Global Equity Markets Outperform US Markets

MACRO FRAME

Global equity markets were mostly higher overnight with the French, UK and Japanese markets leading the world with gains. Critical economic news released overnight included sagging New Zealand business confidence, a slight dip in the Japanese coincident index reading for December, a slight uptick in the Japanese leading economic index for December, an increase in Swiss employment in the fourth quarter, unchanged euro zone consumer confidence, weakness in euro zone economic sentiment, industrial confidence and services sentiment. Expectations for today’s US initial claims call for an increase from 206,000 to 215,000 with continuing claims expected to fall from 1.869 million to 1.86 million which means US data will cancel out.

STOCK INDEX FUTURES

As indicated already, global equity markets continue to outperform the US market with some international markets posting all-time highs overnight. However, very favorable Nvidia earnings adds to recently revitalized investment interest in the NASDAQ and AI, especially with the Nvidia CEO indicating “the AI boom is ”just getting started and is going to be everywhere”. Nonetheless, concerns of significant job losses from AI (as expressed by the Fed’s Bowman) surfaced earlier this month and that has kept some investors on the sidelines. However, seeing US treasury yields nearing the lowest levels of the last year certainly dampens the fear of rotation from equities to interest rate markets. An additional supportive development out of London yesterday indicated a surge in LSEG stock buybacks which combined with strong earnings from LSEG provides a boost to the financial sector’s bullish sentiment.

CURRENCY FUTURES

US DOLLAR: 

Unfortunately, macroeconomic and interest rate differentials offer little assistance in determining which currency is in a leadership role. However, the dollar has a slight edge with European inflation data clearly trending lower while US inflation remains unchanged at elevated levels and at levels that discourage US rate cuts. In fact, the Bank of Japan is reportedly being stacked with fresh dovish members, while the latest CME Fed watch reading peg the odds of a March rate cut at only 2%.

INTEREST RATE MARKET FUTURES

With a departing Fed member on Monday warning of residual inflation risks and another Fed member overnight indicating that inflation is still the biggest problem facing the US Federal Reserve, this week’s triple top in March bonds at 118-05 should be fortified technical and fundamental resistance. While global equity market optimism has not produced fresh all-time highs in US markets early on, this week’s recovery in equities and positive earnings from Nvidia is providing ongoing headwinds against treasury gains. While some may discount that argument, talk of a significant investment rotation out of AI/tech/software starting around February 11th clearly fostered speculation that US treasuries would receive some buying from migrating capital. However, there is a slight headwind for treasuries from IMF calls for the United States to reduce its growing fiscal deficit which in turn would bring down US current account and trade deficits which the IMF deems as a very concerning.

Interested in more futures markets?  Explore our Market Dashboards here.