Futures Surge As Tech, Semis Rebound Ahead Of Fed Decision

Despite disappointing earnings from world's second biggest company and Mag 7 titan, Microsoft, global stocks rallied on Wednesday, with Nasdaq 100 index futures jumping, as a flurry of bullish news powered a rebound in technology stocks ahead of today's Fed meeting. US equity futures are higher with Tech leading and Semis outperforming: NVDA +5% pre-mkt following AMD’s earnings (+9.3%) and a positive read-thru from MSFT earnings even though Microsoft itself is down 3% (cutting losses from as much as 7% and is the only member of Mag7 in the red). As of 7:45am ET S&P futures were up 0.9% with Nasdaq futures surging more than 1.5% as the AI trade appears to remain intact despite yesterday's latest tech rout. Bond yields are flat and USD is weaker ahead of today's FOMC decision where Jerome Powell is expected to signal a potential rate cut for the US in September later today (see our preview here) as the yen soars after the BOJ surprises with a hawkish hike even as its economy careens of a cliff assuring this will be the shortest hiking cycle in recent history. Commodities higher led by energy following yesterday’s supply drawdown and relief rally as WTI has seen ~8% drawdown this month; oil extended gains after Hamas said Israel killed its political leader, stoking tensions in a region that produces around a third of the world’s crude. Today, we receive ADP (which has not been predictive of NFP) and the Fed decision. Mag7 earnings continues with META.

In premarket trading, Dutch ASML Holding and other semiconductor shares surged 11% after Reuters reported of an apparent flip-flop in US plans, now looking to exempt chip-equipment makers in Japan, the Netherlands and South Korea from upcoming export restrictions, refuting the Bloomberg report 2 weeks ago that the US floated trade rules to rein in China's chip industry. Nvidia added 6% as Morgan Stanley said the selloff has opened up a good entry point. That said, the Kamala administration is still under pressure to take additional steps to curb Beijing’s technological developments, and the semiconductor-production equipment companies may still face constraints on selling to Chinese companies, people familiar with the situation told Bloomberg. Meanwhile, Microsoft shares slid after its Azure cloud-computing service posted a slowdown in quarterly growth. Revenue from Azure, Microsoft’s main growth engine in recent years, rose 29% in the fiscal fourth quarter, compared with a 31% jump in the previous period and whispers of a 32% increase. On the other end, AMD jumped 8% after the chipmaker gave an upbeat revenue forecast, underscoring that its new artificial intelligence processors are boosting growth. Here are other notable premarket movers:

BorgWarner climbs 3% after posting 2Q profit that beat the average analyst estimate.
Dupont de Nemours gains 4% after 2Q profit exceeded investor expectations as AI-driven demand for semiconductors drove gains in its electronics business.
Groupon slides 17% after the online coupon company lowered its adjusted Ebitda forecast for the year.
Humana falls 8% after cutting its year profit forecast.
Match Group jumps 10% after the dating-app company said it plans to cut 6% of its global staff as it shuts down livestreaming services across some of its dating apps. Match is under pressure from activists to deliver a turnaround
Microsoft drops 3% after the company’s Azure cloud-computing service posted a slowdown in quarterly growth, disappointing investors anxious to see a payoff from huge investments in artificial intelligence products.
O-I Glass drops 16% after the producer of glass bottles cut its yearly profit forecast, reflecting softer-than-expected demand.
Pinterest falls 11% after the internet platform forecast revenue for the 3Q that missed the average analyst estimate.
Starbucks advances 3% after delivering results that were in line with expectations, assuaging investors who had been bracing for another meltdown after being blindsided by the previous quarter’s slump.
T-Mobile rises 2% after posting 2Q postpaid net customers that beat the average analyst estimate.

Now investors are awaiting results from Meta Platforms due after the close today, with the firm’s AI investments expected to be in focus. It's an action-packed day ahead in markets, where we also get Powell signaling a potential rate cut for September.

Tech stocks had been hammered in recent days as earnings failed to live up to sky-high expectations and traders speculated that the artificial intelligence frenzy had become excessive.

“I’m really satisfied with the earnings of AI stocks, it proves that it’s not a bubble,” said Fares Hendi, portfolio manager of at SG Prevoir in Paris. “The selloff wasn’t related to earnings but rather on valuation and some investors worrying about a bubble, but that’s not the case. For the moment, the cycle goes on.”

Elsewhere, the Bank of Japan raised its benchmark interest rate and unveiled plans to cut its bond purchases (by far less than expected), underscoring its determination to normalize monetary policy. The yen strengthened 1.5% against the dollar and equities advanced after the decision, led by a surge of almost 5% in bank stocks.

“It fits under the umbrella of normalization, whether that’s from the BOJ or what we hear from the Fed later,” Grace Peters, global head of investment strategy at JPMorgan Private Bank, said in an interview with Bloomberg TV. “The theme of normalization is what we need to see to continue supporting equity markets and risk assets more broadly.”

Europe's Stoxx 600 is up 0.9%, as ASML leads a rally in European technology shares after Reuters reported the Biden administration planned to exempt chip-equipment makers in Japan, the Netherlands and South Korea from upcoming export restrictions. Meanwhile, euro-area inflation unexpectedly quickened, an outcome that may make the European Central Bank warier about cutting interest rates further when it meets in September. The DAX is lagging peers given the inflation metrics, though strength in Airbus’ German listing is providing support alongside strength in Infineon. FTSE 100 outperforms with mining names outperforming and supporting with post-earnings strength in HSBC and the housing sector with Taylor Wimpey supporting.

Asian stocks advanced as Chinese shares recouped some of their recent losses, while Japanese shares erased earlier declines after the Bank of Japan raised interest rates. The MSCI Asia Pacific Index rose as much as 2.2%, boosted by gains in semiconductor shares after Reuters reported the Biden administration planned to exempt chip-equipment makers in some US allies from export restrictions. Wednesday’s jump helped put the regional benchmark on track for a third-straight monthly advance.

Key equity gauges in mainland China and Hong Kong climbed about 2%, with the CSI 300 Index capping its best day since February, as the latest sign of slowing economic growth spurred bets on stronger support measures from Beijing. Australian stocks rose after the nation’s core inflation unexpectedly decelerated last quarter, supporting the case for central bank easing.

In FX, the dollar declined against every Group-of-10 currency apart from the Australian dollar. The Japanese yen advances 1.5% against the US dollar - pulling USD/JPY down to 150.10 - after the Bank of Japan raised its benchmark interest rate and unveiled plans to halve bond purchases. The Bloomberg Dollar Spot Index is down 0.3% ahead of the Federal Reserve decision later on Wednesday.

In rates, treasuries were little changed with 10Y yields trading at 4.13%. Gilts lead gains in European government debt ahead of the Bank of England decision on Thursday. Bunds are off the highs after euro-area inflation unexpectedly accelerated in July.

In commodities, oil prices advance on rising geopolitical risks after Hamas said Israel killed its political leader with an airstrike. US crude futures rise 2.6% to $76.70 a barrel. Spot gold adds $9 to around $2,420/oz.

Bitcoin is holding around the USD 66k handle which keeps it toward the mid-point of parameters. Ethereum rebounded back over $3,300 following a surge in buying by the Blackrock ETF.

Today's economic data slate includes July ADP employment change (8:15am), 2Q employment cost index (8:30am), July MNI Chicago PMI (9:45am, several minutes earlier for subscribers) and June pending home sales (10am). Of course, the Fed will reveals its rate decision at 2pm ET.

Market Snapshot

S&P 500 futures up 1.0% to 5,525.25
STOXX Europe 600 up 0.9% to 518.86
MXAP up 2.1% to 183.40
MXAPJ up 1.1% to 564.83
Nikkei up 1.5% to 39,101.82
Topix up 1.4% to 2,794.26
Hang Seng Index up 2.0% to 17,344.60
Shanghai Composite up 2.1% to 2,938.75
Sensex up 0.2% to 81,646.28
Australia S&P/ASX 200 up 1.7% to 8,092.33
Kospi up 1.2% to 2,770.69
German 10Y yield little changed at 2.31%
Euro little changed at $1.0813
Brent Futures up 2.0% to $80.24/bbl
Gold spot up 0.2% to $2,416.71
US Dollar Index down 0.27% to 104.28

Top Overnight News

The BOJ raised its key rate to around 0.25% and unveiled plans to halve bond purchases as it normalizes policy. Governor Kazuo Ueda pledged to keep hiking if the central bank’s price outlook materializes. The BOJ is looking into why some market participants couldn’t access its website ahead of the decision. BBG
Australia’s trimmed mean CPI rose by a bit less than anticipated in Q2 (+0.8% vs. the Street +1%). RTRS
ASML/Tokyo Electron shares surge on reports they will be excluded from new US rules limiting semiconductor equipment exports to China. RTRS
China will expand export controls on a range of drone parts, a sign Beijing is looking to placate the US and NATO by clamping down on its support for Putin’s war. SCMP
Eurozone CPI for Jul runs hot, coming in at +2.6% headline (up from +2.5% in June and ahead of the Street’s +2.5% forecast) and +2.9% core (flat vs. June and above the Street’s +2.8% forecast). BBG
Hamas political leader Ismail Haniyeh was killed in Iran while the IDF took out a senior Hezbollah official (Fuad Shukr) just hours earlier in Beirut. NYT
MSFT briefly plunged nearly 8% post close yday. Just shows the mkt sensitivity to a very slight miss in cloud. That said the narrative here is that it’s actually a lack of availability of AI components that is constraining their growth. "We are constrained on AI capacity, and because of that, we've...signed up with third parties to help us," (MSFT CFO). The implications for semi capex are supportive. GS GBM
Harris is running slightly ahead of Trump in critical swing states according to a new Bloomberg/Morning Consult poll, while a separate poll had her up 4 points in the must-win state of Pennsylvania. BBG
The Fed will probably move closer to lowering rates by signaling a potential cut in September, though may stop short of giving details beyond that. The policy statement may be tweaked to say there’s been “further progress” on inflation versus “modest.” BBG
US VP Harris is expected to announce her VP pick as soon as Monday, according to sources cited by Reuters. It was also reported that Harris will hold her first rally with her running mate next Tuesday in Philadelphia: Politico.

BOJ

BoJ raised its short-term interest rate to 0.25% (prev. 0.00-0.10%) and announced a change in bond purchases in which it will no longer provide a range but will instead specify amounts, while the BoJ is to reduce scheduled monthly bond buying by around JPY 400bln each quarter and with bond purchases to be JPY 3tln a month as of Q1 2026. BoJ said the decision on rates was made by a 7-2 vote with Nakamura and Noguchi the dissenters, while the decision on bond buying made unanimously. Furthermore, it stated that it may modify the bond-taper plan upon mid-term view as appropriate, if deemed necessary for functioning of JGB market, and at the June 2025 meeting, the BoJ will discuss the guideline for its JGB buying from April 2026 and announce results.
BoJ’s Ueda: Upside risks to prices require attention; Will continue to lift rates and adj. the degree of easing, if the current economic/price outlook is realised; "We don't have a 0.5% policy rate in mind as a ceiling."; Main issue is where to stop raising rates, when approaching the neutral rate; Policy response this time was made considering the upward risks to prices as being considerably large.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks gained heading into month-end as participants digested a slew of data releases and the BoJ policy decision. ASX 200 was led by strength in energy and tech, while domestic yields were pressured after mostly softer inflation data. Nikkei 225 declined heading into the BoJ policy decision after rate hike bets were boosted following several local press reports that the central bank is to consider a 15bps rate increase and although the hike materialised, the Bank's taper plan was less aggressive than many had called for. Hang Seng and Shanghai Comp. gained as participants digested the latest Chinese PMI data in which headline Manufacturing PMI topped forecasts despite remaining in contraction territory, while Non-Manufacturing PMI matched estimates.

Top Asian News

Chinese Vice Finance Minister said will strengthen fiscal policy adjustments and deepen fiscal and tax reforms, while they will steadily implement consumption tax reform in a step-by-step way and standardise the management of local governments' non-tax revenues. Furthermore, China will step up fiscal policy implementation to promote economic recovery.

Stocks in Europe opened mostly firmer as the optimism from Asia-Pac reverberated into Europe, Euro Stoxx 50 +1.1%. Modest downside in the European bourses was seen on the hotter-than-expected EZ Flash HICP numbers, though this was within ranges and only modest in nature. Sectors mostly positive, outperformance in Tech as AMD and US exemption reports lift constituents in the sector; Basic Resources benefit from the rise in base metals following Chinese PMIs; Energy names following the underlying benchmarks. DAX 40 +0.6% firmer, but lagging peers given the inflation metrics, though strength in Airbus’ German listing is providing support alongside strength in Infineon. FTSE 100 1.3% outperformers with mining names outperforming and supporting with post-earnings strength in HSBC and the housing sector with Taylor Wimpey supporting. Note, technical issues are ongoing at SIX which is impacting on equity trade in Spain and Switzerland.

Top European News

L'Oreal (OR FP) CEO says the China market turned negative in Q2, do not see any pick up in consumer confidence. Expect growth in China to remain "slightly negative"

DXY lower on account of JPY strength; index down to a 104.17 base. Focus on the FOMC, for that the 50 and 100DMAs @ 104.87 and 104.91 respectively provide resistance.
USD pressure comes amid marked JPY gains; reaction to the BoJ announcement itself was pronounced and two-way but settled shortly after. Thereafter, JPY began strengthening during Ueda’s presser but really picked up on its conclusion and USD/JPY is down to a 150.07 base, with little of note after 150.00 until essentially 149.00.
EUR picking up after hawkish pan-EZ/Italian inflation data, which offset the earlier dovish French print, though no real follow through for ECB pricing. EUR/USD is currently contained within yesterday's 1.0798-1.0835 parameters
Cable contained ahead of Thursday’s BoE and as such is within Tuesday’s 1.2820-86 range.
Aussie lags post-CPI which saw the RBA's preferred core measures come in softer-than-expected and bolster odds of an unchanged rate next week from circa 80% to around 95%; AUD/USD as low as 0.6480.
PBoC set USD/CNY mid-point at 7.1346 vs exp. 7.2419 (prev. 7.1364).

Fixed Income

Pronounced two-way action in JGBs on the BoJ announcement; initial reaction to the hike saw JGBs slump to a 142.63 base. However, this pared instantly and shot to a 143.16 peak given the ‘slow’ taper.
EGBs derived a positive lead from the above, extended by cooler-than-expected French CPI to a 133.76 peak for Bunds. Thereafter, the early release of Italy’s prelim. metrics were hotter-than-expected and trimmed Bunds into the pan-EZ figure which sparked a further pullback but still clear of the earlier 133.36 base.
USTs near the unchanged mark, action this morning dictated by the above into Quarterly Refunding, ADP, Chicago PMI and then the FOMC/Powell.
Germany sells EUR 2.472bln vs exp. EUR 3.0bln 2.40% 2030 Bund: b/c 2.2x (prev. 2.60x), average yield 2.25% (prev. 2.55%) & retention 17.6% (prev. 18.6%)

Commodities

Crude benchmarks firmer across the board, underpinned by the escalating geopolitical backdrop; WTI Sep & Brent Oct at highs USD 76.86/bbl and USD 80.15/bbl.
In short, Israel struck targets in both the Lebanese and the Iranian capitals overnight, taking out a Hezbollah commander and the leader of Hamas Ismail Haniyeh. This has stoked fears of an expansion of the conflict in the region.
Precious metals are higher across the board, given the geopolitical risk premia; XAU is back above USD 2400/oz to a USD 2425/oz peak. Base peers are also supported, by the better-than-feared Chinese PMIs overnight which have shown some signs of a stabilising manufacturing sector.
US Private Inventory (bbls): Crude -4.5mln (exp. -1.1mln), Distillate -0.3mln (exp. -1.2mln), Gasoline -1.9mln (exp. -1mln), Cushing -0.9mln.
India's Steel Ministry has reportedly sought a probe into cheaper imports, via Reuters citing Indian gov't sources; remarking that China and Vietnam are shipping cheaper steel to India.

Geopolitics: Middle East

Hamas stated that its political bureau chief Haniyeh was killed in Iran by an Israeli air strike on his house in Tehran, while a Hamas official said the assassination is a cowardly act that will not go unpunished, according to Al-Aqsa TV. It was also reported that Iran said it is investigating the assassination of Haniyeh with the results to be published soon, according to Tasnim.
UN special coordinator for Lebanon said they are deeply concerned about Israel's strike in a densely populated southern suburb of Beirut which resulted in multiple civilian casualties, while they underscored there is no such thing as a military solution and called for diplomacy to end hostilities.
Russia said that strikes on Lebanon are a flagrant violation of international law, according to TASS.
Explosions were reported inside an Iraqi PMF base south of Baghdad causing casualties, according to Reuters sources, while the US later carried out a self-defence strike in Iraq because of a threat to coalition forces, according to an official cited by Reuters
"Iran's Supreme Leader: Iran sees as a duty to avenge Haniyeh’s assassination", according to IRNA. Thereafter, Hezbollah MP Ammar says Israel "demands war, and we are up for it".
Sources involved in the Hamas-Israel hostage deal talks suggests "the killing of the Haniyeh will have an impact on the negotiations, since the Haniyeh was a significant figure in the negotiations", via Kann's Stein.

Geopolitics: Other

Russian Foreign Ministry spokeswoman said any basis for dialogue with US arms control can come only after Washington refuses confrontation with Russia, according to RIA.

US Event Calendar

07:00: July MBA Mortgage Applications -3.9%, prior -2.2%
08:15: July ADP Employment Change, est. 150,000, prior 150,000
08:30: 2Q Employment Cost Index, est. 1.0%, prior 1.2%
09:45: July MNI Chicago PMI, est. 45.0, prior 47.4
10:00: June Pending Home Sales YoY, est. -7.4%, prior -6.6%
10:00: June Pending Home Sales (MoM), est. 1.4%, prior -2.1%
14:00: July FOMC Rate Decision

Today's Top Stories