“Economically, global service PMIs were mixed as the euro zone service PMI missed expectations, while the U.K. and Chinese service PMIs were in-line,” noted Tom Essaye, the founder of Sevens Report Research. Click here to read the full article.
What’s in Today’s Report:
There is a modest risk-off tone in global markets this morning as a favorable drop in inflation expectations in Europe is helping offset an unexpected rate hike by the RBA.
The Reserve Bank of Australia surprised markets for the second month in a row as policy makers raised rates 25 bp to 4.10% as still elevated inflation levels remains a concern.
Meanwhile, in Europe, the ECB’s 1-Yr Consumer Inflation Expectations dropped to 4.1% in April from 5.0% in March which supports the case that the disinflation trend in Europe and the U.S. has resumed which is helping bonds rally this morning.
Looking into today’s session, it is lining up to be a quiet day as there are no economic reports and no Fed officials are scheduled to speak.
Yes, AI does have great potential and it does appear to be the ‘next big thing’. But I don’t see how that promise can offset the reality of higher interest rates and more pressure on the economy, at least not for a sustainable period…wrote Tom Essaye, a former Merrill Lynch trader who founded The Sevens Report newsletter. Click here to read the full article.
The potential fallout from the U.S. debt-ceiling debacle and rising odds of a June interest-rate hike both “weighed on oil as the former influence would be a broader riskoff market event, while the latter would further reduce already waning optimism for a soft economic landing this year,” analysts at Sevens Report Research wrote in Wednesday’s newsletter. Click here to read the full article.
“Republican Representatives have said this morning that they have the votes to pass it. If that comes to fruition, that should remove a headwind from risk assets and open the door to a continued move higher in equity markets,” writes Tom Essaye, the founder of Sevens Report Research. Click here to read the full article.
What’s in Today’s Report:
Futures are little changed as markets digest the Thursday/Friday rally amidst a mostly quiet weekend of news.
Oil prices are solidly higher (Brent crude up 1.7%) after Saudi Arabia announced a voluntary 1M bpd production cut for the next month, although that’s not seen as a sustainable bullish catalyst.
Economically, global service PMIs were mixed as the Euro Zone Service PMI missed expectations (55.1 vs. (E) 55.9) while the UK and Chinese service PMIs were in-line.
Today focus will be on the ISM Services Index (E: 52.0.) and specifically the price index in this report. Last week, a sharp drop in the ISM Manufacturing PMI Prices Paid Index ignited the rally, and if we see a similar drop in the services price index, it’ll help extend the rally as markets will get more confident disinflation is accelerating.
What’s in Today’s Report:
Futures are higher and global markets rallied overnight on rising hopes for a rapid decline in inflation.
Inflation metrics on Thursday hinted at accelerating disinflation (ISM Prices Paid and Unit Labor Costs were yesterday’s bullish catalysts) and that was reinforced this morning by a decline in Korean CPI.
Chinese stocks surged overnight thanks to a Bloomberg article that raised hopes for more government stimulus.
Today focus will be on the jobs report and estimates are as follows: 180K job adds, 3.5% Unemployment Rate and 0.3% m/m & 4.4% y/y wage gains. Given yesterday’s momentum, if the jobs report shows solid job gains and underwhelming wage growth, the rally should continue. However, if the jobs report comes in “Too Hot” on the headline or wages, don’t be surprised if markets give back part of yesterday’s rally.
“Yes, AI does have great potential and it does appear to be the ‘next big thing’,” wrote Tom Essaye, a former Merrill Lynch trader who founded The Sevens Report newsletter. “But I don’t see how that promise can offset the reality of higher interest rates and more pressure on the economy, at least not for a sustainable period.” Click here to read the full article.
“The debt ceiling drama is getting most of the attention, but a hawkish shift in tone by a list of [U.S. Federal Reserve] officials recently has holstered the dollar and sent policy-sensitive rates (beyond those durations reacting to the debt negotiations) higher,” analysts at Sevens Report Research wrote on Thursday’s newsletter. Click here to read the full article.
What’s in Today’s Report:
Futures are modestly higher after the House of Representatives passed the debt ceiling extension.
The House passed the debt ceiling extension 314-117, effectively ending this drama (passage in the Senate is all but guaranteed).
Economically, EU Core HICP (their core CPI) rose 5.3% vs. (E) 5.5%, hinting at the re-start of disinflation.
Today focus will be on economic data and there are numerous potentially important reports, starting with the ISM Manufacturing PMI (E: 47.0), where markets will want to see stability in the data (so not dramatically above or below the expectation). On employment, we get two important reports via the ADP Employment Report (E: 160K) and Jobless Claims (E: 235K), and moderation in both reports (so a drop in ADP and rise in claims) will be welcomed by markets. Finally, on inflation, Unit Labor Costs (E: 6.3%) will give us the latest insight into wages (the lower this number, the better). Finally, there is also one Fed speaker: Harker (1:00 p.m. ET).
