The Morning Brief
Futures are pointing higher into a quad-witching Friday, but the overnight tape gave traders three things to reconcile at once: a Bank of Japan rate hike, an Iran decision hanging over crude, and chip bulls doubling down on AI demand.
The Bank of Japan raised rates to 1.25% from 1.00% overnight, its latest hike as the central bank leans into normalization even as inflation cools: Japan's headline CPI rose just 0.1% month over month and core CPI came in at 1.7% year over year, a touch under the 1.8% estimate and prior reading. Japan equity proxies (BBJP, DXJ) are both sitting on solid year-to-date gains near 20%, and the yen complex will be one to watch as the hike lands. In Europe, the UK delivered a clean beat: retail sales rose 0.5% month over month against a forecast decline, with the year-over-year print at 2.4% versus 1.9% expected, and core sales even stronger. Germany's producer prices ran hot too, up 1.1% month over month versus 0.6% expected, another data point complicating the ECB's path. UK equities (EWU) are up on the year and the data adds to the case that the developed-market disinflation trade isn't linear.
The bigger overhang is Iran. Headlines overnight had Trump weighing a "big decision" on military strikes, and that kept a bid under crude even as some outlets argue the Israel-Iran-linked spike in prices is starting to sow the seeds of its own demand destruction. Oil funds (USO) are still up sharply year over year despite easing slightly on the day, and commentary is circulating that $4.43 gasoline is reviving the "inflation isn't over" narrative right as the Fed's rate path is in question. On rates, KKR raised its 10-year Treasury yield forecast to 5.1%, a higher-for-longer call that's worth watching against long bonds (TLT), up on the day but still deeply negative year to date.
Nvidia (NVDA)
CEO Jensen Huang pushed back hard on AI slowdown chatter overnight, telling reporters he expects chip sales to double next year. That lines up with Anthropic's disclosure that its Claude models now handle 26% of the company's AI R&D, up from just 1% in March, and comes alongside a Reuters exclusive that China's CXMT is pushing into flash memory to challenge Samsung and YMTC amid a global shortage, with Micron's largest China production base also facing strike threats over bonus pay. NVDA is up sharply on the day and has room to keep running on that setup, with megacap tech (QQQ) tracking the move.
On single names: Alaunos Therapeutics (TCRT) jumped after a patent filing, Xenon Pharmaceuticals (XENE) and Ultragenyx (RARE) both moved on trial and pricing news, BlackBerry (BB) is trending into its print, and Cooper Cos is in activist Jana Partners' sights over a CEO change. Crypto stayed volatile with (COIN) up on Grayscale's bullish bitcoin call and Bessent's sanctions on an Iran-linked exchange.
On the radar: quad witching flows into the close, any headline on Iran strikes, and follow-through in chip names after Huang's comments.
Bottom line: the market is pricing an AI-led rally against a rate and geopolitical backdrop that's getting noisier, and today's witching-driven volume could amplify both.