US futures jumped and the dollar stabilized after president Trump said he has no intention of firing Powell, easing some fears on the Fed’s independence, while he also plans to be “very nice” to China in trade talks and sees China tariff coming down substantially which hinted a potential pivot in trade policy. As of 8:00am ET, S&P futures are up 2.3%, with Nasdaq futures surging 2.7%. Pre-market, Mag 7 names are all higher led by TSLA (+6.4%, after Musk said that his time on DOGE will significantly drop next month), NVDA (+4.9%), AMZN (+4.1%) and META (+3.7%). Intel rose 3% on reports it will cut more than 20% of its staff, a move aimed at eliminating bureaucracy. 10y TSY yields are down 10bps to 4.30% as longer-dated Treasuries rally, recovering from selling on concerns about the Fed’s continued independence; the USD reversed earlier gains. Commodities are mostly higher led by oil (+1.6%) and base metals; gold is 1.3% lower.

In premarket trading, Tesla led the Mag 7 stocks higher as CEO Elon Musk pledged to pull back from his work with the US government to concentrate on the electric-vehicle company (Tesla +7.4%, Alphabet +2.4%, Nvidia +5.7%, Amazon +5%, Apple +3.3%, Microsoft +2.6%, Meta +4.7%). Chip, cryptocurrency-linked stocks and US-listed Chinese companies rally after Trump said China tariffs will drop if the two countries can reach a deal. The president also said he had no intention of firing Powell. Semiconductors gained (SMCI +6.7%, Nvidia +5.7%, Dell +5.5%) as did Apple suppliers: (Qualcomm +2.6%, Broadcom +4.6%, Cirrus Logic +4.3%). Crypto-linked stocks jumped after bitcoin surged above $94,000 (Robinhood +8.1%, Coinbase +4.2%, MicroStrategy +3.4%). Here are some other notable movers:

AT&T gains 4% after adding 324,000 mobile-phone customers in the first quarter, beating Wall Street projections for 254,000.

Boston Scientific rises 6% after the medical device firm boosted its net sales and adjusted profit forecast for the full year.

Bristol-Myers Squibb falls 4.7% after the company’s treatment for schizophrenia failed in a study designed to expand its use, denting the company’s ambitions to turn it into a blockbuster.

Enphase Energy drops 11% after the solar equipment maker’s revenue forecast missed analyst estimates at the midpoint. Morgan Stanley downgrades the stock to underweight from equal-weight.

Intel rises 4% as the company is poised to announce plans this week to cut more than 20% of its staff, according to a person with knowledge of the matter.

Packaging drops 4.5% after the containerboard producer p gave a second-quarter earnings per share forecast that was below the average analyst estimate.

Pegasystems soars 26% after the customer relationship management software company reported first-quarter results that beat expectations.

Philip Morris climbs 3% after the tobacco company boosted its adjusted earnings per share guidance for the full year; the guidance beat the average analyst estimate.

Sportradar slips 3.6% after shareholders including an affiliate of the Canada Pension Plan Investment Board, an affiliate of Technology Crossover Ventures, and Sportradar CEO Carsten Koerl offered 23 million class A shares via Goldman Sachs, JPMorgan.

Vertiv Holdings advances 18% after the company boosted its net sales guidance for the full year.

XPeng ADRs jumps 8% after the Chinese electric vehicle maker unveiled a fast-charging variant of its P7+ sedan model at the 2025 Shanghai auto show.

Wall Street is set to build on the biggest equity gains in two weeks, with S&P 500 futures climbing 2.3% after Trump allayed fears that he plans to fire Federal Reserve Chair Jerome Powell. Optimism of easing US-China trade tensions added to the risk-on mood. Treasuries also rallied as worries about threats to Powell’s position faded: 10-year yields dropped ten basis points to 4.30%. A gauge of dollar strength steadied after rallying from a 16-month low. Bitcoin stormed above $90,000 for the first time since early March. Gold fell as demand for havens cooled. Oil extended its rebound.

Trump said Tuesday he had no intention of firing Powell, despite his frustration with the Fed not moving more quickly to lower borrowing costs. The president posted on social media last week that the Fed chair’s “termination cannot come fast enough!” His rebuke of the Fed and comments from officials that Trump was studying whether he could replace its chief had sent the dollar to the lowest level since December 2023.

Trump’s comments on the Fed chief late Tuesday are a walk-back from opinions expressed in the past week that sparked concerns about the US central bank’s independence. On the trade front, Trump and Treasury Secretary Scott Bessent said that a standoff with China can be de-escalated. On trade, Trump said he plans to be “very nice” to China in any talks and that tariffs will drop if the two countries can reach a deal. The US president also said that final tariffs on China wouldn’t be “anywhere near” the 145% level set.

Still, gains come with a warning from some on Wall Street of possible “head fakes,” given Trump’s unpredictability. Stock trading volumes were light on Tuesday, while the S&P 500 remains down about 7% since Trump’s “Liberation Day” tariffs. Some money managers, like Janus Henderson, are looking to cut exposure to the US. 

“I took the view that the actual probability of Powell getting sacked was close to zero, but the tuning down of the rhetoric on China is clearly a relief,” said Francois Rimeu, a strategist at La Francaise AM in Paris.

“It’s really hard to see the endgame on trade,” said Rimeu at La Francaise AM. “Investors need to prepare in the event that say, in three months, we land with US tariffs that are manageable for the global economy.”

“If one is optimistic, one can take the view that Trump is slowly backing down on trade and on firing Powell,” said Gillles Guibout, head of European equities at AXA IM. “But he has a structural tendency to create uncertainty and now there’s a real defiance among international investors, and that’s palpable in the dollar.”

It’s also a busy day for earnings, with Boeing rising in premarket after first-quarter sales topped estimates. AT&T climbed after a strong first-quarter report. Philip Morris gained as its earnings forecast beat estimates. SAP soared the most in six years after profit at Europe’s most valuable company exceeded expectations. 

In Europe, the Stoxx 600 rose 1.8%, led by gains in mining and technology shares. SAP soared as much as 11% after the German software firm reported profit and free cash flow that topped estimates; Reckitt Benckiser was the biggest laggard. Here are the biggest movers Wednesday:

SAP shares surge as much as 11% after the German software company reported a 29% growth in current cloud backlog on constant-currency terms, indicating resilient demand for its cloud-based software

BE Semiconductor soars as much as 10% after the Dutch firm said two leading memory chipmakers placed orders for its hybrid bonders, a chip-packaging technology used to connect chips and enhance their performance

Croda shares rise as much as 10%, their best one-day gain in 14 years, after the chemicals maker reported earnings and analysts pointed to a strong performance across divisions

Valmet shares rise as much as 9.6% after the supplier of tech and services to the pulp and paper industries reported higher order numbers than anticipated and reiterated its annual outlook

Babcock International shares rise as much as 6%, in sixth straight day of gains and hitting the highest level since July 2018, after the support services company released a pre-close update

Randstad shares rise as much as 6.2% after the Dutch staffing firm’s earnings beat estimates with a smaller-than-expected contraction in first-quarter organic revenue, with analysts pointing to stable trends

Akzo Nobel shares rise as much as 8.2% after the specialty chemicals firm posted first-quarter Ebitda that was ahead of consensus and reaffirmed its adjusted Ebitda forecast for the full year

Reckitt Benckiser shares drop as much as 4.7% after the personal care and homecare product maker delivered like-for-like growth below expectations following a miss in North America and Europe

European defense shares fall, with traders pointing to a Financial Times report that said Russian President Vladimir Putin has offered to halt his country’s invasion of Ukraine across the current front line

Temenos shares drop as much as 8.3%, the most since October, after reporting results that reflect a difficult start to the year and add risk to the company’s reiterated full-year forecasts

Hochschild Mining shares plunge as much as 17%, the most in over three months, after first-quarter production fell short of expectations. Analysts point to poor weather and challenges at the Mara Rosa mine

OVH Groupe slides as much as 11%, following two sessions of strong gains, after Morgan Stanley downgraded to underweight and said the cloud computing company’s valuation appears stretched

Earlier in the session, Asian stocks rallied after President Donald Trump’s administration indicated softer stances on trade with China and Jerome Powell’s tenure as Federal Reserve chair. The MSCI Asia Pacific Index rose as much as 1.9%, with TSMC and Alibaba among the biggest contributors. Benchmarks in Taiwan, Hong Kong and Japan led gains in the region. One by one, equity benchmarks in Asia are recouping losses suffered since Trump’s announcement of inceased tariffs on April 2. India, which has emerged as a relative safe haven amid the tariff war, was the first major global market to wipe out such declines last week. South Korea and Australia stock gauges did so on Wednesday, after Indonesia on Tuesday.

In FX, the Bloomberg Dollar Spot Index slipped 0.1%, wiping out an earlier 0.6% gain; the US currency fell versus all G-10 currencies bar the safe-haven yen and Swiss franc; the higher-risk Australian dollar rose, gained amid hopes of easing trade tensions between China and the US. The Swiss franc falls 0.2% and to the bottom of the G-10 FX pile while the yen weakens 0.1% against the greenback.

In rates, treasuries rose with 30-year yield falling nearly 15bp to week’s low 4.73%; 10-year yields declined 10bp to 4.30% while short-end tenors were little changed, leaving curve spreads dramatically flatter. US session includes 5-year note auction and several Fed speakers. German bonds drop, led by short-term debt, despite downbeat euro-area PMI data. The UK gilt curve flattens as long-end bonds rally following the DMO’s shift in bond sales further away from long maturities, narrowing the 2s30s spread by 12bps. while 2-year yields was little changed, leaving 2s10s and 5s30s curves nearly 10bp flatter on the day. Treasury auction cycle continues with $70 billion 5-year notes sale at 1pm New York time; Tuesday’s 2-year tailed by 0.6bp. WI 5-year yield near 3.955% is about 14.5bp richer than last month’s auction, which tailed by 0.5bp. This week’s cycle concludes Thursday with $44 billion 7-year note sale

In commodities, spot gold tumbles $47 to $3,334/oz as haven demand ebbs. Oil prices advance, with WTI rising 1.6% to $64.70 a barrel. Bitcoin jumps over 3% and above $94,000.

Today's econ calendar includes April S&P Global manufacturing PMI (9:45am) and March new home sales (10am). Fed releases latest Beige book at 2pm. Fed speaker slate includes Goolsbee (9am), Musalem (9:30am, 2:35pm), Waller (9:35am) and Hammack (6:30pm)

Market Snapshot

S&P 500 mini +2.1%

Nasdaq 100 mini +2.5%

Russell 2000 mini +2.1%

Stoxx Europe 600 +1.8%

DAX +2.9%, CAC 40 +2.4%

10-year Treasury yield -6 basis points at 4.34%

VIX -2.3 points at 28.31

Bloomberg Dollar Index little changed at 1221.89

euro -0.2% at $1.14

WTI crude +1.8% at $64.8/barrel

Top Overnight News

President Trump said he is not planning to fire Federal Reserve Chairman Jerome Powell prompting some relief from investors who had been spooked by the White House’s commentary towards the Fed in recent weeks. WSJ

Trump suggested tariffs on China may be “substantially” cut if a deal is reached. China said the door was “wide open” for talks. BBG

Tesla shares climbed (+6% premkt) premarket despite an earnings miss after Elon Musk said he’ll pull back “significantly” from DOGE in May. BBG

JD Vance said the US has issued a “very explicit proposal” to Russia and Ukraine on a path forward to a peace deal and that territory concessions are needed.

Fed's Kugler (voter) said tariff increases are significantly larger than previously expected and economic effects of tariffs and uncertainty will likely be larger than anticipated. Kugler added that Fed policy is well-positioned for macroeconomic changes and she supports holding the policy rate steady as long as upside risks to inflation continue, whilst economic activity and employment remain stable.

Trade war is starting to slam Europe's economy. The euro-area’s flash composite PMI gauge fell more than expected this month to 50.1, as both the German and French measures missed. The UK gauge also fell more than estimated. BBG

Talks between the U.S., Ukraine and European officials to discuss ending Russia's war in Ukraine faltered on Wednesday as U.S. Secretary of State Marco Rubio abruptly cancelled his trip to London and negotiations were downgraded. Rubio's no show prompted a broader meeting of foreign ministers from Ukraine, Britain, France and Germany to be cancelled, although talks continued at a lower level. RTRS

UK government borrowing exceeded official forecasts made just last month. The budget deficit in the full fiscal year through March was £151.9 billion, above the OBR’s £137.3 billion projection. BBG

The US wants the UK to lower levies and other non-tariff barriers on a variety of US goods, including a reduction in its automotive tariff from 10% to 2.5%, the WSJ reported. Chancellor Rachel Reeves will meet Treasury Secretary Scott Bessent this week. BBG

Tariffs/Trade

"China: Door wide open for trade talks with US", according to Sky News Arabia

US President Trump said they are doing fine with China and are going to be very nice with China, while he added that they have to make a deal and if they don't, the US will set a deal. Trump also stated the tariff on China will not be as high as 145% and will not be anywhere near that level but it won't be zero.

US is preparing negotiating terms for UK trade talks and will aim for the UK to reduce its automotive tariff from 10% to 2.5%, while the US will also push the UK to relax rules on agricultural imports from the US, including beef and revise rules of origin for goods from each nation, according to Wall Street Journal citing sources.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks rallied amid tailwinds from the US owing to trade deal hopes and after US President Trump softened his rhetoric on Fed Chair Powell in which he stated he has no intention of firing the Fed chair. ASX 200 was led higher by outperformance in energy and tech with the former supported by a rebound in oil prices and after a quarterly production update from Woodside Energy, while gold miners suffered after the precious metal dropped as the risk-on mood sapped haven demand. Nikkei 225 benefitted from initial currency weakness and briefly surged to above the 35,000 level shortly after the open before fading some of its advances. Hang Seng and Shanghai Comp were varied as the Hong Kong benchmark joined in on the broad rally and the mainland was contained despite the encouraging comments from Treasury Secretary Bessent who noted the tariff standoff with China is unsustainable and expects the situation to de-escalate, while President Trump said they are going to be very nice with China and that the tariff on China will not be anywhere near the 145% level.

Top Asian News

Chinese Foreign Ministry said the US cannot say that it wishes to reach an agreement whilst on the other hand maintaining extreme pressure; this is not the correct way to deal with China.

BoJ Financial System Report said Japan's financial system has been maintaining stability as a whole; Considering that Japanese banks have a certain amount of market risk associated with stockholdings, developments in asset prices warrant attention Since the beginning of April, financial markets at home and abroad have fluctuated significantly. Financial institutions need to be vigilant against materialization of various risks.

China's Commerce Ministry said China received the EU side's appeal request on intellectual property rights case and will handle it in accordance with relevant rules, while China will work with other multi-party interim arbitration arrangement participants to firmly uphold the rules-based multilateral trading system.

European bourses (STOXX 600 +1.8%) are entirely in the green and with clear outperformance in the DAX 40, which benefits from upside in SAP (+9%) after its Q1 results. A slew of EZ PMIs and the latest ECB Wage Tracker had little impact on the complex. Sentiment in Europe has been lifted in continuation of the upside on Wall Street, in the prior session. The strength follows some positive trade related updates, including; a) US Treasury Secretary Bessent expecting the tariff standoff with China to de-escalate, b) US President Trump saying he has no intention to fire Fed Chair Powell. European sectors hold a clear cyclical bias, in-fitting with the risk tone. Tech is the clear outperformer, with the industry lifted by post-earning strength in SAP. Optimised Personal Care and Utilities, two defensive sectors, find themselves at the foot of the pile.

Top European News

UBS lowers its 2025 global GDP growth forecast to 2.5% (prev. forecast 2.9%)

FX

USD is up vs. most peers (ex-Antipodeans) with markets encouraged by two primary inputs. 1) optimism around the trade war following more upbeat comments from US President Trump overnight, reporting yesterday suggesting that Treasury Secretary Bessent sees the current levels of tariff on China as unsustainable and comms from the White House that it is nearing deals with China and India. 2) comments by US President Trump overnight that whilst we wishes for the Fed to lower rates, he is not looking to fire Powell. For today's docket, focus will be on US PMI data and Fed speak from Goolsbee, Musalem, Waller, Hammack. DXY sits towards the top end of Tuesday's 98.01-99.65 range.

EUR is on the backfoot vs. the USD on account of the current trade optimism with the EUR suffering as its viewed as a liquid alternative to the USD. PMI metrics this morning from France, Germany and the Eurozone have all conformed to the same picture of beats on manufacturing, services and composite missed. EUR/USD has delved as low as 1.1309 before recovering to levels closer to 1.14.

JPY is a touch softer vs. the USD but notably less so than seen during APAC hours where the pair hit a peak at 143.21 overnight as markets reacted to the positivity on the trade front and comments by US President Trump on Fed Chair Powell. On the trade front, it remains the case that Japan is front of the queue at the White House and comms suggest that a trade agreement to stave off large US tariffs is nearing. USD/JPY is currently holding above the top end of Tuesday's 139.88-141.67 range.

GBP is on the backfoot vs. the USD with losses briefly exacerbated by a soft outturn for UK PMI metrics which saw the services print unexpectedly slip into contractionary territory, dragging the composite reading with it. Elsewhere, on the trade front, reports state that the US is preparing negotiating terms for UK trade talks and will aim for the UK to reduce its automotive tariff from 10% to 2.5%, while the US will also push the UK to relax rules on agricultural imports from the US. Cable delved as low as 1.3235 overnight before recovering to levels just above the 1.33 mark.

Antipodeans are the G10 outperformers vs the Dollar, benefiting from the broader risk tone. AUD/USD is yet to reapproach Tuesday's YTD peak at 0.6439. If breached, the 200DMA sits at 0.6470. Similar price action for NZD/USD which sits below yesterday's YTD high at 0.6029.

PBoC set USD/CNY mid-point at 7.2116 vs exp. 7.3466 (Prev. 7.1980).

Fixed Income

USTs are bid with markets encouraged by two primary inputs. 1) optimism around the trade war following more upbeat comments from US President Trump overnight, reporting on Tuesday suggesting that Treasury Secretary Bessent sees the current levels of tariff on China as unsustainable and comms from the White House that it is nearing deals with China and India. 2) comments by US President Trump overnight that whilst we wishes for the Fed to lower rates, he is not looking to fire Powell. Focus now turns to US PMI, a slew of Fed speakers and 2yr FRN and 5yr auctions - as a reminder, Tuesday's 2yr outing was soft. Jun'25 contract has ventured as high as 111.00+ with the next resistance point coming from the 21st April peak at 111.09.

Bunds are diverging from their US peers on account of the more encouraging risk tone and increased positivity on the trade front. From a data perspective, PMI metrics this morning from France, Germany and the Eurozone have all conformed to the same picture of beats on manufacturing, services and composite missed. A couple of ECB speakers are on the docket, with focus also on a 2035 Bund auction. Jun'25 Bunds briefly slipped below Tuesday's low at 131.46 before stabilising above the 131.50 mark.

Gilts are diverging from European peers following the latest update from the DMO which saw it cut GBP 10.4bln from its planned sales of long-dated Gilts and increase sales of short Gilts by GBP 5.6bln. Upside was briefly extended following a soft outturn for UK PMI metrics which saw the services print unexpectedly slip into contractionary territory, dragging the composite reading with it. Jun'25 Gilts have been as high as 92.85 with little in the way of resistance until 93.00. From a yield perspective, the 10yr has bottomed out at 4.515%, failing to test 4.50% to the downside.

UK DMO revises its 2024/25 Gilt remit to GBP 299.1bln (prev. 299.2bln); cuts GBP 10.4bln from planned sales of long-dated Gilts, increases sales of short gilts by 5.6bln; increases unallocated portion of Gilt issuance remit by GBP 4.7bln Increases net T-bill issuance to GBP +10bln (prev. +5bln).

Commodities

Firmer trade across the crude complex with optimism was facilitated by the more sanguine language from the US regarding China, whilst US President Trump also dialled down his tone regarding the dismissal of Fed Chair Powell, which, in turn, boosted risk sentiment. WTI currently resides in a USD 63.76-64.84/bbl range while its Brent counterpart trades in a USD 67.68-68.63/bbl parameter.

Mixed trade across precious metals, with spot silver outperforming following yesterday's underperformance. Investors are unwinding some risk premium from gold following the more sanguine language from the US regarding China, whilst US President Trump also dialled down his tone regarding the dismissal of Fed Chair Powell, in turn boosting risk sentiment. Spot gold trades in a USD 3,291.73-3,386.77/oz range.

Firmer trade across base metals amid the constructive risk tone, although gains overnight were limited by the unambitious performance in Chinese equities. 3M LME copper currently resides in a USD 9,380.60-9,483.73/t range.

IEA Executive Director Birol said oil prices may see further downward pressure, via Bloomberg TV; expects oil demand to slow down.

Shanghai Futures Exchange to adjust the transaction fees for Gold's June future contract.

Azerbaijan said average oil price seen at USD 70bbl in 2025 (prev. forecast USD 77bbl).

Norway's Prelim March oil production 1.757mln BPD (prev. 1.723mln BPD); Gas production 10.9bcm (prev. 9.9bcm).

Iran set May Iranian light crude price to Asia at Oman/Dubai plus USD 1.65/bbl.

Peru's Antamina copper mine reported the death of an operations manager in an incident at the mining camp, while Antamina launched a total shutdown for security as it investigates the accident.

Corporation National del Cobre de Chile market intelligence and strategy specialist Eric Medel said the upside potential of copper has been reduced and copper prices are likely to remain bearish in the short term amid trade war risks.

Geopolitics: Middle East

Israeli army said it monitored the launch of a missile from Yemen towards Israeli territory and air defence systems were activated, according to Sky News Arabia.

Iranian Foreign Ministry Spokesperson said the new US energy sanctions contradict Washington's claims of dialogue with Tehran.

Geopolitics: Ukraine

UK government said Ukraine peace talks with international foreign ministers have been postponed, via AFP.

Ukrainian Foreign Ministry said the Chinese ambassador was summoned and told of 'serious concern' over Chinese involvement on Russia's side in the war.

US President Trump's "final offer" for peace requires Ukraine to accept Russian occupation, according to Axios. It was also reported that the US proposed recognising Crimea as Russian as peace talks ramp up and proposals include eventually lifting sanctions against Russia under a future accord, according to WaPo.

UK Foreign Secretary Lammy said the UK is working with the US, Ukraine and Europe for peace and to put an end to Russian President Putin's illegal invasion, while he added that talks continue at a pace and officials will meet in London today.

Russian President Putin reportedly offered to halt the invasion of Ukraine across the current front line as part of efforts to reach a peace deal with US President Trump, according to FT.

Russia launched a large drone attack on east, south and central Ukraine, which damaged civilian infrastructure, according to regional officials.

US Event Calendar

7:00 am: Apr 18 MBA Mortgage Applications -12.7%, prior -8.5%

9:45 am: Apr P S&P Global U.S. Manufacturing PMI, est. 49, prior 50.2

9:45 am: Apr P S&P Global U.S. Services PMI, est. 52.6, prior 54.4

9:45 am: Apr P S&P Global U.S. Composite PMI, est. 52, prior 53.5

10:00 am: Mar New Home Sales, est. 685k, prior 676k

10:00 am: Mar New Home Sales MoM, est. 1.33%, prior 1.8%

Central Banks (All Times ET):

9:00 am: Fed’s Goolsbee Gives Opening Remarks

9:30 am: Fed’s Musalem Gives Opening Remarks

9:35 am: Fed’s Waller Gives Opening Remarks

2:35 pm: Fed’s Musalem Gives Informal Closing Remarks

6:30 pm: Fed’s Hammack Speaks on Balance Sheet

DB's Jim Reid concludes the overnight wrap

It was my first day back yesterday after a 2 week break that in some ways was a one week break after Liberation Day impinged on much of the first week. The highlight was speaking on a conference call whilst on a chairlift. We had a good week and a bit on the slopes in glorious sunshine though, followed by a few days at home where I won a big golf competition (although not quite as big as Rory McIlroy's which I loved), and I caddied for my twins in a national under 8 tournament. My identical twins have totally different golf swings which is strange. Talking of identical twins, the most remarkable story yesterday was a global viral video of two Australian female twins reliving their horrific carjacking ordeal. If you haven't seen it search "in sync twins" online and be prepared to be dazzled. My identical twins don't stop fighting long enough to be able to do what these twins can do.

Markets have started to sync up much more positively over the last 24 hours after Easter Monday's fraught US session (S&P 500 -2.36%) when fears of Powell being replaced by Trump dominated. Yesterday was already seeing most of those losses erased before markets powered past them just after Europe went home as Treasury Secretary Bessent suggested at a private event that the stand-off with China was unsustainable and that he expects de-escalation. The S&P 500 closed +2.51% higher with the strongest performance since the 90-day tariff extension was announced on April 9th. Elsewhere the Dollar index (+0.65%), US HY (-15bps) and 30yr USTs (-2.5bps) also rallied.

Nevertheless, markets remain skittish from day to day, and with the VIX (-3.25pts) still above 30 (30.57 close) we're certainly not out of the woods. But for now, the mood has turned more positive, also helped by other constructive headlines around trade talks yesterday, for instance Politico reporting that the US is nearing framework agreements with Japan and India. Gold did take a rare pause for breath after hitting a fresh record high earlier in the day to close -1.27% at $3,381/oz. But note it's up +9.25% since Liberation Day and +28.81% YTD.

The headlines kept coming after the US close though. Firstly, Tesla’s Q1 results saw sizeable misses on both revenue ($19.34bn vs $21.37bn expected) and operating income ($399m vs $1.13bn exp.), with the company saying it would “revisit” the 2025 revenue guidance in its Q2 update. Nonetheless, the company’s shares gained around +5% in after-hours trading as CEO Elon Musk touted the prospects for the company’s autonomous vehicle and robot businesses and said that he would “significantly” pull back from his government work and devote “far more of my time to Tesla” starting next month. The stock had risen +4.60% in yesterday’s regular session, though this still left it -41.07% YTD.

An even bigger story for markets after the close was Trump’s comments that he has “no intention of firing” Fed Chair Powell, which has helped the rally continue. Equity futures on the S&P 500 and NASDAQ are trading +1.43% and +1.65% higher as I type. The 10yr Treasury yield is -5.3bps lower at 4.35% after a modest -0.9bp move on Tuesday, while the dollar index is another +0.40% higher. The Hang Seng (+2.40%) is leading gains in Asia, stretching its gains to a third consecutive session with the Nikkei (+2.04%), the KOSPI (+1.56%) and the S&P/ASX 200 (+1.48%) also among the top performers. Meanwhile, mainland Chinese stocks are far more muted with the CSI (+0.24%) and the Shanghai Composite (+0.05%) only just above flat.

This morning we’ve also started to get some of the April flash PMIs from around the world. These will be intensely watched, as they are one of the first indicators we have for how the global economy has reacted to the tariff announcements at the start of the month. Ahead of the European PMIs this morning, yesterday saw a concerning signal from the euro area flash consumer confidence print, which posted its largest monthly decline since the 2022 energy shock, falling to its lowest level since November 2023.

Overnight Japan's factory activity shrank for the tenth consecutive month in April, coming in at 48.5, a touch above the 48.4 reading in March as new orders declined at the steepest rate in over a year amid US tariff concerns. Conversely, Japan's service sector experienced a robust rebound, with the au Jibun Bank services PMI climbing to 52.2. Meanwhile, the overall composite PMI expanded to 51.1 in April from 48.9 in March, after its first decline in five months in the previous month.

Elsewhere, Australia’s private sector's business activity slightly slowed as the flash services PMI dropped to 51.4 in April from a reading of 51.6 in March. At the same time, the manufacturing PMI edged down to 51.7 in April, compared to 52.1 in March. The composite PMI fell from 51.6 to 51.4.

Back to markets yesterday and the US saw a very broad-based advance, with every S&P 500 industry group rising on the day, along with 494 companies. Indeed, that matched the number of gainers that we saw in the S&P’s +9.52% surge on April 9, making it the joint broadest advance in the last two years on this metric. The move was also helped by the Magnificent 7 (+3.02%), which managed to snap a run of 5 consecutive daily declines, with all of the Mag-7 advancing by at least 2%.

US Treasuries were another asset that unwound the previous day’s move, with a notable curve flattening as investors grew a bit more optimistic on the US outlook and took out some of the risk premium they’d been assigning to long-end Treasuries over recent days. The 30yr yield (-2.5bps) fell back to 4.88%, moving off from its 3-month high on Monday, with the 30yr real yield down by a larger -4.8bps to 2.63%. By contrast, the 2yr yield (+5.5bps) moved up to 3.82% following the risk-on tone as well as a soft 2yr auction.

Back in Europe, the performance was much more muted given markets were closed on Monday, so we didn’t see the big rebound that took place in the US but we didn't see it respond to the fall on Monday either. Nevertheless, it was still a decent session, with the STOXX 600 (+0.25%) posting a modest gain, alongside a larger advance for the DAX (+0.41%), the CAC 40 (+0.56%) and the FTSE 100 (+0.64%). Sovereign bonds also rallied, with yields on 10yr bunds (-2.7bps), OATs (-2.7bps) and BTPs (-3.6bps) all falling back. French OATs had earlier spiked by a couple of basis points following a Bloomberg report that President Macron had consulted his inner circle about whether to hold snap elections as soon as the autumn. That meant investors got a fresh reminder of French political risk, but the reaction unwound by the close and the current spread to bunds (77bps) is still some way beneath its recent peak of 88bps in early December, shortly before PM Michel Barnier was defeated in a no confidence vote.

In other news, yesterday saw the IMF slash their global growth forecasts relative to January, with widespread downgrades after the US tariff announcements. The global forecast for 2025 was cut half a point to 2.8%, and next year’s was also reduced by three-tenths to 3.0%. Those negative revisions happened across every region, although the US saw a particularly sharp downgrade of nine-tenths to 1.8%. Otherwise, Mexico saw an even larger 1.7pp downgrade, and is now projected to have a to -0.3% contraction. Europe wasn’t affected quite as much, although Germany was downgraded three-tenths this year to show zero growth, following on from two annual contractions in 2023 and 2024.

To the day ahead now, and the main highlight will be the flash PMIs for April from the US and Europe. From central banks, we’ll hear from the Fed’s Goolsbee, Musalem, Waller and Hammack, the ECB’s Knot, Villeroy and Lane, and the BoE’s Pill and Breeden. Finally, today’s earnings releases include IBM, AT&T and Boeing.

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