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

Dolan

Retaining a persistent, if uncertain, threat of new tariffs,

U.S. President Donald Trump quickly switched his attention to

technology and artificial intelligence this week - exciting the

red-hot sector that's about to report its latest earnings round.

Trump on Tuesday announced a private sector investment of up

to $500 billion to fund infrastructure for artificial

intelligence, aiming to outpace rival nations in the

business-critical technology.

The newly sworn-in President said ChatGPT creator OpenAI,

SoftBank and Oracle plan a joint venture

called Stargate, which he said will build data centers and

create more than 100,000 jobs in the United States.

Softbank shares soared more than 10% in Tokyo trading, while

Oracle surged 9% out of hours ahead of Wednesday's bell.

With the fizz back in tech, streaming giant Netflix ( NFLX )

burst 14% higher in premarket trade on Wednesday after

its latest earnings update revealed a record 18.9 million new

subscribers over the holiday quarter and plans for price hikes.

The renewed tech focus comes as the Nasdaq has

marginally underperformed the broader S&P500 so far this

year, with even Apple ( AAPL ) under a cloud on Tuesday despite

brisk Wall Street stock index gains. The Apple ( AAPL ) retreat allowed

AI-chip darling Nvidia ( NVDA ) to retake top spot as America's

most valuable company.

With some big industrial names topping the corporate diary

on Wednesday, and the first 10% of S&P500 firms pointing to

overall annual profit growth of almost 11% through the last

quarter, stock futures were up smartly before the open.

The S&P500 closed above the 6,000 mark on Tuesday for the

first time this year - less than 1% from record highs.

Despite the AI tilt, Trump continued to rattle the tariff

sabre overnight - without necessarily giving much additional

clarity on where exactly or when they may be coming.

Trump vowed to hit the "very, very bad" European Union with

tariffs and said his administration was also discussing a 10%

punitive duty on Chinese imports - blaming the trafficking of

fentanyl from China to the U.S. via Mexico and Canada.

Currency gyrations around the threats seemed to have calmed

down, however, with traders adopting a 'wait and see' mode and

assuming any moves will happen only after the countries in

question respond to Trump's main concerns.

The dollar index slipped to its lowest in two weeks,

with the euro clocking its best levels of the year so far

- even as European Central Bank officials speaking in Davos

lined up behind more interest rate cuts this year.

Even though exchange rate swings have seemed large this

week, implied currency volatility gauges have actually subsided.

Three-month dollar/yen 'vol' fell to its lowest since

July on Wednesday with the Bank of Japan's latest interest rate

hike now seen to be baked in. Equivalent euro vol measures

are the lowest since November, and even sterling

measures have returned to two-week lows.

European shares brushed off Trump's trade threats too, with

the STOXX600 index hitting a record high on Wednesday.

Addidas helped Germany's DAX to a new record

too and the sportswear brand jumped 6% after its latest results.

The near 6% gain in benchmark euro zone stock indexes

this year is twice that of the S&P500 in dollar terms

- with Bank of America's latest global fund manager claiming

allocations to European stocks this month were their second

largest allocation in a quarter of a century.

Chinese stocks were less enthusiastic about

being back in the tariff firing line, however, and fell back

about 1% on Wednesday - the yuan slipping too.

Despite the pre-inauguration phone call between Trump and

Chinese President XI Jinping last week, Trump appears to be

emboldened enough to publicly resume the trade war he started in

his first term.

Back in fixed income markets, the jittery start to the new

year seems to have calmed considerably.

A combination of lower oil prices - due in part to Trump's

plans to increase domestic drilling - and the lack of immediate

tariff hikes has helped to cosset Treasury yields

back at levels seen at the turn of the year.

After significant relief from U.S. inflation data last week,

Canada underlined the optimism on consumer prices on Tuesday

with an unexpectedly large drop in monthly prices that kept

annual inflation below the Bank of Canada's 2% target last

month.

Elsewhere, recently agitated British gilts also

outperformed this week as news of a big drop in UK hiring and

robust auction demand for the bonds offset higher public

borrowing numbers and pulled yields back to where they were at

the start of the year.

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

markets later on Tuesday:

* Canada December producer price inflation

* US corporate earnings: Halliburton, Procter & Gamble, Johnson

& Johnson, Discover Financial, Kinder Morgan, Steel Dynamics,

Abbott Laboratories, Travelers, Amphenol, Ge Vernova, TE

Connectivity, Textron, Teledyne

* World Economic Forum in Davos, including European Central Bank

President Christine Lagarde, Bundesbank President Joachim Nagel,

Bank of France chief Francois Villeroy de Galhau, Dutch central

bank boss Klaas Knot and European Union commissioner Valdis

Dombrovskis

* German Chancellor Olaf Scholz meets French President Emmanuel

Macron in Paris

* US Treasury sells $13 billion of 20-year bonds

(By Mike Dolan, editing by William Maclean

[email protected])