Futures Rise After 4-Days Of Declines Ahead Of CPI, Central Bank Bonanza

Stocks rebounded from Wednesday’s tech-led rout after an upbeat forecast from Micron helped put the brakes on a tech-driven selloff on a busy day for data and central bank meetings. As of 7:15am ET, S&P and Nasdaq  futures rose 0.6% following four down days. In premarket trading, Micron shares soared 11% after reporting blowout earnings. Europe’s Stoxx 600 index rose 0.2%, while Asian shares slid. The tech slide, combined with dovish comments from a Federal Reserve official, helped boost Treasuries. The yield on the 10-year was down two basis points at 4.13% even as the BBG dollar index recovered from an earlier loss to trade 0.05% higher. Oil rose modestly to trade +0.4% at $56.18/barrel. Among key events for financial markets Thursday are the release of US inflation data for November, along with monetary policy decisions from the European Central Bank and Bank of England.

In premarket trading Mag 7 stocks are mostly higher (Tesla +1.4%, Nvidia  +1.4%, Alphabet +1.1%, Amazon +0.8%, Meta +0.7%, Microsoft +0.7%, Apple -0.2%).

• Insmed (INSM) falls 20% after the biotech said its Phase 2b BiRCh study of brensocatib in patients with chronic rhinosinusitis without nasal polyps failed to meet primary or secondary efficacy goals, prompting immediate discontinuation of the CRSsNP program.
• Instacart (CART) is down 6.6% after Reuters reported that the Federal Trade Commission has sent the grocery delivery company a civil investigative demand.
• Lululemon (LULU) rises +6.2% after Elliott is said to build a $BN+ stake.
• Micron (MU) jumps 11% after guiding current quarter earnings to be some 80% higher than consensus estimates, as the firm benefits from the relentless demand for memory chips used in data centers, and the sharp price increase that goes with it. Among memory peers, Sandisk (SNDK) 6.1%, Western Digital (WDC) +3.6% and Seagate (STX) +3.4%.
• PayPal (PYPL) drops 1.7% as Morgan Stanley downgrades the digital payments company to underweight and sets its price target to a new Street-low, citing slow progress on key strategic imperatives.
• Sable Offshore Corp. (SOC) jumps 41% after the company said the US Department of Transportation’s Pipeline and Hazardous Materials Safety Administration determined the pipeline connecting the Santa Ynez Unit to Pentland Station terminal in California constitutes an interstate pipeline.

Today’s Micron-driven bounce follows Nasdaq’s nearly 2% slide on Wednesday when investors again questioned whether companies at the vanguard of the AI boom can keep justifying their nosebleed valuations amid record spending.

“Investors still see limited disclosure of AI-driven revenues, profits or cash flows,” said Frank Thormann, a fund manager at Schroders Investment Management. “The result is a growing concern that AI may not be delivering returns commensurate with the enthusiasm.”

A mini-Santa rally to end the year likely hinges on whether inflation data confirms Powell’s expectation that core goods prices are nearly at a peak. Longer-term, inflation coming down while jobs remain subdued “should weaken FOMC hawks’ resistance to rate cuts,” according to Bloomberg Economics.

Still, investors remain nervous about AI. About 57% of participants in a Deutsche Bank survey said a potential plunge in AI valuations is the biggest risk to market stability in 2026. And there’s a long list of other things that could go wrong, suggesting drawdowns and volatility spikes are likely, especially given an investor base that is so determined to chase the market higher.

Traders are now waiting for Thursday’s US inflation reading for pointers on the path for interest rates, though the data run the risk of being less reliable than usual due to government-shutdown disruptions. The November CPI report will offer only a partial snapshot of inflation, without monthly changes for most of the price categories. Much of the October price information was unable to be collected and November data gathering was also delayed by the government closure.

Data aside, Trump said he plans to announce the new Fed chair soon, and that it will be “someone who believes in lower interest rates.” He also used his address to the nation to talk about housing reforms, which he said are coming in the new year.

European stocks edged upwards as investors awaited rate decisions from the European Central Bank and Bank of England. Retailers outperform, led by H&M, which is on track to close at more than a year-high, while automakers lag. Stoxx 600 rose 0.2% to 580.70 with 214 members down, 366 up, and 20 little changed. Here are some of the biggest movers on Thursday:

• Rational shares gain as much as 4.9%, hitting a five-week high, after UBS analysts said the maker of food appliances and kitchen accessories is “back on the menu,” predicting a return to high single-digit organic growth in FY26 can support a re-rating in the shares.
• Whitbread shares rise as much as 5.2% after stakeholder Corvex Management called for a strategic review of the company’s direction and capital allocation.
• Rentokil Initial shares rise as much as 3.9% as BofA Global Research raises its recommendation to buy from neutral and names it one of the bank’s “25 stocks for 2026” on its US growth.
• H&M shares rise as much as 2.6% to trade at their highest level since September 2024, after being upgraded by Oddo BHF, with analysts raising estimates and attaching a higher multiple on the fashion retailer.
• Currys shares climb as much as 15%, the most since September, after the electronics retailer reported earnings ahead of analysts’ expectations, driven by stronger performance in the Nordics as the UK business grapples with increases in staffing costs.
• Aeroports de Paris shares fall as much as 8.6% as the French Transport Regulatory Authority rejects the firm’s proposed airport charges, leading Oddo BHF to downgrade to underperform.
• Hemnet shares slide as much as 8.7%, pulling back from a five-week high, after analysts at Nordea cut their price target on the Swedish property advertising platform to a Street-low.
• Evolution shares drop as much as 3.1% following a double-downgrade to underweight from overweight at Barclays, which sees continued pressure on the Swedish gambling operator’s earnings.

Earlier in the session, Asian stocks dropped with momentum kamikaze-central, South Korea, leading a broad selloff on concerns over the artificial intelligence sector. Hang Seng nurses a modest loss after tech stocks fall, and ChiNext drops more than 1%.  The MSCI Asia Pacific Index fell 0.4%, tracking a US tech selloff and declining for a third time in four days. LG Chem and LG Energy were among the biggest drags. South Korea’s Kospi slumped 1.5%, while benchmarks in Tokyo and Taiwan were also in the red.

In FX, the dollar is mixed against FX majors. Kiwi dollar slips despite a small GDP beat. The yen hovers around 155.80/USD and offshore yuan is marginally stronger.

In rates, treasury 10-year yields drop 2bps to 4.13%. Australian 3-year yields drop 3 bps after the AOFM cuts bond issuance plans for fiscal year 2026. JGB futures grind modestly higher ahead of Friday’s widely expected BOJ rate hike

In commodities, WTI crude futures inch lower, trading around $55 a barrel. Spot gold falls roughly $12 to ~$4,327/oz, while Bitcoin is up 1.3% .

Looking to the day ahead now, and the highlights will be the ECB and Bank of England policy decisions. Over in the US, we’ll also get the CPI report for November, and the weekly initial jobless claims. Speakers include ECB’s Lagarde & BoE’s Bailey, Supply from US, Earnings from Carnival, Nike & FedEx.

Market Snapshot

• S&P 500 mini +0.6%
• Nasdaq 100 mini +0.6%
• Russell 2000 mini +0.3%
• Stoxx Europe 600 +0.3%
• DAX +0.1%
• CAC 40 +0.3%
• 10-year Treasury yield -2 basis points at 4.13%
• VIX -0.2 points at 17.38
• Bloomberg Dollar Index little changed at 1208.22,
• euro -0.2% at $1.1723
• WTI crude +0.4% at $56.18/barrel

Top Overnight News

• Trump Defends Handling of Economy, Announces Military Dividend: WSJ
• How China reverse engineered chipbuilding giant ASML and built its ‘Manhattan Project’ to rival the West in AI chips: RTRS
• White House official said Trump is expected to address marijuana rescheduling on Thursday.
• Trump said he will soon announce the next Fed chair and that the new Fed chair will believe in lowering interest rates by a lot, while Trump also stated that he will announce aggressive housing reforms in the new year and said more than a million service members will get a special dividend of USD 1,776 before Christmas.
• Trump Told by Alan Dershowitz Constitutionality of Third Term Is Unclear: WSJ
• The House voted 216-211 to pass the Republican health care bill without an extension of the ACA subsidy, which now goes to the Senate. It was separately reported that the Senate voted 77-22 to pass the USD 901bln bill setting defence policy and spending for the 2026 fiscal year, which goes to President Trump for signing
• US approves $11.1 billion arms package for Taiwan, largest ever: RTRS
• FBI Deputy Director Dan Bongino Says He Will Leave in January
• Elliott Said to Build a $1 Billion-Plus Stake in Lululemon: BBG
• Warner Demands Larry Ellison’s Personal Guarantee in Paramount Bid: WSJ
• ECB to Hold With Economy on Sturdier Footing: BBG
• Sweden Holds Rate at 1.75% as Growth Builds, Inflation Cools: BBG
• BP Appoints First Outsider as CEO After Ousting Auchincloss: BBG
• All That Cheap Chinese Stuff Is Now Europe’s Problem: WSJ
• Fed’s Bostic (2027 voter, retiring) said GDP growth is solid and expects that trend to continue into next year, while he added it is less clear what will happen on the employment side.
• America’s Largest Landowner Bets It Can Replace Met Coal With Pine Trees: WSJ
• Frustration Grows as Hunt for Brown Shooter Drags On: WSJ

Trade/Tariffs

• French President Macron said numbers on Mercosur trade deal does not add up right now and talks are not yet over.
• Chinese Commerce Ministry, on talks with the EU on EV tariffs, said they are still being negotiated.
• Chinese Commerce Ministry, on EU rare earth export licenses, said some Chinese licence applications have been approved.
• Chinese Commerce Ministry, on EU’s FRS (Foreign Subsidies Regulation) Investigation, said it has severely impacted Chinese firms business and investment operations in the EU.
• China’s Commerce Ministry, on steel licences, said it involves some 300 products; designed to strengthen monitoring and tracking of exports.
• US President Trump said they used to have the worst trade deals anywhere in the world and were laughed at, but they’re not laughing anymore. said:. Much of the success has been due to tariffs. One year ago, the country was dead and ready to fail, and now its the hottest anywhere in the world.
• Japan government said consultation committee for the USD 550bln US-bound investment package held its meeting on Thursday.

A more detailed look at global markets courtesy of Newsquawk

European bourses are broadly in the green, in contrast to a mostly subdued APAC session as markets await policy decisions from the BoE an the ECB.
European sectors are trading mixed. Retail (+1.0%), Financial Services (+0.4%) and Real Estate (+0.4%) lead. Retail has been underpinned by gains in Curry’s (+8.6%) after Co. posted strong half year growth. At the other end of the spectrum, Autos (-0.6%), Banks (-0.5%) and Travel & Leisure (-0.3%) lag.

Top European News

• Inditex PT to Street-High at Jefferies
• M&A Watch Europe: BNP Paribas, Rheinmetall, BP, Nexi, Aena

APAC stocks were mostly lower following on from the tech-led selling stateside and ahead of US inflation data and a slew of upcoming central bank decisions.
ASX 200 was flat with the index constrained by weakness in energy, gold miners and industrials. Nikkei 225 briefly dipped beneath the 49,000 level amid tech woes and anticipation of a BoJ rate hike when the central bank concludes its 2-day policy meeting tomorrow. Hang Seng and Shanghai Comp were mixed as tech-related headwinds dampened risk sentiment in Hong Kong, although the mainland kept afloat after the PBoC’s open market operations, in which it opted to utilise both 7- and 14-day reverse repos.

Top Asian News

• Japan’s Chief Cabinet Secretary Kihara said watching market moves, including long-term rates closely.
• South Korea’s Finance Minister said concerned of FX volatility widening, adds closely monitoring impacts from diverging monetary policies abroad on local markets.
• South Korea Vice Finance Minister sees herd behaviour in markets, adds KRW declines seem more excessive compared to the economy’s fundamentals.

Central Banks

• Norges Bank maintains its Key Policy Rate at 4.00% as expected; if the economy evolves broadly as currently projected, the policy rate will be reduced further in the course of the coming year. If the policy rate is lowered too quickly, inflation could remain above target for too long. With a gradual decline in wage growth ahead, inflation is projected to move down and be close to 2 percent in 2028. Sees 2026 Key Policy Rate at 3.9% (prev. forecast 3.9%). Sees 2027 Key Policy Rate at 3.4% (prev. forecast 3.5%).
• Norges Bank’s Bache said NOK is weaker than previously assumed, raising inflation prospects slightly.
• Riksbank maintains its rate at 1.75% as expected; reiterates rate is expected to remain at this level for some time to come. Although inflation has varied somewhat from month to month, it has overall developed in line with the Riksbank’s forecast in September and approached 2 per cent. Indicators continue to support the view of inflationary pressures in line with the target going forward.
• Riksbank’s Thedeen said policy rate will stay at this level at some time going forward, with this view covering the horizon for the Bank’s rate path.
• China Securities Times reported PBoC rate cut room shrinks amid shift of focus to policy mix, and noted aggressive RRR cuts are less needed.

FX

• DXY traded little changed with price action contained ahead of US CPI data due later today and following comments from a couple of Fed speakers, including Waller who stated that the Fed is 50bps-100bps over neutral and there is no rush to cut rates given the outlook, but added that they can continue to bring the rate down. Furthermore, the attention overnight turned to US President Trump’s primetime address, where he announced more than a million service members will get a special dividend of USD 1,776 before Christmas and flagged aggressive housing reforms in the new year, but which had little impact on the currency.
• EUR/USD traded sideways beneath the 1.1750 level with a lack of catalysts as participants awaited the ECB meeting.
• GBP/USD struggled for direction after weakening yesterday on the softer-than-expected UK CPI data, which solidified the bets for a 25bps BoE rate cut later today.
• USD/JPY remained afloat after reversing the declines seen earlier in the week, despite the expectations of a looming BoJ rate hike as the central bank begins its 2-day conclave.
• Antipodeans marginally softened amid the lacklustre risk appetite and quiet overnight data calendar, while there was very little support seen following mixed New Zealand GDP data.
• PBoC set USD/CNY mid-point at 7.0583 vs exp. 7.0403 (Prev. 7.0573)

Fixed Income

• 10yr UST futures kept afloat but with the upside limited following yesterday’s choppy performance amid commentary from Fed’s Waller and an average 20-year bond auction, while participants await the incoming US inflation data.
• Bund futures rebounded off the prior day’s trough in rangebound trade with few catalysts ahead of the ECB meeting.
• 10yr JGB futures edged higher amid the downbeat mood in risk assets, although gains were capped as the BoJ kick-started its 2-day policy meeting.

Commodities

• Crude futures were initially boosted amid the US blockade against Venezuela and recent reports of potential new US energy sanctions on Russia, although futures later pared much of the gains alongside US President Trump’s primetime address to the nation, given that there was no mention of the blockade or Russian sanctions.
• Qatar lowered the February term price for Al Shaheen oil to USD 0.53/bbl above Dubai.
• Dubai set official crude differential to GME Oman for March at USD 0.10/bbl discount.
• Venezuela is running out of oil storage space amid tanker curbs, with its main oil storage and tankers sitting at terminals quickly filling up and may be at maximum capacity in about 10 days, which could force state-owned Petróleos de Venezuela SA, whose production is close to 1mln bpd a day, to shut-in wells, according to Bloomberg.
• Israeli PM Netanyahu said he has approved the country’s largest ever gas deal with Egypt valued at USD 35bln.
• Spot gold was lacklustre amid a steady dollar and with early weakness in other metal prices, including silver, which pulled back from record levels, before paring its losses.
• Copper futures saw early pressure amid the subdued risk appetite but has since bounced off intraday lows.

Geopolitics

• Ukrainian President Zelensky said Moscow clearly shows it is ready for war in 2026, and the US says Russia wants to end the war, but Moscow is sending opposite signals. Furthermore, he said the summit in Brussels should show there is no point for Russia to continue the war because Ukraine will have the financial means to defend itself.
• US and Russia are to hold talks on the Ukraine war in Miami this weekend, according to Politico. US Envoy Witkoff and President Trump’s son-in-law Kushner are to represent the US, while the plans remain in flux, but if they go ahead this weekend, the administration will present the outcome of the most recent round of discussions to Russian officials, who have not shifted much on their demands.
• Ukrainian attack damaged a ship in the southern Russian port of Rostov-on-Don, while there were deaths among the crew, according to the regional governor.

OTHER

• US military said it conducted a strike on a vessel in the eastern Pacific, which killed four men.
• Venezuela requested a UN Security Council meeting to discuss ongoing US aggression. It was separately reported that Venezuela’s Navy were escorting vessels following the blockade threat, while Washington was aware of escorts and mulls course of action, according to NYT.
• Taiwan’s Defence Ministry announced that the US government initiated a congressional notification procedure for arms sales to Taiwan totalling USD 11.1bln, while the Taiwan Presidential Office said they express sincere gratitude for the new US arms sale package and noted that Taiwan will continue to promote defence reforms, as well as demonstrate its determination to defend itself and safeguard peace through strength.

DB’s Jim Reid concludes the overnight wrap

Markets failed to see much Christmas cheer yesterday, with the S&P 500 (-1.16%) posting a fourth consecutive decline from its record high last week. The selloff had multiple drivers, but doubts about AI valuations were top of mind, with Oracle (-5.40%) falling to a six-month low after the FT reported that Blue Owl Capital wouldn’t back a $10bn deal for Oracle’s data centre in Michigan.Moreover, fixed income mostly struggled as inflation concerns crept back in, with 10yr Treasury yields (+0.8bps) inching higher, whilst 10yr bund yields (+1.9bps) reached their highest since the fiscal stimulus announcement in March, at 2.86%. So it was a rough day across the board, and the major equity indices in Asia have also lost ground overnight.

Interestingly, it had appeared yesterday as though markets might finally stabilise. But the first loss of momentum came after that FT report, which heightened concerns around a potential AI bubble, and meant that Oracle’s 5yr credit default swaps climbed to 156bps, their highest since the GFC. The other problem is the AI fears are interacting with growing concerns around the US outlook, particularly after we found out the unemployment rate hit a 4-year high in November. So tech stocks led yesterday’s declines, with the Mag 7 (-2.12%) having its worst day in over a month, led by a -3.81% slump for Nvidia, and other cyclical sectors also struggled. Defensive stocks fared relatively better, with energy (+2.21%) the best performing sector after Brent crude (+1.29%) recovered to $59.68/bbl following Trump’s blockade of sanctioned tankers for Venezuela.

Looking forward, the focus will be back on US data today, as the delayed CPI report for November is out at 13:30 London time, which will be important for whether the Fed have the space to keep cutting rates in 2026. This is going to be a slightly unusual report, as the government shutdown meant the October data wasn’t collected, so we won’t get the usual monthly change that we normally focus on with US inflation. That means the focus will instead be on the year-on-year rates, and how those compare to the previous print in September. In terms of what to expect, our US economists think that headline CPI had an average increase of +0.24% over October and November, which would keep the year-on-year rate at +3.0%. Then for core CPI, they expect a similar average increase of +0.26% over the last two months, which would also keep the year-on-year rate at +3.0%. See their preview here for more details.

In the meantime, investors are still looking at who might become the next Fed Chair, with Trump saying in his latest address that it would be announced in the new year and would be “someone who believes in lower interest rates”. Over the last 48 hours, speculation around Governor Chris Waller has rise significantly, with the initial catalyst being a WSJ report on Tuesday that Waller would be interviewed. Indeed, Waller even briefly moved into second place on Polymarket yesterday, overtaking former Fed Governor Kevin Warsh. However, that reversed later on and as we go to press this morning, NEC Director Kevin Hassett (52%) is still in the lead, followed by Warsh (25%) and then Waller (14%). We actually heard from Waller as well yesterday, who said that the US labour market was “very soft”, and that rates were probably 50-100bps from neutral. So those comments meant US Treasury yields pared back some of their initial increase, only closing up +0.8bps at 4.15%, having peaked at 4.18% shortly before the US open.

Meanwhile in Europe, central banks are also in the spotlight as we have the ECB’s latest decision today. They’re widely expected to keep their deposit rate at 2%, where it’s been since June. However, last week saw growing speculation about a potential hike next year, as Isabel Schnabel of the Executive Board said that “I’m rather comfortable” with expectations that the next move would be a hike. So talk about a hike has risen up the agenda, and on Wednesday last week, pricing for a 2026 hike moved as high as 50% on an intraday basis. For now, however, our European economists interpret the recent data and ECB commentary as consistent with an extension of the current pause. Their view is it implies a lower chance of more cuts, rather than a greater chance of imminent hikes. For more info, see their full preview here, where they also discuss what would be needed to hike rates next year, and what could push the ECB into cutting again.

Staying on central banks, the Bank of England are also announcing their latest decision today, where a 25bp cut to 3.75% is widely expected. In fact, there was further momentum behind that yesterday after the UK CPI print was beneath every economist’s estimate on Bloomberg, at +3.2% in November (vs. +3.5% expected). Moreover, core CPI also fell back to +3.2% (vs. +3.4% expected). So investors dialled up the likelihood of a cut today to 98% by last night’s close, and there was a big rally in gilts too, with the 2yr yield (-6.0bps) falling to 3.69% , its lowest since August 2024. Meanwhile, the pound weakened by -0.35% against the US dollar, which supported the FTSE 100 (+0.92%) given the multinationals in the index benefit from the weaker pound. For more info on the BoE’s decision, see our UK economist’s preview here.

Despite the gains for UK equities, the mood was more downbeat across the rest of Europe, with the STOXX 600 (-0.002%) posting an incredibly small decline. Sentiment wasn’t helped by the latest German data, as the Ifo’s business climate indicator unexpectedly fell to a 7-month low of 87.6 in December (vs. 88.2 expected). In addition, yields moved higher across the continent, with 10yr bund yields (+1.9bps) rising to 2.86%, their highest level since March, right after plans to relax the debt brake were announced.

Overnight in Asia, the downbeat mood from the US session has mostly continued, with losses for the Nikkei (-0.86%), the KOSPI (-1.32%), the Hang Seng (-0.22%) and the CSI 300 (-0.24%). By contrast, the Shanghai Comp (+0.42%) is one of the few to be advancing this morning. Meanwhile, we have seen US equity futures begin to stabilise, with those on the S&P 500 (+0.13%) and the NASDAQ 100 (+0.35%) rising after chipmaker Micron gave an upbeat forecast for this quarter.

To the day ahead now, and the highlights will be the ECB and Bank of England policy decisions. Over in the US, we’ll also get the CPI report for November, and the weekly initial jobless claims.