Equity Futures Drop As Bitcoin Trades Above $99,000

US futures are lower but well off session lows as investors turn to other regions for better value following this month’s torrid rally in US equities, while bitcoin inched closer toward the landmark $100,000 level, trading less than a thousand dollars away from the vaunted resistance level. As of 8:00am, S&P futures are down 0.1%, and Nasdaq futures drop 0.2%, as NVDA and META fell -1.0% and -0.7%, respectively, while the rest of Mag 7 are mostly unchanged. Bond yields are 2-4bp lower and the Bloomberg Dollar index rose 0.3% to stay on course for an eighth straight week of gains as it hit a 2 year high as the EUR tumbled after another set of dismal PMI prints. In commodities, oil and base metals are lower; precious metals are higher. Today, the key focus will be global PMI releases. Expectations are for the PMI Mfg and Srvcs to print at 48.9 and 55.0, respectively, largely in line with expectations.

In premarket trading, Alphabet slipoed less than 1% after the Information reported that OpenAI is considering developing a web browser and recently struck deals to power search features for retail, travel and other websites. Gap jumped 15% after raising its full-year outlook as the apparel retailer attracts wealthier shoppers seeking value. Here are some other notable movers:

• Elastic (ESTC) soars 27% after the software company raised its full-year forecast.
• Intuit (INTU) falls 4% after the maker of the TurboTax tax preparation software provided a sales and profit outlook for the current quarter that fell short of analysts’ estimates.
• NetApp (NTAP) climbs 6% as the tech-hardware firm boosted guidance following an earnings beat.
• Ross Stores (ROST) gains 7% after the discount retailer lifted annual projections for earnings per share.

The decline in US equity futures coincided with gains in Europe and Japan. Bank of America strategists warned that the Nasdaq 100 was approaching a level versus the S&P 500 that could trigger the unwinding of the trade favoring US equities. Nasdaq 100 contracts fell 0.4% on Friday. Investors piled into US stocks this month, spurred on by expectations that Donald Trump’s economic policies to cut tax rates and support American industry will drive corporate profits higher. Over the same period, equities in Europe have been largely flat due to fears over lackluster economies and rising geopolitical tensions.

“We had a knee jerk reaction after the election when the US market went up and all others struggled,” said Guy Miller, chief market strategist at Zurich Insurance Co. “Markets like Europe are priced for the advantage US has, so some money will be gravitating to the major laggards.”

Meanwhile, euro area PMIs dipped back into contraction in November. The bad data was good enough to push stocks higher on expectations of more ECB rate cuts, although European stocks traded off session highs with Stoxx 600 up 0.3% with banks and autos the worst-performing sectors. Healthcare and real estate shares made the biggest gains, while tech outperformed the benchmark, after investors shrugged off concerns over Nvidia’s revenue outlook. Here are some of the biggest movers on Friday:

• Games Workshop shares surge as much as 16%, hitting a record high, after a short trading update showed the Warhammer tabletop game specialist delivered impressive growth in the first half that analysts expect will push up consensus estimates.
• Brenntag rises as much as 4.9% after Berenberg upgrades the chemicals firm to buy, saying there’s a good opportunity to enter the stock following 2024’s share-price declines, while consensus numbers for next year are more realistic.
• Thales shares plunged as much as 7.3% on Friday after news that the French aerospace and defense supplier is under investigation by UK and French prosecutors for suspected bribery and corruption.
• Nexans shares slide as much as 5.6% after investors offloaded shares in the cable manufacturer at a discount to Thursday’s closing price.
• Komax shares fall as much as 6.4%, hitting the lowest level since August 2013, after the Swiss machinery manufacturer deferred its medium-term targets by two years to 2030.

Earlier in the session, Asian equities rose, rebounding from two days of declines, as the tech-heavy markets of Taiwan and Korea led a rally. The MSCI Asia Pacific Index climbed as much as 0.7% before paring the gains, with TSMC providing the biggest boost. Australian stocks hit a record high, while benchmarks in Japan and India also rose. Key gauges dropped in mainland China and Hong Kong, as Baidu’s sales decline triggered a selloff in major internet names. The regional benchmark has shown resilience this week after a selloff over geopolitical tensions and China’s slowing growth pushed it down toward its 200-day moving average. Investors continue to monitor US President-elect Donald Trump’s moves as he prepares to take office. Elsewhere in Asia, Adani Group companies advanced after a $27 billion rout on Thursday following a US indictment against Gautam Adani over allegations of bribery. The company denied the allegations.

In FX, the dollar remained on track for an eighth straight weekly advance, which would be the longest streak in about 14 months. The currency has risen 2.5% so far this month, adding to October’s gains of nearly 3%, and hit a 2 year high as the euro tumbled. The euro pares a drop after tumbling to the lowest level in about two years versus the dollar on growth concerns. Money markets assign higher odds of a 50-basis-point interest rate cut from the ECB in December after business activity in euro area unexpectedly shrank. Pound falls 0.7% to $1.25 as UK PMI data showed private sector stagnating.

“The US dollar made another march to the upside, with some safe-haven flows likely contributed from Ukraine-Russia geopolitical developments,” said Jun Rong Yeap, market strategist at IG Asia. “We may expect tensions to persist as both sides vie to gain some political leverage ahead of any upcoming negotiations under a Trump administration,” he said.

In rates, treasuries advanced across the curve, following a bigger bull-steepening move in German bonds after euro-area PMIs missed analysts’ estimates. Swaps market subsequently priced in faster and deeper ECB interest-rate cuts, placing a greater-than-50% chance of a 50bp reduction next month. US yields lower by 3bp-4bp across maturities, leaving curve spreads within 1bp of Thursday’s close. The 10-year US yield around 4.39% trails Germany’s by Bunds and gilts jump, led by shorter-dated maturities. German two-year yields fall 10 bps while the UK equivalent drops 5 bps. The US session also includes PMI readings along with University of Michigan sentiment gauge.

In commodities, oil prices advanced, with WTI rising to around $70 a barrel. Spot gold climbs $38 to $2,708/oz.

Bitcoin, which hit another record high, trimmed gains after earlier flirting with the $100,000 level on bets President-elect Donald Trump’s support for crypto and a looser regulatory environment will help the industry. The latest developments included SEC corrupt head Gary Gensler’s decision to step down in January. His tenure was marked by a flurry of catastrophic crypto enforcement actions, which the industry expects will peter out under Trump.

Looking at today's calendar, US economic data includes November preliminary S&P Global US PMIs (9:45am), November final University of Michigan sentiment (10am) and November Kansas City Fed services activity (11am)

Market Snapshot

• S&P 500 futures down 0.4% to 5,944.00
• STOXX Europe 600 little changed at 502.36
• MXAP up 0.2% to 182.41
• MXAPJ up 0.1% to 577.74
• Nikkei up 0.7% to 38,283.85
• Topix up 0.5% to 2,696.53
• Hang Seng Index down 1.9% to 19,229.97
• Shanghai Composite down 3.1% to 3,267.19
• Sensex up 2.5% to 79,086.51
• Australia S&P/ASX 200 up 0.9% to 8,393.85
• Kospi up 0.8% to 2,501.24
• German 10Y yield little changed at 2.25%
• Euro down 0.6% to $1.0409
• Brent Futures up 0.2% to $74.37/bbl
• Gold spot up 1.2% to $2,701.48
• US Dollar Index up 0.55% to 107.56

Top Overnight News

• China will attempt to boost exports further, with Beijing promising to support its firms to increase shipments despite a rising global backlash over an influx of cheap Chinese goods. Beijing will provide financial and diplomatic help for exporting companies and direct Chinese shipping firms to boost cargo capacity and bolster e-commerce. BBG
• Japan’s core national CPI for October rose 20bp Q/Q to +2.3% Y/Y, coming in a bit ahead of the Street’s +2.2% forecast and further keeping pressure on the central bank to raise its still-low interest rates. Reuters
• Taiwan says it is working on details for its president to stop in the US during an upcoming trip, a move that may escalate tensions between Washington and Beijing. BBG
• The euro dropped to its weakest level since 2022 after data showed euro-area business activity unexpectedly shrank in November. Eurozone flash PMIs for Nov are weak, with manufacturing coming in at 45.2 (down from 46 in Oct and below the Street 46) and services at 49.2 (down from 51.6 in Oct and below the Street 51.6). BBG
• UK retail sales fell short of expectations, coming in -0.9% M/M ex-fuel (vs. the Street -0.4%) while Sept was revised lower. WSJ
• Traders raised bets on a 50-bp rate cut from the ECB next month to 50% from 15% at yesterday’s close. BBG
• Apple will face even more competition in China next week after Huawei launches its new Mate 70 phone. WSJ
• President-elect Donald Trump has floated selecting the financier Kevin Warsh as his Treasury secretary with the understanding that he could later be nominated to lead the Federal Reserve when Jerome Powell’s term as chair ends in 2026, according to people familiar with the matter. WSJ
• Efforts by U.S. antitrust regulators to break up Alphabet by forcing a sale of its Google Chrome browser and other proposals to limit its search dominance are likely to run into legal challenges on grounds the remedies are extreme. Reuters

A more detailed look at global markets courtesy of Newsquawk

APAC stocks mostly sustained the momentum from Wall St where stocks ultimately gained after whipsawing on geopolitical-related headlines and amid mixed data, although pressure was seen in China after weak earnings and an underwhelming briefing from Beijing. ASX 200 rallied with energy leading the advances seen in nearly all sectors aside from tech, while sentiment was also unfazed by the contractions across Australia flash PMI figures. Nikkei 225 gained following confirmation from Japanese PM Ishiba of a JPY 39tln stimulus package, while the latest inflation data from Japan printed mostly in line with expectations and is unlikely to have any ramifications for BoJ policy. Hang Seng and Shanghai Comp were pressured with Baidu the worst performer in the Hang Seng Index following a decline in its profit and revenue, while sentiment was also not helped by the PBoC's net liquidity drain and after comments from China's Vice Commerce Minister on foreign trade failed to inspire.

Top Asian News

• China's Vice Commerce Minister Wang said China's foreign trade maintained positive momentum and a stable and sound development trend but noted that China has seen slower foreign trade growth since August. Wang said regarding Trump tariffs and the yuan that China is able to resolve and resist impacts of external shock, while he added that China will safeguard its sovereignty, safety and development benefits, as well as announced that MOFCOM will roll out policies on expanding trade of green products sometime next year.
• China’s MIIT said it is to develop policies for digital transformation in manufacturing and AI-driven new industrialisation.
• China is willing to engage in "positive dialogue" on trade with US under President-elect Trump, according to the FT citing senior officials.
• China smartphone sales +8% Y/Y in Q3, via counterpoint research

European bourses began the session entirely in the green, but sank into negative territory following the release of the French, German and then the EZ-wide PMI figures which continue to fuel anxiety related to growth within the region. European sectors opened with a strong positive bias, but following the PMI figures sectors are now mixed and display a slight defensive bias. Healthcare takes the top spot alongside Utilities, benefiting from the risk-off sentiment whilst Real Estate benefits from the relatively low yield environment. US equity futures are lower across the board in tandem with the dip in sentiment seen in Europe following the region's poor PMI figures.

Top European News

• US President-elect Trump considers Kevin Warsh to serve as Treasury Secretary and then Fed Chair, according to WSJ.
• US President-elect Trump nominated Pam Bondi as Attorney General after Matt Gaetz withdrew himself for consideration.

FX

• USD firmer vs. all peers (ex-JPY) alongside risk aversion triggered by a dreadful set of Eurozone PMI metrics. Ahead, S&P Global PMIs are due and whilst they normally play second-fiddle to the ISMs, a strong showing from the US could see a widening of US-EZ rate differentials. DXY has been as high as 108.09 which marks a fresh YTD peak.
• A dismal set of EZ PMI metrics has acted as a drag on EUR/USD with the pair printing a fresh YTD low and slipping onto a 1.03 handle for the first time since December 2022. ECB's Schnabel is due later (slides already released). Price action has since stabilised around the 1.0420 mark.
• JPY is steady vs. the USD following a session of outperformance yesterday. The latest Japanese inflation data provided little to spur price action as the figures printed mostly in line with expectations aside from the core reading which was slightly firmer-than-expected.
• A busy day of data for the UK has seen retail sales and PMI reports. On the latter, all three metrics fell short of expectations with the all-important services slipping to neutral territory. GBP/USD briefly slipped onto a 1.24 handle for the first time since 9th May.
• Antipodeans are both softer vs. the broadly firmer USD and in the wake of losses in Chinese equities overnight. AUD/USD has slipped back onto a 0.65 handle.
• PBoC set USD/CNY mid-point at 7.1942 vs exp. 7.2502 (prev. 7.1934).
• PBoC official said they will prevent the formation of one-sided expectations on the yuan and will keep the yuan basically stable at a reasonable and balanced level.

Fixed Income

• Bunds are firmly in the green and resides just off session highs following the release of the French, German and then the EZ-wide PMI figures, which boosted the odds of a 50bps cut at the ECB's December confab. Overall, the data leaves Bunds and OATs near highs of 133.32 and 125.52 respectively.
• Gilts opened lower by a handful of ticks and printed a 93.88 trough before then climbing as participants digested the morning’s retail sales data which was softer than expected across the board. Thereafter, Gilts picked up in tandem with peers and then took another leg higher following region's own PMI figures which were softer across the board. Action which saw Gilts spike higher from 94.58 to a 94.90 peak before fading essentially all of the move.
• USTs are firmer moving in tandem with the above thus far. Rose to a 109-25 peak on the morning’s flash PMIs from the bloc and France/Germany beforehand. For the session ahead, USTs await their own PMIs with the Fed docket very light today until Bowman after hours.

Commodities

• WTI and Brent are modestly firmer on the session, though the benchmarks came under pressure on the growth/demand implications of the EZ and UK Flash PMIs and as the USD picked up. Currently at USD 70.20/bbl and USD 74.45/bbl respectively, in the green but at the lower-end of circa. USD 0.80/bbl parameters.
• Gold is in the green, benefiting from the ongoing tense geopolitical backdrop and lifting with fixed income on the dismal PMIs out of the EZ and UK. As it stands, the yellow metal is just off a USD 2707/oz best, well above Thursday's USD 2673/oz high and at a new peak for the week.
• Base metals began the session on the backfoot and then took another leg lower in tandem with the souring risk tone spurred on by the abysmal PMI metrics from France, Germany and the EZ.
• Goldman Sachs sees upside risks to Brent prices in the short term with Brent seen rising to mid-USD 80s/bbl in 2025 H1 if Iran supply drops 1mln bpd on tighter sanctions enforcement, but sees medium-term price risks skewed to the downside given high spare capacity and estimates Brent to drop to the low USD 60s in 2026 in a 10% across-the-board tariff scenario or if OPEC supply rises through 2025.
• Russian Deputy PM Novak tells the OPEC Secretary General that they plan to develop cooperation with OPEC. Energy market is under significant pressure, incl. price fluctuations.
• Worldsteel (Oct): Global steel output 151.2mln/T, +0.4% Y/Y; China 81.9mln/T, +2.9% Y/Y.
• Oil loadings from Russia's western ports seen falling by 100k bpd to 1.8mln bpd in Dec-Nov, according to Reuters sources.

Geopolitics: Middle East

• US Envoy Hochstein leaves Israel at dawn for Washington without announcing the outcome of the talks, according to Alhadath
• Israeli Home Front announced that sirens sounded in Haifa Bay and Krayot, according to Al Jazeera.
• Israeli army called on residents of three towns in southern Lebanon to evacuate their homes immediately, according to Asharq News.
• IAEA's board of governors passed a resolution ordering Iran to urgently improve cooperation with the IAEA, while the board asked the IAEA to produce a 'comprehensive' report on Iran by the spring of 2025.

Geopolitics: Other

• "Fearing a Russian missile attack on the government quarter in Kyiv, all sessions at Ukraine’s parliament (Verkhovna Rada) have been cancelled for today. Politicians warned to avoid the area", via Michael Bociurkiw on X.
• North Korean leader Kim called for developing and upgrading weaponry, as well as vowed to continue developing defence capabilities, while he said the US has ratcheted up tension and provocations while expanding nuclear-sharing alliances. Furthermore, Kim said the Korean Peninsula has never faced such risks of nuclear war as of now and that previous experience of negotiations with the US only highlighted its hostile policy, according to KCNA.

US Event Calendar

• 09:45: Nov. S&P Global US Services PMI, est. 55.0, prior 55.0
  • Nov. S&P Global US Manufacturing PM, est. 48.9, prior 48.5
  • Nov. S&P Global US Composite PMI, est. 54.3, prior 54.1
• 10:00: Nov. U. of Mich. Sentiment, est. 73.9, prior 73.0
  • Nov. U. of Mich. Expectations, est. 79.0, prior 78.5
  • Nov. U. of Mich. Current Conditions, est. 64.4, prior 64.4
  • Nov. U. of Mich. 1 Yr Inflation, est. 2.7%, prior 2.6%
  • Nov. U. of Mich. 5-10 Yr Inflation, est. 3.1%, prior 3.1%
• 11:00: Nov. Kansas City Fed Services Activ, prior 5

DB's Jim Reid concludes the overnight wrap

Markets continued to make steady gains yesterday, with the S&P 500 (+0.53%) up for a 4th consecutive session, whilst Bitcoin traded above $99,000 intraday for the first time. Moreover, perceived safe havens did very well because of growing geopolitical fears, with assets like the Japanese yen, gold and German bunds all outperforming. That came after Ukraine said yesterday morning that Russia had launched an intercontinental ballistic missile, although US officials later described it as an “intermediate-range ballistic missile” that was based on an ICBM model. So that added to fears about a broader escalation in hostilities, and several commodities saw a direct reaction to those developments.

In terms of the specific moves, they broadly resembled what happened during the 2022 commodity shock, albeit to a much lesser extent. For instance, European natural gas futures (+3.22%) hit a one-year high of €48.30/MWh, and are now on track for their biggest monthly gain in over a year. Oil prices rose as well, with Brent crude up +1.95% to a two-week high of $74.23/bbl. Now it’s worth bearing in mind that natural gas prices are still below their levels for the entirety of 2022, so this is hardly a repeat of that energy shock just yet. But even so, those concerns still contributed to a fresh decline in the Euro, which fell a further -0.66% against the US Dollar to $1.0474, which is its lowest closing level since October 2023.

With commodity prices moving higher, that led to a fresh bout of concern about near-term inflation. In fact, the US 2yr inflation swap was up another +1.2bps yesterday to 2.71%. That’s its highest closing level since March 2023, just before SVB’s collapse occurred and the regional bank turmoil happened. So inflation is something increasingly on investors’ minds, particularly given the prospect of new tariffs under the incoming Trump administration. That said, sovereign bonds still rallied for the most part, particularly in Europe, as the geopolitical fears also led investors to price in more ECB rate cuts. Hence, yields on 10yr bunds fell -3.3bps to a three-week low, which was echoed to a lesser degree among 10yr OATs (-0.2bps) and BTPs (-0.9bps) as well.
When it came to equities, the story was generally one of consistent gains yesterday on both sides of the Atlantic, with the S&P 500 (+0.53%) and the STOXX 600 (+0.41%) both moving higher. The gains were pretty broad-based, and the equal-weighted S&P 500 actually put in a very strong gain of +1.29%. Instead, the main downward pressure came from the big tech stocks, with the Magnificent 7 slumping by -1.17%. That followed a -4.74% decline for Alphabet after the US Justice Department asked a judge to get Google to sell its Chrome browser. Separately, Nvidia (+0.53%) bounced back from a negative initial reaction to its earnings announcement overnight, and earlier in the session it even hit an all-time intraday high of $152.89.

In the meantime, investors had to digest a mixed set of labour market data from the US yesterday. On the bright side, the weekly initial jobless claims were down to 213k in the week ending November 16 (vs. 220k expected). That’s their lowest level since April, and it comes on the back of a clear declining trend in recent weeks, as the 4-week moving average also fell to its lowest since early May, at 217.75k. However, that was countered by some weakness among the continuing claims number, which was up to a three-year high of 1.908m in the week ending November 9 (vs. 1.88m expected). Overall though, investors focused on the positives, dialling back their expectations for Fed rate cuts, and pushing yields on 2yr Treasuries up +3.4bps to 4.35%. The 10yr yield (+1.2bps) also saw a modest increase to 4.42%.

Elsewhere, the search for the new US Treasury Secretary continues, and overnight it was reported by the Wall Street Journal that President-elect Trump had floated choosing former Fed Governor Kevin Warsh for the position, with the understanding that Warsh would be nominated for Fed Chair once Powell’s term ends in May 2026. The report then said that Trump was thinking of appointing Scott Bessent as head of the National Economic Council, and that Bessent could become Treasury Secretary if Warsh then became Fed Chair. While markets wait to hear who’ll lead the Treasury Department, Trump named Pam Bondi as his new nominee for Attorney General, following Matt Gaetz’s withdrawal from consideration.

Overnight in Asia, there’s been a fairly mixed performance for the major equity indices. In Japan, the Nikkei (+0.95%) has posted strong gains, along with South Korea’s KOSPI (+0.85%) and Australia’s S&P/ASX 200 (+0.85%). But Chinese equities have underperformed, with the CSI 300 (-1.51%) and the Shanghai Comp (-1.58%) both losing ground. US equity futures are also pointing lower as well, with those on the S&P 500 down -0.12%.

Those gains in Japan have come despite some stronger-than-expected inflation data overnight. Headline CPI was at +2.3% as expected in October, falling back from +2.5%, but the core-core inflation measure was up to a 6-month high of +2.3% (vs. +2.1% expected). So front-end Japanese bond yields have moved higher overnight, with the 2yr yield up +1.1bps to 0.58%, its highest level since 2008.

Looking forward, the main data highlight today will be the November flash PMIs from around the world, which will offer an initial indication of how the economy’s performed as we move deeper into Q4. Overnight, the readings so far have been fairly subdued, with Japan’s composite PMI coming in at 49.8, so just beneath the 50 mark that separates expansion from contraction.

Australia’s composite PMI also fell back into contractionary territory at 49.4, which is its weakest reading since January.
To the day ahead now, and data releases include the flash PMIs for November from the US and Europe, UK retail sales for October, and the University of Michigan’s final consumer sentiment index for November. Central bank speakers include ECB President Lagarde, Vice President de Guindos, the ECB’s Nagel, Villeroy and Schnabel, along with the Fed’s Bowman.