Read on the Trading Floor - 31 May 2024
Today’s focus… PCE curbs the yield sell off
Macro Themes At Play
Theme 1 - Eurozone Inflation
Theme 2 - PCE keeps the Sept door open
Theme 3 - Trump's found guilty, does it matter?
Theme 4 - Week Ahead Previews
What's being read on Harkster.com
Theme 1 - Eurozone Inflation
As we roll towards June and the first of the ECB cuts, the inflation data remains frustratingly sticky. Price pressures in Germany, Spain and France are testing the mkt's belief that they can deliver a deep cutting cycle. Expectations are being tempered across Europe, as Japanese yields remain under pressure and investors have resigned themselves to "higher for longer" as the disinflation trend stalls globally. Once again markets will be closely monitoring Lagarde's ECB press conference for signals on future rate cuts, with consensus currently believing the ECB will remain data-dependent and forecast inflation aligning with medium-term targets.
Brent Donnelly am/FX - H4L: EU Edition
Bloomberg - French Inflation Quickens for First Time This Year on Energy
Morningstar - Eurozone Inflation Accelerates; ECB Cut Is Still on Track
ING - THINK Ahead: Would you bet your bottom euro on the ECB?
Rabobank - One rate cut is no rate cut
Theme 2 - PCE keeps the Sept door open
A week when market was worried about 10s selling off towards 5% has been saved by month end duration demand and some "soft" US data. US2s dipping back to 4.90% and 10s at 4.50% have taken the shine off the USD into month end. One 0.2% print is not enough, the Fed need consistent 0.2% readings between now and September to cut as well as increased slack in the job market and reduced consumer spending, to justify a pre-election rate move. However, data over the past 24/48hours has at least kept September on the cards after the fixed income market struggled to ingest the 2s, 5s and 7s auction. As house sales slow it is clear that consumer spending weakening. In particular ING flag, "the bottom 60% are under financial pressure, with less wealth exposure, higher borrowing costs, and depleted savings from the pandemic era."
ING - US inflation relief keeps the door open to a September rate cut
BMO - U.S. Core PCE Inflation, Spending, and Income All Moderate in April
Bloomberg - Soft Economic Landing Means Bonds Have a Long, Hard Road Ahead
Theme 3 - Trump's found guilty, does it matter?
A lot of analysis on the guilty verdict, from the potential of an appeal, his ability to campaign, his messaging about key US institutions through to the likelihood of a suspended sentence. For Reps, Trump is the man in front of the machine, the polices they're looking to implement rather than the President, they follow word for word. Belief in his economic policies is undeterred by his court conviction. In fact, a number of prominent figures in US business and finance are rallying behind him and campaign donations have also soared. Promises of tax cuts, lower red tape and elimination of regulation carry a greater weight than the implications of his criminal trial.
Axios - Trump campaign's donation site crashes after guilty verdict
Axios - Trump campaign says it broke fundraising record after hush money conviction
Bloomberg - Wall Street Billionaires Are Rushing to Back Trump, Verdict Be Damned
Bloomberg - Wall Street Scans for Potential Volatility After Trump Verdict
The NY Times - Why Megadonors Are Unfazed by Donald Trump’s Guilty Verdict
Theme 4 - Week Ahead Previews
ING - Asia week ahead: RBI likely to pause while China’s exports rise
Nordea - Macro & Markets: Cut now, then see
ABN Amro - The week ahead: 3 - 7 June 2024
What's being read or listened to on Harkster.com
Dell slumps after AI server backlog missed expectations, the electoral politics of age looms large over many elections, home sales in the US slow, Macro Alf and Brent Donnelly's latest podcast, and much more...
The Macro Trading Floor - Don't Make This Mistake
Steno Research - Portfolio Watch – Adjusting equity and commodity risks as the reflation story stalls
Bloomberg - Dell Falls After AI Server Sales Fail to Impress Investors Company reports first quarterly rev
Axios - April pending home sales hit four-year low as rates and prices soar
FT - Keir Starmer says Diane Abbott can run as Labour candidate
HSBC - The Macro Brief – The good, the bad and the ugly of AI
The Brazilian Report - AMLO aims to become queenmaker as Mexico elects new president
Macro Hive - G10 FX Weekly: SNB and Swiss Data Put Paid to EUR/CHF Upside (for Now)
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