US Equity Futures Jump To Record High After Core CPI Comes In Cool
US equity futures were initially weaker as the market weighs geopolitics, inflation data, and the start to earnings season, where JPM reported results that were mixed at best (unexpected weakness in bank underwriting kept the stock flat in premarket trading). However, just after core CPI printed below estimates, futures spiked as high as 7030, rising to a new record high, up 0.2%, with Nasdaq futures also rising 0.2%, with Mag7 names mixed premarket with AMD/INTC leading Semis. Fins/Energy are leading Cyclicals which are roughly flat vs. Defensives, where Utils are the standout group.Sentiment was impaired after Trump said that any country doing business with Iran will receive a 25% tariff; the potential for conflict is pushing oil prices higher with WTI back above $60 for first time since Nov. Japanese stocks jumped while the yen slumped on speculation that PM Sanae Takaichi may call a snap election, reigniting the so-called Takaichi trade.Bond yields are +1-2bp across the curve and USD is rallying driven by a surge in the USDJPY which jumped as high as 159, the highest since July 2024. CPI print this afternoon with the scenario analysis is below. The ADP weekly print, NFIB Small Biz Survey, and New Home Sales the other macro data today.
In premarket trading, Mag 7 stocks were mixed (Alphabet +0.7%, Nvidia +0.02%, Tesla +0.1%, Meta little changed, Amazon -0.2%, Microsoft -0.4%, Apple -0.4%)
- Delta Air Lines (DAL) falls 5% after the carrier gave an underwhelming profit forecast for the full year.
- L3Harris Technologies Inc. (LHX) gains 13% as the US Department of Defense is set to invest in the company’s Missile Solutions business via a $1 billion convertible preferred security, tightening the direct links between the US government and a major defense contractor.
- Ormat Technologies (ORA) rises 5% after the renewable energy company signed a 20-year power purchase agreement with data center operator Switch for energy from its Salt Wells geothermal power plant in Nevada.
- Synopsys (SNPS) falls 2% as Piper Sandler downgrades the chip design software firm to neutral from overweight, saying the company could see prolonged headwinds to growth.
- Travere Therapeutics (TVTX) slumps 28% after the biotech firm said it received a request from the FDA to clarify the clinical benefit of its therapy that treats a rare kidney disease, a move that analysts said could delay the approval by the agency.
In corporate news, Amgen said its experimental drug MariTide helped patients maintain weight loss for two years. Diageo is said to be considering options for its Chinese assets, including possible divestments. Wall Street firms continue to reduce headcount, with Citi set to cut about 1,000 jobs this week and BlackRock said to be trimming about 1% of staff.
After initially trading lower, spooked by Trump’s threat to tariff countries doing business with Iran which has the potential to disrupt US trading relationships across the globe, futures jumped after core CPI came in below estimates.
Speaking of CPI, JPMorgan’s trading desk predicted a rally of up to 1.75% for the S&P 500 if CPI is in line with, or cooler, than estimated - which is now the case; let's see if stocks surge as much as JPM predicted.
Fed’s Williams said interest rates are “well positioned” to stabilize the labor market and bring inflation back to the 2% goal.
With earnings season kicking off, Bloomberg notes how small caps have been in favor recently, with the Russell 2000 outperforming the S&P 500 for the past seven sessions. The last time it had a longer winning streak was 2019. Yet tech remains the dominant contributor to 4Q profit growth among S&P 500 members, estimated to show year-over-year EPS growth of 20%, while non-tech earnings expansion is slated to decelerate from 9% to just 1%, according to data from Bank of America.
Meanwhile, the Fed drama continues, with global central bankers pledging “full solidarity” with Powell and saying that the independence of central banks is a cornerstone of financial and economic stability. Today’s Big Take looks at the Washington backlash that could derail Trump’s campaign to tighten White House control over the Fed.
In other assets, the dollar has clawed back some ground after Monday’s drop, but downside risks remain. Oil is higher while gold slipped from its record. CME said it will change the way it sets margins for gold, silver, platinum and palladium futures after a surge in prices and volatile trading.
European stocks dip, reversing an earlier rise which pushed them near record highs as investors look ahead to US inflation data. Energy stocks outperform while the construction and materials sector lags. Stoxx 600 is little changed at 610.90 with 336 members down, 250 up, and 14 unchanged. Here are some of the biggest movers on Tuesday:
- Symrise shares rally as much as 7.3% after the company announced a €400 million ($467 million) share buyback and said it’s in advanced talks to sell its terpene business, a kind of chemical used in fragrances and flavors.
- Orsted shares surge as much as 6.6% after a US judge ruled work can resume on a wind farm off the coast of Rhode Island while it challenges the government’s latest attempt to stop offshore projects from being built.
- Whitbread shares jump as much as 6.9%, the most since May, after the Premier Inn owner reported solid trading and increased cost efficiencies in its third-quarter update.
- Synektik shares gain as much as 4.6% after the Polish distributor of medical devices including surgery robots reported new orders rising 30% last quarter as well as new contract with Czech hospital.
- THG shares jump as much as 9.7%, the most since October, as analysts highlighted strong momentum in the company’s beauty and nutrition businesses.
- Gamma Communications shares jump as much as 9.3%, the most since September, after reporting FY25 trading is in line with consensus expectations.
- Persimmon shares rise as much as 2.8% to the highest level since November 2024 as the homebuilder reassures that full-year 2025 results are likely to be at the upper end of market expectations and it is on track to meet this year’s forecasts.
- Raspberry PI shares slump as much as 10% to a record low after the computing company’s strong results were overshadowed by its warning over the rapid increase in the cost of DRAM memory chips, as more supplies are funneled into AI data centers.
- Games Workshop shares drop as much as 3.7%, the most since November, after the Warhammer owner reported first-half results that showed sales growth declining toward the end of the period in some stores.
- Vinci shares fall as much as 3.7% as French infrastructure stocks drop on ratings downgrades by Bank of America, concerned by the risk of rising French taxes.
- Thales shares fall as much as 2.4% as Deutsche Bank downgrades several defense names, citing uncertainties surrounding the French defense budget and lagging cyber sales.
Asian stocks briefly jumped to a fresh record, driven by gains in Japanese shares as traders returned from holiday amid growing speculation that Prime Minister Sanae Takaichi may soon call a snap election. The MSCI Asia Pacific Index rose as much as 1.4%, the most in a week, with Alibaba, TSMC and Toyota Motor among the biggest boosts to the gauge. Most subsectors were in the green, with financials being a major contributor. Benchmarks in Hong Kong, South Korea and Australia also rose. Concerns around Federal Reserve’s independence after the Trump administration escalated its attack on the central bank again prompted flows away from US market into regions like Asia. Traders are also brushing off the latest tariff threats from President Donald Trump, who said to impose a 25% tariff on goods from countries “doing business” with Iran.
“The market does not care about Trump’s capricious tariff threats,” said Vey-Sern Ling, managing director at Union Bancaire Privee in Singapore. “Trump’s previous backdown from China has shown that bigger levers such as the supply of rare earths matter more in tariff negotiations. It is unlikely that he can afford to upset the trade truce with China just to pressure Iran.”
In FX, the yen sinks, following a jolt in Japanese bond and stock markets, on speculation that an early election is on the cards. Dollar-yen briefly hits 159, highest since July 2024. The Bloomberg Dollar Spot Index edges marginally higher.
In rates, treasuries, European and UK bond yields rise by two or three basis points, with US CPI data ahead.
In commodities, oil prices rally on geopolitical risk and Trump’s threat of tariffs on Iranian crude buyers, with Brent hitting the highest since November and briefly moving above $65/barrel before paring. Gold edging lower from another record high, down about $12 to $4,585/oz.
Today's US economic calendar includes ADP weekly employment change (8:15am), December CPI (8:30am), October new home sales (10am) and December Federal budget balance (2pm). Scheduled Fed speakers include Musalem (10am) and Barkin (4pm)
Market Snapshot
- S&P 500 mini +0.2%
- Nasdaq 100 mini +0.3%
- Russell 2000 mini +0.3%
- Stoxx Europe 600 -0.2%
- DAX -0.2%
- CAC 40 -0.5%
- 10-year Treasury yield +2 basis points at 4.19%
- VIX +0.3 points at 15.43
- Bloomberg Dollar Index little changed at 1210.29
- euro little changed at $1.1669
- WTI crude +1.8% at $60.57/barrel
Top Overnight News
- Donald Trump vowed to impose a 25% tariff on goods from any country “doing business with” Iran, a move that risks derailing his trade truce with China, the world’s top buyer of Iranian oil. Germany’s Friedrich Merz said the world is seeing the “final days” of Iran’s regime. BBG
- The criminal probe into Jay Powel by US prosecutors has galvanized the Federal Reserve’s top leaders to resist Trump’s attacks and could push he chair to remain a governor until 2028. Trump’s DoJ probe was seen by people close to the US central bank as a sign that the president would go to extraordinary lengths to force policymakers to bow to his demands. FT
- California Gov. Gavin Newsom said he was working behind the scenes to block a proposed tax on billionaires’ wealth and was committed to defeating the measure if it reached the ballot. NYT
- President Trump reportedly unhappy about AG Pam Bondi's performance and has repeatedly complained to aides: WSJ
- Microsoft has warned that US AI groups are being outpaced by Chinese rivals in the battle for users outside the west, as China combines low-cost “open” models with hefty state subsidies to gain an edge. FT
- Iranian protests appeared to persist in localized pockets overnight as activist group Iran Human Rights warned of imminent executions by the state and said the civilian death toll may be in the thousands. BBG
- The BOJ may raise rates as early as April as heightened market concerns over PM Takaichi’s approach to fiscal policy keep the yen weak, former board member Makoto Sakurai said. “The BOJ must raise rates at least by June or July,” he added. BBG
- Japanese investors dumped UK government bonds at the fastest pace in 14 years in November, citing worries over Britain’s fiscal outlook and more attractive yields at home. BBG
- Japanese stocks surged to an all time high and the yen tumbled to a 19 month low as markets bet that a possible snap election net month would reignite the “Takaichi trade.” FT
Trade/Tariffs
- China's Commerce Ministry outlines the final ruling on the imports of solar polysilicon from the US and South Korea, effective 14th January with tariffs of up to 113.8%. To continue to collect anti-dumping tariffs for another five years.
- China said it opposes unilateral sanctions and "long-arm jurisdiction", following the 25% tariff on US trade for countries doing business with Iran.
- Taiwan officials said 'some' consensus has been reached with the US on a trade deal.
- Japanese Finance Minister Katayama said there were some detailed proposals on rare earth supply chains during the meeting with the US. A potential price floor on rare earths were discussed.
- US President Trump said any countries doing business with Iran are to pay a 25% tariff on any or all business being done with the US.
A more detailed look at global markets courtesy of Newsquawk
Asia-Pac stocks followed on from Monday’s gains, with equities mostly in the green. ASX 200 started the session on the front foot, +0.4%, before extending gains and currently trading just shy of session highs at 8835. With spot XAU trading near ATHs, this has aided sectors such as metals and mining (2.0%) to continue Monday’s gains. Nikkei 225 returned from its long weekend with a gap higher, resulting in the index opening with gains as much as 3.7% and forming new ATHs. This comes amid a weaker JPY and growing speculation of PM Takaichi dissolving parliament. Japanese media noted that the LDP was looking to capitalise on Takaichi's high approval ratings. KOSPI opened Tuesday’s trade at ATHs and oscillated at highs before peaking at 4681 and slightly paring back, but remains comfortably in the green. Hang Seng and Shanghai Comp. opened in line with the broader sentiment, with the former surging higher, aided by gains in Gigadevice (3986 HK). The latter is the laggard across Asia-Pacific equities, trading with slight gains of 0.2%.
Top Asian News
- China examines foreign ETF trades after Jane Street India probe, Bloomberg reported.
- Japanese Finance Minister Katayama said she shared concerns with US Treasury Secretary Bessent over weak JPY.
European equities (STOXX 600 -0.2%) have traded tentatively throughout the morning, as markets await CPI. T he AEX (+0.4%) is the key outperformer in the region amid gains in ASML (+1.2%) after Jefferies raised the Co.'s price target, thereby lifting the index. European sectors are trading mixed, with Energy (+0.9%), Technology (+0.6%) and Banks (+0.6%) leading. The former has gained amid stronger crude prices given the heightened geopolitical tension between US and Iran, whilst ASML helps boost Tech. On the downside, Autos (-0.7%), Utilities (-0.7%) and Construction & Materials (-2.6%) lag. The latter faced steep losses due to Sika (-7.0%) after the Co.'s FY25 sales fell by 4.8%, with the Chinese market a continued weakness for them.
Top European News
- French Budget Balance (Nov) -155.4B vs. Exp. -165.0B (Prev. -136.2B, Rev. -136.2B).
- UK BRC Retail Sales YY (Dec) 1.0% (Prev. 1.2%).
Central Banks
- Fed's Williams (Voter, Neutral) said monetary policy well positioned amid a favourable outlook and that policy is now closer to neutral, well-positioned ahead of January rate decision; expect that we’ll see [the labor market] stabilize this year". MONETARY POLICY. “In considering the extent and timing of additional adjustments… the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.”. “Monetary policy is now well positioned to support the stabilization of the labor market and the return of inflation to the FOMC’s longer-run goal of 2 percent.”. “The actions taken by the FOMC… have moved the modestly restrictive stance of monetary policy closer to neutral.”. INFLATION. “Underlying inflation trends have been pretty favorable.”. “Tariffs have been overwhelmingly borne by domestic businesses and consumers.”. “I expect inflation will be just under 2-1/2 percent for this year as a whole, before reaching… 2 percent in 2027.”. “I anticipate inflation will peak at around 2-3/4 to 3 percent sometime during the first half of this year.”. “Inflation appears likely to peak sometime in the first half of this year as the full effects of tariffs are felt.”. “Medium- and longer-term expectations remain well within their pre-Covid ranges.”. “Inflation expectations remain well anchored.”. GROWTH. “The economic outlook is favorable.”. “I expect the economy to grow above trend this year, with real GDP growth between 2-1/2 and 2-3/4 percent.”. “GDP growth looks to have been somewhat above 2 percent last year, and it will likely pick up some this year.”. LABOR MARKET. “This has been a gradual process, without signs of a sharp rise in layoffs.”. “Downside risks to employment have increased as the labor market cooled.”. “The unemployment rate moved up… and ended the year at 4.4 percent.”. “I expect that we’ll see [the labor market] stabilize this year and then strengthen somewhat thereafter.”
- Fed's Williams (Voter, Neutral) said the Fed is not under strong influence to change rates. Expects the next Fed chair to understand the gravity of the role. Strong productivity growth echoes past booms. Adds that the best way to instill confidence in the Fed is to do the job well. He expects improved labour market demand. Confident the Fed will return inflation to 2%. Jobs market is unusual with low hiring, low firing.
- Japan's government is reportedly likely to delay the nomination of a BoJ board member if PM Takaichi called an election, via Reuters citing sources.
- Global central banks are reportedly drafting a statement in support for Fed Chair Powell.
FX
- DXY is flat and trades within a narrow 98.89 to 99.03 range; the high for the day is a couple of pips short of its 50 DMA, while a bout of pressure in the index could see a test of its 200 DMA at 98.80. Focus for the index today will be on US CPI; in brief, the consensus looks for headline CPI to rise by 0.3% M/M in December (prev. 0.3%), and the annual rate to remain unchanged at 2.7% Y/Y. GS expect the figures to exceed consensus, citing firmer food and energy prices.
- Away from the US, G10s are mixed with mild strength in the GBP whilst the JPY is the clear underperformer – other peers are near-enough flat vs the USD. Nothing really driving the strength in the GBP this morning, whilst the JPY has a lot to digest.
- A full JPY analysis piece can be found on the Newsquawk headline feed at 08:55 GMT, but in brief, USD/JPY eclipsed 159.00 for the first time since 11 July 2024. As a reminder, Japan intervened twice on July 11 and 12 to bring the USD/JPY below the 160.00 mark. The latest depreciation in the JPY has been spurred by continued reports of PM Takaichi's plans to call an election, where her aim is to secure a single-party government. This would, in theory, allow her to enact more expansionary fiscal policy.
Fixed Income
- JGBs led the downside overnight as the "Takaichi trade" resumed. For more details, see the 08:55GMT Market Update.
- Amidst this, USTs and Bunds also found themselves lower. USTs by just a handful of ticks and holding above the 112-00 mark and by extension yesterday's trough, which was half a tick below that. Focus turns to US CPI later, where consensus looks for the headline M/M, and Y/Y prints to remain at 0.3% and 2.7% while both core figures are seen higher by a tenth at 0.3% and 2.7% respectively. Goldman Sachs looks for a hotter print driven by technical factors.
- Bunds in-fitting with the above, at a 127.84 low with downside of 28 ticks at most. Bunds made fresh lows following a soft Bobl outing, which had a weak b/c and lower than exp. amount sold. More generally, action for today will likely be dictated by US CPI. If the bearish bias extends, we look to support at 127.89, 127.82 and 127.70 from the last three sessions.
- Gilts gapped lower by 14 ticks at the open, acknowledging the bearish bias from APAC trade, before dipping further to a 92.30 base. Since, the benchmark has recovered to opening levels. No reaction to the passing of I/L supply while the interview with BoE's Bailey took place this morning, but the text won't be published until January 16th.
- Greece begins the sale of a new 10yr bond; guidance seen at +60-65bps to mid swaps.
- Italy sells EUR 4bln vs exp. EUR 3.5-4bln 2.40% 2029 BTP: avg. yield 2.48%, b/c 1.45x
- Germany sells EUR 4.597bln vs exp. EUR 6bln 2.50% 2031 Bobl: Avg yield: 2.47%, b/c 1.41x, retention 23.38%
Commodities
- Crude firmer with geopolitics in focus. Overnight action was somewhat rangebound, as there was no significant escalation or development. However, we did get reports via CBS that President Trump was briefed on military and covert operations against Iran, but no decision has been made.
- Since, as participants digest this risk and reports via BBG that two tankers were attacked in proximity to the Black Sea loading terminal for the CPC, crude has climbed and posts upside in excess of USD 1.00/bbl. At highs of USD 60.82/bbl and USD 65.20/bbl for WTI and Brent, respectively.
- Spot gold is a little lower this morning, taking a breather following the strength seen in the prior session, where the yellow metal made fresh ATHs beyond the USD 4.6k/oz mark. Slight pressure today without a clear driver; potentially profit-taking ahead of US CPI. Price action in Europe has been sideways, and within a USD 4,573.87-4,608.13/oz range.
- A bit of divergence between gold and silver this morning, with the latter posting modest gains and currently holding at the upper end of the day's range, last at USD 85.76/oz.
- Base metals are mixed after choppy trade overnight. 3M LME Copper currently trades within a USD 13,034-13,232/t range. Desks have highlighted that there have been growing fears amongst traders that copper may sharply pull back if demand for the metal slows in 2026, particularly if China curbs spending.
- Citi said its 3-month price target for gold and silver is now USD 5000/oz and USD 100/oz respectively.
- Two oil tankers were attacked in proximity to the Black Sea loading terminal for the CPC, Bloomberg reports citing sources.-Two additional oil tankers have been hit near the Black Sea CPC terminal by drones, according to sources; taking the total on Tuesday to four tankers.
Geopolitics: Ukraine
- A push by French President Macron and Italian PM Meloni to begin discussions with the Russian Kremlin is gaining traction in EU capitals and in Brussels itself, Politico reported citing sources. Primary goal to ensure EU red lines are not crossed. and to signal to the US that the EU has leverage. Elsewhere, creation of the role of EU special envoy to Ukraine hs support of the Council and leaders. Mario Draghi and Alexander Stubb have been touted. However, EU diplomat Kallas opposes the role.
- Kyiv Mayor said the Russians are attacking the capital with ballistic missiles and that explosions are being heard.
Geopolitics Middle East
- US President Trump is leaning towards striking Iran to punish the regime for killing protesters, but hasn't made a final decision and is exploring Iranian proposals for negotiations, a White House official with direct knowledge told Axios.
- Iran's Foreign Minister said Tehran is ready for any action by the US, including military action.
- China said it opposes unilateral sanctions and "long-arm jurisdiction", following the 25% tariff on US trade for countries doing business with Iran.
- US President Trump has been briefed on a range of military and covert options against Iran, according to CBS News; however no final decision has been made and diplomatic channels remain open.
- "EU intends to impose new sanctions on Iran", Sky News Arabia reported.
- "Washington called on Dual U.S.-Iranian Citizens to Leave Iran", Al Arabiya reported.
- US President Trump said any countries doing business with Iran are to pay a 25% tariff on any or all business being done with the US.
- US President Trump is leaning towards striking Iran to punish the regime for killing protesters, but hasn't made a final decision and is exploring Iranian proposals for negotiations, a White House official with direct knowledge told Axios.
- Iranian authorities claim that the situation is 'under control'.
- "EU intends to impose new sanctions on Iran", Sky News Arabia reported.
- US President Trump has been briefed on a range of military and covert options against Iran, according to CBS News; however no final decision has been made and diplomatic channels remain open.
- "Washington called on Dual U.S.-Iranian Citizens to Leave Iran", Al Arabiya reported.
- At least two unsanctioned supertankers are departing Venezuelan waters carrying crude oil, according to reported citing TankerTrackers.
- US Treasury Secretary Bessent posted that he was pleased to hear a strong, shared desire to quickly address key vulnerabilities in critical minerals supply chains; "I am optimistic that nations will pursue prudent derisking over decoupling".
US Event Calendar
- 8:30 am: Dec CPI MoM, est. 0.3%
- 8:30 am: Dec Core CPI MoM, est. 0.3%
- 8:30 am: Dec CPI YoY, est. 2.7%, prior 2.7%
- 8:30 am: Dec Core CPI YoY, est. 2.71%, prior 2.6%
- 8:30 am: Dec CPI Index NSA, est. 324.17, prior 324.12
- 8:30 am: Dec Core CPI Index SA, est. 332.06, prior 331.07
- 10:00 am: Oct New Home Sales, est. 715k
- 10:00 am: Oct New Home Sales MoM, est. -10.63%
- 2:00 pm: Dec Federal Budget Balance, est. -152.5b, prior -173.3b
DB's Jim Reid concludes the overnight wrap
Morning from Helsinki where it's a reasonably mild -8 degrees. I've spent 2026 so far chasing the cold with -15 in Alps at the start of the year, a rare -7 degrees in Surrey last week and now 4 Nordic cities in 2 days. Most of the time I've been trying not to fall over to break the screws in my back or to further damage knees that will soon need replacing. If I were a racehorse, I suspect a few emotional goodbyes would be coming soon.
There have been lots of icy patches to avoid in markets over the last 24 hours as 2026 continues to be the year of the headline even if most markets have enjoyed the ride so far. The main story this week, and there is competition, are the continued developments and market reaction around the Federal Reserve, after US prosecutors launched a criminal investigation that’s revived fears around central bank independence. That helped push gold (+1.95%) and silver (+6.57%) to new records yesterday, and the move out of US assets also meant the dollar and US Treasuries lost ground as well. Ironically, if the ultimate aim is to reduce yields, it could have the opposite impact as the Fed may be keen not to be seen as reacting to political pressure at the front end, and the long-end may show some concern about the motives. In addition, if Powell was looking for a reason to stay on as a Governor after his term as Chair ends in May, this could be one. It's very unusual to stay on but Eccles did so in 1948 for 3.5 years to help protect and secure Fed independence after the Treasury were trying to fund large post war time debts. So there might be some parallels in 2026. Ironically one of the buildings being renovated, that is causing the DoJ investigation, is the Marrine S. Eccles Building. You can also see our US economists quick take on the developments here.
Meanwhile, investors have also faced an array of geopolitical headlines from Venezuela to Iran, which has pushed Brent crude (+0.84%) to a 7-week high of $63.87/bbl. Remember Rubio is meeting Danish and Greenland officials some time this week as well. We could also hear on IEEPA tariffs tomorrow at the next "opinions day". And there’s no immediate sign of any letup on the calendar either, as today will bring the US CPI print as well as the start of US Q4 earnings season. Yet despite all the noise, risk assets have been remarkably unfazed by everything, with the S&P 500 (+0.16%) and Europe’s STOXX 600 (+0.21%) both at new records.
The prospect of Fed independence being eroded immediately induced a negative reaction for US assets, reminiscent of previous episodes where it looked like Powell might be removed. But even as the reaction followed a clear pattern, it was still fairly subdued relative to previous episodes last year, and the initial losses were pared back significantly. So while the Treasury yield curve saw a bear steepening with 10yr yields trading +4bps higher just before the US open, by the close the 2yr yield (+0.2bps) was virtually unchanged at 3.53%, while 10yr (+1.1bps to 4.18%) and the 30yr (+1.5bps to 4.83%) saw modest increases. Despite higher yields, the US Dollar lost ground, weakening -0.27% against the Euro. The reversal of the initial move was particularly clear for equities, as S&P 500 futures were initially down -0.79% shortly after the European open, before the index rose +0.16% to a new record.
A few arguments were put forward as to why there wasn’t a bigger reaction, but an important one was the resistance from a couple of Senate Republicans to Trump’s move, raising questions as to how successful any attempts to erode the Fed’s independence would be. In particular, Republican Senator Thom Tillis, who sits on the Senate Banking Committee, said that he would oppose confirming any nominee for the Fed until this was resolved. That’s significant, because the Senate Banking Committee is split 13-11 to the Republicans, so Tillis’ opposition would lead to a split if the others voted along party lines. And there were other Republican Senators who voiced concern, with Lisa Murkowski saying that “the administration’s investigation is nothing more than an attempt at coercion.” On top of that, another argument for the limited reaction was that Powell’s term as Chair was already ending in May, so a change in leadership was expected anyway in the next few months. Moreover, previous episodes last year have also led to the sense that the administration don’t want a negative bond market reaction, given long-end yields flow through to mortgage rates, which they’d prefer to keep contained. Clearly it’s a moving situation though, and these are a huge couple of weeks for the Fed, as the Supreme Court are hearing arguments in the Lisa Cook case on Jan 21, ahead of the FOMC meeting on Jan 27-28.
One asset class that did hold on to almost all of its move were precious metals, which surged to fresh records with gold (+1.97%) up to $4,598/oz, and silver (+6.57%) up to $85.10/oz. In addition to investors becoming more concerned about potential currency debasement and future inflation, these were supported by the ongoing geopolitical uncertainty. This related in particular to possible US steps towards Iran and late in the day Trump posted that “effective immediately” any country “doing business” with Iran will pay a tariff 25% on trade with the US. In theory, this would most impact countries across Asia, with China being Iran’s biggest trading partner.
However, we’ve not yet heard any further details or an executive order implementing this tariff threat, and markets have taken Trump’s post in their stride overnight. The Shanghai Comp is flat and the Hang Seng up +0.94%. Elsewhere Japanese stocks are flying, but in line with where futures were this time yesterday during their holiday, with the Nikkei (+3.21%) responding to the media speculation since Friday that Takaichi is considering a snap lower house election as early as February. Elsewhere the KOSPI (+1.13%) and the S&P/ASX 200 (+0.59%) are also performing well. S&P 500 (-0.14%) and NASDAQ 100 (-0.31%) futures are trading slightly lower though.
Coming back to Japan, the election fever has seen the yen (-0.39%) fall to its lowest level since July 2024, trading at 158.76 against the dollar, and 10-year (+5.7bps), 20-year (+5.8bps), and 30-year (+6.1bps) JGBs trading at 2.15%, 3.13%, and 3.46%, respectively this morning.
Looking forward, the next big test will be the US CPI print, which is out at 13:30 London time today. As a reminder, the last print came on the softer side, but there were various methodological issues from the shutdown which meant it was treated with caution. For instance, the shelter numbers saw a huge drop-off that’s more usually consistent with recessions, hence we saw some scepticism around the numbers. For this time round, our US economists expect the print to come in on the stronger side, unwinding some of the distortions from the government shutdown. So they expect headline CPI to come in at a monthly +0.36%, with core pretty similar at +0.35%.
Ahead of all that, equities put in a steady performance on both sides of the Atlantic yesterday, with the S&P 500 (+0.16%) inching up to a new record. However, financials were an underperformer, and the KBW Bank Index (-0.95%) lost ground after Trump’s post that he was calling for a one-year cap on credit card interest rates of 10%. How realistic that is to implement is a moot point and it may actually reduce credit to the poorer population. So an interesting set up for JP Morgan (-1.43%) to kick off earnings season before the bell today.
Elsewhere there were stronger performances, with consumer staples (+1.42%) the top-performing sector in the S&P 500 as Walmart rose +3.00% after NASDAQ’s announcement that they’d join the NASDAQ 100 on Jan 20. The Mag-7 (-0.03%) had a mixed session, but Alphabet (+1.00%) became the latest tech giant to cross the $4trn valuation mark as Google confirmed a “multi-year deal” to power the AI technology for Apple’s iPhones. While Microsoft and Apple also crossed the $4trn level last year, Nvidia is currently the only company with a higher valuation than Alphabet, which has surged by over 100% from post-Liberation Day lows last spring.
Over in Europe yesterday, markets had put in a stronger performance, as they weren’t affected as much by the Federal Reserve news. So sovereign bonds rallied across the continent, with yields on 10yr bunds (-1.2bps), OATs (-1.0bps) and BTPs (-1.4bps) all coming down. In addition, equities also outperformed, with the STOXX 600 (+0.21%) at a new record, whilst the DAX (+0.57%) advanced for a 10th consecutive session for the first time since summer 2024. In fact, if we get an 11th advance today, it would be the longest run of gains for the DAX since 2014.
Looking at the day ahead, and data releases include the US CPI print for December, along with the NFIB’s small business optimism index for December. Central bank speakers include BoE Governor Bailey, the ECB’s Kocher, and the Fed’s Musalem and Barkin. Earnings releases include JPMorgan Chase and BNY Mellon.
Tyler Durden
Tue, 01/13/2026 - 08:40
AFP/Getty Images
In a screenshot of the video presented to a roomful of European diplomats, a masked individual fires a pump-action shotgun
Recent comments