MARKET WRAPS

Watch For:

EU retail trade; Germany manufacturing orders; UK BOE decision; trading updates from ING, Societe Generale, A.P. Moller-Maersk, Siemens Healthineers, Norwegian Air Shuttle, AstraZeneca, Anglo American, Vinci, Compass Group, Amplats, Orsted

Opening Call:

European stock futures advanced, tracking gains by U.S. benchmarks and Asian equities. The dollar and Treasury yields were little changed; oil futures gained and gold edged lower.

Equities:

Stock futures were higher early Thursday as trade-war fears took a step back and markets focused on earnings and economic data.

Trump's tit-for-tat threats with officials in Canada and Mexico have receded for now. Meanwhile, China's response to tariffs was considered by Wall Street to be fairly tame, with new levies imposed on a slim slice of American goods.

Later today, the Bank of England is widely expected to cut interest rates by 25 basis points and could signal further policy easing. The central bank's guidance on the possible path of future rate cuts is likely to influence U.K. market movements much more than the expected cut itself, Morgan Stanley said.

Risks are skewed towards pricing more BOE rate cuts in 2025, although "the scope for a significant move appears limited," Morgan Stanley said.

Forex:

The dollar's strength has continued to ease, as "tensions and USD demand around Trump tariffs have waned sharply, with tariffs on Canada and Mexico deferred and on the back burner for now," DBS said.

The USD is also being weighed by U.S. ISM services PMI data missing expectations, "suggesting that US growth momentum could be slowing even without new Trump tariffs."

Bonds:

The Federal Reserve probably wants short-term yields below 4% with longer-term ones well above it, said Clayton Triick, head of portfolio management of public strategies at Angel Oak. In Wall Street parlance, policymakers would like the yield curve to steepen.

"A steeper curve [is] good for growth, for debt growth, good for banks, and good for the economy." It would also be good for bonds in the front-end of the yield curve, which are mostly above 4%. Their prices would rise if yields fell. "I think there's a good chance that bonds could do quite well" as the curve steepens, Triick said.

Energy:

Oil edged higher early Thursday after falling overnight as data showed a weekly climb of almost 9 million barrels in U.S. crude inventories.

Prices may continue to be weighed by rising U.S. stockpiles and trade-related uncertainty, said Tickmill's Joseph Dahrieh. This reinforces a bearish sentiment due to persistent demand-side risks, he said.

Metals:

Trade war concerns continue to boost gold prices, testing new highs as investors scramble for physical deliveries, said ANZ. Investors remain worried that the U.S. may place tariffs on precious metal imports following Trump's recent moves against Canada, Mexico and China, the bank added.

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The base metals sector has seen "moderate risk-on sentiment" amid a weaker dollar and the return of Chinese traders following the Lunar New Year holidays, said Daria Efanova, head of research at Sucden Financial.

"We expect that a continued increase in liquidity will further support the complex on the upside in the coming days."

TODAY'S TOP HEADLINES

Why Trump Is Closing a Trade Exemption for China

President Trump's order imposing additional tariffs on China this week also suspended a popular trade exemption known as the de minimis provision that has let bargain platforms such as Shein and Temu skirt import duties and red tape on low-value packages from China.

The order caused widespread confusion and prompted the U.S. Postal Service to temporarily stop accepting parcels from China and Hong Kong before allowing them again.

The Economy Is Fine, Fed's Barkin Says. Government Policy Is the Real Wild Card.

Federal Reserve Bank of Richmond President Tom Barkin says he needs more information before assessing how tariffs and a variety of Donald Trump's other policy proposals will affect inflation and the economy. Interest rates are on hold until things become clearer or the data shift.

Barkin doesn't see signs of an impending recession in the data or anecdotes about the economy, but said there are plenty of unanswered questions on the Washington front. The list includes what happens with tariffs, immigration, deregulation, tax cuts, and energy policies.

BOE Expected to Cut Interest Rates. Why That's Good for the Dollar.

The Bank of England is widely expected to lower interest rates on Thursday as the outlook for economic growth dims, taking a different path from the U.S. Federal Reserve.

Investors are pricing in a 97% chance that the U.K. central bank lowers its key rate to 4.5% from 4.75%, according to data on LSEG. The decision follows a quarter-point cut from the European Central Bank in Frankfurt last week. The Fed, worried that inflation is not yet conquered amid the prospect of trade wars and tariffs, kept interest rates on hold.

France's Budget Crisis Ends as Government Survives No-Confidence Vote

PARIS-The French government survived a no-confidence vote in the National Assembly, ending a challenge to President Emmanuel Macron's prime minister and clearing the path to adopt a 2025 budget after months of political brinkmanship that rattled markets and left France's finances in limbo.

The no-confidence motion against the government led by centrist Prime Minister François Bayrou won the support of 128 lawmakers in the 577-seat lower house, far short of the 289 needed to force the government to resign.

Qualcomm Earnings Beat Estimates. The Stock Is Still Falling.

Qualcomm reported strong first-quarter earnings results Wednesday afternoon. Its shares were initially up in after-hours trading before moving into negative territory.

Earnings per share rose 24% to $3.41, compared to Wall Street's consensus estimate of $2.96, according to FactSet. Revenue for the quarter reached $11.67 billion, well above expectations of $10.91 billion, and up 18% on the year.

Google Kills Diversity Hiring Targets

Google is eliminating its goal of hiring more employees from historically underrepresented groups and reviewing some diversity, equity and inclusion programs, joining other tech giants rethinking their approach to DEI.

In an email to employees Wednesday, Google said it would no longer set hiring targets to improve representation in its workforce.

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Expected Major Events for Thursday

01:01/IRL: Jan Ireland Services PMI

06:45/SWI: Jan Unemployment

07:00/ROM: Dec Retail trade

07:00/GER: Dec Manufacturing orders

07:00/GER: Dec Manufacturing turnover

07:00/FIN: Dec Foreign trade

07:30/HUN: Dec Retail Sales

07:30/HUN: Dec Preliminary Industrial Production

08:00/SVK: Dec Internal trade, incl Wholesale & Retail

08:00/CZE: Dec External trade

08:00/CZE: Dec Industry, Construction

09:00/ICE: Jan External trade, preliminary figures

09:30/UK: Jan S&P Global UK Construction PMI

09:30/UK: 4Q Mortgage Arrears and Possessions data

10:00/CYP: Jan CPI

10:00/EU: Dec Retail trade

11:00/IRL: Jan Monthly Unemployment

12:00/UK: Bank of England Monetary Policy Report

12:00/UK: UK interest rate decision

13:30/CZE: Czech interest rate decision

All times in GMT. Powered by Onclusive and Dow Jones.

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This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

February 06, 2025 00:03 ET (05:03 GMT)

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