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

Dolan

With tariff tensions easing a touch for now and price pressures

coming off the boil, U.S. Treasury yields have plunged this week

- defusing a tense January for bond markets and helping stocks

find a foothold in the thick of a noisy earnings season.

Although they backed up a touch early Thursday, 10-year

Treasury yields have sliced below 4.5% - dropping

more than 10 basis points at one point on Wednesday to their

lowest of the year as January ISM service sector readings showed

a surprise drop in the prices paid by businesses.

Along with the prior day's news on some cooling of the labor

market and this week's delays in U.S. tariff hikes on Mexico and

Canada, the drop in yields came largely independently of futures

thinking on Federal Reserve interest rates.

With Fed officials still minded to keep easing slowly and

gradually as they assess President Donald Trump's economic

policies, two cuts this year remain the best bet. Noted Fed

board dove Chris Waller is due to speak later today.

But the drop in long yields was encouraged by a mix of this

week's quarterly Treasury refunding details, a geopolitical

safety bid at the margin and comments from new Treasury

Secretary Scott Bessent on the administration's stance on lower

borrowing rates.

Despite some fears of a future "terming out" of the

Treasury's heavy debt-raising schedule to longer-term tenors,

the refunding announcement on Wednesday showed no increase in

size of note and bond auctions through the April quarter. And,

crucially, there was no guidance on when they would increase.

That was a relief.

Bessent then said that, while Trump wants lower interest

rates, he would not ask the Fed to cut them - putting the

emphasis instead on getting 10-year yields down.

If the economy is de-regulated with more private sector

investment, "interest rates will take care of themselves and the

dollar will take care of itself", he told Fox Business Network.

Falling crude oil prices this week have also calmed

the horses.

As debt yields clawed back a few basis points on Thursday,

the dollar also firmed up against most currencies - even though

dollar/yen briefly touched its lowest in almost a month as Bank

of Japan rate rise speculation has turned up a notch on this

week's wage rise data there.

But Japan aside, central bank easing elsewhere is set to

continue apace.

GILT TRIP

After rate cuts last week from the European Central Bank and

Bank of Canada, the Bank of England is widely expected to cut

its key policy rates on Thursday by a quarter point - with at

least two more pencilled in by markets for the rest of the year.

Sterling was steady ahead of the expected

cut - even with some speculation at least one member of the BoE

council may call for a bigger cut.

And with the better mood in sovereign bond markets in

general, recently restive British government bonds continued

rallying hard. The 30-year "gilt" yield is testing

5% for the first time in six weeks - almost 50bp below January's

multi-decade peaks.

European stocks more broadly hit another record

high - clocking 7% gains for the year so far and more than twice

the gains in the S&P500.

In China, where U.S. tariff rises and retaliatory measures

from Beijing appear to be going ahead without signs yet of a

compromise between the two, the offshore yuan weakened

slightly but stocks advanced smartly.

Mainland Chinese and Hong Kong indexes

gained more than 1%, driven by the tech sector as investors

continued to bet on domestic artificial intelligence firms

following Chinese AI start-up DeepSeek's recent breakthrough.

Back on Wall Street, the S&P500 gained on Wednesday

despite heavy earnings-day losses for megacap Alphabet

, and futures were higher again ahead of today's bell.

With Amazon ( AMZN ) due to report after the close on

Thursday, other earnings continue to be a mixed bag.

Shares in Disney ( DIS ) lost early gains made after a

strong profit beat, as investors fretted about subscriber

numbers in its streaming business. Uber ( UBER ) dropped 8%,

meantime, after the ride-hailing firm forecast bookings below

estimates.

With Friday's January payrolls data top of this week's

economic diary, Thursday brings details of weekly jobless

claims, January layoffs and fourth quarter productivity and

labor cost numbers.

Key developments that should provide more direction to U.S.

markets later on Thursday:

* Bank of England policy decision, monetary policy report and

press conference

* US January layoffs from Challenger, weekly jobless claims, Q4

productivity and unit labor costs, New York Fed's Jan global

supply chain pressure index

* Federal Reserve Board Governor Christopher Waller, Fed Vice

Chair Philip Jefferson and Dallas Fed President Lorie Logan all

speak

* US corporate earnings: Amazon ( AMZN ), Eli Lilly ( LLY ), Bristol-Myers

Squibb ( BMY ), ConocoPhillips ( COP ), Snap-On, Expedia ( EXPE ), VeriSign ( VRSN ), Principal

Financial, Honeywell ( HON ), Kellanova ( K ), Ralph Lauren, Mohawk,

Borgwarner ( BWA ), Philip Morris ( PM ), Hilton, Hershey, Microchip

Technology ( MCHP ), Mettler Toledo ( MTD ), Intercontinental Exchange, Equifax ( EFX ),

Camden Property ( CPT ), Regency Centers ( REG ), Zimmer Biomat, Yum! etc

* Japan Prime Minister Shigeru Ishiba visits United States,

meets US President Donald Trump

(By Mike Dolan, editing by Alex Richardson

[email protected])