Futures Gain As Ides Of March “Quad Witching” Looms

S&P futures are modestly in the green, paying no attention to today’s historical “Ides of March” cautionary date as we continue higher ahead of today’s quad witching day, and after the latest hot PPI data which weakened the case for imminent Federal Reserve rate cuts. As of 8:15am, S&P futures were up 0.1%, while Nasdaq futures gained 0.2% with Goldman’s Michael Nocerino writing that the market bid this morning follows a heavier tape yesterday with PPI coming in stronger than expected (boosting PCE est for next week + pushing market pricing of rate cuts in June to 54% from 68%).

Europe’s Estoxx 50 gained 0.5% in London session with outperformance in banks, healthcare energy, telecom but weakness from the luxury sector (Brunello Cuccinelli earnings) and tech underperforming; earlier Asia was mixed/mostly lower. Elsewhere, 10Y yields are unchanged around 4.29%, WTI futures are lower by 0.5%, unwinding some of this week’s aggressive rally. The dollar is flat while the yen dropped even after Japan’s largest union group announced stronger-than-expected annual wage deals, keeping the prospect of policy tightening from the BOJ next week on the table. USDJPY rises 0.3% to ~148.70 as a clueless Mrs Watanabe remains firmly in control. Bitcoin tumbled overnight after hitting a new record high above $73,000 just hours earlier. Headlines fairly quiet, with a lot of market attention pulled forward to next week’s NVDA AI developer conference, a potential hike from the BoJ, and Wednesday’s FOMC meeting.

Doubts about whether policymakers can take their foot off the monetary brake are creeping into otherwise bullish markets that have taken stock indexes to fresh highs. European stocks are on track for their eighth consecutive week of gains — the longest winning streak since 2018 — lifted by conviction that euro-area interest rates will start to fall in the coming months.
Equities could face additional volatility with Friday’s multiple options expiry, known as a triple witching. Markets are now especially vulnerable to any setback, either in optimistic economic outlooks or bets on monetary easing, according to Guy Miller, chief market strategist at Zurich Insurance Company Ltd.

“I think we’re getting to a more challenging period in markets because we’ve had all of the good news,” Miller said. “There isn’t much risk premium priced into risk assets and therefore if any of the following happen, namely if we don’t have a soft landing or no landing or if we don’t have a rate cut this year, that’s going to becomes a problem for the market.”

European stocks edge higher, with the Stoxx 600 up 0.2% and on track for their eighth consecutive week of gains — the longest winning streak since 2018 — lifted by conviction that euro-area interest rates will start to fall in the coming months. Telecom and auto shares are the best performers while among individual movers, Swisscom gains as the operator says it agrees to buy Vodafone Italia for €8 billion.  Here are some of the biggest movers on Friday:

• HelloFresh shares advance as much as 8.5%, recovering slightly from a slump triggered by its shock warning last week, after the meal-kit maker reported detailed full-year earnings which analysts said contained no surprises. While free cash flow was better than consensus analyst forecasts, the report showed a 7% y/y decline in active customers, suggesting the German firm is still struggling to attract customers for its core meal-kit business in both the US and other international markets.
• IAG shares climb as much as 4.7% after a double upgrade to outperform at BNP Paribas Exane, which says the airline group has addressed all the issues in the broker’s bear case. Wizz Air has its rating cut as it continues to deal with capacity constraints after Pratt & Whitney engine issues grounded some of its fleet.
• Hypoport rises as much as 6.7%, heading for its highest close since August 2022, as BNP Paribas Exane says the German financial services platform is reaching an inflection point and upgrades its rating to outperform.
• Galp rises as much as 6.9% after the Portuguese oil company said after the close of trading on Thursday that it successfully drilled the Mopane-2X well in the PEL83 block in Namibia and found “a significant column with light oil in reservoirs of high quality.”
• Brunello Cucinelli shares drop as much as 9.1% in Milan trading, the biggest decrease since March 2022, after the Italian luxury company reported net income for the full year that missed analyst expectations, due to higher tax charges.
• Vonovia drops as much as 8.2% following its full-year results, which although overall in-line are seen as a “mixed bag” by Baader Helvea. The German real estate firm’s dividend proposal is ahead of expectations, but analysts are divided over the revised dividend policy going forward.
• Shares of European chipmakers trade lower on Friday after Bloomberg News reported that the Chinese government has asked electric-vehicle makers to sharply increase their purchases from local auto chipmakers
• Ahold slips as much as 1.6% after ING cuts the stock to hold from buy on expectation of “continued downward pressure” in the retailer’s US operations due to the macroeconomic environment and issues at its Stop&Shop brand.
• EuroAPI falls as much as 31% to the lowest on record since the French drug-ingredients group was spun off from Sanofi in 2022. The firm suspended its outlook, with Oddo saying there is “no visibility” at this stage.
• Intertek drops as much as 3.1%, a third day of declines since closing on Tuesday at highest since May 2022. Shore Capital cuts its rating on the testing and inspection company to sell from hold, saying valuation is rich.

Earlier in the session, Asian stocks declined, with Chinese and Korean stocks leading a broad regional selloff, after the latest US data was seen as discouraging the Federal Reserve from cutting interest rates. The MSCI Asia Pacific Index fell as much as 0.9%, taking its loss this week to 1.7%. That’s after seven straight weekly gains, which marked the longest winning run since December 2020. The technology sector was the biggest drag on the regional benchmark on Friday, led by TSMC as analysts warned the stock’s rally had gone too far, too fast.

A measure of Chinese shares listed in Hong Kong slid more than 2% to be Asia’s worst performer as the nation’s central bank drained cash from the financial system with a medium-term liquidity tool for the first time since November 2022. Still, the gauge is up about 15% from this year’s low in January thanks to the government’s measures to bolster the economy and markets.

“This is a healthy correction,” said Kerry Goh, chief investment officer at Kamet Capital Partners Pte. “I don’t think China is short on liquidity, but confidence to spend or invest. The draining of liquidity is probably one off to balance the amount of cash sitting in the system.”

In FX, the dollar extended gains for a second day, on course for the first weekly advance in four; G-10 currency traded mixed with Swiss franc and euro leading gains while commodity currencies underperformed. the yen is lower even after Japan’s largest union group announced stronger-than-expected annual wage deals, keeping the prospect of some form of policy tightening from the BOJ next week on the table. USD/JPY rises 0.3% to ~148.70. The kiwi is still the weakest of the G-10 currencies, falling 0.6% versus the greenback after some downbeat remarks from the finance minister.

In rates, treasuries traded in a narrow range with yields slightly cheaper across the curve and gains led by the long-end, unwinding a portion of Thursday’s aggressive selloff. US yields richer by up to 2bp across the long-end of the curve with both 2s10s and 5s30s spreads flatter by around 1bp on the day; 10-year yields around 4.28% remain near top of Thursday’s session range and outperforming bunds and gilts both by 2bp in the sector. Bunds lag, after French inflation is revised higher and money markets trim pricing for potential ECB easing for a fourth day. The US session is set to focus on data, which includes industrial production and University of Michigan sentiment. 

In commodities, oil prices decline, with WTI falling 0.6% to trade near $80.80 but near a four-month high after the IEA forecast a supply deficit through 2024, changing its earlier projection of a surplus, on the premise OPEC+ maintains production cuts. Copper, typically seen as a bellwether of the global economy, surged to $9,000 a ton, as bets that a pick-up in global manufacturing activity will push up demand for industrial commodities. Spot gold rises 0.4%. Bitcoin drops ~4%.

Bitcoin tumbled as much as 6% off its price, falling to as low as $65.5K, before paring the move back to around $68K.

Looking at today’s calendar, the US data calendar includes March Empire manufacturing, February import/export prices (8:30am), industrial production, capacity utilization (9:15am) and March University of Michigan sentiment (10am). There are no scheduled Fed speakers due before the March 20 policy decision; we’ll hear from the ECB’s Panetta, Vujcic and Lane.

Market Snapshot

• S&P 500 futures little changed at 5,152.75
• MXAP down 1.0% to 174.65
• MXAPJ down 1.5% to 533.00
• Nikkei down 0.3% to 38,707.64
• Topix up 0.3% to 2,670.80
• Hang Seng Index down 1.4% to 16,720.89
• Shanghai Composite up 0.5% to 3,054.64
• Sensex down 0.5% to 72,710.31
• Australia S&P/ASX 200 down 0.6% to 7,670.28
• Kospi down 1.9% to 2,666.84
• STOXX Europe 600 little changed at 506.03
• German 10Y yield little changed at 2.45%
• Euro little changed at $1.0886
• Brent Futures down 0.4% to $85.05/bbl
• Gold spot up 0.2% to $2,166.23
• US Dollar Index little changed at 103.43

Top Overnight News

• China left its 1-year MLF (Medium-Term Lending Facility) rate unchanged (as expected) and withdrew liquidity from the banking system as the gov’t prioritizes currency stability over stimulus. RTRS
• China’s home prices continued to fall in February, underscoring the challenge for authorities as they step up efforts to salvage the beleaguered market. BBG
• The Chinese government has quietly asked electric-vehicle makers from BYD Co. to Geely Automobile Holdings Ltd. to sharply increase their purchases from local auto chipmakers, part of a campaign to reduce reliance on Western imports and boost China’s domestic semiconductor industry. BBG
• Japan’s unions reveal more evidence of robust wage hikes in the latest round of negotiations, providing further impetus for a BOJ rate increase next week. RTRS
•  OpenAI is in talks to raise money from Abu Dhabi for the firm’s new AI chip venture it hopes will reduce its reliance on Nvidia semiconductors. FT
• Electricity demand in the US has been flat for nearly 20 years but is suddenly starting to surge on back of an explosion in data centers, a resurgence in domestic manufacturing, and the advent of electric vehicles. NYT
• Vodafone sells its Italian business to Swisscom for an enterprise value of EU8B, and the company is updating its capital return framework, w/the dividend cut to 4.5p per share (from 9c) while the buyback is increased. RTRS
• The US plans to award more than $6 billion to Samsung to expand beyond a project in Texas, people familiar said. Federal funding for the chipmaker would come alongside significant additional investment by the company. BBG
• President Javier Milei’s sweeping executive decree was rejected by the Argentine Senate and now goes to the lower house of Congress, where a simple majority can scrap it. This is the first presidential edict in recent memory to be repealed by the senate. BBG
• The focus on artificial intelligence (AI) has re-intensified in 2024. Initial ebullience about AI in 2023 drove a massive increase in public and investor focus on AI, as measured by search volumes and news stories. These measures plateaued in 2H 2023, albeit at a high level, but have surged again in 2024. Similarly, the share of S&P 500 companies mentioning AI on earnings calls dipped slightly from 35% in 2Q 2023 to 31% in 3Q 2023. However, the share increased to 37% in 4Q 2023, led by Info Tech and Comm Services. GIR

Earnings and company news

• Adobe Inc (ADBE) – Q1 2024 (USD): Adj. EPS 4.48 (exp. 4.38), Revenue 5.18bln (exp. 5.14bln), announces new USD 25bln share repurchase program. Co. drove record Q1 revenue demonstrating strong momentum across Creative Cloud, Document Cloud and Experience Cloud. The chair and CEO said they have done an incredible job harnessing the power of generative AI to deliver ground-breaking innovation across our product portfolio. Co noted Q1 results and record RPO reflect strong customer adoption of their innovative products and services. Sees Q2 Adj. EPS USD 4.35-4.40 (exp. 4.39). Sees Q2 rev. 5.25bln-5.30bln (exp. 5.30bln). (Newswires) Shares -10.9% after-hours.
• Apple (AAPL) – Buys AI startup DarwinAI as part of race to add features; has added dozens of DarwinAI staff to its AI division, according to Bloomberg. (Bloomberg)

A more detailed look at global markets courtesy of Newsquawk

APAC stocks declined amid data-related headwinds from the US including hot PPI and weak Retail Sales. ASX 200 was dragged lower by underperformance in mining-related industries after iron ore resumed its slide. Nikkei 225 retreated amid cautiousness ahead of the RENGO wage announcement and its potential ramifications on BoJ policy as reports had suggested strong wage hikes could be the deciding factor on whether the BoJ hikes at next week’s crucial meeting. Hang Seng and Shanghai Comp. were negative with heavy losses in tech and property sectors in Hong Kong where the Hang Seng Mainland Properties Index fell more than 3% after a steeper decline in Chinese New Home Prices, while the mainland was only marginally pressured after the PBoC kept its 1-year MLF rate unchanged and opted to not fully roll over the maturing amount.

Top Asian News

• PBoC announced a CNY 387bln 1-year Medium-term Lending Facility operation vs. CNY 500bln maturing with the rate kept unchanged at 2.50%, as expected.
• China is said to tighten IPO listing requirements according to the regulator cited by Bloomberg.
• China is reportedly urging EV makers to purchase local chips as the clash with the US escalates, via Bloomberg.
• Chinese FX Regulator says foreign investors increased their holdings of domestic bonds by a net of USD 1.1bln in Feb; foreign holdings of Chinese onshore bonds remain at relatively high levels in Feb and foreigners net increase onshore stocks. Major economies expected to shift monetary policy stance in 2024, external liquidity tensions to ease and conducive to China’s FX market stability.
• S&P Global Cuts outlook on China’s Vanke BBB+ Credit Rating to Negative from Stable

European bourses, Stoxx600 (+0.2%) began the session around the unchanged mark, before sentiment improved and edging into the green. European sectors are mixed; Telcoms takes the top spot, propped up by Vodafone (+4.5%) and Swisscom (+2.5%), whilst Real Estate is hampered by post-earnings losses in Vonovia (-6.1%). US equity futures (ES +0.1%, NQ +0.1%, RTY +0.3%) are modestly firmer with price action mimicking that seen in Europe; Adobe (-11.6% pre-market) is weaker after providing soft guidance.

Top European News

• ECB’s Rehn reiterates data dependence, says inflation is set to enable easing to occur near the summer. On rates “… Therefore, there are no obvious reasons why adjustment measures could not be taken from the point of view of economic policy”. Subsequnt comments: Says at last week’s meeting of the ECB council we started a discussion about reducing the restrictive dimension of monetary policy and about when it is appropriate to begin lowering rates. If inflation continues to fall and according to our estimate, sustainably downwards towards the target. We can already slowly start easing our foot off the brake pedal monpol.
• UK PM Sunak ruled out an early election on May 2nd and noted his working assumption is that the election would be held in H2.
• The Bank of England/Ipsos Inflation Attitudes Survey: 1yr inflation expectation slips to 3% from 3.3%. Median expectations of the rate of inflation over the coming year were 3%, down from 3.3% in November 2023. Asked about expected inflation in the twelve months after that, respondents gave a median answer of 2.8%, unchanged from 2.8% in November 2023. Asked about expectations of inflation in the longer term, say in five years’ time, respondents gave a median answer of 3.1%, down from 3.2% in November 2023. When asked about the future path of interest rates, 36% of respondents expected rates to rise over the next 12 months, down from 44% in November 2023.
• German Economy Ministry says no tangible recovery yet in sight, according to a report.

FX

• Contained trade for DXY and within 103.37-48 parameters, holding onto yesterday’s PPI and IJC-induced gains. Upside sees the 50 and 100DMA at 103.53 and 200DMA at 103.65. To the downside, little in the way of support until 103.
• EUR/USD is unable to reclaim 1.09 with 1.0889 the high watermark for the session in quiet newsflow. If 1.09 is reclaimed, the 10DMA sits just above at 1.0905. Downside sees 1.0867 from 7th March.
• Steady trade for GBP vs. USD as UK-specifics remain light ahead of a CPI, PMI, retail sales data and the BoE announcement next week. The range for Cable stands at 1.2731-1.2756.
• JPY is pressured despite a strong outcome to the RENGO wage tally. Possibly a buy-the-rumour sell-the-fact move given that the data was expected to be on the hawkish side. Currently holds towards the upper end of a 148.83-04 range.
• Antipodeans are both softer vs. the USD but NZD more so amid cross-related buying in AUD/NZD. Antipodean-specific newsflow remains light ahead of the RBA next week.

Fixed Income

• USTs are rangebound and remain around 110-06 following the hawkish PPI/IJC move yesterday, with support at 110-01+ from 14th Feb; focus turns to US Import Prices & UoM Inflation Expectations.
• Bund price action is steady and relatively rangebound within a 131.31-99 range; ECB’s Lane to give remarks at 14:30 GMT / 10:30 ET.
• Gilts are once again the incremental underperformer, but only modestly so and holding above the 98.00 mark and by extension last week’s 97.91 trough.

Fixed Income

• Crude initially traded sideways, taking a breather following yesterday’s rally, before succumbing to some weakness into the European morning around the time details of the Hamas ceasefire proposal emerged; profit-taking may also be a factor. Brent Apr now holds below USD 85/bbl.
• Firm trade in precious metals despite the stronger Dollar but against the backdrop of the global risk aversion experienced yesterday (and into APAC) coupled with the ongoing geopolitical tensions in Russia/Ukraine and the Middle East; XAU resides within yesterday’s USD 2.152-77.04/oz.
• Base metals are higher across the board this morning as momentum picked up with Shanghai copper reaching near-three-year highs and 3M LME touched a 10-month peak.
• Commerzbank lifts silver year-end price forecast to USD 29/oz.
• JP Morgan believes that Russia can maintain oil exports at its current levels through June, even as it cuts crude production by 0.5mln BPD. Drop in Russian exports could spur price pressures of an additional USD 5/bbl to the forecast of USD 88-90/bbl by May and the mid-80/bbl region in H2-2024.
• German Chemical Industry Association (VCI): 2023 production -7.9% Y/Y, Producer Prices -0.4% Y/Y; Revenue -12.2% Y/Y

Japan wage negotiations and upcoming rate hike

• Japanese Finance Minister Suzuki said they are seeing a strong pay hike move in wage talks and the government is to mobilise all policy steps available to continue the wave of wage hikes, while he added that Japan is no longer in deflation.
• A Reuters poll showed 35% of economists expect the BoJ to end negative rates in March and 62% expect April, while 31% of economists expect the BoJ to end YCC in March and 62% expect April.
• Japanese Unions said to have won over 5% average (exp. 4.1%, demand 5.85%) in wage hike talks, according to Kyodo News
• Japan RENGO 1st Wage Tally: 5.28% (exp. 4.1%; 2023 final figure 3.6%). Base Pay to rise 3.70% (Initial 2.33% in 2023). Japan’s FY24 pay increases is the largest in over three decades.
• BoJ is reportedly making final arrangements to end negative interest rates at next week’s meeting, according to JiJi.
• RENGO says part-timers wage hikes reached 6% for 2024.
• Head of Japan’s biggest trade union confederation RENGO says rising inequality, inflation and labour crunch among factors behind big wage hikes.
• Japanese government and BoJ are to keep the joint statement including the 2% price target, according to JiJi.

Geopolitics

• At least 11 Palestinians were killed and 100 injured in Israeli forces targeting people waiting for humanitarian aid in Gaza, according to the Gaza health ministry cited by Reuters.
• Australia’s Foreign Minister said Australia is to resume funding for UNRWA which is the UN’s main Palestinian relief agency.
• US military said Houthis fired two anti-ship ballistic missiles from Yemen towards the Gulf of Aden and two towards the Red Sea although there were no injuries or damage reported to US or coalition ships, while the US military said it destroyed nine anti-ship missiles and two drones in Houthi-controlled areas of Yemen, according to Reuters.
• UKMTO received a report of an incident 76NM west of Yemen’s Hodeida and announced a merchant vessel was struck by a missile and sustained some damage, although the crew were reported safe and the vessel is proceeding to its next port of call.
• Hamas ceasefire proposal to mediators includes first stage of releasing Israeli women, children, elderly, and ill in exchange for 700-1000 Palestinian prisoners, according to the proposal seen by Reuters
• Ambrey says a tanker was subject to a missile strike on the starboard side circa. 88NM north-west of Hodeidah, Yemen; damage report, no crew injuries.
• Russia’s Kremlin, on French President Macron’s latest statement on Ukraine, says France is already involved in the war and has signaled it’s ready for deeper involvement

US Event Calendar

• 08:30: Feb. Import Price Index MoM, est. 0.3%, prior 0.8%
  • Feb. Import Price Index YoY, est. -0.8%, prior -1.3%
  • Feb. Import Price Index ex Petroleu, est. -0.2%, prior 0.6%
  • Feb. Export Price Index YoY, est. -2.4%, prior -2.4%
  • Feb. Manufacturing (SIC) Production, est. 0.3%, prior -0.5%
• 09:15: Feb. Capacity Utilization, est. 78.5%, prior 78.5%
• 10:00: March U. of Mich. 5-10 Yr Inflation, est. 2.9%, prior 2.9%
  • March U. of Mich. 1 Yr Inflation, est. 3.1%, prior 3.0%
  • March U. of Mich. Expectations, est. 75.1, prior 75.2
  • March U. of Mich. Current Conditions, est. 79.7, prior 79.4

DB’s Jim Reid concludes the overnight wrap

The last 24 hours have seen a dramatic bond sell-off, with 10yr Treasury yields (+10.0bps) up to 4.29% as concerns mounted about stubborn inflation. The main driver was a strong US PPI report, which showed that producer prices were rising faster than expected in February. But alongside that, oil prices closed at their highest level since November, which added to fears that inflation was still gathering momentum. And on top of that, there was growing anticipation that the Bank of Japan would end their negative interest rate policy at next week’s meeting, which added to the upward pressure on global yields.

For markets, the big question is what this means for rate cuts. Up to now, futures had been focused on June as the most likely timing for the Fed’s first cut. But this week’s releases have led to growing doubts about that. For example, futures are now pricing in roughly a one-in-three likelihood that the Fed won’t cut at all by June. And for 2024 as a whole, just 76bps of cuts are priced in by the December meeting, which is the fewest so far this year. That’s a big turnaround from the start of the year, when 158bps of cuts were expected by December, and the first cut was fully priced in by March. So we’re seeing yet another hawkish repricing, which echoes several other points over the last couple of years when markets have priced in a dovish pivot before progressively dialling that back. Indeed, this pattern of pricing a dovish pivot has happened at least 7 times now in this cycle (we counted them before here), and on the previous 6 it was followed by even more hawkish outcomes.

That sets the stage for a very important week of central bank meetings ahead, with decisions from both the Bank of Japan and the Federal Reserve next week. Notably at the Bank of Japan, there’s been growing anticipation that they’re about to end their negative interest rate policy, and investors are pricing in a 61% likelihood of a shift. That’s what DB’s economist is expecting in his own preview (link here), but we should get some important information today, as we’ll get the outcome of wage negotiations from Rengo, the country’s largest union group. Meanwhile at the Fed, the big question next week is what they’ll signal in their new dot plot, and whether the median dot still points towards three cuts for 2024, as happened in December.

In terms of the details of that PPI release yesterday, the main story was that headline PPI came in at +0.6% (vs. +0.3% expected), which pushed the year-on-year measure up to +1.6% (vs. +1.2% expected). Moreover, the measure excluding food, energy and trade services was up +0.4% (vs. +0.3% expected). So the release echoed the upside surprise in Tuesday’s CPI print, and led to growing concern that inflation was getting stuck above target levels. At the same time, that inflation narrative got further momentum from the latest uptick in oil prices, with Brent Crude (+1.65%) closing at $85.42/bbl, the highest since early November. The latest oil price rise was supported by the latest IEA report, which now foresees the oil market staying in deficit through 2024.

Admittedly, yesterday’s data wasn’t entirely hawkish, with US retail sales disappointing in February. But the weakness only served to dampen risk appetite further. Headline retail sales were only up by +0.6% in February (vs. +0.8% expected) with the previous month revised down to show a larger -1.1% decline. And the retail control group was flat in February (vs. +0.4% exp.) after falling by -0.3% in January. This means the 3-month change in retail control has turned negative for the first time since last April.

Nevertheless, it was the prospect of faster inflation and fewer rate cuts that dominated the rates reaction and led to a major global sell-off for sovereign bonds. In the US, that meant Treasuries lost ground for a 4th consecutive day, with yields on 2yr Treasuries (+5.9bps) up to 4.69%, whilst yields on 10yr Treasuries (+10.0bps) rose to 4.29%. And there was evidence that investors were anticipating faster inflation, with the US 2yr inflation swap (+3.7bps) rising to 2.47%, its highest level since October. Meanwhile in Europe, yields on 10yr bunds (+5.9bps), OATs (+7.1bps) and BTPs (+10.5bps) all moved higher as well. And overnight there’s only been a slight decline in yields, with those on 10yr Treasuries down -1.0bps to 4.28%.

For equities, it was also a difficult session yesterday. The S&P 500 was down -0.29%, but the decline was very broad with 79% of constituents down on the day and the equal-weighted version of the index (-0.95%) saw its worst daily performance in the past month. The decline was led by both interest-sensitive sectors (with real estate down -1.61% and utilities -0.81%) and consumer-oriented ones (consumer staples -0.78%). The small cap Russell 2000 was down -1.96% while the NASDAQ (-0.30%) and Magnificent 7 (-0.22%) saw moderate losses. It was another day of wide variation within the Mag 7, with large declines for Tesla (-4.12%) and Nvidia (-3.44%) but sizeable gains for Microsoft (+2.44%) and Alphabet (+2.37%). Back in Europe, the STOXX 600 (-0.18%) fell back from its all-time high the previous day, but the CAC 40 (+0.29%) outperformed to close at a new record.

Overnight in Asia, those equity losses have continued across the region, with declines for the Hang Seng (-2.18%), the KOSPI (-1.63%), the CSI 300 (-0.57%), the Nikkei (-0.42%) and the Shanghai Comp (-0.20%). In China, that comes as the PBoC have left their 1yr medium-term lending facility rate at 2.5%. Moreover, they withdrew a net 94 billion yuan of cash from the banking system. Looking forward, US equity futures are also pointing to further weakness, with those on the S&P 500 down -0.08%.

To the day ahead now, and data releases include US industrial production and capacity utilisation for February, along with the preliminary University of Michigan consumer sentiment index for march, and the Empire State manufacturing survey for March. Alongside that, we’ll get Italian retail sales for January. Meanwhile from central banks, we’ll hear from the ECB’s Panetta, Vujcic and Lane.