๐Ÿ“ˆ Macro-News round-up

๐Ÿ“ˆ Yesterday, Neel Kashkari, president of the Minneapolis Fed, stated that policymakers haven’t completely ruled out more interest rate increases. In addition, we had a positive US consumer confidence data. This may have triggered a bearish mood in the markets, as the SP500 has retreated again, currently losing 5300 points. The Nasdaq has failed to break above the 18,900 level, and is currently retreating towards 18,750.

๐Ÿ’ฐ Moreover, Kashkari’s comments have also been reflected in the currency and bonds. The gold index has regained its strength and has approached the 105 point zone. The US 2-year bond has reached a yield of almost 5% in the last few hours.

๐Ÿ—ฃ๏ธ This morning, Fed officials make a series of statements that appear to be a self-criticism of the Fed’s own political system. Bowman stated, “It’s important to keep reducing the balance sheet size to reach ample reserves as soon as possible and while the economy is strong.” Mester advocated for greater transparency through scenario analysis and the publication of an anonymized matrix of economic and policy projections. She stated, “I would like the Fed to publish an anonymized matrix of economic and policy projections so market participants can see the linkage between each participant’s outlook and their view of appropriate policy associated with that outlook.” Mester also suggested that FOMC statements should be more descriptive, stating, “It would be preferable for FOMC statements to use more words to describe the current assessment of the economy, how that influences the outlook, and the risks to that outlook.”

๐Ÿ‡ฏ๐Ÿ‡ต BOJ board member Adachi said rates may rise if sharp yen falls boost inflation expectations beyond targets. Consumer prices seen rebounding from summer through autumn due to import costs and wage gains. As we explained in previous reports, a weaker yen would make imports more expensive, and in an importing country like Japan, this puts upward pressure on price inflation. The yen has fallen roughly 10% this year despite the BOJ’s March rate lift-off from the negatives. While no set schedule, any bond purchase tapering would proceed gradually to avoid market disruption. This could be the key, as after the last rate hike, the BoJ chairman indicated that bond purchases would not be reduced, which in practice made the rate hike useless.

๐Ÿ›ข๏ธ Commodities: Gains in oil are maintained as global tensions increase ahead of an OPEC+ summit. In response to yet another attack on a ship in the Red Sea, and in despite of US warnings, Israeli tanks have advanced into the heart of Rafah, Brent crude futures are currently trading at about $84 per barrel.

๐Ÿ“ˆ Equity: Sharp rise in Nvidia after Musk’s artificial intelligence startup xAI raises 6 billion from investors. According to The Information, Musk wants to build an xAI supercomputer by connecting clusters of Nvidia’s H100 graphics processors. NVIDIA hits our projections at $1,150 per share, shared in our Nvidia report last week. Now it will most likely sideways in price.

โš ๏ธ Remember, we are still waiting for this week’s most important macro data, the PCE inflation rate to be released in the US on Friday. A higher than expected figure would be negative for the stock markets, and would also send US bond yields soaring against the dollar.

๐Ÿ‡ช๐Ÿ‡บ Geopolitics:

๐Ÿ‡ฎ๐Ÿ‡ฑ Israel’s war in Gaza is creating political divisions within Europe. French lead candidates held divergent views on recognizing an independent Palestinian state in a TV debate, reflecting splits among parties. Pro-Macron candidate Valรฉrie Hayer said recognition would benefit Hamas, aligning with France’s position. Far-right’s Jordan Bardella and Marion Marรฉchal condemned lack of condemnation for Hamas attacks. Left-wing candidates called for sanctions on Israel, ending the EU-Israel agreement and arms exports. Recognition of Palestine remains divisive among EU member states and candidates across the political spectrum.

๐Ÿ‡บ๐Ÿ‡ฆ On the other hand, Ukraine’s top military commander said he signed papers allowing French instructors to visit training centers soon. No further details were provided but the commander believed it would encourage other partners to join. The move signals deepening cooperation between France and Ukraine on defence issues. We recall, once again, that Putin has said, that military personnel who are on Ukrainian territory, assisting the Ukrainian army, will be considered legitimate military targets. The question is, will NATO consider such an event, without a direct attack on any NATO country, an act of aggression?