Futures Flat Ahead Of Flood Of Economic Data

US equity futures pointed to modest gains, led by tech stocks – following Monday’s 38bps drop which was the worst Monday since early December and the second worst Monday since last June – as investors looked ahead to economic data and commentary from Federal Reserve speakers in coming days for clues on the outlook for interest rates. As of 8:00am ET, S&P 500 futures rose 0.1% while Nasdaq 100 contracts added 0.3%. Europe’s Stoxx 600 index was also flat, hovering near its all-time high. Two-year notes led gains as Treasuries rose, retracing some of Monday’s drop. The dollar slipped, oil dipped and bitcoin soared above $57,000. It’s a busy day for economic data, which includes January durable goods orders (8:30am), Case-Shiller home prices (9am), consumer confidence, Richmond Fed and Dallas Fed.

In premarket trading, cryptocurrency-linked stocks rise after Bitcoin’s price reached the $57,000 level for the first time since late 2021 (Cleanspark (CLSK) +16%, Coinbase (COIN) +6, Marathon Digital (MARA) +12%). Hess shares dropped premarket after Chevron said its $53BN acquisition of Hess faces potential disruption as rivals ExxonMobil and CNOOC claim pre-emptive rights over Chevron’s stake in a crucial Guyana oil project (the largest oil discovery in a decade). Discussions are ongoing, but failure to resolve this could jeopardise the Hess takeover, Chevron said.

Macy’s shares were volatile after it said it plans to close 150 unproductive locations as the department-store chain seeks to fight off a pair of activist firms seeking to buy the company. Zoom shares jumped 13% in US premarket trading after the video-conferencing software company’s guidance for adjusted earnings per share was stronger than expected. Additionally, Zoom also said its board approved a buyback program. Here are some other notable premarket movers:

• Aaron’s slumps 25% after providing disappointing 2024 forecasts.
• Altice USA gains 4% after Bloomberg reported that Charter Communications is exploring a takeover of the cable provider.
• Cava rises 7% after the restaurant chain posted fourth-quarter sales that beat expectations as diners splurged on premium dishes.
• Hims & Hers Health (HIMS) soars 18% after the telehealth group’s forecast for first-quarter revenue topped the average analyst estimate.
• Workday shares fell 7.2% in US premarket trading after the human resources software company issued full-year subscription revenue forecast that was weaker than expected at the midpoint. The company also reported fourth-quarter results that analysts said showed less upside than usual.
• Unity Software shares slid 17% in US premarket trading after the video-game software development company’s forecast for revenue fell short of expectations amid a portfolio review that includes exiting some businesses.
• Lowe’s said its sales will fall further this year as consumers continue to hold off from sprucing up their homes amid higher mortgage rates and a drop in new construction projects.
• Janux Therapeutics jumps 106% after the company reported updated clinical data.
• PubMatic rises 27% after the advertising technology company’s fourth-quarter earnings beat expectations, with analysts highlighting a boost from new products.
• TransMedics gains 21% after the transplant therapy biotechnology company reported fourth-quarter revenue that beat the average analyst estimate.

Readings on the US economy are in sharp focus this week, with the Fed’s favored inflation gauge due on Thursday grabbing the most attention. Markets have already dialed back expectations for early and rapid Fed easing after hotter-than-expected data on jobs and price gains, pushing out bets on a first cut to June or July.

“We have always been in the camp that the Fed is unlikely to move as quickly as the market was pricing and data for the first couple of months will only confirm that the first cut will be pushed into the third quarter,” said Matt Stucky, chief portfolio manager for equities at Northwestern Mutual Wealth Management Co.

In response to some arguments that stocks are in another tech bubble, Citigroup strategists said they don’t regard the US equity market as being in a bubble like that of 1999-2000, and suggested the rally could spread to other sectors. Valuation multiples for stocks are well below 2000 levels and, while cash flow expectations around tech companies have increased, forecasts for other industry groups aren’t stretched. That supports the case for broader equity gains.  

“We argue that ‘bubble’ is the wrong term to describe the current market setup,” the Citigroup team led by Scott Chronert wrote. “Rather, the recent rally puts pressure on fundamentals to deliver.”

Elsewhere, Bitcoin climbed, rising briefly beyond $57,000 for the first time since late 2021, supported by investor demand through exchange-traded funds as well as further purchases by MicroStrategy Inc.

European stocks were little changed, with mining and autos & parts shares leading gains, while personal care and media stocks are the biggest laggards; drinkmakers’ stocks rose as earnings from Aperol-maker Davide Campari-Milano exceed analyst forecasts. The moves followed sharp drops over the past year for beverage manufacturers amid worries about destocking and consumers turning to cheaper alternatives. Campari gained as much as 7.5% while Remy Cointreau (+2.2%), Pernod Ricard (+1.8%), Diageo (+1.6%) also rise. Here are the biggest movers Tuesday:

• Bouygues rises as much as 5.3% after the French conglomerate reported full-year results, with Morgan Stanley saying that a beat on free cash flow was the main highlight
• GTT shares gain as much as 9%, to touch their highest since August 2022, after the French engineering company’s guidance for 2024 Ebitda beat analysts’ consensus at the mid-point, according to data tracked by Bloomberg
• Flutter shares gain as much as 5.7% in London as Barclays upgrades the stock to overweight from equal-weight, seeing earnings growth over several years as the gambling operator’s US market share strengthens
• Abrdn rose as much as 7.8% after the UK asset manager reported adjusted operating profit above estimates, with analysts also drawing attention to stable net interest margins
• SIG Group shares rise as much as 3.6%, the most since February 2023, after the Swiss carton-packaging maker’s cashflow turned positive thanks a strong 4Q, according to Vontobel
• Puma shares advance as much as 3.9% after the sportswear brand reported full-year results. The company also said it sees weaker demand for sneakers and sports gear persisting through the first half of the year before picking up amid major sporting events
• Eurofins Scientific shares fall as much as 12%, the most in a year. Morgan Stanley said cashflow was disappointing from the laboratory testing services company, citing the cost of higher start-up losses and more restructuring
• Straumann shares decline as much as 7.1% after the Swiss dental equipment company reported operating profit was much weaker due to restructuring and impairment
• Croda shares fall as much as 3.6% after the British specialty chemicals firm reported FY23 results. Citi analysts say though the figures mark the end of a difficult year
• Rovi declines as much as 9% after the Spanish pharmaceutical company said it expects revenue to decrease by a mid-single-digit percentage in 2024. It’s the steepest drop since May last year

Earlier in the session, Asian stocks declined in the absence of fresh catalysts to drive the regional benchmark’s longest stretch of weekly gains in more than a year, with shares in Japan and Hong Kong reversing earlier advances. The MSCI Asia Pacific Index fell 0.2%, reversing a rise of as much as 0.3%, with losses in technology stocks weighing on the index. Japan’s benchmarks, reversed an early advance, while stocks also fell in Korea, Taiwan and Singapore. Mainland and Hong Kong-listed Chinese shares declined, extending Monday’s slide, as attention shifts to next week’s NPC meet. Hong Kong’s benchmark dropped ahead of the budget announcement on Wednesday.

• Hang Seng and Shanghai Comp. were mixed with the mainland mildly positive after the PBoC injected liquidity and with China said to consider approving additional REITs to support consumption.
• ASX 200 was choppy as strength in the consumer sector was partially offset by weakness in miners.
• Nikkei 225 printed fresh record highs before reversing the advances as participants digested the latest CPI data.

Japan’s two-year yield climbed to the highest since 2011 after stronger-than-expected inflation data boosted bets the central bank will end its negative-interest-rate policy in coming months. Traders increased the probability of Bank of Japan exiting its negative rate policy by April to about 82%, up from 78% on Monday, according to swaps data compiled by Bloomberg. The yen strengthened against the dollar.

The inflation report “is adding to speculation that the BOJ will end negative-rate policy as early as March and is serving as a selling catalyst for bonds,” said Kazuya Fujiwara, a fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo. The data underscores persistent inflationary pressures, he said.

In FX, the Bloomberg Dollar Spot Index drops as much as 0.2% before paring losses to 0.1%  while the yen stood atop the G-10 FX leader board, rising 0.3% versus the greenback after Japanese CPI topped estimates and pushed two-year JGB yields to the highest since 2011. The greenback also lagged the Australian dollar, though outperformed others incuding Sweden’s krona.

In rates, treasuries held small gains across the curve after being led higher by bunds and gilts after data showed inflation in UK stores slowed to the lowest level since March 2022. 10-year US TSY yields were around 4.26%, about ~2bps lower on the day, with bunds and gilts outperforming by 0.5bp and 2bp in the sector; gilts, richer by 3bp-4bp on the day, lead gains in core European rates as BOE rate cuts are more aggressively priced. Supply remains the main theme, with $42 billion 7-year note auction at 1pm and another heavy slate of new corporate bonds anticipated after $27 billion was priced Monday.  The week’s coupon issuance concludes with today’s 7-year note auction, and follows small tails for 2- and 5-year notes Monday; the WI 7-year yield near 4.30% is about 19bp cheaper than January’s, which tailed by 0.3bp. The dollar IG credit issuance slate includes a handful of deals already; 18 names priced $27b across 37 tranches Monday on order books that were three times oversubscribed according to Bloomberg, spreads compressed nearly 25bps across execution and attrition rates climbed. Another busy session is is expected Tuesday, before critical inflation data later this week.

In commodities, oil steadied after Monday’s gains as pockets of strength in physical markets supported wider sentiment; WTI trade near $77.60 while Brent was at $82.40. Iron ore gained after Monday’s hefty loss, as market watchers looked for signs China’s approaching construction season will bolster demand after costs of the raw material dropped. Spot gold is up 0.2%.

Bitcoin surged more than 4%, hitting a fresh two-year high and rose above $57,000, extending on the sharp gains seen on Monday, with the latest ETF inflows confirming that retail interest continues to surge.

Looking at today’s calendar, US economic data includes January durably goods orders (8:30am), 4Q house price purchase index, December FHFA house price index and S&P CoreLogic Case-Shiller home prices (9am), February Richmond Fed manufacturing index, consumer confidence, and Richmond Fed business conditions (10am) and Dallas Fed services activity (10:30am). Fed speakers scheduled include Barr at 9:05am.

Market Snapshot

• S&P 500 futures up 0.1% to 5,085.50
• STOXX Europe 600 little changed at 495.81
• MXAP up 0.3% to 173.34
• MXAPJ up 0.2% to 527.76
• Nikkei little changed at 39,239.52
• Topix up 0.2% to 2,678.46
• Hang Seng Index up 0.9% to 16,790.80
• Shanghai Composite up 1.3% to 3,015.48
• Sensex up 0.5% to 73,141.23
• Australia S&P/ASX 200 up 0.1% to 7,663.01
• Kospi down 0.8% to 2,625.05
• German 10Y yield little changed at 2.43%
• Euro little changed at $1.0854
• Brent Futures little changed at $82.57/bbl
• Gold spot up 0.2% to $2,035.73
• U.S. Dollar Index down 0.12% to 103.71

Top overnight news

• Japan’s Jan CPI overshoots the Street, with headline coming in at +2.2% (vs. the Street +1.9% and vs. +2.6% in Dec) while core rises 3.5% (vs. the Street +3.3% and vs. +3.7% in Dec). BBG
• Chinese regulators are taking measures to keep the renminbi’s dollar exchange rate stable as Beijing seeks to bolster confidence in the country’s currency and economy ahead of a key leadership summit. FT
• China’s state-backed funds have poured more than 410 billion yuan ($57 billion) into onshore shares this year in a bid to prop up the market. Further purchases are expected. BBG
• Samsonite is weighing its options following interest from suitors including buyout firms, people familiar said. Some PE firms are considering acquiring the company and relisting it in another market — such as the US — at a higher valuation. Shares jumped in Hong Kong. BBG
• President Emmanuel Macron of France on Monday said “nothing should be ruled out” after he was asked about the possibility of sending Western troops to Ukraine in support of the embattled nation’s war against Russia. NYT
• Iran reduced its stockpile of near-weapons-grade nuclear material even as it continued expanding its overall nuclear program, the United Nations’ atomic watchdog said Monday, marking a surprise step that could ease tensions with Washington. WSJ
• President Biden said Monday that fighting in Gaza could stop as early as this coming weekend, the most detailed timeline to date from the White House on a cease-fire between Hamas and Israel in Gaza. WSJ
• Federal Reserve Bank of Kansas City President Jeffrey R. Schmid said the US central bank should be patient in cutting interest rates with inflation above its 2% target and the job market still strong. In his first major speech since taking the job six months ago, Schmid also said he’s in no hurry to stop the ongoing reduction of the Fed’s balance sheet. BBG
• Sixth Street wants to go big on beaten down real estate to capitalize as banks grapple with stress in their portfolios. “We don’t think this is systemic risk, but there are obviously large exposures, particularly in some of the small and regional-sized banks,” CEO Alan Waxman said. BBG

Earnings

• Hess (HES), Chevron (CVX) – Chevron’s USD 53bln acquisition of Hess faces potential disruption as rivals ExxonMobil (XOM) and CNOOC (883 HK) claim pre-emptive rights over Chevron’s stake in a crucial Guyana oil project (the largest oil discovery in a decade). Discussions are ongoing, but failure to resolve this could jeopardise the Hess takeover, Chevron said. (Newswires) HES -2.9%, CVX -0.6% in pre-market trade
• Puma (PUM GY) – Q4 (EUR): Revenue 1.98bln (exp. 2.094bln). EBIT 94.4mln (exp. 100mln). Net 0.8mln (exp. 28mln). Adverse currencies lead to a negative impact on sales of more than EUR 400mln. Asia/Pacific sales increased by 2.8% Y/Y, supported by strong growth in Greater China and India. The rest of Asia was softer, impacted by consumer sentiment and warm weather conditions. Sales in the Americas region decreased by 2.4% Y/Y due to the devaluation of the Argentine peso. 2024 EBIT guidance 620-700mln (exp. 663mln). “Going into 2024, we see that the market environment remains challenging.” (Puma) +0.5% in European trade
• Lowe’s Companies Inc (LOW) Q4 2023 (USD): Adj. EPS 2.28 (exp. 1.68), Revenue 18.602bln (exp. 18.45bln) choppy pre-market
• EU antitrust regulator says it will analyse Microsoft’s (MSFT) AI partnership with Mistral AI.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded mixed after the lacklustre handover from the US as markets braced for looming risk events. ASX 200 was choppy as strength in the consumer sector was partially offset by weakness in miners. Nikkei 225 printed fresh record highs before reversing the advances as participants digested the latest CPI data. Hang Seng and Shanghai Comp. were mixed with the mainland mildly positive after the PBoC injected liquidity and with China said to consider approving additional REITs to support consumption.

Top Asian News

• US intends to increase defence industrial cooperation with Japan, India, and other partners in the Indo-Pacific to build supply chain resilience in the face of threats like China, according to a Pentagon official cited by Nikkei.
• China’s Commerce Minister Wang met with USTR Tai at the WTO conference in Abu Dhabi and expressed Beijing’s “solemn concerns” over US tariffs and Taiwan-related issues, according to SCMP.
• China’s Commerce Minister Wang said China is highly concerned about the trade remedy investigation initiated by the European side on China’s EVs and other products, while he expressed strong dissatisfaction with this investigation that lacks factual basis.
• China’s Commerce Minister Wang said China hopes Australia will pay attention to and actively promote the resolution of specific problems encountered by Chinese enterprises in Australia, as well as actively support China’s accession to CPTPP.
• ABC News reported that it understands China is on track to lift tariffs on Australian wine at the end of next month when a review into the wine duties concludes.
• Standard Chartered (2888 HK) suspended new subscriptions by clients in China under the QDII outbound investment programme citing “commercial reasons”, according to Reuters.
• PBoC held a working meeting on Feb 26th; says they are to use all monetary tools in full and use them well.
• China says it will prevent fluctuations in the housing market, according to CCTV; says localities should promote balance between supply and demand in the real estate market. All cities should accurately study and judge housing demand and improve housing supply, cities should take into account local economic and social development alongside population changes.

European bourses are modestly firmer having picked up a touch in limited newsflow after an uneventful open, Euro Stoxx 50 +0.3%. Breadth overall fairly narrow, though the likes of the DAX 40 +0.4% have begun to extend modestly higher. Sectors mixed with no clear theme or bias though Basic Resource names outperform while Morgan Stanley lifted Semiconductors to Overweight (prev. Neutral). Auto names, in Germany in particular, are modestly firmer after Monday’s pressure. Stateside, futures remain near the unchanged mark but with a slight positive bias, ES +0.1%, in-fitting with initial action in European trade but yet to experience the modest uptick seen since in European peers. Newsflow thus far limited, updates around MSFT, HES, CVX among others.

Top European News

• UK Chancellor Hunt is considering plans to lower national insurance instead of income tax and could also announce a duty on vapes, according to reporting by The Telegraph.

FX

• The DXY fell below Monday’s 103.71 trough to a 103.60 base amid JPY pressure post-Japanese CPI. However, USD/JPY failed to test 150.00 to the downside and has since risen a touch with the USD benefitting in-turn and towards the 103.81 peak.
• EUR holds near the 1.0850 mark in relatively tight parameters with specifics light and no follow through from German GfK.
• Cable is unchanged and within Monday’s range, docket ahead for the UK is headlined by BoE’s Ramsden.
• AUD outperforms as it resides near its 100-DMA and is yet to test the 200-DMA at 0.6555 and 0.6561 respectively, Kiwi ever so slightly softer vs the USD ahead of the RBNZ.
• PBoC set USD/CNY mid-point at 7.1057 vs exp. 7.1945 (prev. 7.1080).
• Chinese regulators are reportedly taking measures to keep the renminbi exchange rate stable as Beijing aims to bolster confidence in China’s economy and currency ahead of the “Two Sessions” gathering set to begin March 4th, while measures include refraining from short-term interest rate cuts and keeping the CNY currency band against the dollar firm, according to FT.

Fixed Income

• Session’s focus has been supply. Little reaction to outings from the Netherlands, UK & Germany thus far though the overall hefty docket in addition to syndication details/announcements from Slovakia, France, Italy (Valore) & UK has kept EGBs near the unchanged mark.
• Bunds held a tick above Monday’s Monday’s 132.33 base and by extension remain above Friday’s 132.05 low; BTPs similarly contained but we await further 7yr Valore (Retail) updates after Monday’s first day of subscription saw a record EUR 6.4bln of demand.
• Gilts not ‘stuck; to unchanged levels in the same way as BTPs as its own supply was via a I/L; most recently, no reaction to the DMO announcing it will be launching a new 30yr syndication from 11th March (week after the March budget).
• USTs a touch firmer but someway shy of Monday’s 110-04 peak after lacklustre 2yr & 5yr sales, 7yr due later. Yields currently under modest pressure with no overt flattening/steepening bias.

Commodities

• Crude is near unchanged but holding on to most of the prior day’s gains amid the recent Dollar softness and ongoing geopolitics, no reaction to the most recent updates which poured some cold water on Biden’s relative optimism overnight.
• Nat gas under pressure but within familiar ranges for Dutch TTF while its US peer is essentially flat intraday.
• Precious metals benefit from the softer USD and yield environment, but slipped from best as the DXY lifted from its low; base peers post modest gains with potential tailwinds from reports out of China around measures to support consumption.
• Russia is to ban gasoline exports for six months with the ban to be introduced from March 1st, according to Tass.

Geopolitics: Middle East

• Hamas received a draft Paris proposal which allows for a 40-day initial halt in all military operations and for the gradual return of displaced civilians to North Gaza, except men of military age, while it proposes all Israeli women, children under 19, elderly, and sick hostages would be released in exchange for a number of Palestinian prisoners. Furthermore, Palestinian prisoners would be exchanged for the release of Israeli hostages at a ratio of 10 to 1, according to a senior source cited by Reuters.
• US President Biden said he hopes a ceasefire agreement between Israel and Hamas can take effect by next Monday and national security advisers told him negotiators are “close”, according to AP.
• US President Biden said Israel has agreed not to engage in “activities” during Ramadan and has committed to enable an evacuation of significant portions of Rafah “before they go and take out remainder of Hamas”, according to NBC interview
• US Central Command said it destroyed three unmanned surface vessels, two mobile anti-ship cruise missiles, and a one-way attack unmanned aerial vehicle in self-defence, according to Reuters.
• Hamas official says there are still “big gaps” that need to be bridged before a ceasefire. Thereafter, Israeli political sources report that they do not know what the basis of US President Biden’s optimism regarding the imminent ceasefire is, via AJA Breaking and there is no breakthrough to announce on Gaza ceasefire, according to Qatar’s Foreign Minister; remain upbeat and optimistic on mediation talks; no agreement between Israel and Hamas on any of the main issues linked to a ceasefire.

Geopolitics: Other

• Czech PM Fiala said about 15 countries have shown interest in the Ukraine ammunition initiative and Dutch PM Rutte noted that several other countries will also contribute to the Czech-proposed ammunition initiative, according to Reuters.
• French President Macron said they think a Russian defeat is indispensable for Europe’s security and they will be exploring ways to mobilise third countries to buy ammunition, while he added they will join the ammunition initiative. Macron also said European countries will increase sanctions on countries helping Russia to bypass European sanctions and noted that he didn’t say France was not in favour of sending troops to Ukraine, while he stands by strategic ambiguity on the issue of sending troops to Ukraine and cannot rule it out.
• Russia’s Kremlin, on French President Macron not ruling out sending European troops to Ukraine, says sending NATO member contingent to Ukraine is a very important new element; if this happens, talks would have to shift to the inevitability of conflict with NATO.
• Russian Security Council Secretary Patrushev met with Cuba’s Raul Castro to discuss security cooperation, according to Ifax.

US Event Calendar

• 08:30: Jan. Durable Goods Orders, est. -5.0%, prior 0%
  • Jan. Durables-Less Transportation, est. 0.2%, prior 0.5%
  • Jan. Cap Goods Ship Nondef Ex Air, est. 0.1%, prior 0%
  • Jan. Cap Goods Orders Nondef Ex Air, est. 0.1%, prior 0.2%
• 09:00: Dec. S&P/Case-Shiller US HPI YoY, prior 5.14%
  • Dec. S&P/CS 20 City MoM SA, est. 0.20%, prior 0.15%
  • Dec. S&P CS Composite-20 YoY, est. 6.00%, prior 5.40%
  • Dec. FHFA House Price Index MoM, est. 0.3%, prior 0.3%
  • 4Q House Price Purchase Index QoQ, prior 2.1%
• 10:00: Feb. Conf. Board Consumer Confidenc, est. 115.0, prior 114.8
  • Feb. Conf. Board Expectations, prior 83.8
  • Feb. Conf. Board Present Situation, prior 161.3
• 10:00: Feb. Richmond Fed Index, est. -9, prior -15
• 10:30: Feb. Dallas Fed Services Activity, prior -9.3

Central Bank speakers

• 09:05: Fed’s Barr Speaks on Counterparty Credit Risk

DB’s Jim Reid concludes the overnight wrap

Its been a pretty quiet start to the week in equities but with the S&P 500 (-0.38%) seeing a late minor sell-off and with Chinese equities rising this morning on speculation that the authorities bought a notable amount of domestic shares in recent weeks. Yields rising across the board has been the main source of interest though. In the process the amount of cuts priced in by the Fed’s December meeting is now the lowest since mid-November, at 79bps, around half the amount expected at the start of the year. Meanwhile, yields on 2yr Treasuries (+2.8bps) closed at 4.72%, their highest level since the Fed’s December meeting, and overnight 2yr Japanese yields have edged up to their highest since 2011 after Japanese inflation beat expectations.

It was a similar story earlier in Europe yesterday with yields then rising steadily all day, even before ECB President Lagarde comments to the European Parliament just before the European equity close. These remarks showed ongoing patience, suggesting that the ECB “needs to be confident that [the current disinflationary process] will lead us sustainably to our 2% target”. Overall her comments were not that different to the last ECB statement and the yield rise was mostly done for the day before she spoke.

By the close 10yr bunds (+7.7bps), OATs (+8.3bps) and BTPs (+9.1bps) all posted significant yield increases, effectively reversing Friday’s rally (-7.8bps for 10yr bunds). And at the front end of the curve, the 2yr German yield (+6.9bps) closed at 2.92%, its highest level since November. The likelihood of an ECB cut by the April meeting was down 6pp to 27%, which is the lowest since late September.

Over in the US, the 10yr yield ended the day up +3.1bps at 4.28%, whilst the 2yr yield ended the day up +2.8bps at 4.72%, its highest level so far this year. Bonds reversed some of their decline late in the session, perhaps as equities dipped, with the 10yr yield having been more than 5bps higher on the day shortly after 2yr and 5yr Treasury auctions, which saw decent investor demand but with bonds being issued a touch above the pre-sale yields.

The day’s yield rises occurred alongside some decent second-order data releases, with the UK CBI’s retail sales volume survey at a 10-month high of -7 (vs. -31 expected and up from a 3-year low of -50 in January). Later the Dallas Fed’s manufacturing index was up to -11.3 in February (vs. -15.0 exp.). US new home sales came in at an annualised pace of 661k in January, below the 684k expected but their highest level in three months as December was revised down from 664k to 651k.

It’s an interesting week for equities as the recent run is starting to get into once in a couple of generation territory. The S&P 500 has now posted 15 weekly gains in the last 17 for the first time since 1989. Moreover, if we get another positive week this week, then it would be 16 out of 18 weeks for the first time since 1971, and it would also be a joint record since the index’s formation. So even though there’s been lots of positive catalysts, from lower inflation to excitement about AI, it’s actually very unusual to see the sort of sustained rally that’s occurred over the last few months. For more info, Henry put out some charts on the current rally in his Mapping Markets publication yesterday (link here).

As we started a new week equities struggled to maintain their spectacular recent momentum, with the S&P 500 -0.38% lower on Monday. The NASDAQ declined a marginal -0.13%, while the Magnificent 7 were down -0.39%, dragged lower by a -4.44% decline for Alphabet amid concerns over recent missteps with its AI model. Small-cap stocks were the strongest performers, with the Russell 2000 up +0.61%. Over in Europe the picture was more negative though, with the STOXX 600 down -0.37% as it fell back from its all-time high on Friday. Even so, it wasn’t all bad news there, as the DAX (+0.02%) eked out a new record, and Euro HY spreads reaching their tightest level in over two years.

In Asia the KOSPI (-0.42%), Hang Seng (-0.36%) and Nikkei (-0.12%) are all slightly lower. Elsewhere, Chinese stocks are bucking the trend with the CSI (+0.35%) and the Shanghai Composite (+0.51%) higher after reports on Bloomberg of state buying in recent weeks. US stock futures are slightly lower as I type.

Coming back to Japan, inflation slowed less than expected in January, rising +2.2% y/y (vs. +1.9% expected) even if down from the previous month’s +2.6%. The +2.0% increase in core consumer prices was slower than the 2.3% increase in December and a tenth above expectations. Core-core was two-tenths above expectations at 3.5% from 3.7% last month. As mentioned at the top, yields on 2yr JGBs Japanese (+1.0bps) have hit their highest level since 2011, trading at 0.165% as we go to print. As a result, The likelihood of BOJ exiting its negative rate policy by April has risen to about 81%, up from yesterday’s 78%.

To the day ahead now, and US data releases include the Conference Board’s consumer confidence for February, the Richmond Fed’s manufacturing index for February, preliminary durable goods orders for January, and the FHFA house price index for December. Meanwhile in the Euro Area, there’s the M3 money supply for January. From central banks, we’ll hear from Fed Vice Chair for Supervision Barr, the ECB’s Elderson, and BoE Deputy Governor Ramsden. Lastly in US politics, there are Republican and Democratic primaries taking place in Michigan.