Futures At New Record High On Tech, Tehran, Trade, Taiwan And Tariffs

US futures are higher as we await color on the Trump-Xi summit and US- Iran negotiations, which are said to be ongoing, and as the tech meltup continues. What is known so far is that Trump / Xi agree that Iran cannot have a nuclear weapon, Hormuz should reopen without a toll or militarization; the countries will look to increase investment in each other as NVDA H20 chips are approved for a set of Chinese companies. In short, markets are higher on what BBG calls the 4 Ts: Tehran, Trade, Taiwan and Tariffs, to which we can also add Tech. As of 8:00am ET, S&P futures are up 0.3% while Nasdaq futures rise 0.2%. In pre-market trading, Cisco soared 16% after the company reported results that beat expectations and raised its full-year forecast as it laid off thousands to fund capex. Mag7 stocks are higher led by NVDA again; semis are mostly lower despite KOSPI adding 1.7%, while Cyclicals are seeing a bid. Cyclicals, esp Consumer Disc and Fins, would be among the biggest beneficiaries of a reopening of SoH (oil down, yield curve bull steepens, lower inflation expectations). Bond yields are flat to down 1bp, the USD is flat, and commodities are mostly lower. Energy commodities are still rallying but Metals are weaker dragged by the PGMs as Ags come for sale. Today’s macro data focus is on Retail Sales and Jobless Data.

In premarket trading, Magnificent Seven are mostly higher: Nvidia (NVDA) is up 1.5% as the semiconductor giant’s CEO Jensen Huang joined President Donald Trump on his visit to China. Huang told reporters in Beijing that “the meetings went excellent.” (Tesla +1%, Apple +0.4%, Microsoft +0.2%, Meta Platforms +0.1%, Amazon -0.1%, Alphabet -0.2%)

Canada Goose (GOOS) rises 5% after the parka and other apparel maker reported revenue for the fourth quarter that easily beat even the most bullish analyst projection. The stock is down 18% YTD through Wednesday’s close.
Cisco Systems (CSCO) soars 15% after the networking-equipment company delivered a better-than-anticipated sales forecast and announced plans to cut thousands of jobs, an attempt to focus on the fast-growing AI market.
Doximity (DOCS) tumbles 23% after the healthcare software firm gave a full-year forecast that was weaker than expected, with AI investments pressuring the company’s earnings.
EquipmentShare (EQPT) gains 4% after the equipment-rental company reported revenue for the first-quarter that beat the average analyst estimate.
Precigen (PGEN) jumps 17% after the drugmaker reported product revenue for the first quarter that topped the average analyst estimate.
Staar Surgical (STAA) climbs 21% after the healthcare supplies firm reported earnings per share for the first quarter that beat Wall Street analysts’ estimates.
Stubhub (STUB) is up 14% after the ticketing company reported better-than-expected first quarter results and reiterated its annual forecast. Morgan Stanley analyst notes that gross merchandise sales and revenue should improve in the second half of the year.
Viking Holdings (VIK) rises 2% after the cruise line operator posted first quarter revenue that climbed about 17% from the year-ago period.

In corporate news, Cerebras Systems raised $5.55 billion in its US IPO, as the AI chipmaker seizes on the surging demand for semis. The deal, said to be 20x oversubscribed, priced at $185 per share, above an increased, upsized range. It follows Wednesday’s report about Arm and majority owner SoftBank making an approach to acquire Cerebras weeks before the IPO. In other corporate news, Lululemon’s incoming CEO gave her first speech to employees this week, pledging to put the athleisure brand back on track. QVR Advisors is closing its volatility-focused multistrategy hedge fund and looking to sell the management company, following months of losses and investor redemptions.

With the Trump-Xi talks underway, markets may expect a focus on the “four T’s” — Tehran, Trade, Taiwan and Tariffs — with scope for constructive headlines across all four topics. Of course, Tech remains the biggest upside driver of all: Cisco Systems soars in premarket after raising its full-year forecast. Cisco delivered a better-than-anticipated sales outlook and announced plans to cut thousands of jobs to focus on the fast-growing AI market. Analysts highlight the company’s accelerating growth rate. Elsewhere in AI, Alphabet’s bond fundraising continues at pace: the latest sale over four months is for quadruple the amount of bonds Alphabet had sold in its first 26 years in business.

“Ingredients for the big top in markets are still missing, namely multiple Fed hikes, wider credit spreads or an overheating growth pulse,” said Manish Kabra, chief US equity strategist at Societe Generale. “The bull case for the S&P 500 stays intact.”

Trump’s summit with Xi Jinping shifted the spotlight from the war in Iran that has left a key conduit for Middle East oil flows all but closed for more than two months. The Chinese leader signaled that Beijing is moving toward greater openness as traders look out for business deals and purchasing commitments from the world’s second-biggest economy.

“I would expect the summit to matter more for sentiment than for a grand policy reset,” said Ulrich Urbahn, head of multi-asset strategy and research at Berenberg. “The market is likely looking for a de-escalation tone, fewer tariff threats, and no new restrictions on trade, technology, or geopolitics.”

Meanwhile, excessive risk-taking, particularly from the retail crowd, is showing no sign of abating as leveraged ETF assets under management hit a record $180 billion, with growing impact on underlying assets.

In Europe, the Stoxx 600 rose 0.4% as local markets rose for a second day, led by technology shares that were boosted by better-than-expected results from Cisco Systems in the US. Trading volumes were lighter than usual, with markets in Denmark, Finland, Norway, Sweden and Switzerland closed for a holiday. to 614.14 with 164 members down, 407 up, and 29 little changed. Here are some of the biggest movers on Thursday:

Legal & General shares rise as much as 5.2% as the Financial Times reports speculation over whether the financial services firm could be sold or broken up.
Watches of Switzerland shares rise as much as 14%, hitting the highest since early 2024, after the watch retailer said annual adjusted Ebit will be ahead of its previous guidance. Analysts said the confident outlook for the year ahead should also push up consensus. Barclays hiked its price target on the stock to a new Street-high.
Premier Foods shares rise as much as 6.2% after the food company reported profits slightly ahead of expectations and hiked its dividend. Analysts flagged that sales growth improved through the year and that the balance sheet is stronger.
3i Group shares fall as much as 25%, the steepest drop since January 2009, after the private equity group flagged slowing sales growth at its discount retailer Action. RBC analysts said the retailer, 3i’s largest single investment, has left itself much to do in the second half to meet its guidance.
CIE Automotive shares slip as much as 7% after Mahindra Overseas Investment Co. Mauritius sold its stake in the Spanish auto parts firm at €29.37 per share, a 6% discount to the last closing price.
Shurgard shares drop as much as 5.9% after the self-storage company reported a weak set of results, according to analysts. Pricing pressure in the UK was flagged as a key headwind. Guidance was maintained, although Stifel said factors outside its control could weigh on expectations later this year.

Earlier in the session, Asian stocks edged higher as investors poured into the region’s top chipmakers while keeping watch on talks between US President Donald Trump and Chinese counterpart Xi Jinping. The MSCI Asia Pacific Index rose 0.2%, boosted by Samsung, Alibaba and TSMC. Shares advanced in South Korea and Taiwan, while benchmarks in mainland China fell amid the ongoing US-China summit. In their meeting Thursday, Trump said China and the US will have a “fantastic future,” while Xi stressed stability in trade between the world’s top economies. The leaders had discussed expanding market access for US businesses and China’s potential interest in purchasing more US energy and agriculture, among other things.

In rates, treasuries slightly richer across the curve, supported by steady oil prices and marginally bigger gains for bunds and gilts. S&P 500 futures also hold small gains, led by technology stocks. US session includes April retail sales data and several Fed speakers. US 2- to 10-year yields are 1bp-2bp lower on the day, slightly outperforming long-end tenors; 10-year near 4.455% trails German and UK counterparts by about 2bp. IG dollar issuance slate empty so far, with weekly volume $48 billion vs $50 billion predicted. Six names priced $14 billion Wednesday, with issuers paying about 2.7 basis points in new issue concessions on deals that were 3.4 times covered

In FX, Bloomberg’s Dollar Spot Index steadied after three days of gains, while 30-year Treasury yields held above 5%. USD/CNY and USD/CNH fell to the lowest levels since February 2023; Xi Jinping signaled China is moving toward greater openness during his meeting with US business leaders. GBP/USD steadied around 1.3518; Keir Starmer’s efforts to hold back a potential leadership challenge showed new cracks

In rates, treasuries advance, pushing US 10-year yields down 1 bp to 4.46%. European government bonds outperform with UK and German 10-year borrowing costs falling 3 bps each.

In commodities, oil prices are steady with WTI crude near $101/barrel and Brent crude futures near $106 a barrel. Precious metals are mixed.

Economic data slate includes April retail sales and import/export prices and weekly jobless claims (8:30am) and March business inventories (10am). Fed speaker slate includes Miran (8am), Schmid (10:15am), Hammack and Bowman (1pm), Williams (5:45pm) and Barr (7pm)

Market Snapshot

S&P 500 mini +0.2%
Nasdaq 100 mini +0.2%
Russell 2000 mini little changed
Stoxx Europe 600 +0.5%
DAX +1.3%
CAC 40 +0.6%
10-year Treasury yield -1 basis point at 4.46%
VIX little changed at 17.84
Bloomberg Dollar Index little changed at 1193.97
euro little changed at $1.171
WTI crude +0.8% at $101.78/barrel

Top Overnight News

Xi Jinping has told American chief executives travelling with Donald Trump that China’s door to business “will only open wider and wider” as the leaders of the world’s two biggest economies meet in Beijing. FT
Beijing granted permission on Thursday for hundreds of American slaughterhouses to resume beef shipments to China, 15 months after Chinese officials had signaled displeasure with President Trump’s initial tariffs by allowing the industrial facilities’ licenses to expire. WSJ
Scott Bessent said he had no news on additional access for Nvidia chips in China, but said there may be a large Boeing order. BBG
Chinese leader Xi Jinping warned President Trump that any mishandling of Taiwan could lead to “an extremely dangerous situation,” directly raising a point of tension that has loomed over the meeting. Xi’s statement, while in line with China’s longstanding position, threatened to dim the mood of a visit both countries hoped would stabilize ties.
The BoJ should raise interest rates as soon as possible if there are no clear signs of an economic slowdown, board member Kazuyuki Masu said in comments that appear to increase the chances of ‌a June rate hike. RTRS
Data centers in space are gaining traction as an idea to get around constraints limiting expansion on Earth. SpaceX and Blue Origin have both announced plans to build and launch. BBG
Russia pummelled cities across Ukraine with dozens of missiles and more than 1,400 drones on Wednesday into Thursday, as a three-day ceasefire collapsed in a relentless 24-hour bombardment, which killed at least a dozen people. FT
US President Trump's proposals are reportedly facing opposition in Congress. These include a gas tax holiday and federal funding for a new ballroom in the White House: Semafor
US Pentagon has not signed new contracts to replenish its munitions supplies: NBC
London office leasing bounced back from Covid-era lows, with tenant floor-space expansions reaching a six-year high on rising demand from finance and professional services firms. BBG
India is considering a significant reduction in taxes paid by foreign investors on the nation’s bonds as authorities seek to align policies with global norms and attract inflows, people familiar said. BBG

Trump-Xi Summit

In the White House official statement, it stated that US President Trump had a good meeting with Chinese President Xi, in which the two sides discussed ways to enhance economic cooperation. On the Iran conflict, the two sides agreed that the Strait must remain open and that Iran can never have a nuclear weapon. However, Taiwan was not mentioned.
US President Trump told Chinese President Xi that they've had a fantastic relationship, and they are going to have a fantastic future together, while he added that he has such respect for China and that he tells everybody Xi is a great leader. Trump also stated that the relationship between the US and China will be better than before, with trade to be totally reciprocal on their behalf and he looks forward to doing business with China.
Chinese President Xi said to US CEOs that China's door will only open wider, adds China welcomes US to strengthen reciprocal cooperation in China, according to Xinhua.
Chinese President Xi told US President Trump it is a pleasure to meet him in Beijing, while he has always believed that the common interests between China and the US outweigh the differences. Xi stated that the success of China and the US is an opportunity for each other, and he looks forward to discussions with US President Trump.
Chinese President Xi said talks are the only right way to resolve disputes and that there are no winners in a trade war, while he also commented that the Taiwan issue is the most important in US-China ties, and if the issue is not handled well, the two countries will clash, according to Xinhua.
China People's Republic Chair Qiang said the US and China should focus on cooperation, and continue to be friends.

Iran War news

US President Trump's team is now discussing options for military escalation to break the deadlock, Axios reported. US officials don't expect Trump to take any dramatic steps during his trip but think he could make his next move immediately afterward. One option is to resume "Project Freedom," while another is to launch a new bombing campaign focusing on Iranian infrastructure.
Pakistan Foreign Ministry said the peace process is intact, its holding on, we remain engaged and hopeful, Journalist Mallick reported.
Iranian Foreign Minister Araghchi said although Iranian forces are ready to "deliver a crushing and devastating response to foreign aggressors, we do not seek war."
US Secretary of State Rubio said US hopes to convince China to play a more active role in persuading Iran to back down on its actions in the Gulf, according to Reuters.
US intelligence report emphasised that China acted to maximise its advantage and achievements against the US following the war in Iran on the diplomatic, military, economic and intelligence levels, according to WaPo.
UKMTO reports an incident 38NM northeast of Fujairah, UAE. The vessel has been taken by unauthorised personnel whilst at anchor and now bound for Iranian territorial waters.
Israel is to inform the Lebanese delegation that its strategy that it will not be committing to a comprehensive ceasefire, Al Hadath reported citing sources. Israel may offer to avoid bombing northern Bekaa and Beirut
Iraqi sources reported hearing the sound of several explosions in Erbil, Iraq, while a drone strike hit an Iranian opposition camp north of Iraq's Erbil, according to Fars. It was also reported shortly after that a second drone strike hit an Iranian opposition camp north of Erbil, according to security sources.
Israeli raid was reported on the town of Arnoun in the district of Nabatieh in southern Lebanon, while Hezbollah said it targeted a Merkava tank with a guided missile in Tel Nahas on the outskirts of the town of Kafr Kila and achieved a confirmed hit, according to Al Jazeera. It was also reported that Hezbollah conducted 17 operations against Israeli forces on Wednesday.
Israeli PM Netanyahu reportedly made a secret visit to the UAE in the midst of the Iran operation, where he met with UAE President Mohamed bin Zayed Al Nahyan, while the visit resulted in a historic breakthrough in relations between Israel and the UAE. However, the UAE later denied the report of a visit.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded mixed following the mostly positive lead from Wall St, where markets were choppy and gradually brushed aside the firmer-than-expected PPI data amid strength in tech and communications, while the focus turns to the Trump-Xi summit, which has begun in Beijing, although it has provided very little so far to excite markets. ASX 200 was lacklustre as weakness in consumer staples, tech, health care and energy counterbalanced the resilience in the top-weighted financials sector, while a lack of tier-1 data added to the humdrum mood. Nikkei 225 initially climbed to a fresh record high, before fading the gains amid quiet catalysts. Hang Seng and Shanghai Comp were mixed as participants digested earnings releases, including from the likes of Alibaba and Tencent, which both beat on the bottom line but disappointed on sales, while participants now await any concrete outcomes from the Trump-Xi summit.

Top Asian News

Japan considers drafting an extra budget, according to Kyodo. However, Japanese Chief Cabinet Secretary Kihara said no immediate need for a supplementary budget.

A broadly positive start for European bourses (STOXX 600 +0.5%) to begin Thursday’s session. The DAX 40 (+1.4%) is the clear outperformer, supported by Infineon and Rheinmetall while the FTSE 100 (+0.2%) underperforms, as 3i Group slumps after its FY total return missed estimates. European sectors hold a positive bias. Tech tops the sector pile while Financial Services lies at the bottom. Newsflow surrounding European tech has been light, but gains in US-listed Cisco after-hours seem to have passed through to the broader tech area. A Reuters report suggesting that the US approved H200 chip sales to Chinese companies also helped to lift sentiment.

Top European News

Former UK Deputy PM Rayner is prepared to put her herself forward in any leadership race if required, Sky News' Rigby reported citing sources.
Former UK Deputy PM Rayner said she's been cleared of any tax wrongdoing by HMRC.
Afzal Khan told Sky News he has no plans to give up his seat for Manchester Mayor Burnham. This is a denial of earlier reports.
Leadership candidates are considering making an early statement that Chancellor Reeves would actually be retained as Chancellor to secure market stability in the event of a longer leadership contest, according to Mail on Sunday's Hodges citing UK MPs.
BoE is set to water down stablecoin rules after industry pressure, with Deputy Governor Breeden stating that initial plans may have been ‘overly conservative’ and the central bank is ‘looking very hard’ at alternatives, according to FT.
British Chambers of Commerce warned UK manufacturers and construction groups will be hit by significant financial and logistical problems as a result of ministers' plans to double tariffs on steel imports from July 1st, according to FT.

DXY continues higher into of a packed session of US data and Fed speak. Today's focus, aside from the scheduled data/speakers, will be on the US/China summit, where we recently saw a positive US readout with no mention of Taiwan and agreement that the Strait of Hormuz must remain open. So far, the Buck has yet to move significantly to the aforementioned updates and resides within narrow 98.41-98.55 parameters.
In terms of notable news overnight, the US Senate confirmed Kevin Warsh to Fed Chair - to remind, Powell's term officially terminates tomorrow. In terms of some analyst commentary on the Greenback, MUFG wrote this morning that the "Buck could strengthen if there is any indication that the Fed’s tolerance for looking through higher inflation is diminishing", while ING wrote "face‑to‑face summits involving the US President have tended to generate a slew of conciliatory headlines, which can bolster risk assets".
USD/JPY continues to chop with a c. 45 pip move lower this morning, seen on hawkish remarks from BoJ's Masu, who said the central bank needed to raise rates "at the earliest stage possible". Masu, at the last BoJ confab, was not one of the three hawkish dissenters, meaning the vote split could theoretically be 5-4 should former dissenters maintain their votes. Markets are reluctant to fully price a June meeting hike, with just 15bps of tightening expected. The move seen on Masu's remarks has since been faded as oil prices remain high.
GBP trades with mild losses, with a strong regional GDP report ultimately overlooked by ongoing political unrest. Latest UK political updates suggest former Deputy PM Rayner may put herself forward in a leadership race after HMRC cleared her tax case. Rayner has indicated she favours supporting Manchester Mayor Burnham, which potentially strengthens his bid. Burnham, however, still needs to find an MP willing to step aside to spark a by-election and give Burnham a route to Parliament; reports and denials on the seat in question continue. Some analysts are circulating a survey from Survation, which indicates that soft-left Burnham is the most popular candidate amongst Labour members by a margin. Cable finds support at the round 1.3500 mark.

Central Banks

BoJ's Masu said they need to raise the rate at the earliest stage possible, and due attention should be paid to whether inflation triggered by the yen's depreciation may raise people's inflation expectations and, in turn, affect underlying inflation. Masu said the BoJ will continue to raise rates in response to economic, price, and financial developments, as well as noted that Japan has clearly entered an inflationary phase. Masu said there were mixed views among policy board members at the April meeting on whether to raise the policy interest rate immediately, while he judged at the April MPM that the situation did not warrant a hasty policy rate hike. Masu also commented that he is convinced the BoJ needs to raise the policy interest rate further, so that it falls solidly within the estimated range of neutral interest rate, and warned that if inflation is not contained at an appropriate level, this could lead to a vicious cycle in which firms have to further raise wages to retain workers. Furthermore, he noted that given Japan is no longer in a deflationary period, negative real rates should be addressed as soon as possible.
Fed’s Collins (2028 voter) said she expected the Federal Reserve would need to maintain restrictive policy for some time but hoped the economy would eventually permit more rate cuts later this year. Collins stated that further rate hikes could become necessary to cool inflation pressures and said current Fed policy remained “well positioned” to address risks. It was later reported by WSJ that Collins said she is watching the extent to which tariffs continue to pass through the price chain and that the Fed may need to raise rates if inflation pressures broaden in the coming months, but sees inflation pressures from the Iran war eventually subsiding.
ECB's Kazaks said can't yet see full impact of Iran war on inflation, and the situation is a bit worse than the ECB's baseline scenario.

Fixed Income

Global fixed benchmarks are firmer this morning, attempting to clamber off recent lows, as energy prices remain stable in today’s session. Geopolitical updates overnight were lacking, but attention this morning was on reports that a vessel off the coast of the UAE has been taken by unauthorised personnel. Later reports by Axios stating that US President Trump's team is now discussing options for military escalation to break the deadlock failed to move benchmarks.
USTs are firmer by 5 ticks, and currently trading within a 110-02 to 110-06+ range. Strength, which appears to be a bounce-back from the lows seen on Wednesday, following a hotter-than-expected PPI report. Oxford Economics outlined that following both CPI and PPI, its PCE “nowcast points to a 3.8% y/y rise in headline prices.
Bunds are stronger by c. 30 ticks, and trades within a 124.80 to 125.03 range. Price action has followed the above, with a lack of fundamental European drivers this morning. It is also worth noting that today is Ascension Day, celebrated across parts of Europe, so lower volumes are possible. From a policy perspective, ECB’s Chief Economist Lane stated on Wednesday that the surge in energy prices may require the Bank to deliver hikes. He continued his hawkish remarks by suggesting that an increase in selling price expectations suggests input cost pressures will map into higher output prices in the coming months.
Gilts are performing in-line with peers, and trade within an 86.14 to 86.48 range. A strong GDP report this morning is having little follow-through on price action. ING opines that it does not change much for the BoE, which is “singularly focused on the impending inflation spike”. UK traders also eye the domestic political situation, with reports on Wednesday suggesting that Health Minister Streeting is preparing to resign as soon as today. Close allies suggest he has more than the required 81 MPs to launch a leadership contest, though others question these claims. Another growing risk is Former Deputy PM Rayner being cleared of any tax wrongdoing by the HMRC, which gives her better credibility should she decide to launch a challenge.
JGBs underperform vs peers, following hawkish commentary from BoJ’s Masu, who stated that there is a need to raise rates at the earliest stage possible. The 10yr now resides at levels not seen since 1997. Elsewhere, the 30yr auction overnight gave an indication that demand remains strong at these elevated yields, as the b/c rose to 3.49x (prev. 3.12x). However, the wider tail suggests that some buyers are potentially holding out for a 4% yield.

Commodities

In geopolitics, the US and Iran both signalled a preference for diplomacy. US VP Vance said Washington is making progress in talks and remains focused on a diplomatic path “for now”, reiterating that Tehran must not obtain nuclear weapons. Iranian Foreign Minister Araghchi also said Iran does not seek war. However, tensions remain elevated: Tehran warned that new confrontations with the US are possible, said its forces are ready to deliver a “crushing” response if attacked, and confirmed it is preparing new navigation laws for the Strait of Hormuz. Separately, Iran accused Kuwait of unlawfully attacking an Iranian boat and detaining four Iranian citizens near an island allegedly linked to US operations. Shipping risks also rose after UKMTO reported that a vessel northeast of Fujairah was taken by unauthorised personnel and moved toward Iranian waters.
Crude markets are holding a mild positive bias but trade off best levels following the diplomacy-first approach by the US and Iran, whilst the positive US-China commentary could also be underpinning the benchmarks. Some mild pressure was seen in energy benchmarks after a WH statement outlined that the US and China agreed that the Strait of Hormuz must remain open. WTI July resides in a 95.48-98.13/bbl range while Brent July sits in a USD 104.57-107.13/bbl range. Sticking with energy, Dutch TTF meanwhile is choppy but posts mild gains (+0.2%) above EUR 47/MWh at the time of writing.
In terms of metals, spot gold is choppy within a narrow range, and largely within yesterday’s parameters after finding support near yesterday’s trough (4,669.53/oz). Newsflow has remained somewhat light this morning with no real macro drivers. Spot gold resides in a USD 4,669-4,719/oz while spot silver consolidates with modest losses above USD 87/oz after gaining for yet another session yesterday, bringing the win streak to seven straight sessions. HSBC raised its average silver price forecasts to USD 75/oz in 2026 and USD 68/oz in 2027.
Copper futures pulled back from record levels despite the broadly positive risk sentiment, with 3M LME copper briefly dipping under USD 14,000/t to trade in a current USD 13,887.50- 14,132.78/t range.

Trade/Tariffs

China renewed export licenses for more than 400 US beef plants, according to customs data.
EU officials said they are open to collaboration with the UK, but the UK will need to relax its trade and economic integration stance in order to progress towards a more ambitious deal, Politico reported.

US Event Calendar

8:30 am: United States Apr Import Price Index MoM, est. 1%, prior 0.8%
8:30 am: United States May 9 Initial Jobless Claims, est. 205k, prior 200k
8:30 am: United States May 2 Continuing Claims, est. 1780k, prior 1766k
8:30 am: United States Apr Retail Sales Advance MoM, est. 0.5%, prior 1.7%
8:30 am: United States Apr Retail Sales Ex Auto MoM, est. 0.7%, prior 1.9%

Central Bank Speakers

8:00 am: United States Fed’s Miran Appears on Bloomberg TV
10:15 am: United States Fed’s Schmid Speaks on Payments Innovation
1:00 pm: United States Fed’s Hammack Gives Opening Remarks
1:00 pm: United States Fed’s Bowman Delivers Pre-Recorded Remarks
5:45 pm: United States Fed’s Williams in Moderated Discussion
7:00 pm: United States Fed’s Barr speaks on Balance Sheet

DB's Jim Reid concludes the overnight wrap

This time yesterday I was finishing off the EMR looking across the ocean, thinking that work travel wasn’t actually that bad. Today I’m writing it on a bus in gridlocked LA rush hour traffic. I landed at LAX to find that traffic suggested 1hr 45 minutes to my hotel. However, the maps app suggested a bus and metro route that was slated to take 1 hr 25 mins. I gambled but then waited 30 minutes for a bus and that’s now where you find me. Not moving, along with around 70 other passengers!

Markets have been moving much faster than my bus over the last 24 hours though, with US equities last night surging to new highs, with the S&P 500 advancing +0.58%. That was led by fresh gains for tech stocks, with the NASDAQ (+1.20%) and the Magnificent 7 (+2.00%) reaching record highs of their own. The Mag-7 has now risen by over +27% in just over six weeks, while the Philly semiconductor index (+2.57% yesterday) is up +68% over that period. While there wasn’t a single clear catalyst, positive sentiment around the tech mega caps was a dominant theme as several of the Mag-7 CEOs were among the business leaders joining Trump’s visit to China. This included the Nvidia CEO Jensen Huang who must have been delighted to see his stock up (+2.29%) for a sixth day and to fresh records ahead of earnings next Wednesday. If only the West Coast tech gurus could find an answer to LA traffic.

It's early in Asia and as long as I'm reading this correctly, while trying to avoid motion sickness, markets continue to be bouyant. The KOSPI is up over a percent and the Nikkei, alongside Nasdaq futures, are up around two-thirds of a percent. European futures are up nearly a percent but it's still early in the session and perhaps a few hours before you wake up and read this. Obviously the world awaits news from the first Trump/Xi meeting today.

Ahead of that, the market mood was also supported by an easing in oil prices even as the Strait of Hormuz remained blocked with no new signs of progress towards a resolution. Brent crude retreated by -1.99% to $105.63/bbl while WTI was down -1.14% to $101.02/bbl. The drop in oil helped European stocks mostly match US gains, as the STOXX 600 (+0.79%) advanced alongside the DAX (+0.76%), the CAC 40 (+0.35%), and the FTSE MIB (+1.00%).

That said, it was not all good news, with nearly two thirds of the S&P 500 actually declining yesterday as blue chip names underperformed. A key challenge was an incredibly strong PPI inflation print, which led markets to price a growing chance of Fed rate hikes. In fact, the monthly PPI reading surged to +1.4% in April (vs. +0.5% expected), marking the biggest monthly surge in producer prices since March 2022. And in turn, that pushed up the year-on-year measure to +6.0% (vs. +4.8% expected), which is the fastest annual pace since December 2022. Moreover, it wasn’t just an energy story, as the core PPI measure excluding food, energy and trade was up +0.6% for the month (vs. +0.3% expected). So for investors, the print pushed back against the idea it was simply a one-time energy shock, and led to growing fears about broader inflation persistence.

That PPI print led to an immediate reaction in rates markets, pushing US Treasury yields to their highest in months, though this reaction then eased as oil prices edged lower. By the close, fed funds futures were little changed, pricing a 40% chance of a hike by year-end, while 2yr yields were down -1.1bps on the day. Yields still inched higher further out the curve, with the 10yr yield (+0.6bps) reaching its highest level since last July at 4.47%, while 30yr yields were up +0.9bps to 5.03%. That came as yesterday’s auction saw 30yr bonds issued at a yield of above 5% for the first time since 2007.

Meanwhile, Kevin Warsh was formally confirmed by the Senate as Fed Chair in a 54-45 vote. He will take over the role as Powell’s term as Chair ends on Friday. Trump’s pick comes in as the FOMC has sounded increasingly doubtful on prospects for further easing. The latest such comments came from Boston Fed President Collins yesterday, who said rates should remain on hold for “some time”, adding that she “could envision a scenario in which some policy tightening is needed” though this was not most likely.

Otherwise in the UK, the political news has shown no sign of letting up, as speculation continues to swirl around PM Keir Starmer’s position. In terms of the latest, it was reported in the Times yesterday, and then in several other outlets, that Health Secretary Wes Streeting might challenge Starmer for the leadership as soon as today. Clearly we’ll have to see what happens, but if Streeting wants to launch a formal challenge, he requires nominations from 20% of Labour MPs, so all eyes on whether he can do that and trigger a contest.

Interestingly, if there is a contest right now, it would also mean that Greater Manchester Mayor Andy Burnham is unable to run as it stands, as he’s not currently an MP in the House of Commons. So that’s led to speculation about whether Energy Secretary and former leader Ed Miliband might run instead although there is some talk overnight of a Labour MP in Manchester prepared to stand down to give Burnham a chance to win a by-election relatively quickly. However, he would still need to be selected as a candidate by the ruling NEC and hold off the strong Green Party in that particular seat.

While this manoeuvring is going on, Starmer himself has made clear that he intends to fight on, so it’s a volatile situation that keeps shifting. Indeed, in the last week alone, the Polymarket odds of a Starmer resignation in 2026 have fluctuated between 47% and 91%, and it’s now back at 70% as we go to press.

When it came to gilt markets, they actually outperformed yesterday, with the 10yr yield down -3.7bps by the close. So that was a larger decline than for yields on 10yr bunds (-0.1bps), OATs (-1.0bps) and BTPs (-2.2bps). Meanwhile, UK equities also traded in line with the rest of Europe, with the FTSE 100 (+0.58%) and the more domestically-focused FTSE 250 (+0.28%) both rising. Moreover, sterling was broadly steady against other major currencies, weakening -0.13% against the US Dollar, but strengthening +0.10% against the Euro.

Looking at the day ahead, a key highlight will be the meeting between President Trump and President Xi in China. Otherwise, data releases include the US weekly initial jobless claims, April retail sales, and the UK’s Q1 GDP reading. Finally, from central banks, we’ll hear from the Fed’s Logan, Schmid, Hammack and Williams, along with the BoE’s Pill. Fingers crossed I won't be on the same bus by tomorrow's edition.

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