European markets are pointing higher this morning, with Eurostoxx 50 futures advancing 0.69% following a positive finish from Wall Street. Overnight trading saw the S&P500 and Nasdaq close up 0.32% and 0.25% respectively, while Asian markets were posting modest gains as trading sessions were coming towards a close.
The dollar has regained its footing after Wednesday's volatility, with the dollar index climbing above 98.500. Markets experienced a brief panic following rumours that President Trump was considering removing Federal Reserve Chair Powell, but tensions eased after Trump later described such a move as "highly unlikely." This pattern of creating market drama before walking back statements has become a familiar strategy from the administration.
Wednesday's PPI came in flat for June, reinforcing expectations for Fed rate cuts later this year. Markets remain firmly positioned for a September reduction, though today's upcoming retail sales data could either strengthen this outlook or complicate the narrative. Treasury yields have retreated from recent peaks, with the 10yr yield trading at 4.47% during Tokyo hours after touching a five-week high of 4.49% on Wednesday.
The Federal Reserve's latest Beige Book described gradually normalising economic conditions, noting "very modest" employment growth and easing wage pressures. Particularly noteworthy was the mention of decreased foreign-born workforce participation, suggesting economic impacts from recent immigration policies. The report also indicated that cost pressures from Trump's trade policies are proving less severe than initially feared across multiple industries.
On the trade front, Trump's strategy continues to evolve. After reducing Indonesia's tariff from 32% to 19%, he's now indicating Japan will "probably" still face the full 25% increase. India might be next in line for negotiations as the August 1st deadline approaches, with many nations scrambling to secure favourable terms.
Corporate America is currently sending mixed signals – Johnson & Johnson raised guidance despite tariff and drug pricing headwinds, while ASML's CEO has already begun tempering 2026 sales forecasts, citing trade tensions.
Oil markets have finally found support after three consecutive down days, with WTI approaching USD67/brl and Brent crude at USD69. The EIA report revealed a substantial 3.9m barrel crude draw, though builds in gasoline and diesel inventories tempered enthusiasm. China's refinery throughput jumped 8.5% YoY in June, and their Q2 growth exceeded expectations, suggesting healthy demand fundamentals.
Looking ahead to today's European session, the Eurozone will release finalised June CPI data, expected to remain unchanged at 2.00% YoY. The UK publishes critical wage and unemployment figures for May, with the ILO Unemployment Rate forecast to hold steady at 4.6%. The UK labour market has shown clear signs of cooling, with rising redundancies and declining job vacancies amid employer caution over higher payroll taxes and minimum wage increases.
The New York session will be dominated by US retail sales data, with June figures expected to show a modest 0.1% increase following May's 0.9% decline. Consumers reportedly grew cautious amid tariff concerns and persistent inflation, potentially limiting spending growth. A stronger-than-expected reading, particularly alongside stubborn inflation, could reinforce the Fed's cautious stance on rate cuts.
Other notable releases include weekly jobless claims and the Philadelphia Fed Manufacturing Index, with the latter potentially coming in below consensus estimates as survey responses were collected during the height of recent tariff tensions. In corporate news, 18 Stoxx600 companies and 12 S&P500 firms report earnings today, including high-profile names like Nordea, Swedbank and Netflix.
For more on latest developments see the European Breakfast Briefing.
Thursday's supply prospects
The pipeline is sparse as we come into Thursday’s session, only two IG names present including Spanish retailer El Corte Ingles which wrapped up a two-day roadshow yesterday ahead of an 8yr benchmark in what will be just its second ever IG-rated euro line. However, we can’t rule out more US bank supply today with Bank of America, Goldman Sachs and Morgan Stanley now out of blackout having updated investors with earnings on Wednesday. That after peers Citigroup and Wells Fargo made plays in euros on Wednesday following Tuesday earnings announcements and contributed to a EUR8.4bn day for the IG single currency market. In turn that put the weekly euro haul at EUR14.325bn (ex-HY) and beyond the average estimate of EUR11bn put forward in our issuance survey.
** El Corte Ingles EUR500m no grow 8yr
** Brandenburg EUR500m no grow 6yr LSA
Three borrowers emerged in the US on Wednesday to raise USD7.2bn across three tranches. JP Morgan and Citigroup were the first banks to tap the bond market following better-than-expected earnings the previous morning. JP Morgan launched a USD4bn 11nc10 fixed-to-floating deal, while Citigroup added USD2.7bn in a junior subordinated PerpNC5 transaction. Golub Private Credit Fund rounded out the day with a USD500m 3yr deal. For more colour, see THE ENDGAME.
What to watch Thursday – Earnings & US Retail Sales
** Key Data: UK May ILO Unemployment Rate (07:00), UK May Average Weekly Earnings (07:00), EC Jun F CPI (10:00), US Jun Retail Sales (13:30), US Jun Import Price Index (13:30), US Weekly Jobless Claims (13:30), US Jul Philly Fed Business Outlook (13:30), US May Business Inventories (15:00) and US Jul NAHB Housing Market Index (15:00)
** Key Events: ECB’s Villeroy (10:30) speaks, as do Fed’s Kugler (15:00), Daly (17:45), Cook (18:30) & Waller (23:30)
** Auctions: SP to sell EUR5-6bn 2030, 2035 & 2048 Bonds (09:30), FR to sell EUR10-12bn 2028, 2030 & 2031 OATs (09:50), as well as EUR1-1.5bn 2034, 2038 & 2039 Linkers (10:50) and UK to sell GBP4.75bn 2030 Gilts (10:00)
** Earnings: 18 Stoxx600 & 12 S&P500 companies report. Former includes Nordea & Swedbank, latter includes Netflix
All times BST