A look at the day ahead in U.S. and global markets from Mike Dolan
As a hectic January ends, world markets continue to brace for U.S. import tariff rises as soon as this weekend - lifting the dollar in anticipation as interest rates in Europe tumble.
Despite the currency market anxiety, stocks pushed higher - with index futures adding to Thursday's Wall Street gains as the world's most valuable company Apple (NASDAQ:AAPL) rallied 4% ahead of today's bell. Apple's upbeat outlook overnight impressed even in the face of a slight quarterly earnings miss.
But U.S. President Donald Trump stole the show again late yesterday as he kept markets guessing about the extent of promised 25% import tariffs on Canada and Mexico on Saturday.
"We may or may not. We're going to make that determination probably tonight," Trump said, when asked whether the tariffs would cover Canadian and Mexican oil.
Aiming to push the two largest U.S. trading partners to take action to halt illegal migrants and shipments of fentanyl, Trump said the level of North American duties "may or may not rise with time."
The Canadian dollar hit near five-year lows after losing 1% in a week of another Bank of Canada rate cut. The Mexican peso steadied from its steep fall from the previous session but remained on track for its worst weekly performance since October with a drop of almost 2%.
The dollar was higher more broadly, with the euro hitting 10-day lows following the European Central Bank's expected quarter-point interest rate cut on Thursday.
Even as the Federal Reserve paused its rate cut campaign this week, the rationale for ECB easing was underlined by news of a contraction in German and French economies in the final quarter of last year, and January inflation readings from France and the main German states were also below forecasts.
ECB sources said another rate cut is likely to go through in March without much resistance among policymakers before the debate between them on further easing becomes more heated. Other reports said the central bank may stop describing its monetary policy stance as "restrictive" after the March decision.
European stocks, however, continued to push higher to new records in the thick of the earnings season there - with Novartis (SIX:NOVN) up 2.4% after the drugmaker posted a hefty quarterly income beat.
Euro zone stocks' near 8% gain for January in dollar terms is more than twice that of the S&P500.
Back on Wall Street, the earnings deluge and this week's curve ball from China on the DeepSeek artificial intelligence model have distracted from the macro and political picture to some degree.
Alongside the positive reception to Apple's update overnight, Intel (NASDAQ:INTC) also rallied overnight after its report. Even though Microsoft (NASDAQ:MSFT) lost 6% on Thursday amid cloud computing worries, another standout earnings-day gain was the 13% jump in IBM (NYSE:IBM) - its biggest daily percentage gain since 1999.
Big Oil tops Friday's corporate updates. Chevron (NYSE:CVX) reported earnings below estimates as weak margins pushed its refining business into a loss for the first time since 2020.
With the Fed on hold, there was a mixed economic data picture. Fourth-quarter gross domestic product growth slowed to 2.25%, broadly as expected after the prior day's trade report, but weekly jobless claims fell more than forecast too.
Friday brings a December readout on the Fed's favored personal consumption expenditures (PCE) inflation gauge. The annual 'core' PCE inflation rate is expected to have held steady at 2.8%.
Elsewhere, Treasury yields were a touch higher above 4.5%.
Gold hit a record high - and was set for its best month since March 2024 as investors sought the safe-haven metal due to heightened U.S. tariff concerns.
Key developments that should provide more direction to U.S. markets later on Friday:
* US December personal consumption expenditures (PCE) inflation gauge, personal income and spending, Q4 employment costs, January Chicago business survey
* Federal Reserve Board Governor Michelle Bowman speaks
* US corporate earnings: AbbVie (NYSE:ABBV), Exxon (NYSE:XOM), Chevron, Colgate Palmolive, Aon (NYSE:AON), Franklin Resources (NYSE:BEN), WW Grainger (NYSE:GWW), LyondellBasell, Revvity, Broadridge, Church & Dwight (NYSE:CHD), Phillips 66 (NYSE:PSX), Charter Communications (NASDAQ:CHTR)
(By Mike Dolan, editing by William Maclean; mike.dolan@thomsonreuters.com)