Solid Earnings Kick Off Session

STOCK INDEX FUTURES

The indexes are mixed with tech leading the way, while the S&P gained and the Dow fell. Yesterday saw a broad sell-off in the equities amid growing geopolitical tensions between the US and Iran, and as investors still wait for a Supreme Court ruling on President Trump’s tariffs. President Trump did soften warnings about striking Iran over its crackdown on civil unrest, but Washington is withdrawing some personnel from bases in the Middle East as Iran warned neighbors it would hit American bases if the US attacked. Weekly initial jobless claims came in at 198,000, missing expectations for a reading of 215,000.

TSMC, posted a 35% jump in fourth quarter profit on Thursday thanks to the AI boom. The major supplier to Nvidia and Apple said it plans to ramp up investment to $56 billion in 2026, a sign of confidence in sustained Big Tech spending on AI buildouts. Shares in the Taiwanese company jumped, stoking a broader rally in chip-related stocks. Elsewhere on the corporate front, Goldman Sachs and Morgan Stanley both posted strong results in the fourth quarter, bringing a close to what has been quite a successful year for both firms. Goldman reported 12% increase in  fourth quarter net income, while Morgan Stanley, net income climbed 18%, fueled by a 47% jump in dealmaking revenue. Shares of BlackRock were also higher in pre-market trading after surpassing forecasts for both earnings and revenue.

CURRENCY FUTURES

US DOLLAR: The dollar is higher, with recent support likely coming from safe-haven demand despite the recent sell-off on Monday as a result of the situation at the Fed. Analysts are split, with some saying the latest episode strengthens the case for global diversification away from the dollar, while others argue there is a reasonable chance the greenback will ultimately emerge stronger. December’s inflation print showed core price pressures eased in December, while headline prices remained stable. Fed Chair Powell has suggested that the impact of tariffs on inflation will peak in the first quarter and then subside. The dollar has recovered its losses from the beginning of the week after Fed Chair Powell said the Department of Justice had served the Fed with grand jury subpoenas. Currently, markets are pricing in a 5% chance of a rate cut at the January meeting, with a rate cut not fully priced in until the June meeting.

EURO: The euro fell against the dollar as traders weighed economic data out of the Germany and as the dollar has gained recent strength despite questions to central bank independence in the US. Preliminary data showed that Germany’s GDP grew 0.2% in 2025, rebounding from a 0.5% contraction in 2024. The growth marked an end to a two-year period of economic contraction, supported mainly by higher household consumption and government spending. Exports continued to decline, weighed down by higher US tariffs, a strong euro, and rising competition from China. Investment remained weak, with fixed capital formation in machinery, equipment, and construction falling compared with the previous year. By sector, manufacturing output fell for the third consecutive year, with the automotive industry and machinery and equipment manufacturing experiencing sharp losses. The ECB left policy rates unchanged in December and raised some growth and inflation forecasts, reinforcing market expectations that rates will remain on hold for an extended period. Eurozone inflation figures showed that consumer prices rose 2.0% year over year in December, while core inflation edged down to 2.3%. The data has reinforced views that the central bank is set to stand pat on rates for 2026, while markets look for any clues in economic data for policy cues in 2027.

BRITISH POUND: The pound fell against the dollar after UK economic data showed the economy grew more strongly than expected in November, but failed to affect the policy rate outlook. UK gross domestic product recorded the fastest growth since June, boosted by a return to full production at Jaguar Land Rover after a cyberattack which hit the carmaker and its suppliers. GDP grew 0.3% month-over-month, rebounding from a 0.1% contraction in October above forecasts of 0.1% growth. The services sector led the recovery, growing by 0.3% and reversing a 0.3% decline in the previous month. Manufacturing grew 2.1%, driven by a 10.7% surge in transport equipment manufacturing, with output of motor vehicles, trailers and semi-trailers jumping 25.5%, as car production continued to normalize after August’s cyber incident. However, economic activity in the UK still remains subdued and today’s data brought little change to the policy outlook for the Bank of England. Traders have priced in around 40 bps of Bank of rate cuts by September. The BoE lowered rates by 25 bps last month, although officials at the bank cautioned that the pace of easing could slow as the bank does not want to jump the gun on inflation. Money markets suggest the next rate cut could come in April or June, with the latter meeting being fully priced in for a cut.

JAPANESE YEN: The yen edged lower against the dollar but held below the 160 level as traders increasingly expect a government intervention to support the currency. Concerns about looser fiscal and monetary policy in the country continue to be the primary contributor in the yen’s fall since the election of Takaichi, and news that Takaichi may hold a snap election has continued to exacerbate those pressures. Takaichi’s policies favor big spending and a dovish Bank of Japan stance, have recently weighed on the Japanese currency and a strong electoral victory could pressure the yen further. The news has seen JGBs reach new local highs as concerns about fiscal expansion grow. Markets are favorable for a July rate hike from the Bank of Japan, though wage negotiations and updated forecasts on the economy do present opportunities for odds to shift earlier in the year.

AUSTRALIAN DOLLAR: The Aussie is little changed against  the dollar as recent volatility in global equities has led the currency to struggle in recent days. Markets continue to await domestic data out of the continent for further clues on how central bank policy could unfold in 2026. A concern for the Reserve Bank of Australia remains persistently high inflation. The release of the November household spending indicator later in the week will also draw close attention, amid growing evidence of a broad-based economic recovery partly driven by consumer demand. If household spending shows a sharp pre-Christmas increase, the RBA might be more inclined to begin raising rates sooner than expected. Markets imply a 27% chance that the RBA will raise the 3.6% cash rate by a quarter point when it meets on February 3, though that rises to 76% by May. Data out last week showed that consumer prices rose 3.4% on the year in November, below forecasts for 3.6% and a drop from October’s reading of 3.8%. Trimmed mean CPI, which is a key measure of core inflation for the Reserve Bank of Australia, rose 0.3% in November and 3.2% for the year, staying well above the target 2%. Capacity utilization, housing demand, facets from GDP data, and other indicators have all recently posted hotter-than-expected readings. Still, the central bank sees the monthly inflation figures as volatile and places greater emphasis on its quarterly inflation report, which is due in late January.

INTEREST RATE MARKET FUTURES

Yields are higher at the front end and little changed at the long end as solid earnings from a few large financial firms lifted sentiment ahead of the open, while easing tensions with Iran also pressured prices. The yield on the 10-year note rose to the 4.16%, approaching the four-month highs of 4.2% that were tested earlier in the week as fresh evidence of a stable market limited the urgency for the Fed to lower interest rates. Initial unemployment claims were sharply below expectations to hold the decrease in average claim counts since December, extending the view that the US labor market has not seen a significant increase in job cuts despite the prolonged period of higher interest rates.

December’s inflation figures  revealed moderate but sticky inflation, with headline prices up 0.3% on the month and 2.7% year over year, while core inflation rose 0.2% on the month and 2.6% on the year. Services inflation remained sticky, with notable increases in recreation, airline fares, medical care, and lodging, highlighting why inflation progress has slowed even as headline readings stabilize. However, the data is not very likely to shape opinions on how to move on monetary policy. Several officials have recently reiterated the policy remains in a good place, while the bank waits to see how current economic conditions play out and in conjunction with last Friday’s jobs report, the Fed does appear well positioned to wait on policy for the near term.

The spread between the two- and 10-year yields is 60.50 bps, while the two-year yield, which reflects short-term interest rate expectations, is 3.547%.

Interested in more futures markets?  Explore our Market Dashboards here.