis point in new issue concessions, with deals nearly five times oversubscribed on average. Monday’s session is expected to be active, which could warrant some deal-related hedging flows for Friday’s session. Solventum is a candidate for either Friday or Monday, contemplating a deal in the context of $7bn with proceeds earmarked to fund a payment to 3M. Monday also sees a US double auction of 2- and 5-year notes for combined $127b

In commodities, oil prices decline, with WTI falling 1.3% to trade near $77.60. Spot gold falls 0.3%.

Looking to the day ahead, we have UK February GfK consumer confidence, Germany Q4 private consumption, government spending and capital investment, and the February ifo survey, as well as the ECB’s Consumer Expectations Survey. The US economic data calendar is empty for the session; we also hear from the Fed’s Waller, the ECB’s Schnabel, and the BoE’s Greene.

Market Snapshot

• S&P 500 futures little changed at 5,092.75
• STOXX Europe 600 little changed at 495.25
• MXAP little changed at 172.84
• MXAPJ little changed at 528.43
• Nikkei up 2.2% to 39,098.68
• Topix up 1.3% to 2,660.71
• Hang Seng Index down 0.1% to 16,725.86
• Shanghai Composite up 0.6% to 3,004.88
• Sensex little changed at 73,119.16
• Australia S&P/ASX 200 up 0.4% to 7,643.59
• Kospi up 0.1% to 2,667.70
• German 10Y yield little changed at 2.48%
• Euro little changed at $1.0820
• Brent Futures down 1.2% to $82.67/bbl
• Gold spot down 0.3% to $2,018.05
• US Dollar Index little changed at 104.02

Top Overnight News

• China’s housing crisis is getting worse, w/Dec new home prices in 70 major cities falling 1.24% Y/Y in Jan (vs. -0.89% in Dec) while secondhand prices sank even more. WSJ
• Constrained on all sides, China’s central bank is aiming to squeeze more value out of its policy actions by catching markets unaware with surprise easing aimed at putting a floor under the struggling economy. A record cut to a key lending rate earlier this week announced by the People’s Bank of China was just the latest unexpected move since Governor Pan Gongsheng took office last summer. At a press briefing last month, he shocked with an outsized cut to banks’ reserve requirement ratio. BBG
• A bill in the U.S. Congress targeting Chinese biotech companies may end up being more “narrowly tailored”, the U.S. lawmaker who proposed it said on Friday, adding that he was cautiously optimistic something could be passed this year. RTRS
• The US and China are discussing new debt plans to prevent a wave of EM sovereign defaults, in potentially their biggest joint economic cooperation in years, people familiar said. Any plan — which may include extending loan periods before defaults — may require buy-in from private creditors. BBG
• ECB Governing Council member Robert Holzmann said he doesn’t see reductions in interest rates coming before the US — suggesting he reckons any move by policymakers in Frankfurt may still be some way off. BBG
• Fed officials (Waller, Jefferson, Cook) signal rate cuts will arrive eventually (and likely this year), but additional disinflationary evidence will be required first. BBG
• Prime Minister Benjamin Netanyahu has finally unveiled Israel’s plans for Gaza after hostilities end in the enclave, submitting to his war cabinet a formal proposal that directly contradicts the objectives of the US. FT
• Comments this week from Fed officials and the minutes to the January FOMC meeting suggest that the first rate cut is unlikely to come as early as our previous forecast of the May meeting. We have therefore dropped our forecast of a May cut and now expect 4 cuts total in 2024 (vs. 5 previously) in June, July, September, and December, followed by 4 more cuts in 2025 (vs. 3 cuts previously), to the same terminal rate of 3.25-3.5%. GIR
• Intuitive Machines leapt premarket after becoming the first private firm to land a robotic spacecraft intact on the moon. NASA paid almost $118 million for the mission that ended a string of failures. BBG
• Mutual fund cash allocations are nearing record lows. Mutual fund PMs can express directional views on the forward path of equities through the share of their assets they choose to hold in cash. Mutual funds continued to deploy cash reserves into the equity market in 4Q23, cutting their allocation to cash from 1.9% to 1.7% of assets. Fund cash allocations now stand just 20 bp above their all-time low of 1.5% reached in December 2021. GIR

Earnings

• Standard Chartered (2888 HK / STAN LN) – FY23 (USD): adj. Pretax 5.7bln (exp. 5.89bln, prev. 4.76bln Y/Y), adj. Op Revenue 17.4bln (exp. 18.6bln, prev. 16.3bln Y/Y). Announces USD 1bln share repurchase. Guides initial FY24-26 op. income growth at the top of the range +5-7%. Underlying profit before tax rose 27% Y/Y to 5.7bln, NII rose 23% Y/Y to 9.6bln, Q4 adj. pretax 1.08bln (exp. 989.6mln), Co. announces USD 1bln buyback. (Newswires) Index Weightings: FTSE 100 (0.8%). Shares +8.1% in European trade
• Allianz (ALV GY) – Q4 (EUR): Adj. EPS 6.00 (exp. 5.69, prev. 4.99 Y/Y), Op. 3.77bln Y/Y (prev. 3.96bln Y/Y). Guides initial FY24 Op. 13.8-15.8bln. Proposes to increase FY dividend to EUR 13.80 (exp. 12.08, prev. 11.40), announces buyback programme of up to EUR 1bln, to be conducted between March 2024 and year-end. Regular dividend payout ratio increased to 60% (prev. 50%). This new dividend policy shall already apply to the dividend for fiscal year 2023 (Newswires) Index Weightings: DAX (7.9% – third largest), Euro Stoxx 50 (3.0%), Stoxx 600 (1.0%) Shares -3.2% in European trade
• BASF (BAS GY) – Q4 (EUR): Revenue 15.9bln (exp. 16.2bln). Adj. EBIT 292mln (exp. 398mln). Sees 2024 operating profit between EUR 13.8-15.8bln (exp. 15.48bln). Guides FY24 EBITDA 8-8.6bln, FCF 0.1-0.6bln. Proposes dividend of EUR 3.40/shr for FY23. Targeting cost-saving plans of up to EUR 1bln by the end of 2026. (Newswires) Index Weightings: DAX 40 (3.6%), Euro Stoxx 50 (1.4%), Stoxx 600 (0.4%) Shares +0.5% in European trade
• Deutsche Telekom (DTE GY) – Q4 (EUR): Adj. Net 1.83bln (exp. 1.63bln), Adj. EBITDA 10.06bln (exp. 10.1bln), Revenue 29.4bln (exp. 28.5bln). Guides initial FY24 EPS > 1.75 (exp. 1.84), Adj. EBITDA 42.9bln. (Newswires) Index Weightings: DAX 40 (6.2%), Euro Stoxx 50 (2.3%), Stoxx 600 (0.8%) Shares -2.7% in European trade

A more detailed look at global markets courtesy of Newsquawk

APAC stocks mostly benefitted amid tailwinds from the tech-led surge in the US on the NVIDIA wave as its shares surged over 16% and its market cap increased by a record USD 277bln. ASX 200 finished higher with gains led by outperformance in tech, consumer stocks and financials. KOSPI kept afloat with South Korea to execute a record KRW 398tln budget in H1 to prop up domestic demand. Hang Seng and Shanghai Comp. were mixed with the tech sector facing headwinds from ongoing trade-related frictions, while the mainland was indecisive as participants digested the PBoC’s liquidity injection, CSRC’s denial of regulatory measures, and the latest Home Price data which showed a steeper Y/Y fall in property prices.

Top Asian News

• US and China are in talks over innovative emerging market debt plans to prevent a surge in defaults.
• China has reportedly turned to private firms to hack an array of foreign governments and organisations, while files indicate China infiltrated the cyberinfrastructure and collected data of government departments in Malaysia, Thailand and Mongolia, according to FT citing a large data leak from Shanghai Anxun Information Technology.
• China’s Embassy in the UK commented regarding UK sanctions on Chinese companies in which it stated that sanctions against relevant companies are ‘unilateral actions that have no basis in international law’ and it is firmly opposed to them, while it would like to inform the British side that any act that undermines China’s interests will be resolutely countered by the Chinese side, according to Reuters.
• US export curbs on China won’t extend to legacy chips which generally refers to 28-nanometer and older-generation semiconductors, according to US official cited by Nikkei.
• US lawmakers urged Volkswagen (VOW3 GY) to halt operations in Xinjiang after vehicles with Chinese components were held at US customs.
• Chinese commercial banks sold a net USD 9.8bln of FX in Jan (vs net sale of USD 4.3bln in Dec), according to FX regulator.
• China’s CSRC vows to crack down on market manipulation and insider trading, will step up onsite inspection of listing candidates.
• Fitch on China says it believes rate cuts will deliver only a minor boost to economic activity.
• Chinese Cabinet meeting says they are to study measures to attract and utilise foreign investment on a larger scale; to study measures to prevent and resolve local debt risks

European bourses, Stoxx600 (+0.1%), have not deviated much from levels seen at the open, with trade fairly tentative after the prior day’s strength. The FTSE MIB (+0.6%) is the exception, lifted by continued strength in the Italian banking sector. Sectors are mixed; Chemicals take the top spot, lifted by post-earning strength in BASF (+0.5%). Autos build on the prior day’s gains after Barclays upgraded Mercedes Benz (+1.5%). Telecoms is the clear laggard, hampered by Deutsche Telekom’s (-1.7%) results. US Equity Futures (ES -0.1%, NQ -0.2%, RTY -0.6%) are subdued, paring back some of the pronounced strength in the prior session. Nvidia soared as much as 16% in the prior session and is higher by 1.8% in the pre-market.

Top European News

• ECB’s Holzmann says the main risk to rake cuts is Red Sea tensions, via Bloomberg TV; Some wage increases have been quite high. Better to cut later and faster than too early. ECB hopes for cuts but have been wrong before. Does not see circumstances for the ECB to cut before the Fed.
• ECB’s Schnabel says monetary policy has had a weaker impact on dampening demand for services
• ECB’s Nagel says it is too early to cut rates even if a move appears tempting; will only get a key price pressure in Q2, then “we can contemplate cut in interest rates”; price outlook is not yet clear enough. Period of rapid inflation is over, and some setbacks ahead are possible. Inflation, including “hard core” will remain markedly higher than 2% in coming months.
• ECB Consumer Inflation Expectations Survey (Jan) – 12-months ahead 3.3% (prev. 3.2%); 3-year ahead 2.5% (prev. 2.5%)
• UK Ofgem Energy Price Cap (GBP): 1,690 (exp. 1,656; prev. 1,928), -12.3% (exp. -14%) for dual-fuel households.

FX

• DXY is pivoting around the 104.00 mark within a 103.85-104.01 range and contained within yesterday’s 103.43-104.12 parameters.
• Uneventful trade for EUR/USD with the pair sandwiched between its 100DMA at 1.0811 and 200DMA at 1.0826. IFO did little to move the dial, whilst ECB inflation expectations posted a modest uptick for the 1yr reading.
• Hawkish Fed rhetoric has seen the JPY lose further ground to the dollar with focus on a potential test of the recent YTD peak at 150.88. Such a move could prompt verbal jawboning from Japanese officials.
• NZD is the marginal laggard across the majors following soft retail sales overnight. AUD is trivially firmer vs. the USD with the pair supported via favourable risk dynamics.
• PBoC set USD/CNY mid-point at 7.1064 vs exp. 7.2008 (prev. 7.1018).

Fixed Income

• Once again, initial leads were bearish with EGBs veering lower throughout the morning. The German Ifo release which printed alongside the latest ECB Consumer Inflation survey, saw a slight increase in the 12-month view. Reaction to the data was hawkish, but not sufficient to trigger a test of 132.00.
• USTs are following their European peers with the pressure resulting in a slight uptick in pricing for the Fed, but very close to the Fed’s own view; currently near lows at 109-10.
• Gilt price action is in-fitting with Bunds with specifics light so far. Overall bearish action has pressured Gilts to a 97.10 trough.
• Italy sells EUR 4bln vs exp. EUR 3.5-4bln 3.20% 2026 BTP Short Term and EUR 0.5-1.0bln 1.50% 2029 & EUR 2.55% 0.25-0.5bln 2041 BTPei.

Commodities

• A weak session for crude prices this morning despite a lack of fresh or clear fundamental drivers, although sentiment has been gradually coming off best levels this morning; Brent Apr dipped back under USD 83/bbl.
• Precious metals also see broad weakness, despite a relatively contained Dollar and quiet news flow, whilst risk appetite has been waning from best levels in recent trade; XAU holds around USD 2020/oz; base metals are lower across the board.
• QatarEnergy is due to make an announcement on Sunday that will have “a significant impact” on the industry, according to Reuters sources; details light

Geopolitics: Middle East

• US charged four mariners from an Arabian sea vessel transporting suspected Iranian-made advanced conventional weapons.
• “Israeli Foreign Minister: We will not be patient for a longer period in order to reach a diplomatic solution on the Lebanese front”, according to Sky News Arabia

Geopolitics: Other

• China’s envoy for Korean Peninsula affairs told US’s North Korea affairs official that China will continue to play a constructive role in promoting the political settlement of issues concerning the Korean Peninsula and said all parties concerned should acknowledge the core of the Korean Peninsula issue, as well as address their concerns through balanced and meaningful dialogue, according to Reuters.

US event calendar

• Nothing major scheduled

Central Bank speakers

• Nothing major scheduled

DB’s Jim Reid concludes the overnight wrap

We’ve been discussing in recent days how Nvidia earnings was the main macro event of the week and how options were pricing in a 10.5% move in either direction in the 24-hours post earnings. This made me a bit nervous we were overselling the event but the reality is we undersold it as post earnings the company surged +16.40% yesterday, a phenomenal performance for one of the biggest companies in the world. There is no doubt it transformed the mood of the whole global risk market as well. Pretty much every global asset class is influenced by these seven stocks, something we tried to get across in our chart book.

To frame the scale of its move yesterday, Nvidia added $277bn to its market capitalisation, making this the biggest single session gain in value of all time, surpassing the $197bn gain by Meta earlier this month. This saw Nvidia shoot back up to fourth place in the ranking of the world’s largest companies by market capitalisation, and the third largest in the S&P 500. Total year-to-date returns for the company now amount to +58.59%, the best out of the entire S&P 500. Nvidia’s year-to-date gains alone are equivalent to nearly 80% of the combined market capitalisation of the two largest listed companies in Europe (Novo Nordisk at $561bn and ASML at $380bn). The Philadelphia Semiconductor Index also partook in the rally closing +4.97%. For more on Nvidia, and the 2024 outlook on semiconductors, see my team’s chartbook from last week here.

The Nvidia-led optimism saw the S&P 500, Nasdaq 100 and Dow Jones indices all hit new all-time highs. The S&P 500 leaped up by +2.11%, its largest gain in over a year, primarily driven by the information technology sector (+4.35%). The gains were clearly concentrated, but the equal weighted S&P 500 still posted a solid +1.03% gain, and the Russell 2000 index of small-cap stocks increased by +0.96%. Within tech, the Mag-7 gained +4.87%, while the broader NASDAQ rose +2.96%, ending the day only a tenth of a percent below its November 2021 highs. Talking of all time highs (ATHs) I did one of my favourite CoTDs yesterday where I looked at 85 countries’ stock markets and showed how far away they were from their ATH in terms of percentage and years. Japan before yesterday was the furthest away at 34 plus years but that record has now been put to one side. For interest the furthest away from ATHs now are Italy, Finland, Portugal, Greece and Cryprus who all last hit their ATH around the 2000 bubble. Then there are 25 countries who last had their ATH around the GFC. You can see more on this in my CoTD here from yesterday. Please email jim-reid.thematicresearch@db.com if you want to be added to the daily chart list.

All global equities benefited yesterday. Indeed European equities enjoyed the risk-on sentiment, as the STOXX 600 rose +0.82%. The German DAX strongly outperformed, jumping +1.47% to another new record, propelled forward by the information technology (+2.83%) and consumer discretionary (+2.82%) sectors. The MSCI EM index increased +0.86%.

It wasn’t just Nvidia that helped the mood yesterday, with data largely supportive on both sides of the Atlantic. In the US, weekly jobless claims at 201k (vs 216k expected) were a boost even if it helped keep yields elevated (see below). Continuing claims also fell more than expected to 1862k (vs 1884k). This reverses the gentle increases from previous weeks, adding to the picture of US economic resilience. Taking the edge off the day’s overarching trends, the US composite PMI modestly fell 0.6 points to 51.4 (vs 51.8 expected), driven by a fall in the services component to 51.3 (vs 52.3 expected). The manufacturing component rose to 51.5 (vs 50.7 expected).

With this overall supportive backdrop, Fed speakers continued to urge caution regarding Fed cuts with Vice Chair Jefferson warning of the risk of “easing too much on improving inflation” after the January “CPI highlight[ed] disinflation is likely to be bumpy.” He still said that it is “likely appropriate to cut later this year” but it was a slightly hawkish message from someone around the center of the FOMC. Philadelphia Fed president Harker made some mixed comments, saying he “would caution anyone from looking for [rates easing] right now and right away” but later suggesting that cuts could come within “a couple of meetings”. Later on, we heard a patient tone from Governor Waller, who noted that there was “no great urgency” to ease policy, as well as from Minneapolis Fed President Kashkari, who said “we still have some work to do” on inflation.

Fed funds futures saw expectations of 2024 rate cuts sink to a new 3-month low of 81.5bps (-5.2bps), which is less than half what priced at the peak on January 12. As a result, 2yr Treasury yields rose +4.6bps to 4.71%, their highest since the December Fed meeting. The softer PMI data saw 10yr Treasuries waver between gains and losses, ultimately finishing the day +0.3bps at 4.32%. Yields saw a bit of volatility, but little lasting impact, around a soft 30yr TIPS auction. This saw bonds issued at a 2.20% real yield, 2.5bps above the pre-sale yield and the highest since 2010 (the last 30yr TIPS auction was back in August).

In Europe, the main release was the preliminary February PMIs, which saw the composite rise 1pt to 48.9 (vs 48.4 expected). This puts the index at an 8-month high, with the overall Euro Area growth outweighing a slump in German manufacturing. This was led by the services PMI, which rose to 50.0 (vs 48.8 expected), its first time out of contractionary territory since July. Adding to this, the publication of the ECB’s January meeting accounts showed officials were of the view that the risk of cutting rates too early was the greater danger relative to holding them steady, particularly with the limited indications of a wage turnaround. This signal of patience came even as there was “increased confidence” that inflation would come back to target and with the accounts flagging the likely lowering of the ECB’s inflation forecast at the March meeting. See our economists’ full take on the accounts here .

Against this backdrop, traders trimmed bets of an ECB cut. The amount of rate cuts expected by the June meeting fell -4.2bps to 25.3bps, so only just pricing in a full rate cut by June. As many as 75bps of cuts had been priced by June back in late December. Off the back of this, the 2yr bund yields rose +5.4bps, even as 10yr bund yields saw a marginal decline (-0.7bps).

In the energy space, strong risk sentiment and lingering supply fears saw Brent crude prices post their highest close since early November (+0.77% to $83.67). In more encouraging news for inflation, month-ahead TTF natural gas prices fell to their lowest since May 2021 (-4.59% to EUR 22.85/MWh) as mild weather and curtailed industrial demand have left Europe with historically high gas storage as it nears the end of winter.

Asian equity markets are relatively quiet after a big week. As I check my screens, the KOSPI (+0.26%) and the S&P/ASX 200 (+0.34%) are trading in the green while Chinese equities alongside the Hang Seng keep on fluctuating in and out of positive territory. Markets in Japan are closed for a public holiday which means no cash Treasury trading. US equity futures are fairly flat.

Now to the day ahead. In terms of data releases, we will have UK February GfK consumer confidence, Germany Q4 private consumption, government spending and capital investment, and the February ifo survey, as well as the ECB’s Consumer Expectations Survey. We will also hear from the Fed’s Waller, the ECB’s Schnabel, and the BoE’s Greene.