US Futures Rise As Global Bond Rout Fizzles

US equity futures are higher, extending yesterday’s gains, while the global bond rout is put on hold for the time being as traders boost wagers on a faster pace of US interest-rate cuts ahead of Friday’s pivotal jobs report. As of 8:00am ET, S&P futures are 0.1% higher, pointing to a back-to-back advance, and Nasdaq futures gain 0.25%, with Mag 7s mostly higher premarket as AMZN and TSLA add 1.3% and 1.4%, respectively. Advances were stronger in Europe, where the Stoxx 600 strengthened 0.6% and French bonds led gains across the board. Treasuries extended gains, with the yield on 10-year notes falling two basis points to 4.19% while the USD is higher. Commodities are mostly lower; oil -1.2%; gold -0.6%. Overnight, not a lot of major headlines in the US as investors are waiting for the 2x major catalysts this week (Broadcom earnings today after the close, and NFP tomorrow). Today we get the ADP Employment report at 8:15am ET (68k survey vs 104k prevsious) and ISM Services at 10am ET today (50.9 survey vs. 50.1 prior).

In premarket trading, Mag 7 stocks are mostly higher (Amazon +1.6%, Tesla +1.1%, Nvidia -0.7%, Meta +1.8%, Apple -0.3%, Microsoft -0.1%, Alphabet -0.7%). 

• American Eagle (AEO) gains 26% after the clothing retailer reported better-than-expected 2Q revenue, boosted by demand following its Sydney Sweeney ad campaign.
• C3.ai (AI) slumps 13% after the software company forecast revenue for the second quarter that missed the average analyst estimate. It also named Stephen Ehikian as its new CEO, replacing founder Tom Siebel, who will remain executive chairman.
• Caleres (CAL) falls 7% after the footwear retailer reported adjusted earnings per share for the second quarter that missed the average analyst estimate.
• Ciena (CIEN) climbs 11% after the maker of equipment used by telecom companies reported adjusted earnings per share for the third quarter that beat the average analyst estimate.
• Credo Technology (CRDO) is up 11% after reporting adjusted earnings per share for the first quarter that beat the average analyst estimate.
• Figma (FIG) falls 15% after the software design company forecast annual sales that failed to impress Wall Street’s lofty expectations. This was the company’s first report since it went public in late July.
• GitLab (GTLB) is down 7% after the software company gave an outlook for third-quarter revenue that was weaker than expected. It also said that Brian Robins will step down as chief financial officer.
• HP Enterprise (HPE) is up 3% even as the company expects narrower profit margins as it enters the next leg of AI-driven demand. Bloomberg Intelligence says that with server execution issues behind it, the company should get free cash flow back on track in fiscal 2026.
• PagerDuty (PD) falls 3.6% after the cloud computing company trimmed the top end of its 2026 revenue guidance range. The company’s third quarter adjusted EPS view came in slightly lower than the consensus estimate.
• Salesforce (CRM) is down 7% after the software company gave an outlook that was seen as underwhelming.
• T. Rowe Price Group Inc. (TROW) rises 8% as Goldman Sachs Group Inc. will invest as much as $1 billion in the company and team up with the asset manager to sell private-market products to retail investors.

Calm is returning to markets after days of shifts in stocks and bonds that were driven by concerns over stretched valuations and government finances. As data continue to highlight softness in the labor market, swaps show traders are nearly fully pricing in a quarter-point rate cut this month and broadly split on the likelihood of another in October.
Until Wednesday, most traders saw a second cut only by December.

“September’s cut is a given but we don’t have any strong convictions going forward,” said Fabien Benchetrit, head of target allocation for France and southern Europe at BNP Paribas Asset Management. “As for equities, we’re on the lookout for opportunities and we would look for a temporary weakness to reinforce our positions.”

Economists project about 75,000 jobs were added in August, based on the median of a Bloomberg survey, while the jobless rate is seen at 4.3%. Four straight months of sub-100,000 payrolls growth would mark the weakest such stretch since the onset of the pandemic in 2020. Ahead of Friday’s data, the ADP Research report on Thursday showed even  slower private payroll growth in August, with jobs rising just 54K, below the 68K expectation, and down from 106K the previous month. Weekly initial jobless claims are seen little changed from the week before.

In separate figures, hiring plans fell to the weakest level for any August on record and intended job cuts mounted, according to outplacement firm Challenger, Gray & Christmas.

“I think at this point, it’s clear that the labor market is slightly cooling down,” said Nataliia Lipikhina, head of EMEA equity strategy at JPMorgan Private Bank. “The market is now pricing a 97% chance of the Fed cut. What could change that potentially is if we have very strong inflation data, but we’re not seeing that yet.”

Elsewhere, Wall Street strategists say investors are increasingly uneasy about the Fed’s independence as President Donald Trump pressures the central bank for rate cuts and seeks greater influence over its leadership. Market positioning across stocks, bonds and gold indicates investors are bracing for a potential pickup in inflation following Trump’s nomination of close adviser Stephen Miran to the Fed and his move to oust Governor Lisa Cook, JPMorgan strategists said. Meanwhile, Goldman analysts warned that mounting doubts over US institutional credibility pose “significant tail risks,” including the risk of a surge in the price of gold… supposedly much more than the one already observed. 

In Europe the Stoxx 600 strengthened 0.4%, rising for a second day as investors welcomed a further pullback in longer-dated European government bond yields. Retail and media stocks are outperforming while the travel and leisure sector is one of the few decliners as budget airlines including EasyJet and Ryanair drop after a profit warning from Jet2. Here are some of the biggest movers on Thursday:

• Genus shares jump as much as 29% after the animal genetics specialist reported adjusted pretax profit for the full year that beat the average analyst estimate.
• Currys shares rise as much as 24% after the electrical retailer reported a strong update.
• SMA Solar rallies as much as 5.7% as Jefferies upgrades to hold following the significant correction in the German solar-energy equipment maker’s shares after it delivered a profit warning this week.
• Asseco Poland surges as much as 7.8% after the IT company’s second-quarter profit beat estimates on growing demand for new software solutions to Poland’s public sector, as well as its international expansion.
• Grafton rises as much as 5.8% as the building material supplier’s first-half profit surpasses analysts’ estimates and it confirms a recovery in current trading.
• Sanofi shares drop as much as 10% after an experimental drug for atopic dermatitis disappointed investors in a late-stage trial.
• Saab shares drop as much as 6.7% as Morgan Stanley initiates coverage of the Swedish defense company with an underweight rating, cautious of the market’s elevated expectations at peak multiples. Kongsberg declines as much as 3% on an equal-weight initiation.
• Jet2 shares slump as much as 25% after the budget travel firm said it expects full-year Ebit to come in at the lower end of the consensus range.
• Lisi shares fall as much as 14% after Peugeot Invest sold 2.7 million shares in the aircraft parts maker for €39/share, for a total amount of approximately €105 million, according to a statement.
• CVC Capital falls as much as 5% after the private markets firm reported an adjusted Ebitda for the first half-year that slightly missed the average analyst estimate.
• D’Ieteren drops as much as 8% after the automobile distributor delivered first-half results that disappointed analysts.

Earlier in the session, in Asia, a selloff in Chinese stocks deepened on a Bloomberg report that regulators may move to cool a rally that has added $1.2 trillion since August. Still, Asian stocks were set to snap a two-day losing streak, led by financials, as investors returned to risk assets after US jobs data boosted Fed rate-cut bets. Chinese benchmarks declined. The MSCI Asia Pacific Index gained rose 0.2%, supported by Commonwealth Bank of Australia and Mitsubishi UFJ Financial Group. SoftBank Group and Sony Group were also among key advancers. Japan led regional gains, with benchmarks in South Korea and India also moving higher. In China, stocks plunged after Bloomberg reported that regulators are muling cooling measures for the market on concerns over the speed of the recent rally. The country has also started imposing duties on additional US optical fiber imports after a months-long investigation. Benchmarks in Hong Kong and the mainland dropped more than 1%. Meanwhile, shares in India got a lift after policymakers announced a range of consumption tax cuts to boost local demand. 

In FX, the Bloomberg Dollar Spot Index is up 0.1%. The Norwegian krone leads declines among G-10 peers against the greenback, falling 0.6%. The Swiss franc falls 0.1% with little reaction seen after headline CPI matched expectations.

In rates, treasury futures hold small gains in early US session, with yields richer by 2bp-3bp, following similar price action in European bonds. Long-end gilts outperform, flattening the UK yield curve. Economic data calendar provides main focal points of US session, including ADP employment and ISM services index. US 10-year, about 2bp richer on the day near session low, slightly underperforms bunds and gilts in the sector; curve spreads are narrowly mixed, broadly within 1bp of Wednesday’s closing levels. German, French and UK 30-year borrowing costs are down some 5 bps each. Treasuries also gain, with the US 30-year yields down 2 bps to 4.88%.

In commodities, spot gold drops $20. Oil prices fall for a second day, with WTI down 1.2% to $63.20 a barrel. Bitcoin falls 1.2%.

Today’s US economic data slate includes August Challenger job cuts (7:30am), August ADP employment change (8:15am), 2Q final nonfarm productivity and unit labor costs, weekly jobless claims and July trade balance (8:30am), August final S&P Global US services PMI (9:45am) and August ISM services index (10am). Fed speaker slate includes New York Fed’s Williams (12:05pm) and Chicago Fed’s Goolsbee (7pm)

Market Snapshot

• S&P 500 mini +0.1%
• Nasdaq 100 mini +0.2%
• Russell 2000 mini +0.2%
• Stoxx Europe 600 +0.4%
• DAX +0.5%
• CAC 40 -0.3%
• 10-year Treasury yield -2 basis points at 4.2%
• VIX -0.1 points at 16.29
• Bloomberg Dollar Index +0.1% at 1206.84
• euro -0.1% at $1.1645
• WTI crude -1.1% at $63.26/barrel

Top Overnight News

• US House Republicans are reportedly less than eager to extend Obamacare subsidies which expire at the end of the year, a GOP aide cited said an extension is “Incredibly unpopular within the conference, expensive, bad policy, etc.”: Punchbowl
• A federal judge barred the Trump administration from unilaterally cutting roughly $12 billion in foreign aid that Congress approved and is poised to expire by the end of September. BBG
• US Republicans are looking into and/or speaking out against the administration’s plan to use the CHIPS Act to take a stake in Intel (INTC). Senator Rounds is looking into its legality while Young is said to be sceptical: Punchbowl;
• China’s financial regulators are considering a number of cooling measures for the stock market as they grow concerned about the speed of a $1.2 trillion rally since the start of August, people familiar with the matter said. BBG
• A rare meeting of Chinese fiscal and monetary policymakers has prompted speculation among analysts that easing measures are on the cards that will bolster the bond market and economic growth this year. BBG
• Japan and the United States are in the final stages of talks to implement lower tariffs on Japanese automobile imports within 10-14 days after the issuance of a U.S. presidential executive order, a Japanese government source told Reuters on Thursday. That means that a reduced U.S. tariff rate on Japanese cars, from the current 27.5% to 15%, is set to take effect by the end of this month. RTRS
• BYD, the Chinese EV giant, has slashed its sales target for this year by as much as 16% (from ~5.5M units to ~4.6M) as demand cools and competition rises. RTRS
• Alibaba, ByteDance and other Chinese tech firms remain keen on Nvidia’s artificial intelligence chips despite regulators in Beijing strongly discouraging them from such purchases, four people with knowledge of procurement discussions said. They want reassurance that their orders of Nvidia’s H20 model, which the U.S. firm in July regained permission to sell in China, are being processed, and are closely monitoring Nvidia’s plans for a more powerful chip, tentatively named the B30A and which is based on its Blackwell architecture. RTRS
• DeepSeek is building an AI model with advanced agent features to challenge rivals such as OpenAI, people familiar said. The release is planned before year-end. BBG
• European leaders are said to be increasingly concerned that Russia will mount a new Ukraine offensive. Trump told CBS he remains committed to pursuing a peace agreement. BBG
• Bond traders are banking on revenue from Trump’s tariffs to bolster the US’s public finances,, in a sharp switch from earlier this year when his trade war triggered a brutal sell off in the Treasury mkt.  investors are now counting on hundreds of billions of dollars raised by the remaining tariffs to offset Trump’s tax cuts and keep a lid on US borrowing. FT
• The rally in small-cap stocks has stalled as rising yields and uncertainty over the Fed’s policy weigh on investor sentiment. The Russell 2000 Index has dropped every day so far in September. BBG
• BofA Institute total card spending +2.8% Y/Y in week ending August 30th (vs +1.8% July average); Spending growth for pre-Labor Day at 1.9%, supporting a Q3 rebound.

Corporate News

• Goldman Sachs Group Inc. will invest as much as $1 billion in T. Rowe Price Group Inc. and team up with the asset manager to sell private-market products to retail investors.
• Revolut Ltd. is quietly engineering a series of transactions that would allow the fintech to stay private for longer while maintaining strict control over its registry of shareholders.
• DeepSeek is developing an artificial intelligence model with more advanced AI agent features to compete with US rivals like OpenAI in a newer frontier of the technology, Bloomberg News has reported.
• Sanofi’s experimental drug for the skin condition atopic dermatitis disappointed investors in a late stage trial, after the benefit of the drug was less than expected. The stock fell.
• Tesla Inc. said it has opened its robotaxi app to the general public, suggesting the company will soon roll out the service beyond a select group of early access users in Austin, Texas.
• Apple Inc. is planning to launch its own artificial intelligence-powered web search tool next year, stepping up competition with OpenAI and Perplexity AI Inc.
• Salesforce Inc. shares fell 6% in premarket trading as the firm projected lackluster quarterly sales growth, suggesting its artificial intelligence product isn’t yet paying off as quickly as hoped for.
• Hewlett Packard Enterprise Co. Chief Executive Officer Antonio Neri said the company expects to weather a slimming of profit margins as it enters a new era of artificial intelligence-driven demand.

Trade/Tariffs

• China’s Commerce Ministry announced anti-dumping duties on some types of US optical fibres, effective September 4th.
• Japan and the US in final stage of talks to implement lower tariffs on Japanese auto imports, according to Japanese sources cited by Reuters; reductions could take effect within 10-14 days after US presidential executive order. Japan and the US to issue joint statement on July trade accord, also MoU on rules for Japan’s investment package. Japan aims to secure an executive order soon after the trade negotiator arrives in Washington.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks followed suit to the mixed performance stateside, where tech and communications outperformed following the Google antitrust ruling, and participants digested dovish data and Fed rhetoric. ASX 200 advanced with the gains led higher by outperformance in the top-weighted financial sector and with tech stocks inspired by US counterparts. Nikkei 225 outperformed despite light catalysts, although Japan’s trade negotiator Akazawa is scheduled to visit the US from today, while he noted that administrative issues have been resolved and will continue to push for a presidential order for what has been agreed on tariffs. Hang Seng and Shanghai Comp were pressured following a report that China is said to consider curbs on stock speculation to foster steady gains, while US-China frictions resurfaced following US President Trump’s comments during the Victory Day parade and with China announcing anti-dumping duties on optical fibre from the US.

Top Asian News

• China is said to consider curbs on stock speculation to foster steady gains, according to Bloomberg.
• China’s Global Times, on Nasdaq exchange’s proposed changes to its listing standard, says “The proposed rule could be seen as targeted or discriminatory, potentially restricting Chinese companies, especially tech firms, from listing in the US,”.
• China’s DeepSeek is reportedly targeting AI agent release by year-end, according to Bloomberg.
• UMC (2303 TT) reports August 2025 revenue -7.2% Y/Y.

European bourses (STOXX 600 +0.3%) opened mixed and traded tentatively on either side of the unchanged mark, before sentiment improved a little to now show a mostly positive picture. European sectors opened mixed but now hold a slight positive bias. Travel & Leisure is found right at the foot of the pile, and is the clear underperformer today. Downside which has been driven by Jet2 (-14%), after the Co. provided an awful trading update, where it now sees EBIT at the lower end of its guided range. Healthcare also sits towards the foot of the pile, giving back some of the prior day’s losses, but also following an update from Sanofi (-8.7%); the Co. announced that amlitelimab met all primary and key secondary endpoints in the COAST 1 phase 3 study. Though analysts highlight that the efficacy of the drug did not meet expectations.

Top European News

• Germany’s IFW says 2025 GDP expected at 0.1%, 2026 at 1.3% and 2027 at 1.2%. Unemployment expected to decline to 5.8% from 6.3% this year.
• RWI forecasts that the German economy will grow 0.20% in 2025 (prev. saw 0.30%); sees 1.1% in 2026 (prev. saw 1.5%).
• Ifo Institute for Economic Research lowers 2025 German economic growth forecast to 0.2% (prev. saw 0.3%); cuts 2026 forecast to 1.3% (prev. saw 1.5%).
• BoE Monthly Decision Maker Panel data – August 2025: In the three months to August, firms reported that their year-ahead own-price inflation was expected to be 3.7%, unchanged from the three months to July. Expectations for year-ahead CPI inflation rose by 0.1 percentage points to 3.3% in the three months to August.
• Riksbank’s Jansson says underlying inflation pressures do not look too dramatic. There is a risk that temporary inflation effects could become more persistent if they find a way into price-setting behaviour, wages, and inflation expectations. A situation with higher inflation is much worse than a slightly delayed economic recovery. Being on top of the inflationary issue, “even though we are optimistic”, is important. Don’t need to hit 2% exactly before bank can cut, but need confirmation that inflation is temporary and, on the way, down.

FX

• DXY is a touch higher after suffering on Thursday in the wake of a larger-than-expected decline in US job openings, which further added to the narrative that the labour market is continuing to cool. Today sees further jobs metrics from the US with ADP, weekly claims and Challenger lay-offs all due on deck. Elsewhere, ISM Services will be parsed for evidence of how tariffs are impacting the non-manufacturing industry and used as a proxy for Q3 growth. Fed speak today includes Williams, who will be speaking on the outlook for policy and the economy. Traders will also be mindful of Fed nominee Miran’s appearance before the Senate Banking Committee. DXY delved as low as 98.07.
• EUR is steady vs. the USD and holding below its 50DMA at 1.1665 after a session of slight gains yesterday. Following a non-incremental Eurozone inflation release earlier in the week, newsflow for the Bloc has slowed down. We have heard from a slew of ECB speakers covering both the dovish and hawkish ends of the spectrum. French political tensions remain a part of the market narrative ahead of next Monday’s confidence vote in PM Bayrou. A softer-than-expected outturn for EZ retail had little sway on price action. EUR/USD is currently caged within Wednesday’s 1.1607-82 range.
• After clawing back some of its recent losses vs. the USD yesterday, the JPY is once again on backfoot with USD/JPY reverting back onto a 148 handle. Price action for the pair this week has been dictated by perceptions of the BoJ being non-committal to additional tightening and broader moves in the USD. JPY saw some mild support following source reporting via Reuters that Japan and the US are in the final stage of talks to implement lower tariffs on Japanese auto imports; reductions could take effect within 10-14 days after a US presidential executive order. USD/JPY has ventured as high as 148.41.
• GBP is slightly firmer vs. the USD after a steady start to the session with little follow-through from Wednesday’s BoE TSC hearing, which saw policymakers broadly (ex-Taylor) reaffirm their cautious stance on additional easing given the risks surrounding the persistence of underlying inflation. The August DMP report showed expectations for year-ahead CPI inflation rose by 0.1ppts to 3.3% in the three months to August. Cable currently sits towards the top end of Wednesday’s 1.3333-1.3458 range.
• Antipodeans are both softer vs. the broadly firmer USD after gaining vs. the greenback on Wednesday. With little follow-through seen from a larger-than-expected Australian goods balance during APAC trade, broader moves in the USD will likely dictate the state-of-play for both pairs.
• PBoC set USD/CNY mid-point at 7.1052 vs exp. 7.1405 (Prev. 7.1108).

USTs

• USTS are flat/incrementally firmer. In a very thin 112-16 to 112-22 bound. Numerous updates on the trade and Fed front overnight, but nothing that has fundamentally shifted the narrative as we await the Senate hearing on Miran’s appointment to the Fed and then numerous US data prints, which include ADP National Employment, Jobless Claims, ISM Services PMI.
• Bunds are firmer. Specifics for the region remain focussed on politics and supply. On the first point, French PM Bayrou is holding a meeting with the Socialist Party this morning, though the Socialists remain clear that they will not support Bayrou and the gathering is essentially a formality. As such, the base case firmly remains that Bayrou will lose Monday’s confidence vote, barring an 11th hour deal. On the supply front, Spain was well received and passed without incident. More pertinently, given the political situation, France sold the top-end of its forecast amount though the longer-dated cover was a little softer than is typically the case, seemingly weighing on OATs by around 10 ticks. Bunds at the upper end of a 129.27 to 129.70 band; was briefly held back on the French auction but has since continued to climb to fresh highs.
• Gilts moved in tandem with EGBs throughout the morning. Opened higher by just under 10 ticks before extending to gains of over 40 at best. Printing a 90.66 WTD high, looking to a double-top of 90.84 from last week. Press focus remains firmly on the Deputy PM. Given this, updates around the Autumn Budget have quietened down a touch. On Wednesday, Chancellor Reeves pushed back against some forecasts that the “black hole” in UK finances is GBP 50bln in size, remarks which also saw her reiterate commitment to the fiscal rules and describe a lot of the speculation around her taxation plans as “rubbish”.
• Spain sells EUR 5.49bln vs exp. EUR 4.5-5.5bln 1.40% 2028, 3.10% 2031, 4.20% 2037 Bono and EUR vs exp. EUR 0.25-0.75bln 1.00% 2030 I/L.
• France sells EUR 11bln vs exp. EUR 9.5-11bln 3.50% 2035, 3.60% 2042, and 3.75% 2056 OAT.
• UK sells GBP 800mln 0.625% 2045 I/L Gilt: b/c 3.91x (prev. 3.19x) & real yield 2.412% (prev. 2.23%).

Commodities

• Crude remains subdued after declining yesterday on OPEC+ headlines with the group reportedly mulling another oil production hike at Sunday’s meeting but with the decision not yet made. That being said, prices this morning found a floor after Russian Deputy PM Novak clarified OPEC-8 are not discussing production increase now, and no agenda has been set for the upcoming OPEC+ meeting yet. Novak added current market conditions and forecasts are to be considered. WTI currently resides in a 63.05-63.84/bbl range while Brent sits in a USD 66.67-67.41/bbl range.
• Softer trade across the board for precious metals despite a lack of fresh catalysts but with some possible profit-taking ahead of tomorrow’s jobs report. Spot gold resides in a USD 3,511-3,564.15/oz range at the time of writing, with the next upside level being Wednesday’s peak at USD 3,578.66/oz.
• Base metals are lower across the board despite a relatively rangebound dollar and mixed risk sentiment, although Chinese markets traded with low spirit overnight which could explain the similar sentiment in industrial commodities.
• Russian Deputy PM Novak says OPEC-8 are not discussing production increase now; no agenda has been set for the upcoming OPEC+ meeting yet; current market conditions and forecasts are to be considered.
• OPEC+ could weigh a 12-month phase-out of the cut, delegate sources told Argus, implying monthly increments of about 137k BPD; should this go ahead they expect a cautious approach, maintaining the flexibility to increase, pause, reduce or even reverse. There are also doubts over some countries’ ability to ramp up production. Kazakhstan has been consistently overproducing and is near its maximum capacity. The unwinding of the cut “will amount to nothing more than 700,000-800,000 b/d at best”, a delegate said. “If we bring it in a phased process, monthly increments will be around 60,000 to 70,000 b/d. The impact will be minimal,” the delegate said.
• US Private Energy Inventories (bbls): Crude +0.6mln (exp. -2mln), Distillates +3.7mln (exp. -0.6mln), Gasoline -4.6mln (exp. -1.1mln), Cushing +2.1mln.
• Russia’s Energy Minister said Rosneft signed a deal on additional supply of 2.5mln tons of oil to China via Kazakhstan.
• Russian Energy Minister says construction work on raising of existing Power of Siberia pipeline capacity to 44bcm (currently 38bcm) has already commenced, via Ria; adjustments to be made so maintenance does not occur in high demand periods

Geopolitics: Middle East

• Israel reportedly conducted a strike on Hezbollah terrorist infrastructure in Ansariyah in southern Lebanon, according to Visegrad 24 via X.
• “The “Gideon 2 vehicles” operation in Gaza may extend to a full year”, via Sky News Arabia citing Yedioth Ahronoth’s miliary sources

Geopolitics: Ukraine

• US President Trump said he will find out over the next week or so how good the relationship is with Russia, while he also commented that the US will help Poland protect itself with US soldiers to remain in Poland and will put more there if they want. Furthermore, Trump said he will be talking to Ukrainian President Zelensky shortly in the next days, as well as implied 2nd and 3rd phases of Russian oil sanctions.
• Russia said security guarantees sought by Ukraine are “guarantees of danger to the European continent”. It was separately reported that a Russian Foreign Ministry spokeswoman said allegations of Russia being behind European Commission President Von der Leyen’s plane incident is fake and paranoia.
• North Korean leader Kim and Russian President Putin held a meeting in Beijing where Putin highly praised North Korean soldiers fighting in Kursk and Kim expressed thanks, while Kim told Putin that North Korea would continue to support Russia and the leaders reaffirmed they would keep bilateral relations at a high level, according to KCNA.
• Ukrainian President Zelensky is expected to have a one-on-one meeting with US Envoy Witkoff on Thursday, according to Reuters sources.
• WSJ’s Norman posts “any claim that Europe is “ready” on its part in security guarantees is a very significant exaggeration.”

US Event Calendar

DB’s Jim Reid concludes the overnight wrap

The global bond selloff finally paused for breath yesterday, as weak US data meant investors ramped up their expectations for Fed rate cuts this year. The main catalyst was the JOLTS report for July, which showed that job openings fell to a 10-month low and exacerbated fears about a labour market slowdown. So that pushed the 2yr Treasury yield (-2.2bps) to 3.62%, whilst the 30yr yield (-6.5bps) saw an even bigger decline to 4.90%. Moreover, any fall in yields is going to ease some concern about the fiscal situation, which gave risk assets a lift as well on both sides of the Atlantic. So equities put in a decent performance, with the S&P 500 (+0.51%) moving back within 1% of its record high from last Thursday.

Perhaps the most interesting data today will be the prices paid components in the US ISM services release. As you’ll see on page 41 in our pack it has a very good record of leading CPI. Last month it climbed to 69.9 which if you took at face value from the graph predicts over 5% US CPI in the coming months. Now clearly that’s highly unlikely, as the prices paid is more prone to spikes than CPI, but it shows where the momentum and risks are for now. So markets do need to see this mean revert lower soon.

Back to yesterday, and it had been quite a different story at the start of the day, as right after the European open, the US 30yr yield moved within a whisker of 5% again, reaching an intraday peak of 4.9997%, a full 10bps above its closing level. But those moves then unwound, as several data releases started to come in more softly than expected. That began in Europe, where the final services and composite PMIs for August mostly saw downward revisions. For instance, the German services PMI was revised down to 49.3 (vs. flash 50.1), putting it back in contractionary territory, whilst the Euro Area services PMI came down as well to 50.5 (vs. flash at 50.7).

Those moves then got further momentum during the US session, where weak data and somewhat dovish Fed commentary pushed the rally on. Most dovish was Governor Waller, who voted for a rate cut at the most recent meeting. He reiterated his expectation that the Fed should cut at the next meeting and favoured multiple cuts over the next few months. In addition to the JOLTS release, his labour market concerns got some support from the Fed’s latest Beige Book which saw seven of the twelve Fed districts report that “firms were hesitant to hire workers because of weaker demand or uncertainty”. Separately, St Louis Fed President Musalem said he expected the labour market “to gradually cool and remain near full employment with risks tilted to the downside”. And Atlanta Fed President Bostic said that he still only favoured one cut this year, but suggested that September could be in play if economic data weakened from here.

Speaking of the Fed, we might get a better sense of the outlook today, as the Senate Banking Committee are holding the nomination hearing for Stephen Miran, who Trump has nominated to replace Adriana Kugler on the Fed’s Board of Governors. The administration are trying to get him confirmed in time for the next FOMC meeting on September 16-17. But from a market point of view, it’ll be interesting to hear senators’ questioning of Miran’s views on Fed independence as Trump seeks to reshape the makeup of the Fed’s Board and influence it to cut rates. In prepared opening remarks released yesterday ahead of the hearing, Miran says that “Independence of monetary policy is a critical element” of the Fed’s success and that “I intend to preserve that independence”. As it stands, the Republicans hold a majority in the Senate, so Miran doesn’t need any Democratic votes to be confirmed, and he was confirmed to his current position as CEA Chair by a 53-46 vote with all Republicans in support.

The topic of Governor Cook’s attempted dismissal also stayed in the headlines, with Republican Senator Thom Tillis, who’s a potential swing vote in the Senate Banking Committee on any Fed nominee, saying that he would not consider any nominee to replace Cook until the courts determined the legality of Trump’s move to fire her.

Otherwise, the bond rally got its main push from that JOLTS report yesterday, which showed the US labour market was a bit softer than expected. Notably, the number of job openings fell to a 10-month low of 7.181m (vs. 7.380m expected). So that confirmed the message from the underwhelming July jobs report, and it added to fears that the labour market was softening more significantly. Indeed, it backed up the message from Fed Chair Powell’s Jackson Hole speech that the “downside risks to employment are rising”. That meant investors moved to price in more Fed rate cuts for the months ahead, with a 25bps September rate cut now 100% priced as I type. And in turn, yields moved lower across the Treasury curve yesterday, with the 2yr down -2.2bps to 3.62%, whilst the 10yr was down -4.4bps to 4.22%, a level it’s settling at in overnight trading.

Over in Europe, sovereign bonds followed a pretty similar pattern, with yields moving lower across the continent. To some extent, the moves fed upon themselves, as markets moved from a vicious circle to a virtuous one where lower yields helped to ease fears about debt sustainability and helped yields fall further. So by the close, yields on 10yr bunds (-4.6bps), OATs (-4.2bps), BTPs (-6.2bps) and gilts (-5.2bps) had all moved lower. But even with that rally, there’s still a fair amount of nervousness before Monday’s confidence vote in the French National Assembly, with the Franco-German 10yr spread closing back above 80bps again.

For equities, lower bond yields provided a decent tailwind as concerns eased about the fiscal position. So that led to a rally on both sides of the Atlantic, with the S&P 500 up +0.51%, whilst Europe’s STOXX 600 rose +0.66%. In the US, tech stocks provided a big lift that meant the Magnificent 7 surged +2.20%, aided by a very strong performance for Alphabet (+9.14%) that made it the strongest performer in the entire S&P 500. That followed the news after the previous day’s US close, that we discussed yesterday, that Google had avoided a breakup and won’t have to sell its Chrome browser.

In the commodity space, gold rose +0.74% to a new record high of $3,559/oz but has given up these gains this morning in Asia. Meanwhile, oil prices fell after Reuters reported that OPEC+ will consider further raising oil production at a meeting this Sunday, with WTI crude seeing its biggest decline in over a month (-2.47% to $63.97/bbl). Oil is extending these declines in Asia, down another -0.7%.

In Asia there is a major divide between Chinese stocks and the rest. Chinese markets are underperforming, with the CSI down by -2.47%, the Shanghai Composite declining by -1.97%, and the Hang Seng falling by -1.21%. This decline follows a report from Bloomberg indicating that China’s financial regulators are contemplating measures to limit stock market speculation due to concerns regarding the rapid pace of a $1.2 trillion rally that began in early August.

Outside of China, sentiment is much more upbeat, likely helped by the global bond rally over the past 12-24 hours. The Nikkei is up +1.52%, leading the gains, while the Topix has also increased by +0.93%. Elsewhere, the S&P/ASX 200 has climbed by +0.95%, recovering from significant losses in the previous session, after robust GDP data tempered some expectations for further interest rate reductions by the RBA. Meanwhile, the KOSPI has edged up +0.13%, marking its third consecutive session of gains following positive GDP figures released earlier in the week. S&P 500 (+0.14%) and NASDAQ 100 (+0.18%) futures are also edging up. 10 and 30yr JGB yields are -1.5bps and -3.3bps lower respectively after a 30 year auction that saw demand broadly in line with its two year average.

Early morning data revealed that Australia’s trade surplus surged to A$7.31 billion in July, (vs. A$4.90 billion expected), the highest level since February 2024. It follows an increase from the revised surplus of A$5.37 billion recorded in June.

Looking at the day ahead, data releases in Europe include Euro Area retail sales for July, whilst in the US we’ll get the ADP’s report of private payrolls for August, the weekly initial jobless claims and the ISM services for August. From central banks, we’ll hear from the Fed’s Williams and Goolsbee, and the ECB’s Cipollone. Finally, the Senate Banking Committee will hold the nomination hearing for Stephen Miran to join the Fed’s Board of Governors.