The JPY is the strongest and the CHF is the weakest as the North American session begins. The changes from top to bottom are relatively modest. The USD is mixed to stronger with the USD up the most vs the CHF (+0.45). The US inflation data will be released later this week (Wednesday CPI and PPI on Thursday), and will be key for the trajectory of the next Federal Reserve's policy decisions (set for June 14). That decision will come after the drop dead date for passing the debt ceiling (June 1 is projected date). Pres. Biden and congressional leaders are scheduled to meet today at 4 PM ET.
Meanwhile overnight, China's trade data reveals a sluggish post-pandemic recovery, with imports slipping and export growth ok.
- Chinese trade balance (USD)(Apr) at $90.21 billion (better than expected $71.6 billion)
- Chinese exports YY (USD)(Apr) at 8.5% (slightly better than expected 8.0%)
- Chinese imports YY (USD)(Apr) at -7.9% (worse than expected 0.0%)
- Chinese trade balance (CNY)(Apr) at 618.4B (worse than expected 632.7B)
- Chinese exports YY (CNY)(Apr) at 16.8% (better than expected 10.5%)
- Chinese imports YY (CNY)(Apr) at -0.8% (worse than expected 4.2%)
In other APAC news:
BoJ Governor Ueda keeps on explaining what he really meant during the BOJ meeting last week, regarding BOJ policy review and implications for monetary policy saying the bank's scheduled review won't have pre-set ideas on specific monetary policy moves and will take necessary policy action at each meeting. He also noted some bright signs in inflation expectations.
Australian Budget: The government forecasts a 2022/23 budget surplus of AUD 4.2 billion (better than expected AUD 4 billion), a 2023/24 budget deficit of AUD 13.9 billion (0.5% of GDP), and a 2024/25 budget of AUD 35.1 billion (1.3% of GDP).
In Europe:
ECB's Kazaks says rate hiking may not be finished in July, suggesting that bets on Spring 2024 ECB cuts are premature. He believes that doing too little remains the greater danger and it's not impossible for the ECB to hike/pause in the scenario the Fed is cutting.
ECB's Kazimir says that based on current data, the ECB will need to keep raising rates for longer than anticipated. He believes that September projections are the earliest time to gauge the effectiveness of measures and see if inflation is heading to target.
German Chancellor Schloz says the EU must reduce risks in China relations without cutting ties, advocating for smart de-risking as the way forward with China.
- UK BRC Retail Sales Like-For-Like YY (Apr) at 5.2% (better than the previous 4.9%); Total Sales YY (Apr) at 5.1% (same as the previous 5.1%)
- French Trade Balance, EUR, SA (Mar) at -8.023B (better than expected -9.3B and the previous -9.904B, revised to -9.302B)
U.S. stock index futures are moving lower in premarket due to downbeat earnings forecasts from Apple supplier Skyworks (-9.1%) and payments company PayPal (-5.6%). PayPal cut its operating margin outlook which more than offset its profit forecast raise (or so it seems). Apple shares are trading down -0.47%. Yesterday the major indices were mixed with the Dow down marginally, the S&P near unchanged, and the NASDAQ up marginally.
Regional bank stocks, are back in the markets focus with the KRE ETF of regional banks down -1.1% in premarket trading. Pacwest Bancorp shares are down -9.72% while Western Alliance shares are down -2.0%. Yesterday the Fed's senior loan officers survey revealed that credit conditions for U.S. businesses and households continued to tighten by large and mid sized banks in the first quarter of the year, and are expected to continue to tighten through year end. Tightening credit conditions are doing some of the job for the Fed.
In the US the debt market, yields are lower after yesterday's move to the upside. The 2 year yield is back below the 4.0% level at 3.988%. The 10 year yield is back below 3.5% at 4.81%.
The economic calendar is a light with the weekly Redbook sales that 8:55 AM ET. The treasury will auction all 3 notes at 1 PM ET. After the close the private API inventory data will be released. FOMC's Jefferson is expected to speak at 8:30 AM ET while NY Fed's Williams is scheduled for 12:05 PM ET.
Looking at the markets the snapshot currently shows:
- Spot gold is trading at $10.31 or 0.51% at $2030.67. Flight to safety (and modestly lower yields today) or helping to increase the price of gold, but it is still below the intraday high of $2081.82 reached last Thursday before rotating back to the downside.
- Spot silver is down $0.05 or -0.19% at $25.48
- WTI crude oil is down $0.75 at $72.41
- Bitcoin is trading little change of $27,697
in the premarket for US stocks:
- Dow industrial average trading down -122.69 points after yesterday's -55.69 point decline
- S&P index -16.37 points after yesterday's 1.87 point rise
- NASDAQ index is down -62 points after yesterday's 21.50 point rise
In the European equity markets, major indices are also trading lower:
- German DAX -0.39%
- Frances CAC -1.03%
- UKs FTSE 100 -0.47%
- Spain's Ibex and -0.4%
- Italy's FTSE MIB -0.75%
in the US a debt market, yields are lower:
- 2 year yield 3.99% -2.1 basis points
- 5 year yield 3.468% -2.9 basis points
- 10 year yield 3.488% -3.1 basis points
- 30 year yield 3.799% -3.5 basis points
In the European debt market the benchmark 10 year yields are mixed.
