US equity futures, and Asian markets are lower as the recent tech-led selloff on Wall Street accelerated, sparking further risk-off behavior and momentum liquidations, and spilling over into bitcoin which plunged to a 3 month low breaking below its post election support. As of 7:00am, S&P futures are down 0.3% and are outperforming Nasdaq futs which are down 0.5%; sentiment was dented after Trump said that Canada/Mexico tariffs would be implemented on-time. Mag7 names and semis are lower with NVDA down 1.6%; Europe's ASML and STMicroelectronics also Bloomberg reported that the Trump admin is planning to expand efforts to limit China's technological advancements, including tougher semiconductor curbs and pressuring allies to escalate restrictions on China's chip industry. The ongoing stock rout sparked a rally in Treasuries that has pushed US 10-year yields down 6 bps to 4.34%. Traders also added to their Federal Reserve interest-rate cut bets with ~53 bps of easing now priced in by year end; the USD is flat. Commodities are mostly lower with crude/gasoline higher. Today’s macro data focus is on Housing, regional Fed activity indicators, and Consumer Confidence. 

Meanwhile Bitcoin tumbled 7%, dropping below $90,000 and sliding to a 3 month low of $88,000 breaking post-election support levels, as the recent momentum massacre sparked a brutal crypto selloff; meanwhile DeepSeek reopened access to its core programming interface after nearly a three-week suspension.

In premarket trading, Nvidia led premarket losses among the Mag 7 stocks after Bloomberg News reported that Donald Trump’s administration is pressuring US allies to escalate their chip restrictions on China (Nvidia -1.3%, Alphabet -0.7%, Amazon, Alphabet, Microsoft, Meta and Apple were falling less than 1%, Tesla was little changed). US-listed Chinese stocks broadly rebound, with Alibaba rising 3.8% following its biggest drop since 2022; JD.com is up 1.8%, PDD +1.4%, Baidu +0.8%, Bilibili +2.8%. here are some other notable premarket movers:

As broad-based selling swept markets, the VIX Index touched its highest level this year at just below 20. There didn’t appear to be a single catalyst for the selling - the suddenly pervasive pessimism was correctly described here two days ago in "Goldman Traders Hit The Panic Button: Perfect Sell Storm Of Positioning, Valuation, Breadth, Concentration And Policy"- although concerns are mounting that President Trump’s policies will hurt global economic growth. Uncertainty on trade policies has prompted investors to pare risk and switch to havens like Treasuries or gold. Trump signaled Monday that tariffs on Mexican and Canadian imports will go ahead.

“At the moment there’s a lot of uncertainty reigning in the background which is making it challenging for investors to navigate,” said Alexandra Morris, an investment director at Skagen AS. “The whole tariff discussion is the main negative catalyst.”

Nvidia’s earnings report on Wednesday could be yet another catalyst to unleash volatility given its outsized impact on the broader market.

“Bear in mind that the market impact of Nvidia’s results have often proved to be as significant as US jobs reports over the last couple of years,” Deutsche Bank AG strategist Jim Reid wrote in a note to clients.

In Europe, tech stocks also underperformed but have been offset by gains in healthcare and banks with the Stoxx 600 rising 0.3%. European defense stocks rose after Bloomberg reported that Germany’s chancellor-in-waiting Friedrich Merz is in talks with the Social Democrats to approve up to €200 billion in special defense spending. Unilever shares fell after the company announced in a surprise move that CEO Hein Schumacher would step down and pass the reins to CFO Fernando Fernandez. Here are the biggest movers Tuesday:

Earlier in the session,  Asian stocks fell as US President Donald Trump’s continued attempts to pressure China and other nations dented investor sentiment. The MSCI Asia Pacific Index slid as much as 1.4% before paring some losses. Chinese stocks whipsawed throughout the day, showcasing the volatility sparked by uncertainties around Trump’s actions. His administration is said to be sketching out tougher versions of US semiconductor curbs and pressuring key allies to escalate their restrictions on China’s chip industry. According to Bloomberg, Trump officials recently met with their Japanese and Dutch counterparts about restricting Tokyo Electron Ltd. and ASML Holding NV engineers from maintaining semiconductor gear in China, according to people familiar with the matter. This comes after a directive set the stage for a more muscular use of the Committee on Foreign Investment in the United States, or CFIUS, a secretive panel that scrutinizes proposals by foreign entities to buy US companies or property, to thwart Chinese investment. The Hang Seng Tech Index had slumped as much as 4.4%, pacing losses for Chinese equities in New York. The gauge later erased most of its decline as more than $1 billion worth of money poured into Hong Kong stocks from China. JPMorgan strategists said US moves to limit investment in China tech may trigger a reversal in mainland stocks after the recent rally, while some investors saw an opportunity buy on dips. TSMC, Hitachi and Alibaba were among the biggest drags on the regional gauge. Most national benchmarks were in the red.

In FX, the Bloomberg Dollar Spot Index rises 0.1%. The Aussie and kiwi dollars underperform, falling 0.4% each.

In rates, bonds surged, pushing the yield on 10-year Treasuries down six basis to 4.34%. The treasury rally sent yields to YTD lows, fueled by risk aversion tied to the potential for US tariff policies to dent economic growth. Swap spreads are notably tighter, a sign that receiving flows are a driver. In short-term rates, Fed-dated OIS revert to fully pricing in two 25bp rate cuts by year-end. US yields are near session lows, 6bp-8bp richer across maturities with gains led by the belly, steepening 5s30s spread by 2bp; 10-year touched 4.32% and outperforms German counterpart by 7bp, UK by 3bp. 10- and 30-year swap spreads are nearly 2bp tighter on the day; Dallas Fed President Lorie Logan during London morning said the central bank when it stops balance-sheet runoff should purchase more shorter-term than longer-term securities to mirror the composition of Treasury issuance. A widely-watched gauge of the attractiveness of German debt fell to the most negative on record, reflecting expectations for higher borrowing to fund big outlays on defense spending. Gilts followed Treasuries higher, with UK 10-year yields falling 3 bps to 4.53%. German 10-year borrowing costs are flat at 2.47% as bunds were held back by reports of emergency defense spending.

In commodities, oil prices are steady with WTI near $70.80 a barrel. Spot gold falls $10 to $2,941/oz. Bitcoin tumbled below $90,000 to hit the lowest since mid-November as investors stepped back from one of the most popular Trump trades.

Looking at today's calendar, we get the February Philadelphia Fed non-manufacturing activity (8:30am), December FHFA house price index and S&P CoreLogic home prices (9am), February consumer confidence and Richmond Fed manufacturing index (10am) and February Dallas Fed services activity (10:30am). Fed speaker slate also includes Barr (11:45am) and Barkin (1pm)

Market Snapshot

Top Overnight News

Tariffs/Trade

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded lower following the weak handover from the US where the tech sector led the declines and risk appetite was sapped amid ongoing uncertainty surrounding tariffs and geopolitics. ASX 200 retreated with underperformance seen in the tech, consumer discretionary and financial sectors, while defensives showed resilience and energy was also lifted following a jump in Woodside Energy's profit. Nikkei 225 slumped at the open on return from the long weekend but was off worse levels as shares of Itochu, Marubeni, Mitsubishi, Mitsui and Sumitomo rallied following reports late last week that Berkshire Hathaway plans to gradually raise its investments in Japanese trading houses. Hang Seng and Shanghai Comp conformed to the negative mood amid headwinds from trade frictions with the US seeking to tighten chip controls on China and after the PBoC's MLF operation resulted in a net drain of CNY 200bln. Nonetheless, Chinese markets were well off today's worst levels as the heavy slump at the open spurred some dip buying.

Top Asian News

European bourses (STOXX 600 +0.2%) are mostly modestly firmer vs. an entirely negative open; sentiment gradually improved as the morning progressed, paring some of the early-morning losses following a negative APAC handover. European sectors are mixed vs opening mostly lower. Healthcare tops the pile, with Novo Nordisk (+4%) shares on the front foot. Tech is the clear underperformer today, after Bloomberg reported that US President Trump's team is seeking to tighten chip controls on China; it was also said that US officials reportedly met with Japanese and Dutch counterparts to restrict Tokyo Electron and ASML engineers from maintaining semiconductor equipment in China.

Top European News

FX

Fixed Income

Commodities

Geopolitics

US Event Calendar

DB's Jim Reid concludes the overnight wrap

Morning from what promises to be a relatively warm and sunny day in Lisbon. Two consequences of Brexit hit me last night. One I had to queue for 75 minutes at immigration with a British passport and secondly when I got to the counter the officer said that he shouldn't let me in as I have no blank spaces left on my passport. He squeezed a stamp on a full page and let me in and warned me to get a replacement immediately. So in my hotel room last night I had to book an emergency passport appointment before a US trip next week. I had no idea the passport was full. It's only been an issue since Brexit as previously no European travel got stamped. To get an appointment though I needed to take a passport photo of myself on my phone in a dimly lit hotel room. 25 attempts later and I finally managed to get one that the online portal approved after balancing a table on my bed, putting the iPhone on it, the camera timer on and running to stand in front of the blank wall. The glamour of work travel.

While I was travelling and taking selfies, US markets tried to recover yesterday but ultimately struggled with the Magnificent 7 (-1.40%) closing at its lowest level since early December, which in turn left the S&P 500 -0.50% lower. Europe managed to again outperform the US, though the STOXX 600 was still down -0.08% even as the DAX (+0.62%) advanced. And with more negative sentiment coming to the fore, US Treasuries rallied across the curve, with the 10yr yield (-3.1bps) closing at a two-month low of 4.40%. This morning its edged lower again to 4.375%.

Those election results from Germany were a key market focus yesterday, as investors reacted to Sunday’s vote. As a reminder, the conservative CDU/CSU are the largest group in the new Bundestag, but the only two-party coalition that can reach a majority are the CDU/CSU and the SPD, given that they’ve refused to cooperate with the AfD. A coalition between the two seemed to be the goal for the CDU/CSU yesterday, with CDU leader Friedrich Merz saying that “I am determined to hold constructive, good, swift talks with the Social Democrats”. That’s a combination Germany has seen frequently in the last couple of decades, with the two governing together for three of Angela Merkel’s four terms, including from 2013-21. However, it’s clear that the SPD’s position as the only party able to provide a majority for the CDU/CSU offers them leverage in any negotiations, and SPD co-leader Lars Klingbeil said that “Whether the SPD enters a government isn’t yet clear”.

In the meantime, there was continued speculation about whether there might be some sort of reform to the debt brake. As it stands, the centrist parties (CDU/CSU, SPD and Greens) are just short of the two-thirds majority required to change the constitution. They could achieve that threshold with the left-wing Die Linke, but they favour lower defence spending and have said they’d only vote for that if investments were made in infrastructure. So there’s theoretically a compromise you could reach where they agree to exempt infrastructure from the debt brake, and that could create more space for defence spending in the core budget. 

Another idea gaining momentum yesterday was that the centrist parties could even reform the debt brake in the current Bundestag, where the different centrist groups already have a two-thirds majority, and Merz said that “The German Bundestag is able to make decisions at any time”, although current finance minister Joerg Kukies said that it would “be a questionable political signal if constitutional amendments were now made with an old majority”. While this debate is in its early stages, our Germany economists argue that markets should start pricing in some probability of meaningful debt-brake reform in the next few weeks. Indeed, Bloomberg reported after Europe went home that Merz has opened talks with the SPD for special defence spending of as much as EUR 200bn before a formal coalition deal is made and before the new legislature sits on March 24th.

In terms of the market reaction, German equities saw a clear outperformance relative to their European counterparts. After a topsy-turvy session, the DAX was +0.62% by the close, having been up more than +1% in the European morning but then briefly falling into the red amid a broader risk-off move early in the US session. There was a stronger performance for the MDAX index of mid-cap stocks, which are more domestically concentrated, but even there the index was up +2.83% before paring that back to close +1.52% higher. Looking at the specifics, expectations for higher defence spending meant that Rheinmetall (+6.40%) was the strongest performer in the DAX again, bringing its YTD advance to +54.80%.

In my CoTD yesterday which went out late due to technical issues I discussed how the election continued a global trend (especially in Europe) where the establishment parties combined hit a record low share of the vote. In Germany support for the CDU/CSU and SPD combined has never been lower at 45.0%, down from 91.2% at the peak in 1976. In the UK election last year the combined vote for Labour and the Conservatives was the lowest in over a century and in the French elections at a similar time we saw support for the far right, far left and centrists broadly equal. We think mainstream parties are suffering due to ever lower economic growth, which along with wider inequality means that an increasing share of the electorate must be, by definition, exposed to negative growth in their world. Concerns over issues like immigration and globalisation are likely symptoms of this rather than the root cause.

Finally on the election, the Euro itself was fairly subdued yesterday, only seeing a modest +0.10% move against the US Dollar. Our FX strategists published an update yesterday after the German election, where they stay euro bearish on balance. However, their conviction on a sub-parity drop for the euro is now lower than it was, mainly because of incoming US fiscal news and the market’s resilience to absorbing tariff announcements without building a risk premium. Nevertheless they also don’t see a breakout higher for EUR/USD given the lack of sufficiently clear positive catalysts from Europe, particularly given the prospect of further ECB easing and persistent tariff risk.

Elsewhere in Europe, there was a lot of focus on Ukraine yesterday, with growing noises that the Ukraine and the US were moving closer to some sort of minerals deal. Ukraine’s Deputy PM Olga Stefanishyna said that “Ukrainian and U.S. teams are in the final stages of negotiations”, with Trump saying later on that “It looks like we’re getting very close” and that Zelenskiy could visit Washington in the next week or two to sign an agreement. Earlier Bloomberg reported that a draft text would see the US commit to a “free, sovereign and secure” Ukraine. Separately, in a meeting with France’s Macron, Trump claimed that Russia’s Putin would accept European peacekeepers in Ukraine. Macron suggested that he and Trump made “substantive steps forward” as he stressed the need for security guarantees for Ukraine, though Trump avoided any direct assurances on this front. So we’ve seen a more constructive tone compared to last week’s concerns that US-Russia talks would leave Ukraine and Europe out in the cold, but the path towards ending Russia’s war in Ukraine is still far from clear.

As mentioned at the top risk assets saw a bit of volatility yesterday. In the US, the S&P 500 (-0.50%) closed beneath 6,000 for the first time since mid-January, extending its -1.71% slump last Friday. This decline came due to a late sell-off that in part followed Trump’s suggestion that the delayed tariffs against Canada and Mexico “are going forward on time, on schedule”. That said, Bloomberg later reported that the fate of the 25% levies was still to be determined. The US equity decline was driven by tech stocks, with the Magnificent 7 down -1.40% ahead of Nvidia (-3.09% yesterday) reporting its results after the US close tomorrow. Bear in mind that the market impact of Nvidia’s results have often proved to be as significant as US jobs reports over the last couple of years, so it’s still a big event on the calendar. There were some news stories over the weekend around Microsoft (-1.03%) cancelling some leases for data centers which raised concerns about excess capex spending.

Otherwise, US Treasuries put in a fresh rally yesterday, as the broader risk-off tone pushed yields lower. Indeed, the 10yr yield (-3.1bps) closed at its lowest since early December, at 4.40%, and the 10yr real yield (-4.2bps) moved back beneath the 2% mark again. That came as investors also dialled up their expectations for Fed rate cuts this year, with the amount priced in by the December meeting up +3.6bps to 50bps.Meanwhile in Europe, 10yr yields were much steadier, with those on 10yr bunds, OATs and BTPs all +0.7bps higher on the day.

Asian equity markets are weaker overnight. There was a Bloomberg report that the Trump administration is seeking further curbs in Chinese investments in strategic sectors including technology, and especially in chips. The move has led to a decline in Chinese technology shares with the Hang Seng dropping more than -1% initially and tech titans including Alibaba and Tencent emerging as the biggest losers. As I check my screens, the Hang Seng (-0.62%) has partially recovered some of its earlier losses with the Shanghai Composite (-0.25%) also recovering. Elsewhere, the KOSPI (-0.49%) and the S&P/ASX 200 (-0.68%) are also trading lower with the Nikkei (-1.10%) leading the declines after reopening following yesterday’s holiday.

In monetary policy action, the Bank of Korea cut interest rates by 25 bps to 2.75%, its lowest since August 2022, as it strives to shore up economic growth amid weak domestic demand and uncertainties at home and abroad. The decision comes as South Korea continues to grapple with political uncertainty over the impeachment trial of President Yoon Suk Yeol.

There was very little other data yesterday, although Germany’s Ifo business climate indicator remained at 85.2 in February (vs. 85.8 expected). The expectations component did pick up to 85.4 (vs. 85.0 expected), but the current assessment reading fell back to 85.0 (vs. 86.3 expected).

To the day ahead now, and US data releases include the Conference Board’s consumer confidence for February, the FHFA’s house price index for December, and the Richmond Fed’s manufacturing index for February. From central banks, we’ll hear from the Fed’s Logan, Barr and Barkin, the ECB’s Nagel and Schnabel, and the BoE’s Pill.

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