A look at the day ahead in U.S. and global markets from Mike Dolan

As the week's tariff rollercoaster levels out a bit, Wall Street stocks are tilting lower again - clouded by a poor reception for Alphabet's results, lingering China tariff hike plans and fresh interest rate rise speculation in Japan.

U.S. stock futures were back in the red ahead of Wednesday's bell as shares in megacap Alphabet plunged 7% overnight. The drop came amid doubts about the Google parent's cloud computing business, much like Microsoft last week, and anxiety about its huge investment in artificial intelligence - especially in the light of last week's DeepSeek news.

Following the previous day's sideswipe from Beijing on an anti-monopoly probe into Google there, Alphabet said it would spend $75 billion on its AI buildout this year, 29% more than Wall Street expected, and it missed its cloud revenue target.

Adding to the overnight pressure, shares in Advanced Micro Devices fell 9% after the company's AI chip revenue failed to meet lofty expectations.

With a deluge of earnings updates across the world this week, the news on global macro policy did not help either.

Japan's yen surged to its best levels of the year so far after domestic wage numbers rekindled talk of another Bank of Japan rate hike this year.

Japan's December inflation-adjusted real wages rose 0.6% year-on-year thanks to a wintertime bonus bump, with government officials expressing optimism that wage hike momentum is growing.

"We will continue to raise interest rates and adjust the degree of monetary support, if underlying inflation accelerates toward 2% as we project," Kazuhiro Masaki, director-general of the BOJ's monetary affairs department, told parliament.

As Chinese markets returned from the week-long lunar new year holiday, there was a lot to unpack - not least this week's 10% U.S. tariff hikes on Chinese imports, planned retaliation from Beijing by Feb. 10 and the DeepSeek AI developments.

But both mainland China and Hong Kong stock indexes fell on Wednesday as prior day's hopes of a meeting between U.S. President Donald Trump and China's President Xi Jinping to avert the tariff war were doused. U.S. plans to slap tariffs on Canada and Mexico were postponed for a month this week after similar calls between Trump and the leaders of those countries.

Trump said late on Tuesday he was in no hurry to speak to Xi. White House spokeswoman Karoline Leavitt told reporters a Trump-Xi call still needed to be scheduled.

EMPLOYMENT NUMBERS

Adding to the tension, the U.S. Postal Service said it would temporarily suspend parcels from China and Hong Kong as Trump ended a trade provision this week used by retailers including Temu and Shein to ship low-value packages duty-free to America.

And in the background, private sector business surveys showed China's services activity expanded at a slower pace in January, with the Lunar New Year holidays worsening employment.

The currency reaction was a bit more mixed, however. While the onshore yuan, guided closely by the People's Bank of China, was reset slightly weaker after the holiday break, the offshore yuan strengthened for the second day.

The combination of yen and yuan gains weighed on the dollar index more broadly.

And a retreat in U.S. Treasury yields dragged on the greenback to boot, with the 10-year slipping back below 4.5%.

Treasury yields ebbed on a mix of trade war angst and the latest employment update, which showed U.S. job openings falling more than expected in December. That takes some of the perceived heat out of the labor market and allows more wiggle room for the Federal Reserve to keep easing policy.

"I continue to see a gradual reduction in the level of monetary policy restraint placed on the economy as we move toward a more neutral stance," Fed Vice Chair Philip Jefferson said on Tuesday. "That said, I do not think we need to be in a hurry to change our stance."

Two Fed cuts this year are virtually fully priced for the year - resuming around mid-year.

In a big week for employment numbers, private sector payrolls for January will be released by ADP later on Wednesday and the national payrolls report is due on Friday.

Elsewhere, geopolitical tension added to trade war worries - with Trump's statement on the United States taking over Gaza confounding many who assumed he wanted to withdraw the country from foreign conflicts and remove expensive U.S. military and aid funds from around the world.

Much like the puzzlement over similar contradictions in trade and currency policy, the statement left more confusion about the road ahead.

Gold seemed the only real beneficiary of the uncertainty and set another new record with gains of almost 10% for the year so far.

In other corporate news, the Nikkei newspaper said Japan's Nissan will call off merger talks with rival Honda - abandoning a tie-up that would have created the world's third biggest automaker. Nissan shares fell 4% and Honda's rose 8%.

Key developments that should provide more direction to U.S. markets later on Wednesday:

* U.S. January private sector payrolls from ADP, Jan service sector surveys from ISM and S&PGlobal, December international trade balance; Canada Dec international trade

* Federal Reserve Vice Chair Philip Jefferson, Fed Board Governor Michelle Bowma, Chicago Fed President Austan Goolsbee and Richmond Fed chief Thomas Barkin all speak; European Central Bank chief economist Philip Lane speaks in Washington

* U.S. corporate earnings: Qualcomm, Boston Scientific, Walt Disney, Ford, News Corp, T Rowe Price, MetLife, Uber, Mckesson, Coognizant, Corpay, Allstate, Emereson Electric, Align Technology, Molina, STERIS, Bunge, Johnson Controls, etc

(By Mike Dolan, editing by XXXX; [email protected])