US rate cut expectations grow as economic data sours

• Europe continues to outperform despite weak German Gfk survey.

• US rate cut expectations grow as economic data sours.

• Nvidia earnings in focus.

European markets continue to outperform, with indices throughout the region pushing sharply higher in early trade despite the US-led jitters. Yesterday’s Conference Board consumer sentiment survey provided the basis for yet another sell-off in US 10-year yields, as economic growth concerns continued to build in the week of Fridays services PMI contraction. However, Europe continues to provide a relative haven for traders, with the prospect of an end to the Russia-Ukraine war bringing with it significant potential benefits for sentiment in the region. While Donald Trump’s somewhat cold approach to Europe may provide a warning sign to some, the comments from Friedrich Merz over the need for greater independence from the US does highlight the prospect of a more expansive and self-sufficient Europe. Unfortunately, the continued decline in the Gfk consumer climate survey seen in Germany this morning does highlight the task ahead for the new Chancellor.

US markets are expected to rebound an early trade today, although it is perhaps too soon to call the bottom on this current episode. Despite fears over a rise in US inflation, we have seen sharp declines in US treasury yields as economic data continues to underperform. The benefit of any near-term weakness appears to be that we could see greater monetary easing from the federal reserve with markets now pricing roughly 55-basis points worth of easing this year. With the core PCE price index figure due on Friday, any surge in inflation could reverse the recent decline in yields to the benefit of the dollar. However, with a trade war between the US and their Mexican/Canadian neighbours potentially kicking off next week, markets appear to be focusing on the economic suffering associated with this initial phase of the Trump Presidency.

Artificial intelligence looks to take centre stage today, with Nvidia and Salesforce both reporting after the close. Nvidia comes into this report off the back of a decline of almost 10% in the past three trading sessions alone, and the weakness seen over the course of 2025 does at least ease some of the talk around the stock being overbought. Given the fact that Nvidia has beat market expectations on both top and bottom line in every report in the past two-years, it stands to reason that we are highly likely to see the same again today. However, the rollout of the new Blackwell chip will likely provide the key factor for the market reaction, with traders likely to focus heavily on the outlook for sales going forward.