Check out Mike Dolan’s day in the US and international markets
With U.S. President Donald Trump keeping the threat of new tariffs at bay, this week he turned his attention to technology and artificial intelligence — a red-hot sector that’s about to report its latest earnings.
Trump on Tuesday announced up to $500 billion in private sector investment to support artificial intelligence infrastructure.
The newly sworn-in president said OpenAI, the creator of OpenAI, SoftBank and Oracle plan a joint venture called Startgate, which will build data centers and create more than 100,000 jobs in the US.
Shares of Softbank rose more than 10 percent in Tokyo trading, while Oracle jumped 9 percent in the hours before the bell on Wednesday.
Back in tech, streaming giant Netflix jumped 14 percent in premarket trading on Wednesday.
The renewed focus on technology comes as the Nasdaq has underperformed the broader S&P500 this year, even with Apple under a cloud on Tuesday, despite rapid gains in Wall Street’s stock index. Apple’s retreat has allowed AI-chip darling Nvidia to take the top spot as America’s most valuable company.
Stock futures rallied well before the open, as some of the industry’s biggest names added to their corporate agenda on Wednesday and the top 10% of S&P500 companies reported annualized profit growth of nearly 11% last quarter.
The S&P500 closed above the 6,000 mark for the first time this year — less than 1% from its record high.
Despite the AI tilt, Trump continued to swing his tariff saber overnight — without much further explanation of exactly where and when they would come.
Trump has vowed to hit the “very worst” EU with tariffs, and his administration is discussing a 10% punitive tariff on Chinese imports – which he blames on the smuggling of fentanyl from China to the US via Mexico and Canada.
Currency markets around the threat appear to have calmed down, but traders are adopting a ‘wait and see’ mode, with any movement likely to come after the countries in question respond to Trump’s main concerns.
The dollar index fell to its lowest level in two weeks, leaving the euro at its best level of the year so far – as European Central Bank officials speaking in Davos lined up more interest rate cuts this year.
Although price volatility looks large this week, measures of implied currency volatility are subdued. The three-month dollar/yen volt has fallen to its lowest level since July as the Bank of Japan’s latest interest rate hike is now seen. Equivalent euro-volt measures are at their lowest since November, and sterling measures have even recovered. Two week minimum.
European stocks also shrugged off Trump’s trade concerns, with the STOXX600 index hitting a record high on Wednesday. Adidas helped Germany’s DAX to a new record high and the sportswear brand jumped 6 percent after its latest results.
Benchmark euro zone stock indexes’ gains of 6 percent this year are more than double the S&P500’s dollar gains — Bank of America’s latest global fund manager said this month’s allocation to European stocks was its second-biggest allocation in a quarter-century.
Chinese stocks were less enthusiastic about being back in the firing line for tariffs, however, and fell back about 1% on Wednesday – with the yuan also falling.
Despite a preliminary phone call between Trump and Chinese President Xi Jinping last week, Trump appears to have the courage to publicly resume the trade war he started during his first term in office.
Turning to fixed income markets, the start of the new year looks very calm.
A combination of low oil prices — partly due to Trump’s plans to increase domestic drilling — and the lack of immediate rate hikes have helped keep Treasury yields at levels seen at the start of the year.
After a sharp relief from U.S. inflation last week, Canada on Tuesday cut consumer optimism sharply with an unexpected monthly price increase that kept annual inflation below the 2 percent the Bank of Canada had pegged last month.
Elsewhere, recently upset British gilts also outperformed this week as a big drawdown in the UK and strong bond bidding offset higher public borrowing numbers and pulled yields back to where they were earlier in the year.
Key developments that should give US markets more direction on Tuesday:
* Canadian December producer price inflation
* US Corporate Earnings: Halliburton, Procter & Gamble, Johnson & Johnson, Find Financial, Kinder Morgan, Steel Dynamics, Abbott Laboratories, Travelers, Amphenol, Gay Vernova, TE Communications, Techron, Teledyne
* Including European Central Bank President Christine Lagarde, Bundesbank President Joachim Nagel, Bank of France Governor Francois Villeroy de Galhau, Netherlands Central Bank Governor Claes Knoth and EU Commissioner Valdis Dombrowski at the World Economic Forum in Davos.
* German Chancellor Olaf Scholz spoke to French President Emmanuel Macron in Paris.
* The US Treasury will sell 20-year bonds for $13 billion
(By Mike Dolan, Editing by William McLean, mike.dolan@thomsonreuters.com)
