A look at the day ahead in U.S. and global markets from Mike Dolan
Global stocks captured by MSCI's all-country index surpassed 2022's peaks on Friday and soared to new records - leaving bonds unloved.
As the dust settles on another Nvidia-led AI feeding frenzy on Wall Street, interest rate markets have sulked back to mid-December settings - dragged there by the ebullience of the wider economy and a stubborn Federal Reserve.
With U.S. labor markets still in fine fettle, corporate profit growth in double digits and surging stocks loosening financial conditions again, rate futures now finally agree with what the Fed told them in December - only 75 basis points of rate cuts are likely this year and not starting until second half of 2024.
Kicking and screaming, bond markets have dialled back the clock to December too - with 2-year Treasury yields hitting their highest since December 11, just before the Fed meeting that month, and 10-year yields hitting the highest since November. The dollar was firmer.
The contrast with the stock market couldn't be starker, and it sees a breakdown in a long-running correlation of both asset classes - a return to normal patterns in some respects.
Sparked by Nvidia (NASDAQ:NVDA)'s latest blowout earnings report, its 15% stock surge and general excitement about a "tipping point" in generative artificial intelligence, Thursday was the best day in more than a year for Wall St's main stock indexes.
That catapulted the S&P500, Dow Jones back to record closing highs and the Nasdaq came within 1% of a new all-time peak too.
With annual profit growth of S&P500 companies through the fourth quarter now running at more than 10%, the main indexes are now up 6-7% for 2024 so far - and we're still in February.
World stocks have followed suit, with Japan's Nikkei finally vaulting 1989 peaks on Thursday before taking Friday off for a holiday.
More subdued Chinese stock indexes eked out only another marginal gain - but they have now closed higher for nine sessions straight, lifted by some hopes the authorities were finally getting a grip on the property sector bust and spluttering economy.
The scale of the problem was clear in data showing China's new home prices continuing their downward trend with a drop of 0.3% in January, even though the pace of that decline slowed from the prior month and the biggest cities saw some stabilisation.
Expecting further monetary stimulus ahead, ten-year Chinese government bond yields fell to 2.39% - the lowest since June 2002 - and the yuan weakened.
In Europe, German business morale brightened in February, in line with analysts' expectations. But it's badly needed as it was also confirmed that the German economy shrank by 0.3% in the final three months of 2023.
In banking, Standard Chartered (OTC:SCBFF)'s stock surged 8% after its results as chief executive Bill Winters acknowledged the bank's underwhelming share price and vowed to fix it as the lender announced increased dividends, a fresh $1 billion buyback and an 18% increase in annual profit.
Key diary items that may provide direction to U.S. markets later on Friday:
* Federal Reserve Board Governor Christopher Waller speaks
* European Union and Eurogroup finance ministers meet in Ghent, with European Central Bank President Christine Lagarde
* President of Argentina Javier Milei meets U.S. Secretary of State Antony Blinken in Buenos Aires
* U.S. corp earnings: Warner Bros Discovery (NASDAQ:WBD), Intuit (NASDAQ:INTU)
(By Mike Dolan, editing by Jane Merriman mike.dolan@thomsonreuters.com)