Good morning,
After closing at a post-election low on Friday US equity markets were under additional pressure coming out of the weekend. The S&P 500 opened down ~0.75% essentially filling the election night gap (~5,785) while the equal-weight version of the index traded with 0.1% of its 200d moving average, a level it has not tested since the Fed Pivot in Q4 of 2023. Treasury yields remained at the forefront of investor concerns. Coming into the week the S&P 500 had closed lower in four of the last five weeks and as we tested some technical support levels and yields pulled back modestly there was a rally in the back half of the session. The S&P 500 closed slightly higher despite tech weakness while the equal-weight version of the index closed up ~0.8%
Shortly after the close yesterday Bloomberg ran a story suggesting that President Trump’s economic team was considering a gradual approach to tariffs to limit the inflationary impacts. This put a bid under global indices and futures while the USD index and Treasury yields pulled back. However, pretty much all of those moves unwound ahead of this morning’s inflation data. PPI came in better-than-expected flat m/m and up 3.3% on a y/y basis both better than expected though that is up from 3% last month. S&P futures quickly bounced back to the overnight highs up ~0.5%. Treasury yields have started to pull back but are only slightly lower. The USD index is down ~0.35% to ~$109.45, it was ~$109.70 ahead of the tariff story last night.
After being closed yesterday the Nikkei did close down nearly 2% amidst some hawkish commentary from BOJ officials suggesting that a hike next week is still on the table. Major indices in China/Hong Kong rallied sharply reversing much of Monday’s losses amidst further commentary around policy support. Interestingly, there were also reports that Tik Tok could be sold to Elon Musk’s X, though the company has called that “pure fiction”. Most Asian markets closed modestly higher. Most European indices are up between 0.5% - 1%. The FTSE 100 is modestly lower with weakness in staples and healthcare.
Commodities markets are mixed. After the recent rally ICE Brent is pulling back just under 1% to ~80.35. There are multiple press reports suggesting that a Gaza ceasefire deal is close. Metals and ag commodities are trading on either side of unchanged. Yesterday Bitcoin tested 90k before bouncing to reclaim its 50d ma just over 94k. There is some upside follow through this morning with prices up >2% to ~96.5k.
There are a couple of Fed speakers on the calendar today including NY Fed President Williams around 3:00. Looking ahead to tomorrow CPI and bank earnings will be the key catalysts.
Global Markets
Asia:
Japan's Nikkei: -1.8%
Hong Kong's Hang Seng: +1.8%
China's Shanghai Composite: +2.5%
India's Sensex: +0.2%
South Korea's Kospi: +0.3%
Australia's ASX All Ordinaries: +0.5%
Europe:
STOXX Europe 600: +0.5%
Germany's DAX: +1%
U.K.'s FTSE 100: -0.1%
France's CAC 40: +1.1%
Italy's FTSE MIB: +0.9%
Spain's IBEX 35: +0.6%
Washington:
- Bloomberg reports that Trump’s economic team is working on the idea of gradually ramping up tariffs month by month to help avoid a spike in inflation
Sectors/Other Asset Classes:
Government Yields
- US 2yr -1bps to 4.38%, 5yr -1bps to 4.60%, 10yr +0bps to 4.79%, 30yr +2bps to 4.99%
- USD index: -$0.40 to $109.41
- Oil prices - ICE Brent: -0.8% to $80.36, WTI: -0.8% to $78.20, Nat Gas: -3.9% to $3.30
- Gold: -0.1% to $2,675.50, Silver: +0.1% to $30.33, Copper: -0.2% to $4.32
- Wheat: +0.2% to $5.62, Corn: -0.4% to $4.75, Soybeans: -0.3% to $10.50, Cotton: +0.3% to $0.68
- VIX: -0.52 to 18.67
- Bitcoin: +2.3% to ~96.3k
Economic Data:
- US:
- NFIB Small Business Index: 105.1 vs. 102.1 cons., prior 101.7
- PPI: 0%/3.3% m.m/y.y vs. 0.3%/3.4% cons., prior 0.4%/3.0%
- PPI ex-food & Energy: 0%/3.5% m.m/y.y vs. 0.2%/3.8% cons., prior 0.2%/3.4%
- Global