North American News
US Stocks Surge Late, Closing Strong
- S&P closes higher. The NASDAQ index nearly erases all that the intraday declines
Major indices rallied strongly into the close as month end flows erased earlier declines:
- Dow rose 574.84 points or 1.51% at 38686.31. The gain was the largest one-day gain since November 2, 2023
- S&P rose to 42.03 points or 0.80% at 5277.50. At session lows the S&P index was down -43.79 points
- NASDAQ index fell -2.06 points or -0.01% at 16735.02. At session lows, the NASDAQ index is down -291.54 points
The small-cap Russell 2000 rose 13.52 points or 0.66% at 2070.12.
For the trading week:
- Dow Industrial Average average fell -0.98%
- S&P index snapped a 5-week win streak with a decline of -0.51%
- NASDAQ index set it to five week win streak with a decline of -1.10%
the story was different for the month of May:
- Dow industrial average rose 2.3%
- S&P rose 4.8%
- NASDAQ index rose 6.88%, its largest gain in 2024 and since November 2023
- Russell 2000 rose 4.87% its largest gain since February 2024
Atlanta Fed GDPNow growth estimate for Q2
- Atlanta Fed GDPNow growth estimate for Q2 2024
The most recent Atlanta Fed GDPNow growth estimate for Q2 comes in at 2.7% down from 3.5% on May 24.
In their own words:
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2024 is 2.7 percent on May 31, down from 3.5 percent on May 24.After recent releases from the US Census Bureau and the US Bureau of Economic Analysis, a decrease in the nowcast of second-quarter real personal consumption expenditures growth from 3.4 percent to 2.6 percent was partly offset by an increase in the nowcast of second-quarter real gross private domestic investment growth from 5.1 percent to 6.3 percent, while the nowcast of the contribution of the change in real net exports to second-quarter real GDP growth decreased from -0.06 percentage points to -0.60 percentage points.
US Core PCE for April 0.2% vs 0.3% estimate
- The US PCE data for the month of April
- Prior month 0.3%
- Core PCE MoM 0.2% vs 0.3% estimate.
- Core PCE YoY 2.8% % vs 2.8% estimate.Last month 2.8%.
- PCE MoM 0.3% % vs 0.3% estimate.Last month 0.3%.
- PCE YoY 2.7 % vs 2.7% estimate.Last month 2.7%
- Unrounded core PCE 0.249% so it was right between 0.2% and 0.3%.The prior month was at 0.317% (rounded to 0.3%)
- PCE services prices excluding energy and housing 0.3% versus 0.4% previously
Looking at personal income and personal consumption for April:
- Personal income MoM prior month 0.5%
- Personal consumption MoM prior month 0.5% revised to 0.4%
- Personal income for April 0.3% % versus 0.3% expected
- Personal consumption for April -0.1% % vs 0.3% expected
The 3 month measure came in at 3.46%, which is lower vs the last 2 months, but higher than any point in 2H of 2023.
United States Chicago PMI (May)
- Actual: 35.4
- Expected: 41.1
- Previous: 37.9
Fed’s Logan: Too soon to think about rate cuts
- Dallas Fed head Logan
Federal Reserve Bank of Dallas President Lorie Logan:
- Too soon to think about rate cuts
- there are good reasons to think we are still on the path to 2% inflation, but bumpy
- policy may not be as restrictive as we think
- good reasons to believe neutral rate is higher now than before the pandemic
- if the neutral rate is higher than before it suggests rates won’t go back down to pre-pandeimc levels
- I do worry an energy price shock could disrupt inflation expectations
- I worry about geopolitical risks for their potential risks for energy prices
- If we continue to see increase in investment, from ai or energy transition or other, that could impact longer-term neutral rate
Deutsche Bank on yields rising – “bad news” for risk assets across the globe
- Tough to maintain the gains of past weeks
Via a note from Deutsche Bank saying negative momentum is not easing.
- S&P 500 has managed to rise for 23 of the last 30 weeks, DB says this is a joint record since 1989
- rise in longer-dated yields proved bad news for global risk assets
- Bonds took a particular hit after a weak US Treasury auction yesterday, along with mounting concern about inflationary pressures
- a tough backdrop for markets across several asset classes
- the relentless run of gains in recent weeks was always going to be tough to maintain
Geopolitics: Biden proposes a three-step process for Israel/Hamas
- Pres. Biden proposes 3-phase plan for peace in Middle East, includes cease-fire, hostage release, and Gaza reconstruction.
Pres. Biden has proposed a 3-phase plan for peace in the Middle East:
- Phase 1 complete cease-fire and withdrawal of Israeli forces from populated areas of Gaza. Palestinians would return to their homes.During phase 1, Israel and Hamas would negotiate phase 2 which would permanently end the hostilities.
- Phase 2 would see in exchange for the recent release of all remaining living hostages, and Israeli forces will withdraw
- Phase 3 would be a major reconstruction plan for Gaza
Biden says that Hamas no longer has the capabilities to carry out another October 7 event.
Israel responded saying that Pres. Biden does not understand the reality here and that his speech is weak and represents a victory for Hamas.
Canada budget balance for March -C$33.59B vs a surplus of C$8.34B last month
- Prior month plus C$8.34 billion
- Canada budget balance C$-33.59 billion
- Year to data is at C$-50.93 billion that is down from C$-17.339 last month
Canada GDP QoQ annualized 1.7% versus 2.2% estimate
- Canada GDP data for Q1 2024
- Prior quarter 1.0%
- GDP QoQ Q1 annualized 1.7% vs 2.2% estimate
- GDP implicit price -0.3% vs 1.4% estimate
- GDP YoY Q1 x.x% vs 0.93% estimate
- GDP MoM March 0.0% versus 0.0% estimate. Prior month 0.2%
Below is a table of the contributions (or not) to the GDP in Q1:
Commodities
Gold reverses gains from US PCE inflation data miss
- Gold reverses the gains made after the release of PCE inflation data shows price pressures cooled in April.
- Precious metal already made gains following the second estimate for US Q1 GDP which showed the economy expanded less than previously anticipated.
- Gold remains technically vulnerable after a breakout from the Bear Flag continuation pattern.
Gold slumps back into the $2,330s on Friday undoing the gains it made after the release of the US PCE data for April, which showed cooling core price pressures.The PCE is the Fed’s prefered gauge of inflation and Core PCE cooled to 0.2% month-over-month, from 0.3% previously, according to data from the Bureau of Economic Analysis.Analysts had expected Core PCE to remain unchanged at 0.3%.
The rest of the PCE data came out in line with analysts estimates, however, the undershoot in Core PCE revealed inflation cooling in the US more quickly than analysts expected.This, as a consequence, increased the likelihood of the Fed cutting interest rates sooner rather than later.Lower interest rates tend to be positive for Gold as they reduce the opportunity cost of holding the non-yielding asset and the precious metal rose after the data.
The gains came on the back of a recovery that started on Thursday after the release of weaker US growth data, suggested inflation would remain contained, also leading to lower interest rate projections.
As traders wrap up for the weekend, however, Gold is pulling back down and may even end the day in the negative.
Gold recovers after US growth slows
Gold rebounded on Thursday after the second estimate of US first-quarter GDP growth showed a downward revision to an annualized 1.3% from 1.6% in the first estimate.
The slower growth came from lower consumer spending, which in turn is expected to keep inflation contained, and the Federal Reserve on track to lower interest rates.
The probabilities of the Fed cutting interest rates before September are insignificant but stand at 55% for a cut in September, data shows
OPEC+ to hold its June 2 meeting in person in Riyadh
OPEC+ which was supposed to hold their meeting remotely, has now announced that they will hold their Juen 2 meeting in person.
Baker Hughes oil rig count 496 versus 497 last week
- Total rig count remains unchanged at 600
Weekly reviews rig count;
- Oil rig count 496 versus 497
- Gas 100 versus 99 last week
- Total rigs 600 versus $600 last week
- US drillers cut oil and gas rigs for third month in a row.
- Drillers cut most oil and gas rigs in a month since August
- Drillers cut oil rigs in May in first monthly cut since January
- Drillers cut most oil rigs in a month since September
Reports that OPEC+ is working on a deal to extend some oil production cuts into 2025
- OPEC+ meet this weekend
A report overnight said that OPEC+ is working on a deal that will allow the group to extend some of its deep oil production cuts into 2025.
Reuters had the report, citing three unnamed sources “familiar with OPEC+ discussions”. More here.
EU News
European indices closed with mixed results
- Major indices closed the month of May with gains
Major European indices are closing the day with mixed results:
- German DAX, -0.07%
- Frances, +0.18%
- UK FTSE 100 +0.57%
- Spain’s Ibex, -0.14%
- Italy’s FTSE MIB +0.13%
For the trading week, major indices were mixed as well:
- German DAX -1.13%
- France CAC, -1.26%
- UK FTSE 100 -0.51%
- Spain’s Ibex +0.68%
- Italy’s FTSE MIB, unchanged
Finally for the trading month of May major indices all moved higher:
- German DAX +3.07%.The German DAX reached a new all-time high this month at 18892.92 (closing at 18483.06)
- France CAC +0.10%.The France CAC also reached a new record high at 8259.19 (closed at 7992.88)
- UK FTSE 100, +1.61%. The UK FTSE 100 traded at a new all-time high of 8474.41 before rotating lower (closed at 8275.39)
- Spain’s Ibex, +4.31%. Spain’s Ibex traded to the highest level since July 2015.
- Italy’s FTSE MIB +2.21%. Italy’s FTSE MIB traded at the highest level this month since June 2008.
Eurozone May CPI +2.6% vs +2.5% y/y expected
- Latest data released by Eurostat – 31 May 2024
- Prior +2.4%
- Core CPI +2.9% vs +2.7% y/y expected
- Prior +2.7%
Germany April import price index +0.7% vs +0.5% m/m expected
- Latest data released by Destatis – 31 May 2024
- Prior +0.4%
Taking out energy prices, import prices in Germany were still up 0.6% on the month in April. Looking at the breakdown, we saw increases in the price for intermediate goods (+0.7%) and consumer goods (+0.5%). The price for capital goods were unchanged on the month.
Germany April retail sales -1.2% vs -0.1% m/m expected
- Latest data released by Destatis – 31 May 2024
- Prior +1.8%
France May preliminary CPI +2.2% vs +2.4% y/y expected
- Latest data released by INSEE – 31 May 2024
- Prior +2.2%
- HICP +2.7% vs +2.5% y/y expected
- Prior +2.4%
France Q1 final GDP +0.2% vs +0.2% q/q prelim
- Latest data released by INSEE – 31 May 2024
- Prior +0.1%
The breakdown:
Italy May CPI Y/Y 0.8% vs.0.8% expected
- Latest data released by ISTAT – May 31 2024
- CPI Y/Y 0.8% vs. 0.8% expected and 0.8% prior.
- CPI M/M 0.2% vs. 0.2% expected and 0.1% prior.
- Harmonised CPI Y/Y 0.8% vs. 0.7% expected and 0.9% prior.
- Harmonised CPI M/M 0.2% vs. 0.2% expected and 0.5% prior.
The stabilization of the growth on annual basis of All-item index underlies contrasting trends: the prices of Processed food (including alcohol and tobacco) (from +2.5% to +2.1%), of Services related to transport (from +2.7% to +2.4%) and of Services related to housing (from +2.8% to +2.6%) slowed down; on the contrary, the prices of Non-regulated energy products (from -13.9% to -13.5%), of Regulated energy products (from -1.3% to zero) and of Unprocessed foods (from +2.2% to +2.3%) have increased.
In May 2024, core inflation (excluding energy and unprocessed food)slowed down as well as inflation excluding energy (both from +2.1% to +2.0%).
Italy Q1 final GDP +0.3% vs +0.3% q/q prelim
- Latest data released by Istat – 31 May 2024
- Prior +0.1%
UK April mortgage approvals 61.14k vs 61.50k expected
- Latest data released by the BOE – 31 May 2024
- Prior 61.33k; revised to 61.26k
- Net consumer credit £0.7 billion
- Prior £1.6 billion; revised to £1.4 billion
On net, individuals borrowed £2.4 billion of mortgage debt in April, compared to £0.5 billion in March. Of note, it is the first time that the annual growth rate (+0.2%) for net mortgage lending rose on the month since October 2022. It was down to a series low of -0.1% in March previously.
UK May Nationwide house prices +0.4% vs +0.1% m/m expected
- Latest data released by UK Nationwide Building Society – 31 May 2024
- Prior -0.4%
- House prices +1.3% vs +0.8% y/y expected
- Prior +0.6%
Citi/YouGov: 1 year ahead inflation expectations fell to 3.1% in May
- Lowest level since July 2021
A Cit/YouGov poll shows;
- 1-year ahead UK inflation expectations fell to 3.1% in May. That was the lowest level since July 2021.
- Long-term inflation expectations – 5/10 years ahead – fell sharply to 3.2% from 3.5% previously
S&P cuts France to AA- from AA
- Outlook stable,
S&P cuts France credit rating to AA – from AA. They leave the Outlook stable. The downgrade is on deterioration of budgetary position.
- Says that the downgrade reflects projection that France’s general government debt as a share of GDP will increase
- he leaves French economy and public finances overall will continue to benefit from structural reforms implemented over the past decade
- Says that they expect the French economy will pick up from the second half of 2024
ECB Centeno: May inflation acceleration only slightly above forecast
- ECB easing cycle can start
- May inflation acceleration only slightly above forecast
- Says that it still allows ECB to start the easing cycle
ECB’s Panetta: Inflation data today is neither good nor bad
- Remarks by ECB executive board member, Fabio Panetta
- Monetary easing can be expected over the coming months if data confirms our forecasts
- Must avoid policy becoming too restrictive
- That could push inflation below the ECB’s symmetrical target
- Inflation is expected to ease further in the next few quarters
- ECB will take into account Fed policy, but not be bound by it
- Inflation data today is neither good nor bad
UK data – Lloyds Bank business sentiment index hits its highest since November 2015
- Lloyds Bank Business Barometer50% in May (prior 42%), highest in 8 years
Lloyds Bank Business Barometer jumped by eight points to 50% in May
- highest since November 2015
- confidence about the broader economy was its highest since September 2021
Asia-Pacific-World News
China May 2024 Official Manufacturing PMI 49.5 (expected 50.5)
- Manufacturing PMI 49.5 and back into contraction
expected 50.5, prior 50.4
Services 51.1, missing estimates and falling below April’s result. Still in expansion though.
- expected 51.5, prior 51.2
The Composite comes in at 51.0
- prior 51.7
The disappointing China manufacturing PMI for May – fell back into contraction
- A three month low at 49.5
ING with a quick assessment on the stumbling manufacturing PMI from China,
- a 3-month low
- main reason was a drop in new orders (49.6) and new export orders (48.3), which both fell back into contraction after two months of expansion
- Production (50.8) remained in expansion for the third consecutive month
- Employment (48.1) remained in contraction for the 15th consecutive month
- raw material purchase prices (56.9) and ex-factory prices (50.4) both hit an 8-month high, which likely precedes a rise in inflation in HS
HSBC on recent China policy support, reason to tentatively buy mainland & Hong Kong stocks
- CSI been higher since February
Chinese authorities announced a number of policy measures aimed at support for the property sector during May including:
lowering down payment requirements
300 bn RMB (yuan) in a relending programme for local governments to acquire properties and convert them into social housing
national floor for mortgage interest rates will be removed
HSBC, in brief, say that the supportive policy measures are enough encouragement for some investors to ‘dip their toe’ into Chinese stocks, both mainland and Hong Kong listed. HSBC say further reason to buy is found in low valuations.
PBOC sets USD/ CNY reference rate for today at 7.1088 (vs. estimate at 7.2383)
- PBOC CNY reference rate setting for the trading session ahead
PBOC injects 100bn via 7-day RR, sets rate at an unchanged 1.8%
- 2bn mature today
- net adding 98bn to banking system
Australian April 2024 Private Sector Credit +0.5% m/m (expected +0.4%)
- Data from the Reserve Bank of Australia
Credit growth creeping higher m/m.
BOJ panelist warns of inflation overshoot, urges the central bank to raise rates further
- Some comments by Takeo Hoshi, who is an academic with insights on the BOJ’s monetary policy
Hoshi remarks that “unless the BOJ raises rates, inflation could accelerate too much”.Adding that “the same kind of inflation seen in the US and Europe could very much happen in Japan”.For some context, Hoshi was also a participant in the BOJ’s workshop held on 21 May and chaired a session that scrutinised Japan’s economic and price developments.
His take is that there is a significant risk that inflation could stay higher above the BOJ’s target and that is a risk that Ueda & co. need to be worried about.His argument is that recent wage-inflation dynamics are changing in ways not seen before in the past in Japan.And that will see intensifying labour shortages, thus pushing up labour costs and leading to more firms to raise prices down the road.
As for when the BOJ might hike next, Hoshi declined to offer up a timing on that. But he said that the BOJ should hike rates “steadily” while also taking into account its policy stance on the yen exchange rate.
Japan spent nearly ¥10 trillion on intervention in the past four weeks
- The Japan MOF confirms that they have intervened to prop up the yen in the period between 26 April to 29 May
The total spent was ¥9.8 trillion (or to be more exact ¥9,788.5 billion). The two big moments that they likely stepped in during that period was on 29 April and in the late hours of 1 May or one can say early hours of 2 May in Tokyo.
Tokyo area May inflation data: Headline 2.2% y/y (prior 1.8%)
- Tokyo CPI data leads the national result by about three weeks
- the unemployment rate flat at 2.6%
Japan April Retail Sales +2.4% y/y (expected +1.9%)
- Japan April Retail Sales
Japan finance minister Suzuki says FX stability is important
- Some verbal intervention
Japan finance minister Suzuki:
- Higher interest rates could pressure fiscal policy
- Will work to enhance fiscal health
- Currency rates should reflect fundamentals
- Fx stability is important
- Will respond appropriately to excessive fx moves
Cryptocurrency News
Ethereum Defies JP Morgan’s Bearish ETF Prediction with Bullish On-Chain and Derivatives Signals
- Ethereum accumulating addresses have increased steadily since the beginning of May.
- JP Morgan analysts predict that spot Ethereum ETFs will see a disappointing launch.
- Ethereum derivatives data indicates traders are highly bullish.
Ethereum (ETH) maintained a stable price on Friday following on-chain and derivatives data pointing to increased bullishness among investors. Meanwhile, JP Morgan analysts predicted that spot Ethereum ETFs will only command a fraction of Bitcoin flows if they launch.
Increased accumulating addresses, Grayscale filings, JP Morgan predictions
Ethereum is at the center of key discussions in the crypto market. Here are the latest stories surrounding the top altcoin:
- According to data, the number of new addresses accumulating ETH has grown steadily in May despite prices remaining relatively stable. Notably, new accumulating addresses with a balance of 10,000 to 100,000 ETH skyrocketed and have been growing steadily following rumors and the eventual approval of spot ETH ETF 19b-4 filings.
- Grayscale submitted its updated registration statements for spot ETH ETFs with the Securities & Exchange Commission (SEC) on Thursday.This follows updated BlackRock and Van Eck S-1 submissions after the SEC approved 19b-4 applications of eight issuers on May 23.
- The Block earlier reported that two sources confirmed that the SEC asked issuers to submit their updated S-1 filing on Friday at the latest.Eric Balchunas confirmed the report in an X post, stating he heard the same.
- Meanwhile, JP Morgan analysts predict that spot ETH ETFs will face a disappointing reception in a report on Thursday. The analysts stated several reasons for their position, including Bitcoin’s first mover advantage, the removal of staking from filings, and lack of halving event catalyst.
- More importantly, they stated how Ethereum’s smaller market cap will see its spot ETFs gaining a fraction of the flows seen in spot Bitcoin ETFs.As a result, they capped their maximum expected inflows across all spot ETH ETFs — if they launch — in 2024 at $3 billion.They expect the figure to double if issuers eventually allow staking.
1INCH price likely to provide buying opportunity before a 20% rally
- 1INCH price eyes a retest of the $0.443 to $0.471 support zone.
- Increasing Open Interest and a plummet in supply on exchanges indicate investors’ are accumulating.
- 1INCH could rally 20% to $0.560.
- A daily candlestick close below $0.327 would invalidate the bullish thesis.
1INCH (1INCH) price falls on Friday, and it is likely to face a further pullback after rallying 15% since Tuesday. However, a price decline towards $0.471-$0.443 could provide an opportunity for sidelined buyers as on-chain metrics and open interest data suggest that this area is a major support zone from which prices could rally by 20%.
Crypto political committee receives $25 million donation from a16z amid Trump and Elon Musk’s meeting
- Fairshake received another $25 million donation from venture capital firm a16z.
- Donald Trump’s pro-crypto stance continues as he allegedly sought counsel from Elon Musk.
- President Joe Biden’s campaign is allegedly reaching out to crypto industry players.
Andreessen Horowitz (a16z) made a new donation to the Fairshake Super PAC on Thursday following an alleged report that Donald Trump is seeking counsel on cryptocurrency guidelines from Tesla and Space X CEO Elon Musk.
a16z adds fresh donation to crypto PAC
Andreessen Horowitz (a16z) made a fresh $25 million contribution to the Fairshake Super political action committee (PAC) on Thursday, bringing its total donations to $47 million. Crypto expert and a16z’s General Partner, Chris Dixon, revealed the latest donation. This follows Ripple’s $25 million donation to the Super PAC on Wednesday, making the company the committee’s highest donor.
These donations aim to further Fairshake’s mission to support pro-crypto candidates in the upcoming elections.
Meanwhile, a recent Bloomberg report claimed that former US President Donald Trump met with billionaire Elon Musk to seek counsel on crypto.
The report suggests that both billionaires are discussing crypto policies, following Trump’s recent positive attitude towards Bitcoin and crypto. It also alleged that Trump’s campaign is considering bringing Musk to speak on cryptocurrencies at a convention.
“Trump campaign officials have also talked about the possibility of inviting Musk to speak at the Republican convention, but are still far from making a final decision,” Bloomberg wrote.
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