πŸ“° Macro-News round-up

MarketNews

πŸ“Š US interest rate futures markets cool down, with rate cut expectations falling by 90 basis points. We started 2024 with a market discounting 150 basis points of cuts, now most futures traders are discounting approximately 60 basis points of cuts.

πŸ’Ό The good employment data released on Friday did nothing but push back the idea of a rate cut by the Fed. As we have insisted in these reports since December, if there was no clear macroeconomic data worsening in the US, a rate cut became unjustified. Not only that, we pointed out that the inflation rate in the US since summer 2023 had only zigzagged up and down in the vicinity of 3%.

πŸ’± Even the Fed authorities are sceptical about controlling inflation: “While it is not my baseline outlook, I continue to see the risk that at a future meeting we may need to increase the policy rate further should progress on inflation stall or even reverse,” said Fed Governor Michelle Bowman in a speech on Friday, raising the possibility that the central bank may need to take additional action to calm price pressures. Does this mean that the possibility of a rate hike is not excluded?

πŸ“ˆ In any case, stay tuned tomorrow, as the US inflation rate for March will be presented, and this data will undoubtedly confirm our suspicions or allay unfounded fears.

πŸ’° Crude oil prices remain strong, with Brent crude currently trading above $90, up from almost $92 on Friday. The general trend in oil prices is upwards or remains elevated in prices, the chances of the inflation we were talking about falling below 3% are even lower. Oil is the most inflationary asset there is.

πŸ“‰ Market: Meanwhile, the dollar index seems to be losing steam after a flash rally on Friday on the back of the US jobs data. From yesterday to today it has lost the 55 average as support, and is trading closer to 104. The 2 year US bond, on the other hand, is now returning over 4.70%, and in the last few hours has been as high as 4.80%. Equities have lost confidence since Friday. The mini SP500 futures is trading above 5250 points, but seems to be struggling to hold those levels. The Nasdaq 100 is trading above 18,000 points, up 18,130 from 18,400 points in March. In Europe, the Dax 40 is also showing declines, falling more than half a percentage point in today’s session and probably heading towards 18,000 points compared to the 18,600 reached in March. In any case, we are not witnessing strong corrections, but rather a pause or slight pullback.

πŸ‡¨πŸ‡³ China: Sinolink Securities reports that during the April 4-6 vacation, when Chinese people typically honour their ancestors by visiting graves located in their home towns, per capita spending was 435 yuan ($60.14), or roughly 101.1% of the spending recorded during the holiday five years prior. According to researchers, Chinese spent more per person over the long weekend than they had during any other holiday since China removed COVID-19 limitations in late 2022.

🌍 Geopolitics: Trade tensions between the two great powers, the United States and China, continue to simmer and appear irreconcilable, or at least the comments we continue to gather from this weekend seem to indicate this. Just hours before the two-day EU-US Trade and Technology Council (TTC) in nearby Leuven began, US trade representative Katherine Tai warned that Beijing’s “non-market” policies will severely harm both blocs’ economies and political systems unless they are addressed with suitable “countermeasures.”

πŸ‡ΊπŸ‡¦ Ukraine war: According to the Washington Post, anonymous sources close to Trump have reportedly revealed to them the peace plan Trump has in mind for the Ukrainian war, and eventually the one that would be implemented if he becomes president. The plan would be based on two key points, pressure on Kiev to accept the handover of the Crimea and Donbass regions to Russia. Additionally, a firm written commitment that Ukraine will not join NATO. It is worth noting that these revelations have been officially denied by Trump’s campaign representative, so we have no way of verifying whether they are true.

βš”οΈ On the other hand, let us recall that even according to Ukrainian officials themselves, Russia offered, within 2 months of the outbreak of the war, its complete withdrawal from Ukrainian territory in exchange for a commitment not to join NATO. However, this now idyllic proposal was rejected under pressure from the US and the UK, which promised Ukraine that it would have enough support to win the war. Today, NATO’s main fear is that the weight of the Republican party will eventually cut off funding for the war, and the US will finally withdraw its financial and military support.

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