Futures Rise Ahead Of Tech Earnings As Gold, Silver Resume Surge

US futures are higher, led by Tech, and approaching record levels from earlier this month as geopolitical and headline risk subsides while the market focuses on looming Mag 7 earnings and Wednesday’s Fed decision is expected to be a non-event. Equities are poised for another attempt at 7k. As of 8:00am ET, S&P futures are up 0.2% and set for a fifth day of gains; Nasdaq futures lead gains, up 0.6% with all Mag7 members higher while Healthcare stocks hammered on headlines related to Medicare pricing. Micron jumped 5% in premarket trading on plans to expand its memory-chip capacity. Big tech has started to wake up, with Apple having its best day in three months yesterday and Meta also strong. Both are due to report later this week. So far, the earnings season has been good but not great, according to strategists at BofA. The dollar hit the lowest level since March 2022, while the yen fluctuated as jitters over intervention lingered, before rising to session highs. The yield curve is twisting steeper as JGB-induced vol subsides; In commodities, precious metals continue to move vertically with gold +1.5% and silver +8%, though PGMs are being sold. Today’s macro focus is on the weekly ADP print, home price data, Consumer Confidence, and regional Fed activity indicators.

In premarket trading, Mag 7 stocks are all higher (Microsoft +0.6%, Apple +1.2%, Tesla +0.4%, Nvidia +0.4%, Alphabet +1.1%, Amazon +0.5%, Meta +0.3%).

• Health insurers including Humana (HUM), UnitedHealth (UNH) and CVS (CVS) slide after the US proposed holding payments to private
• Medicare plans flat next year. Analyst note that investors are disappointed as they expected mid-single digit-percentage rises. Humana -15%, UnitedHealth -16%, CVS -13%.
• UnitedHealth also forecast a decline in 2026 revenue, the first annual contraction in more than three decades
• Agilysys Inc. (AGYS) falls 12% after the hospitality software firm posted fiscal third quarter adjusted earnings per share that fell short of expectations.
• American Airlines Group Inc. (AAL) rises 3% after reporting fourth-quarter results.
• CoreWeave (CRWV) gains 4%, set to extend Monday’s 5.7% rally, after Nvidia invested an additional $2 billion in the cloud computing firm. Following the latest investment announcement, Deutsche Bank raised the recommendation on the stock to buy.
• General Motors Co. (GM) climbs 4% as the company expects profits to grow as much as $2 billion this year and plans to return more of that to shareholders with a higher dividend and buybacks.
• JetBlue Airways Corp. (JBLU) falls 3% after reporting a wider loss than expected last quarter, highlighting challenges in its strategy to win over higher-paying customers.
• Northrop Grumman (NOC) slips 1% after the military contractor gave a forecast for full-year adjusted earnings per share below what analysts had expected.
• Redwire Corp. (RDW) climbs 15% after being awarded a contract for the Missile Defense Agency Scalable Homeland Innovative Enterprise Layered Defense contract.
• RTX Corp. (RTX) gains 3% after the maker of aircraft engines and missiles reported fourth-quarter adjusted earnings per share above what analysts expected.
• Sanmina (SANM) falls 8% after the electronics manufacturing services provider gave a revenue outlook for the second quarter that fell short of the consensus estimate.
• United Parcel Service Inc. (UPS) gains 3% as the courier forecast full-year sales above Wall Street’s expectations as it forges ahead with plans to cut less-profitable package volume out of its network.

Even as stocks are set to make new record highs, there are still numerous reasons to be cautious: Trump and Senate Democrats are hurtling toward another government shutdown, while North Korea fired what appeared to be ballistic missiles off its east coast days after the US released a new defense strategy for the region. While the Greenland drama has died down, there are still some tariff headlines. The EU and India concluded a free-trade agreement after almost two decades of negotiations, part of an effort to deepen economic ties amid Trump’s aggressive trade policies. And Trump threatened to hike tariffs on South Korea to 25%.

Citigroup said that short-covering dominated the latest weekly US large-cap futures flows, while new long risk was added to the Russell 2000. Goldman Sachs strategists, meanwhile, said that a proprietary measure of risk appetite hit the highest level since 2021 last week despite elevated policy and geopolitical uncertainty.

“In the US, while very elevated valuations and the dollar weakness make us more cautious than in Europe, there’s possibly still one or two interest-rate cuts lined up for this year,” said Laurent Chaudeurge, an investment committee member at BDL Capital Management in Paris. “Investors are still chasing the AI trade, and at the moment this is done through semiconductors.”

Precious metals rallied again after gold and silver erased much of their advance in the previous session, with bullion trading near $5,080 an ounce. 

“Gold prices could potentially exceed $7,000 by the end of the year,” said Frederique Carrier, head of investment strategy for RBC Wealth Management in the British Isles and Asia. “The main drivers that were there last year — trade tensions, geopolitical instabilities — are still very much there.”

In earnings, of the 69 S&P 500 companies to have reported so far this earnings season, about 77% have beaten analysts’ forecasts, while nearly 15% have missed. American Airlines, Boeing, General Motors and UPS are among companies scheduled to report before the market open. Texas Instruments is among those due after the close.

In Europe, the Stoxx 600 is up 0.4%, with banks and insurance names leading gains after India and the European Union reached a free trade agreement, with a raft of upbeat earnings also lifting sentiment. Banks and telecoms outperform, while miners and carmakers are the biggest laggards. Here are the biggest movers Tuesday:

• Puma shares rise as much as 21%, before quickly paring gains, after China’s Anta Sports Products agreed to buy a ~29% stake for €1.5 billion, becoming the biggest shareholder in the German company
• Siegfried shares rise as much as 15%, the most in over three years, after the contract development and manufacturing organization serving the pharmaceutical industry bought two new sites in the US and one in Australia
• HSBC shares gain as much as 3.1% in London, to the highest on record, taking the bank’s market capitalization above $300 billion for the first time, as Citigroup (buy) lifts its price target
• Comet shares rise as much as 7.7% to the highest since October 2024 after ZKB said the Swiss technology firm’s share price doesn’t reflect the benefits it will likely see from the upcoming investment cycle in memory chips
• HMS Networks surges as much as 14% after releasing its fourth-quarter results, which DNB Carnegie says came in “better-than-feared”
• Spirax rises as much as 3.7% after analysts at Barclays raised their price target on the maker of pumps and steam management systems. Analysts say the stock has lagged the broader capital goods sector and is now trading at a discount
• Getinge shares drop as much as 7.2%, the most in more than six months, after the Swedish health-care equipment firm reported weaker-than-expected sales and earnings for the fourth quarter
• Amplifon shares drop as much as 3.7%, second-worst performer in the Stoxx 600 Health Care Index on Tuesday morning, after Kepler Cheuvreux cut its earning estimates for the hearing-aid retailer and decreased its price target
• Demant shares slip as much as 3.4%, among the worst performers in the Stoxx 600 Health Care Index on Tuesday morning, after Bank of America decreased its price target on the stock to the lowest among analysts tracked by Bloomberg
• Capgemini shares fall as much as 3.3%, with traders citing a TV report that highlighted a contract between the IT group and the US’s Immigration and Customs Enforcement
• Aker BP shares fall as much as 3.2% after Danske Bank cut its recommendation on the Norwegian oil and gas exploration firm to sell from hold on high valuation and the outlook for commodity prices

Earlier in the session, Asian equities extended gains, lifted by a continued rally in technology stocks in Taiwan and South Korea. The MSCI Asia Pacific Index gained as much as 0.9%, with Samsung, SK Hynix and TSMC offering the biggest boost. South Korea’s Kospi led advances in the region with a nearly 3% gain, as investors bought the dip spurred by President Donald Trump’s latest tariff threat. Markets were mostly in the green, with benchmarks in Hong Kong, Singapore, Malaysia and Thailand rising more than 1%. Traders are awaiting mega-cap tech earnings, which will shape expectations for the sustainability of the AI-driven rally. The Federal Reserve’s rate decision on Wednesday will also hold sway over rate-sensitive stocks.

In FX,the Bloomberg Dollar Spot Index drops to the lowest level since March 2022 as the greenback loses ground against almost all its G-10 peers. USD/JPY is down 0.6% near 153.35 after another bout of choppy price action. The pair dropped ~130 pips in relatively short order before recovering, a move that looked similar to price action observed during the European morning session on Friday. There did not appear to be a obvious catalyst for the move.

In rates, treasuries dip following limited price action during Asia session and London morning, similar to European bonds.10-year yields are 4.23%, about 2bps higher on the day and slightly outperforming bunds and gilts in the sector. Focal points of US include consumer confidence data and a 5-year note auction. 

In commodities, spot silver rises 8% and is closing in on Monday’s record high. US crude futures rise 0.5% to around $61 a barrel.

US economic calendar includes weekly ADP employment change (8:15am), November FHFA house price index and S&P Cotality home prices (9am), January Richmond Fed manufacturing index and consumer confidence (10am) and Dallas Fed services activity (10:30am)

Market Snapshot

• S&P 500 mini +0.3%
• Nasdaq 100 mini +0.6%
• Russell 2000 mini +0.4%
• Stoxx Europe 600 +0.3%
• DAX little changed, CAC 40 little changed
• 10-year Treasury yield +1 basis point at 4.22%
• VIX -0.2 points at 16
• Bloomberg Dollar Index little changed at 1187.28
• euro unchanged at $1.188
• WTI crude +0.3% at $60.83/barrel

Top Overnight News

• President Trump has received multiple U.S. intelligence reports indicating that the Iranian government’s position is weakening, according to several people familiar with the information. The reports signal that the Iranian government’s hold on power is at its weakest point since the shah was overthrown in the 1979 revolution. WSJ
• South Korea scrambled on Tuesday to assure the U.S. it remained committed to implementing a trade deal after U.S. President Donald Trump said he would hike tariffs on autos and other imports from its ally, blaming a delay in enacting the pact agreed last year. RTRS
• India and the European Union said Tuesday they have reached a free-trade agreement that will open a new market for European cars and other products, showing how the world’s middle powers are expanding alliances in response to President Trump’s tariffs. WSJ
• The Trump administration has indicated to Ukraine that US security guarantees are contingent on Kyiv first agreeing a peace deal that would likely involve ceding the Donbas region to Russia. FT
• China’s industrial enterprises had their first annual gain in profits since 2021, as producer deflation showed signs of easing in the wake of government efforts to curb excess competition and cut capacity. Profits climbed 5.3% in December from a year earlier, rising for the first time in three months and recovering from a plunge of more than 13% in November. BBG
• Japan’s bond meltdown sparked speculation that the $1.8 trillion GPIF might shift its portfolio allocation to JGBs while reducing foreign bond holdings, particularly Treasuries. BBG
• Trump said he will increase the tariff rate on South Korean imports from 15% to 25% unless the South Korean National Assembly approved the trade deal struck back in July. NYT
• US natural gas fell, with traders taking profits after prices shot up almost 30% on Monday amid freezing temperatures that pushed up heating demand. BBG
• Republicans and President Trump designed their tax cuts for this moment, creating a refund bonanza that will land in Americans’ bank accounts well ahead of the midterm elections. The annual tax-filing season that opened Monday will produce a cash surge estimated at $100 billion beyond last year’s $329 billion total. WSJ
• Philippines said they conducted joint military exercises with the US in the South China Sea: Al Arabiya.
• US ambassador to China Perdue said in Bloomberg TV interview that China and the US completed most agreements made in Busan, South Korea.

Trade/Tariffs

• US President Trump announces he is “increasing South Korean TARIFFS on Autos, Lumber, Pharma, and all other Reciprocal TARIFFS, from 15% to 25%”.
• South Korea Legislature Trade Committee head said that passages of such trade bills usually take six to seven months.
• South Korea’s ruling party said it aims to pass special act on US trade deal by end of February, according to Yonhap Infomax.
• South Korean ruling party official said bills to enact US investment have been introduced and will soon be reviewed.
• South Korean Industry Ministry said Minister is to visit the US soon and meet with Commerce Secretary Lutnick.
• EU Commission begins 2 set of proceeding on Google under the DMA; Google is designated as a core platform service, requiring interoperability with third-party services.
• China reportedly signs deals to buy at least 8 cargoes or approximately 520k tonnes of Canadian Canola following PM Carney’s visit, according to sources.
• Chinese Foreign Minister said UK PM Starmer will visit China between January 28-31st.
• European Commission President von der Leyen said EU and India finalised a trade deal, and called it “the mother of all deals”.
• Japan and the US are reportedly to announce several projects in a first batch under the USD 550bln scheme.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were mostly higher following on from the rebound on Wall Street, but with some of the gains capped ahead of key events and big tech earnings stateside, while participants also digested Trump’s latest tariff salvo against South Korea. ASX 200 rallied on return from the long weekend, with risk appetite also facilitated by M&A-related headlines and improved business sentiment. Nikkei 225 gained despite the initial indecision following recent currency moves and after Services PPI cooled but remained above the BoJ’s price  target. KOSPI sold off at the open following US President Trump’s announcement to raise tariffs on South Korean autos, lumber, pharma, and all other reciprocal tariffs to 25% from 15% due to its legislature not yet enacting the US-Korea trade deal. However, the index then clawed back its losses and more, with the TACO trade likely in play and with South Korean officials attempting to appease Trump. Hang Seng and Shanghai Comp traded somewhat mixed with firm gains in Hong Kong led by Zijin Mining, which is to buy Canada’s Allied Gold for USD 4bln, while the mainland index lagged despite an acceleration in Chinese Industrial Profits and the PBoC’s liquidity efforts.

Top Asian News

• China is to roll out policy document on boosting jobs amid AI impact, according to Xinhua. China will roll out policies to support employment amid AI shift and will boost support for employment among key groups.

European bourses (STOXX 600 +0.3%) are broadly in the green this morning, following a similar theme seen in the APAC session. The DAX 40 (-0.2%) is mildly pressured whilst the FTSE 100 (+0.4%) outperforms slightly, benefitting from strength in Banking names. European sectors are mixed; Banks lead followed closely by Insurance names whilst Basic Resources lags given the broader losses seen in underlying metal prices. In terms of key movers, Puma (+4%) opened higher by 20%, but has since pared much of that move – Jefferies highlighted that ANTA may find it hard to boost Puma’s brand in China, given it already has high presence in the region.

Top European News

• China’s Industry Ministry announces that they have renewed the cooperation MOU regarding green maritime tech and shipbuilding with Denmark.
• India to sign a security and defence partnership with EU today in addition to advancing the free trade agreement at the 16th India-EU Summit, according to The Print.
• UK government plans to tighten scrutiny of Chinese influence in the UK, with PM Starmer seeking to bolster the registration scheme while still deepening Sino-British ties, according to FT.

FX

• G10s were initially broadly lower against the USD, but following recent JPY strength, G10s are now broadly higher. JPY leads the pile (vs initially underperforming), whilst the NZD and CAD hold around the unchanged mark. EUR/USD is mildly lower, and ultimately within a narrow 1.1850-1.1899 range. Earlier, the EU and India announced an FTA, which cut circa EUR 4bln of tariffs on the bloc’s exports.
• Delving into USD/JPY, the pair fell from 154.49 to a session low of 153.16 within a few minutes, but has since pared back towards 153.90. This drove the pair below the prior day’s low, and also below its 100 DMA at 153.61. A move that also weighed on the Dollar index, which fell from 97.10 to a session low of 96.90. Nothing fresh behind that move, with participants ultimately mindful of potential intervention risks, or further rate checks being carried out by the US and/or Japan. Note, the JPY move occurred alongside reports of an explosion near Iran’s Parchin site, a development that potentially influenced the JPY; however, the lack of follow-through to other assets, particularly crude, diminishes this narrative.
• DXY is flat this morning and trades within a 96.90 to 97.28 range, and currently holding within the prior day’s ranges. On the trade front, US President Trump said South Korea had delayed its trade agreement with the US and imposed a 25% tariffs on various Korean sectors – the Korean Industry Minister is to visit the US, and aims to pass a special act on the deal by end-February. The Korean Won was initially pressured at the reopen of trading, but has pared about half of the move. Back to the US, markets await ADP Weekly Average figures, Richmond Fed and Consumer Confidence. Participants also count down to the FOMC tomorrow. Barring any surprises in the data, the DXY may find itself relatively rangebound into the confab.

Fixed Income

• A modestly bearish start for fixed income. Action driven by the mostly constructive risk tone, though there are some pockets of weakness in Equities.
• USTs a tick or two softer in a 111-23 to 111-26+ band, within Monday’s 111-22+ to 111-30 parameters. Aside from supply, which follows a solid 2yr auction last night, the US docket is headlined by ADP.
• Bunds are also lower, with magnitudes slightly larger to losses of 15 ticks at most. No follow through to Bunds or EGBs generally from the morning’s German and Italian supply, taps that were unremarkable but robust enough.
• Gilts gapped lower by 15 ticks, acknowledging the pressure seen in peers overnight from the constructive risk tone. Since, the benchmark has stabilised slightly off lows and trades broadly in line with European benchmarks. The morning’s 2033 UK auction was well received, with a b/c above the 3x mark, though this did not spur any move in Gilts.
• Italy sold EUR 3bln vs exp. EUR 2.5–3bln 2.20% 2028 BTP & EUR 2bln vs exp. EUR 1.5–2bln 1.10% 2031, 2.55% 2056 BTPei.
• UK sold GBP 3.25bln 4.125% 2033 Gilt: b/c 3.18x (prev. 3.04x), average yield 4.296% (prev. 4.191%), tail 0.2bps (prev. 0.3bps).
• Germany sells EUR 4.633bln vs exp. EUR 6bln 2.10% 2028 Schatz: b/c 2.1x, average yield 2.14%, retention 22.8%.
• Germany opens books to sell EUR-denominated 20-year Bund via syndicate; guidance seen +3bps to DBR.
• EIB to sell EUR-denominated 5-year bonds, guidance seen +9bps vs mid-swaps.
• Australia sold AUD 1bln 1.50% June 2031 bonds, b/c 3.46, avg. yield 4.4382%.

Commodities

• Crude benchmarks softened in the earlier hours of the Asia-Pac session. WTI futures fell from USD 60.85/bbl to a trough of USD 60.17/bbl following the report, but have since rebounded slightly as the European session gets underway, but remains just shy of the USD 61/bbl figure. It was recently reported that explosions were heard near Iran’s Parchin nuclear site, but no damage was reported. Some reports suggest it could have been a routine missile test – no move in crude benchmarks on the initial or subsequent reports.
• Nat Gas prices remain elevated, Dutch TTF holds above EUR 40/MWh while Henry Hub futures hover near USD 7/MMBtu, as the Arctic storm provides a short-term shock to gas production.
• Precious metals continue to rise, despite selling off late in the US session, which was seemingly led by profit-taking in silver. Spot XAU found support at USD 5,000/oz and is currently trading just shy of USD 5,100/oz. Spot silver returns above USD 112/oz after a USD 15/oz selloff from its ATH of USD 117.70/oz on Monday.
• 3M LME Copper re-opened lower, as it reacted from the selloff in the precious metals space, but found support at USD 13k/t before oscillating in a USD 13k-13.15k/t band.
• Explosions have reportedly been heard near Iran’s Parchin nuclear site, no damage has been reported – details light, awaiting verification.
• Largest US power grid PJM Interconnection has issued alerts amid storm bolstering energy demand.
• Deutsche Bank expects a quarterly peak of USD 13k/t in Q2, with price moderation onwards as production recovers at several major mines. Threat of US tariffs on refined copper should lead to continued metal flows to the US in H1’26. On aluminium, they assume some moderation from current levels in H2 (2026 Avg. of USD 2.9k/t, peak of USD 3.1k/t in Q2).
• German’s Economic Minister said they will move forward with the wind power tenders to expand capacity.
• Deutsche Bank thinks USD 6,000/oz for spot gold is achievable this year due to a weaker dollar; in alternative scenarios, USD 6,900/oz would be in line with the past 2-year outperformance. An eventual moderation of XAU/XAG ratio may result in higher absolute silver prices.
• ADNOC Gas (ADNOC) CEO said they’re investing more than USD 20bln to increase processing capacity by approximately 30% by 2029.
• DTEK Power Company said the Russian attack damaged an energy facility in Ukraine’s Odesa region.
• UAE’s ADNOC chief revises forecast and sees oil demand above 100mln barrels per day until 2040.
• US President Trump is said to be mulling a cap on California state fuel tax and vowed to drive down the state’s gas prices, according to NY Post.

Geopolitics: Ukraine

• DTEK Power Company said the Russian attack damaged an energy facility in Ukraine’s Odesa region.
• Infrastructure facilities in the Lviv region of western Ukraine were hit by a Russian strike, according to the regional governor.
• US President Trump’s administration has signalled to Ukraine that US security guarantees are contingent on Kyiv first agreeing a peace deal that would likely involve ceding the Donbas region to Russia, according to sources cited by FT.

Geopolitics: Middle East

• Intensive diplomatic efforts are currently underway between Iran and the US across multiple channels, Kann news reported; efforts aimed at reducing the level of “escalation” between parties. However, no significant breakthrough reported at this stage.
• Explosions have reportedly been heard near Iran’s Parchin nuclear site, no damage has been reported – details light, awaiting verification.
• Palestinian media reported Israeli artillery shelling targeting areas in Khan Yunis in the southern Gaza Strip, according to Sky News Arabia.
• The Rafah crossing is estimated to be opened on Wednesday or Thursday, Israeli media reported.
• The explosions heard on the outskirts of Tehran are a routine missile test, Al Hadath reported citing Iranian TV.

Geopolitics: Other

• South Korea’s National Security Office reportedly urges North Korea to immediately stop its launches of ballistic missiles.
• North Korea reportedly fired several ballistic missiles, according to the South Korea military.
• North Korean missile appears to have landed outside of Japan’s Exclusive Economic Zone (EEZ), according to NTV.
• Japan’s Coast Guard sends second notice that a possible North Korean ballistic missile has already fallen.
• Projectile believed to be North Korean-fired ballistic missile has already fallen, according to the Japanese Coast Guard.
• Japanese Coast Guard issues second notice regarding North Korean projectile.
• North Korea fires projectile towards sea, according to Yonhap; details light.
• China said US-Philippines patrol in South China Sea undermines regional peace, while China’s military vows to safeguard sovereignty and maritime rights, uphold regional peace amid US-Philippines patrol.
• US President Trump said he is pleased to report that Venezuela is releasing its political prisoners at a rapid rate, which rate will be increasing over the coming short period of time. Full post: “I am pleased to report that Venezuela is releasing its Political Prisoners at a rapid rate, which rate will be increasing over the coming short period of time. I’d like to thank the leadership of Venezuela for agreeing to this powerful humanitarian gesture! PRESIDENT DONALD J. TRUMP”.

US Event Calendar

• 9:00 am: Nov FHFA House Price Index MoM, est. 0.26%, prior 0.4%
• 9:00 am: Nov S&P Cotality CS 20-City YoY NSA, est. 1.2%, prior 1.31%
• 9:00 am: Nov S&P Cotality CS U.S. HPI YoY NSA, est. 1.3%, prior 1.36%
• 10:00 am: Jan Richmond Fed Manufact. Index, est. -5, prior -7
• 10:00 am: Jan Conf. Board Consumer Confidence, est. 91, prior 89.1

DB’s Jim Reid concludes the overnight wrap

The post-Greenland rally has continued over the last 24 hours, with the S&P 500 (+0.50%) posting a fourth consecutive advance that left the index within half a per cent of its record high. For 2026 standards it was a quiet but solid day for bonds and equities ahead of the FOMC tomorrow and four out of the Mag-7 reporting tomorrow and Thursday. However, we did see some extreme moves in precious metals, with gold prices (+0.43%) closing above $5,000/oz for the first time ever, while silver (+0.57%) gave up almost all of its +14% intra-day gain before rallying again this morning in the Asia session.

That precious metal pullback began shortly after the European close yesterday but it’s proving short-lived, with gold back up +1.23% to $5,070oz as I type, with silver up +5.39% to $109.38/oz. And even though it’s still January, gold had already seen a YTD return of +16% as of yesterday’s close, whilst silver has surged +45% since the start of the year. Silver prices are up over +260% since the start of 2025, although unlike gold they still haven’t exceeded their real terms peak back in 1980. My CoTD yesterday (link here) showed the 235 year history for both gold and silver in real terms. The fascinating thing is that on January 9th this year (ie 2.5 weeks ago) silver in real terms was no higher than it was at the start of 1790! So while I’ve generally been a precious metal bug in recent years given my belief that fiat money is inherently inflationary, over the medium to longer-term precious metals are unlikely to compete with equities, especially from this starting point. It doesn’t mean you shouldn’t hold in a diversified portfolio but some realism of future long-term returns should be factored at these levels.

The volatility in precious metals came as the US dollar lost further ground, with the dollar index (-0.55%) closing less than half a percent from the post-2022 lows it reached back in September. In part, that was driven by the Japanese Yen’s strength, which moved up +0.99% against the US Dollar yesterday, making it the strongest-performing G10 currency. That followed the weekend comments from PM Takaichi that the government was prepared to “take all necessary measures to address speculative and highly abnormal movements”. But on top of that, investors also had to grapple with the prospect of a fresh government shutdown this week, which is now considered a 79% probability on Polymarket, not long after the longest-ever government shutdown back in Q4. Those odds did decline a couple of percent age points from earlier yesterday as we saw some de-escalation of the tensions between the White House and local officials over the recent events in Minnesota. Our economists note that a shutdown could delay the big refund cheques about to go out so there are incentives to compromise and avoid any lasting disruption.

Looking at the equity moves in more detail, as mentioned at the top, the S&P 500 (+0.50%) posted a 4th consecutive advance. The NASDAQ (+0.43%) and Mag-7 (+0.46%) saw similar gains, while blue chip names helped a slight outperformance for the Dow Jones (+0.64%). By contrast, the small cap Russell 2000 (-0.36%) lost ground for a second session running. The index is still up +7.16% YTD compared to a +1.53% gain for the S&P 500, having outperformed the S&P for fourteen consecutive sessions at the start of the year prior to Friday.

Those equity gains were bolstered by another batch of stronger-than-expected US data which added to the buoyancy of risk assets there. For instance, the Dallas Fed’s manufacturing activity hit a six-month high of -1.2 in January (vs. -8.5 expected). And the durable goods orders for November were up +5.3% (vs. +4.0% expected). So that cemented the optimistic view around Q4 growth, with the Atlanta Fed’s GDPNow estimate remaining at an annualised pace of +5.4%.

Earlier in Europe, the performance was a bit more subdued by comparison to the US, with the STOXX 600 only up +0.20%. That followed an underwhelming set of data, with the Ifo’s business climate indicator in Germany remaining at 87.6 in January (vs. 88.2 expected). Plus the expectations component unexpectedly fell to an 8-month low of 89.5 (vs. 90.3 expected). So that dampened sentiment a bit, with investors dialling up the probability of an ECB rate cut this year. And in turn, sovereign bonds rallied across Europe, with yields on 10yr bunds (-3.9bps), OATs (-5.8bps) and BTPs (-4.7bps) all falling back. US Treasuries also rallied a bit, with the 10yr yield (-1.3bps) falling to 4.21%.
Elsewhere, the Canadian dollar was the worst performing of the G10 currencies yesterday after Trump’s weekend threat of 100% tariffs against Canada if it strikes a trade deal with China. In response, Canada’s trade minister LeBlanc said he had reassured US Trade Representative Greer that the recent pact with China was a “narrow arrangement”. We saw further tariff headlines just after the US close, as Trump posted that he was raising tariffs on South Korea from 15% to 25% in response to South Korea’s legislature not yet enacting the trade agreement reached last year. So tariff threats remain an active policy tool for the White House, even if last week’s episode over Greenland shows that the resulting tensions can also decline quickly.

Asian equities are mostly higher this morning. The KOSPI (+2.43%) is higher after dipping at the open following the tariff news. However, sentiment improved when South Korea’s presidential office clarified that it had not received prior notification of any tariff increase plans. Additionally, it was noted that Trade Minister Kim Jung-kwan, who is currently in Canada, would travel to Washington for discussions with US Commerce Secretary Howard Lutnick. In other markets, the CSI (+0.34%), Shanghai Composite (+0.25%), the Nikkei (+0.69%), the ASX (+0.92%) and the Hang Seng (+1.01%) are all higher. S&P 500 (+0.28%) and NASDAQ 100 (+0.55%) futures are both higher. Meanwhile, 10yr USTs are +1.6bps higher standing at 4.23% as we go to print.

The Japanese yen (-0.18%) is experiencing a small decline after two days of gains, with 10 and 30yr JGB yields back up +5.3bps and +4.8bps respectively. In terms of data, China’s industrial profits have returned to growth, ending a two-month contraction with a rise of +5.3% year-on-year in December, significantly surpassing expectations of a -13.1% decline.

Looking at the day ahead, US data releases include the Conference Board’s consumer confidence for January and the Richmond Fed’s manufacturing index for January. Otherwise, central bank speakers include the ECB’s Nagel, and earnings releases include Boeing, UnitedHealth, UPS and General Motors.