5 Things You Need to Know to Start Your Day: Americas

Good morning. The world braces for the possible return of Trump, the dollar hits a one-month high as aggressive rate cut bets ease and more [View in browser]( [Bloomberg]( Good morning. The world braces for the possible return of Trump, the dollar hits a one-month high as aggressive rate cut bets ease and more Wall Street heavyweights are set to report. Here’s what’s moving markets. — [Charlotte Hughes-Morgan](. Clear frontrunner Countries around the world are [preparing]( for Trump’s possible return to the White House, after the former US President cruised to victory in the Iowa Republican presidential caucuses and established himself as the party’s clear frontrunner. This put Trump on track for a Biden rematch. A [Trump victory]( in November could result in sweeping changes for US policies on trade, overseas conflicts, taxes and civil rights, concerns that will no doubt be front of mind for business leaders and policy makers at the World Economic Forum in [Davos]( today. Trump still faces 91 criminal charges in four separate cases, including some over his efforts to overturn the 2020 election. But so far the legal jeopardy has only energized his Republican supporters. Hear more on the [Bloomberg Daybreak]( podcast. Dollar surges The dollar hit a [one-month high]( as Treasury yields climbed on growing speculation that the Fed may hold back on cutting interest rates as early as March. The Bloomberg Dollar Spot Index rose 0.4% to its highest level since December 13, as cooling demand for risky assets boosted the greenback after Monday’s holiday. A possible pivot to rate cuts has been the focus of markets after a series of cooler inflation readings, but increasingly traders believe bets on more aggressive rate cuts may have been overdone. This comes after ECB Council member [Robert Holzmann]( said threats stemming from lingering inflation and geopolitical risks may prevent the ECB from lowering interest rates this year. Investors are awaiting a speech by Fed Governor Christopher Waller scheduled for later today. China’s bold stimulus effort China is considering [1 trillion yuan]( ($139 billion) of new debt issuance under a so-called special sovereign bond plan, as authorities seek more money to finance efforts to shore up the world’s second-largest economy. The proposal under discussion by senior policymakers would involve the sale of ultra-long sovereign bonds to fund projects related to food, energy, supply chains and urbanization. It would be the fourth sale of its kind in the past 26 years, and would highlight the shift in spending responsibility from local officials to Chinese central authorities. Meanwhile, as China’s unprecedented housing slump continues, major Chinese lender Ping An Bank has put 41 developers on a list of builders eligible for its [funding support](, as it considers more lending to a property sector in crisis. Apple pulls disputed tool Apple is planning to remove its [blood-oxygen feature]( from its latest smartwatches — the series 9 and Ultra 2 — to get around a US ban of the devices if an appeal of the decision fails. The plan was disclosed by tech company Masimo, which has been locked in a feud with Apple over patents related to the technology. The International Trade Commission ruled in October that Apple’s devices violated Masimo patents related to blood-oxygen measurement. That led Apple to pause sales of the smartwatches just ahead of Christmas, though an [interim stay]( allowed the company to bring the products back late last month. A decision on Apple's request for a permanent stay on the ban during its appeal is expected in the coming days. More major US banks report Wall Street heavyweights Morgan Stanley and Goldman Sachs are among the companies reporting results today. They’re expected to reveal a continued lull in investment banking activity as high borrowing costs, geopolitical tensions and recessionary risks dampen deal-making. At Morgan Stanley, investors will focus on the bank’s new leadership after CEO Ted Pick took the reins earlier this month. They’ll also be looking at details of  the bank’s wealth management strategy. At Goldman, eyes will be on a probe related to the bank’s consumer business. Last week’s spate of Wall Street earnings saw a disappointing quarter for [Citigroup]( as JPMorgan closed out the[most profitable year]( in US banking history. Three weeks into the new year, is it still a good idea to jump on some of the trades that everyone was talking about at the end of 2023? Do you think January returns are a good indicator of how the year will pan out for markets? Share your views in the latest MLIV Pulse [survey](. What We’ve Been Watching This is what’s caught our eye over the past 24 hours. - Iran hits [‘Israel Spy Base’](as Middle East tensions grow - Look ahead to what’s happening today at the [World Economic Forum]( in Davos - US Defense Secretary [leaves hospital]( after stay that caused uproar - A pessimist’s guide to [global economic risks]( in 2024 - Elon Musk pressures Tesla’s Board for another [massive pay day]( - [Biden Challenger]( Phillips floats Musk and Ackman for Cabinet roles - [Listen]( to Odd Lots: The massive economic impact if China invades Taiwan And finally, here's what Joe’s interested in this morning So far this year the stock market has been pretty quiet. The major indices are pretty much flat through the first half of January. Meanwhile the MOVE Index (which is basically the VIX for bonds) has fallen since the end of December. Speaking of the MOVE Index, last week on the Odd Lots podcast, [we interviewed its creator Harley Bassman]( about all things macro and the state of the bond market. One thing that Bassman flagged in our conversation that’s worth watching is where the action in the bond market is actually happening. Since late December, 10-year yields (the white line) are actually up modestly while 2-year yields have declined (as investors price in rate cuts coming in sooner.) As such, there's been a pretty significant re-steepening of the yield curve lately. The 2-10 spread is now its least inverted since October. A complete un-inversion of the curve could plausibly happen any day. What's interesting here is that we may be at the end of the rally in the long end of the Treasury curve. We saw rates on the 10-year go from about 5% (at the end of October) to a low of around 3.8% at the end of December. But since then they've hovered around 4%, even with the market pricing in more rate cuts. Of course if we got some kind of mega hard landing you would assume a big decline in long-term rates. But outside of that scenario, it's not obvious what pushes the long end down further. Of course, 4% isn't crazy high or anything. That's lower than where it was through much of the pre-GFC period. But it's about 100 bps higher than the peaks of the pre-Covid period. Follow Bloomberg's Joe Weisenthal on X [@TheStalwart]( Like Bloomberg's Five Things? [Subscribe for unlimited access]( to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. Tell us what you want to see in the Five Things newsletter! Please [take our quick survey here.]( [Bloomberg Markets Wrap: The latest on what's moving global markets. Tap to read.]( Follow Us Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. Before it’s here, it’s on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can’t find anywhere else. [Learn more](. Want to sponsor this newsletter? [Get in touch here](. You received this message because you are subscribed to Bloomberg's Five Things to Start Your Day: Americas Edition newsletter. If a friend forwarded you this message, [sign up here]( to get it in your inbox. [Unsubscribe]( [Bloomberg.com]( [Contact Us]( Bloomberg L.P. 731 Lexington Avenue, New York, NY 10022 [Ads Powered By Liveintent]( [Ad Choices](