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1. Futures subduedStock futures on Wall Street were subdued on Tuesday, as traders looked ahead to key economic data this week and a fresh slate of corporate earnings.By 03:13 ET (08:13 GMT), the Dow futures contract, S&P 500 futures, and Nasdaq 100 futures were all mostly unchanged.The main averages ended the prior session slightly lower, in a sign that an AI-fueled rally in equities last week was losing some steam. The benchmark S&P 500 dipped by 0.4%, the tech-heavy Nasdaq Composite shed 0.1%, and the blue chip Dow Jones Industrial Average fell by 0.2%.Weighing on sentiment on Monday were comments from Kansas City Federal Reserve Bank President Jeffrey Schmid, who was giving his first policy speech since starting in the role last August. Schmid was the latest Fed official to stress that there is no rush to “preemptively” bring interest rates down from more than two-decade highs due to sticky inflation.Fed policymakers and markets alike will have more economic data to pour through in the coming days. Updated fourth-quarter U.S. gross domestic product figures are scheduled to be released on Wednesday, while the personal consumption expenditures price index — a key inflation gauge — is set to be published on Thursday.2. Lowe’s highlights earnings calendarInvestors will also be keeping an eye on an ongoing parade of quarterly returns.On Tuesday, Lowe’s is expected to unveil its results for the three month period ended in January. Like peer Home Depot (NYSE:HD), the DIY goods retailer has offered a relatively downbeat assessment of customer demand.In November, Lowe’s slashed its full-year earnings target, flagging that inflation-hit shoppers are ratcheting down spending on home renovation projects. Chief Executive Marvin Ellison told Reuters at the time that the North Carolina-based group has seen a “greater-than-expected pullback” in discretionary expenditures on items like appliances, kitchen goods, and home decor.Lowe’s now estimates that annual comparable sales will decline by 5%, down from its prior guidance of a 2% to 4% drop.Other firms reporting their latest results today include car parts seller AutoZone (NYSE:AZO) and fruit spreads maker The J.M. Smucker Company (NYSE:SJM).3. Bitcoin briefly clears $57,000Bitcoin prices touched a two-year high on Tuesday, boosted largely by indications of sustained capital inflows into spot exchange-traded funds which were launched earlier this year.The world’s largest cryptocurrency jumped nearly 10% to $56,293.4 by 03:19 ET. The token was less than $14,000 away from a lifetime high hit during a bull run in late-2021.Gains in Bitcoin, along with the broader crypto market, came as a report from digital asset manager Coinshares showed crypto investment products saw a fourth straight week of capital inflows.4. Disney shakes up movie studio leadershipWalt Disney (NYSE:DIS) has unveiled leadership changes at its key live action movie studio following a string of recent box office flops like “Haunted Mansion” and “Jungle Cruise”.David Greenbaum, who previously served as the president of Searchlight Pictures and has overseen the release of several critically-acclaimed titles, will replace long-time Walt Disney Studios Motion Picture Production president Sean Bailey.Pressure has been increasing on Disney’s management to revive the division. Apart from 2022’s “Avatar: The Way of Water,” Disney has not produced a film that has grossed $1 billion since the latest installment of its Star Wars franchise was released in 2019.Chief Executive Bob Iger has said that the entertainment giant’s studios have “lost focus,” arguing that the business focused on quantity instead of quality.5. Oil ticks higherOil prices rose in European trade on Tuesday, extending the prior session’s gains, as fears of tighter supplies have supported prices this week.Still, crude prices remained largely within a $75 to $85 a barrel range established over the past two months, as any major price gains were held back by concerns that sticky inflation and higher-for-longer interest rates will weigh on demand.Brent oil futures expiring in April climbed 0.3% to $82.80 a barrel, while West Texas Intermediate crude futures advanced 0.3% to $77.83 a barrel by 03:19 ET.Goldman Sachs analysts said in a recent note that they largely expected oil to remain within $70 to $90 a barrel in the near-term. More

LONDON (Reuters) – European private lending activity has rebounded to levels last seen in mid-2022, new data from Deloitte showed on Tuesday, in a sign investors are piling in to risky corporate debt as they anticipate European Central Bank interest rate cuts this year. Private debt funds, which mostly lend at high interest rates to indebted companies backed by buyout houses, extended 189 loans in the final quarter of 2023, the accounting group said, the most since the second quarter of 2022, just before the ECB first raised interest rates. Andrew Cruickshank, a Deloitte director and the study’s author, said private debt deal volumes were likely still rising this year after credit markets opened up to riskier borrowers, even as the ECB keeps rates at record highs. “From our own work in progress, activity seems to be higher than it was in the final two quarters of last year,” said Cruickshank, who advises European companies on private debt deals. The turnaround in private markets, where the number of deals in Europe slumped in the second quarter of 2023 to the lowest since 2020 according to Deloitte, has echoed a revival in the market for bonds issued by risky companies. Sales of European junk bonds – issued by companies whose debt is rated as speculative – rose 51% in January from the same month last year, data from ratings agency S&P Global showed. Debt investors spent much of last year worrying that tight financing conditions would cause weaker companies to default on borrowings. Now, the iTraxx Europe Crossover index, which measures the cost of insuring against debt defaults in a basket of European junk bonds, is trading at around a two-year low of 302 basis points (bps), down from 406 bps in September.The rapid loosening of credit conditions ahead of any move by the ECB to cut rates has unsettled some of the central bank’s policymakers. Governing council member Isabel Schnabel said at a university lecture in Milan last week that financial conditions had loosened substantially because markets were anticipating rate cuts, creating more need for caution. European companies, meanwhile, have been benefiting from current accommodative conditions to refinance existing loans at cheaper rates. A fifth of European private debt transactions in the final quarter of last year were refinancing deals instead of new loans, the Deloitte study showed. Paul Watters, senior director at S&P, said this trend was widespread across debt markets. “We’ve seen an awful lot of repricing and refinancing,” he said. “Companies that are taking advantage of this window (are) worried about market sentiment changing later in the year.” More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.This article is an on-site version of our Europe Express newsletter. Sign up here to get the newsletter sent straight to your inbox every weekday and Saturday morningGood morning. News to start: French President Emmanuel Macron last night said sending western troops to fight in Ukraine “could not be ruled out” and that Paris would drop its longstanding opposition to purchasing emergency artillery supplies for Kyiv from outside the EU. Today, Denmark’s Prime Minister Mette Frederiksen tells us that her tough migration stance is a pan-European vote-winner, while our trade correspondent previews this week’s World Trade Organization gathering.Mette ideasEurope’s Socialists are heading for losses in June’s European elections amid a rightwing surge. So what can they learn from Frederiksen, one of their few prime ministers? Context: Polls suggest the Socialists could drop from 154 to 140 seats in the European parliament, but remain the second-largest force. Populist and far-right groups could add around 36 seats.Denmark’s Frederiksen told Andy Bounds and Richard Milne that her hard line on crime and immigration was popular with traditional, poorer leftwing voters. “An unsafe society is always a bigger challenge for people without a lot of opportunities. If you have the money, you will always be able to defend yourself,” she said.The rich could choose where to live and where to send their children to school, Frederiksen pointed out in an interview where she also said “naive” Europe must curb welfare spending and ramp up funding for defence.Denmark’s tough migration policy — it closed its borders to refugees from Syria in 2015 — has attracted much criticism. But it is fast becoming a model for the EU.Even neighbouring Germany is trying to cut numbers and considering outsourcing the processing of claims overseas, as Denmark has — unsuccessfully — tried. EU governments agreed a new pact to toughen border security, and inked agreements with countries such as Tunisia, paying autocrats cash to curb migration.Frederiksen’s hawkish comments come as the Socialists’ main rival, the centre-right European People’s party, also toughens its rhetoric on migration in a bid to appeal to voters who may be tempted to vote for far-right parties.The Danish leader said Europe had to “be in control again”. “It’s smugglers who decide who will enter the European Union. And they don’t really care about the consequences for these poor people. And they don’t care if people actually have a need for protection,” she added.Her Social Democrats are expected to hold their own with 22 per cent of the vote in Denmark in June, similar to what they gained in the last European elections in 2019.Frederiksen is seen as a dark-horse candidate for president of the European Council. The Socialists’ second place gives them the pick, and favourite António Costa of Portugal had to resign as premier because of a corruption probe.Is the 46-year-old interested? “I have never asked for an international job. I am happy about being a Danish prime minister,” is her diplomatic answer. She is however, effusive about her possible working partner, the European Commission president: “I think she has been strong and powerful, what she did during Covid-19 and now the war. I don’t have any negative things to say about Ursula von der Leyen.”[embedded content]Chart du jour: One of usHungary’s parliament yesterday approved Sweden’s bid to become Nato’s 32nd member, redrawing the geopolitical map of northern Europe.WTO is going on?A big international meeting requiring unanimous agreement, and a couple of countries threatening to veto everything. No, this is not another EU summit but the World Trade Organization ministerial conference, writes Andy Bounds.Context: Roughly every two years, trade ministers meet to try to improve the workings of the rules-based global trade system. Recently the task has been to prevent its collapse.The ministerial conference — or MC13 — kicked off yesterday in Abu Dhabi and is a rerun of 2022’s MC12. First, countries must agree to extend an exemption from customs duties for digital goods — otherwise we will all pay extra for streaming, software updates and premium social media subscriptions. Some governments, such as India and Indonesia, argue the exemption favours western countries who produce much of the content. They are threatening to block an extension, which requires unanimity. India — the Hungary of the WTO — is also obstructing progress in talks to eliminate subsidies for fishing in areas where stocks are dangerously low, and, along with many others, cuts to agricultural subsidies. Similarly to MC12, diplomats forecast that India is likely to give way on digital goods in return for concessions on other issues, and claim credit for clinching a successful outcome. As John Clarke, a former European Commission trade negotiator, noted on X, “The big question at MC13 is what will countries pay India to continue the moratorium?”What to watch today European parliament votes on contentious Nature Restoration Law and EU budget review.Prime ministers of the Visegrad group of Poland, Czech Republic, Hungary and Slovakia meet in Prague.Now read theseRecommended newsletters for you Britain after Brexit — Keep up to date with the latest developments as the UK economy adjusts to life outside the EU. Sign up hereChris Giles on Central Banks — Your essential guide to money, interest rates, inflation and what central banks are thinking. Sign up hereAre you enjoying Europe Express? Sign up here to have it delivered straight to your inbox every workday at 7am CET and on Saturdays at noon CET. Do tell us what you think, we love to hear from you: [email protected]. Keep up with the latest European stories @FT Europe More

LONDON (Reuters) – Euro zone bonds are trading more in sync with their U.S. peers than ever before, as investors ignore the slowdown in Europe and remain laser-focused on inflation and interest rates, driving correlations between the two markets to a record high in recent weeks.Although the enormous U.S. bond market typically exerts a big influence, the tight correlations have puzzled some bond analysts, given the weakness of the euro zone economy.American bank State Street (NYSE:STT) found the 52-week correlation between moves in German and U.S. two-year bond yields has risen to a record high. Correlations between longer bonds are also highly elevated.”The U.S. has always driven everything, but not to this magnitude,” said Jon Jonsson, senior fixed income portfolio manager at Neuberger Berman. “The correlations have gone up quite dramatically, this is really stunning.”He added: “As an investor, it’s difficult. You try to make country specific-bets, but you’re not getting any benefit.”The U.S. economy has powered ahead of Europe’s, where governments spent less during the pandemic and industries have been hit hard by the energy crisis.Euro zone gross domestic product grew just 0.5% in 2023, while U.S. GDP rose 2.5%. Survey-based data shows the U.S. private sector is growing, while the euro zone’s is contracting.But bond investors and strategists say inflation has become almost the sole focus of markets. They also note that the European Central Bank typically follows the Federal Reserve, and the U.S. bond market is a behemoth that dictates conditions around the world.INFLATION OBSESSIONInflation began to surge in the euro zone and the United States in 2021, prompting the Fed to hike rates in March 2022 and the ECB to follow in July. Price growth peaked at 9.1% in the U.S. in June 2022, four months before it topped out at 10.6% in the euro zone, before falling to around 3% in both.The lag in inflation and interest rates in the euro zone has left investors looking to the U.S. economy for hints about what might be coming.”A common factor has been driving inflation in the U.S. and the euro zone…the onset of COVID and the resolution of the adverse supply shock,” said Stephen Jen, CEO of investment firm Eurizon SLJ Capital. “Bond yields, therefore, are tracking each other primarily reflecting the high correlation of inflation.”ECB Governing Council member Robert Holzmann told Bloomberg on Friday: “Typically, the Fed in the last few years has always gone first by about half a year, so I would assume…we would also follow with delay,” noting that the “currency areas are interrelated”.KING DOLLARU.S. bond yields have long been the benchmark for borrowing costs everywhere. But that position has grown as U.S. administrations have issued debt at a faster pace than Europe to tackle the financial crisis and COVID-19 slump.There is $21.9 trillion of U.S. government securities outstanding, excluding that held by the central bank, according to Barclays estimates. That compares to $7.5 trillion for the euro zone and $1.2 trillion for Germany, its biggest economy.As sovereign bonds are imperfect substitutes for each other and that money can flow around the world easily, when the U.S. moves, everything else tends to move in the same direction.Yet many investors think record correlations are unlikely to last. “We expect this correlation to fall back as we begin to see more of a divergence in macro and policy outcomes,” said Julian Le Beron, chief investment officer for core fixed income at Allianz (ETR:ALVG) Global Investors.Michael Metcalfe, head of macro strategy at State Street, said the correlation in bonds was likely subduing volatility in currency markets, which are driven by cash flowing towards countries with higher relative bond yields. A divergence in bond markets could therefore ignite volatility in FX, which has hit multi-year lows this month, he said.Barclays economists think the ECB is in fact likely to cut interest rates in April ahead of the Fed in June, given the weaker euro zone economy. “Say the ECB makes significant revisions to their forecasts, and takes a dovish turn, then it again bodes well for (German) Bunds to outperform Treasuries,” said Barclays’ head of euro rates strategy Rohan Khanna. More

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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Chinese regulators are taking measures to keep the renminbi’s dollar exchange rate stable as Beijing seeks to bolster confidence in the country’s currency and economy ahead of a key leadership summit.The moves from authorities — such as holding off on cuts to short-term interest rates and keeping the currency’s dollar trading band firm despite the spot price pushing towards its official floor — have helped to stave off further falls for the currency, which is down 1.4 per cent this year at about Rmb7.1 to the dollar.Those efforts come as markets look forward to potential policy signals from the “two sessions” gathering of top Communist party cadres in Beijing, set to begin on March 4 and where authorities have historically sought to minimise market volatility.Strategists and analysts said the People’s Bank of China was focused on fending off short-term pressure from the interest rate differential between Chinese and US government debt, which has widened this year as expectations of an imminent rate cut by the US Federal Reserve have faded.Higher yields on dollar debt relative to renminbi bonds stoked outflows from China’s bond market for much of last year, piling downward pressure on the Chinese currency.Mansoor Mohi-uddin, chief economist at Bank of Singapore, said China’s move last week to lower its mortgage-linked five-year lending rate, while leaving the one-year rate untouched, showed that top leaders were wary of looser monetary policy, which could risk widening the interest rate differential and weakening the exchange rate further.“They’re clearly focused on the exchange rate implications of easing monetary policy for the renminbi,” Mohi-uddin said. “What the PBoC is doing is trying to buy itself time until the Fed starts cutting rates.”In line with analyst expectations of eventual relief from US rate cuts later in the year, forward markets tip the renminbi to end the year slightly stronger against the dollar at about Rmb7.Ju Wang, head of greater China foreign exchange and rates strategy at BNP Paribas, said Beijing was already demonstrating a clear preference for a stable exchange rate through its daily fixing of the renminbi’s dollar trading band — around which the currency trades 2 per cent against the dollar in either direction.“The pattern for the fixing is very stable, and by the second half the rates differential will narrow,” Wang said. “But in the second half, there is the US presidential election, and if [Donald] Trump wins . . . China would allow the currency to adjust proportionally to any tariffs.”Trump, the Republican frontrunner, has said he could impose a 60 per cent tariff on Chinese imports if elected in November.“That’s essentially saying we’re at the end of the era of normal trade between the US and China,” Wang said, forecasting that the renminbi would drop by at least 10 per cent from its current level to about Rmb8 against the dollar.Economists at Capital Economics have forecast an even sharper fall against the dollar of about 18 per cent to Rmb8.5 if Trump follows through on his tariffs threat.“Donald Trump’s previous tariffs did surprisingly little damage to China’s economy,” they wrote in a recent note, “but China may find it harder to shrug off the damage in a rematch.” More