Macro: Sandcastle economics
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Morning Brew May 31 2024
Erik Schafhauser
Senior Relationship Manager
Summary: Happy Inflation DAy
Good morning to Inflation Day
Donald Trump was pronounced guilty on all count 34 felony counts as the top news of today. The impact on his chances to be reelected may have a market impact once we see the first polls, but I don`t expect that today.
Economic data painted an unclear picture yesterday and traders could not really decide on any clear direction. In the End, equities ended a little lower but off the lows. The reaction shows the indecisiveness in markets at the moment and the importance of the narrative that is being traded. The weaker data yesterday should have caused equities to rise as a slowing economy gives the Fed room to cut rates which in turn makes equities more attractive. Is this broken?
In precious metals we have already seen a move away from that storyline, both rose despite the Fed being more aggressive this year. In January we were expecting 6 rate cuts and Gold was trading at 2070, now we are not sure if we will see two cuts and Gold is at 2340.
The Dow lost 0.9%, the S&P 500 lost 0.6% and the gave up Nasdaq 1.1%, 10-year yields are a little lower at 4.55 and the Dollar Index retreated below the 105 to trade 104.77.
Salesforce lost almost 20% in value yesterday, today Dell is seen to open around 20% lower and MongoDB is expected 25% lower. If you want to adjust your position before the open, remember you can place premarket limits that will be routed from 13:00 CET. You can obtain the premarket pricing from eg. Nadaq.com
EURUSD rose to 1.0820, GBPUSD 1.2720 and USDJPY is at 156.70. Gold is stuck at 2343 and Silver is lower at 31.00. With the key data out today, where will we end the month?
Key today is the European Inflation at 11:00 CET with the headline expected at 2.5% and the US PCE Deflator at 14:30. The PCE is expected at 2.7% and the Core at 2.8% and the reaction to the data will be extremely interesting. The ECB is the second large central bank setting rates next week Thursday, the Bank of Canada next Wednesday. Right now, traders are 95% certain there will be a cut of 25 Basis points. Should that change in any way, there will be a strong reaction in EURUSD, GER40 and Bund Future as the main trading products.
Besides economic data, a defense meeting between the US and China is worth having an eye on and we could still see month end adjustments in positions.
Friday
- Data Japan CPI, China PMI, France CPI, EU Inflation, US PCE and CA GDP
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