Distinction Matter - Subscribed Feeds

Authored by Ven Ram, Bloomberg cross-asset strategist,

Gold looks well poised to build on this year’s gains, with speculative momentum seeming to entice marginal buying and perpetrating a virtuous circle.

Bullion is on track for a fourth successive monthly rally, with its gains so far this year of over 15%.

While those gains appear stunning, in reality, gold adjusted for prices in the economy is far less impressive. At around $2400, it is in line with the 2011/12 highs after adjusting for inflation.

Gold must be viewed for what it actually is: an asset that delivers inflation-adjusted returns in fits and spurts with a highly inconsistent trajectory. Even so, given that we are now in a world where there is little conviction of returning to a 2% inflation regime anytime soon, bullion has room to grind higher.

Over in the US, the markets are again warming up to the idea of interest rate cuts from the Fed after the softer-than-forecast inflation prints for April. Traders now seem to be converging on September for a first reduction and are factoring in nearly two cuts by year-end. Whether or not that positioning proves accurate needs to be seen, but gold traders will be inclined to price those cuts into bullion pricing first and ask questions later.

And with geopolitical tensions staying elevated, gold will find the extra bid going in its favor.

Last October, when we pointed out that China's FX outflows had just hit a whopping $75BN - the single biggest monthly outflow since the 2015 currency devaluation - we concluded that the "unfavorable interest rate spread between China and the US will "likely imply persistent depreciation and outflow pressures in coming months", or in other words, September's biggest FX outflow in years is just the beginning, and very soon - in addition to geopolitics and central banks - the world will also be freaking out about the capital flight out of China... not to mention where all those billions in Chinese savings are going and which digital currency the Chinese are using to launder said outflows."

We wrote that on October 20 when Bitcoin was trading just under $30,000, a level it had been for much of 2023. And, just as we correctly predicted at the time...

Clockwork: every time China FX outflows surge, bitcoin erupts.

From last Friday: China Capital Flight Panic Eruptshttps://t.co/j0eWLnbFMq

... following this surge in Chinese FX outflows, bitcoin - traditionally China's preferred means to circumvent Beijing's great capital firewall since gold is, how should one put it, a bit more obvious when crossing borders - promptly exploded more than 100% higher in the next 4 months.

And while conventional wisdom is that this surge in the price of the digital currency was largely due to the January launch of Bitcoin ETFs, what many missed was a Reuters story in January which reiterated our original thesis from back in 2015, according to which much more than ETFs, and much more than rapidly shifting sentiment or frankly any day-to-day newsflow, it is China's massive wall of inert capital that has been the biggest driver of bitcoin moves, and never more so than during periods of FX and capital outflows which usually precede some form of capital controls.

We bring all this up because seven months after our first correct prediction that China's spike in FX outflows would send bitcoin surging, it's time to do it again.

One wouldn't know it, however, if one merely looked at the official Chinese FX reserve data published by the PBOC, here nothing sticks out. In fact, at $3.2 trillion, despite a rather notable drop for April, reported Chinese reserves are now near the highest level in past four years, and monthly flows are very much stable as shown in the chart below.

The problem, of course, is that as we have explained previously China's officially reported reserves are woefully (and purposefully) inaccurate of the bigger picture.

Instead if one uses our preferred gauge of FX flows, one which looks at i) onshore outright spot transactions; ii) freshly entered and canceled forward transactions, and iii) the SAFE dataset on “cross-border RMB flows, we find that China's net outflows were a massive $86BN in April, up from $11BN in February and $39BN in March and the fastest pace of outflows since the September spike in FX outflows which we duly noted half a year ago.

Drilling down, in April, we saw $50BN in net outflows via onshore outright spot transactions, and $1BN outflows via freshly entered and canceled forward transactions. Another SAFE dataset on "cross-border RMB flows" showed outflows of $35bn in the month, suggesting net receipt of RMB from onshore to offshore, likely on the back of Stock Connect outflows, but the "unusual flow" really could be anything including the unexplained  capital flight into gold and bitcoin. Ours - and Goldman's - preferred FX flow measure therefore suggests FX outflows were really $86BN in April, more than double the official net FX outflows of $39BN in the month.

How did we get this number? First, the portfolio investment channel showed net outflows in March after adjusting for cross-border RMB receipts. Stock Connect flows showed around US$9bn outflows, vs. US$8bn outflows in March. Foreigners kept buying RMB bonds - the bond market saw US$7bn inflows in April, vs. US$6bn in March.

Finally, the current account channel also showed faster net outflows. Despite a sizeable goods trade surplus in April, we saw a small outflow of $2bn related to goods trade in April vs. an inflow of $14bn in March. The services trade deficit widened to $22bn vs. $18bn in March. The income and transfers account showed outflows of $5bn in April, faster than the $2bn outflows in March.

At the time when FX outflows were re-acclererating, the broad USD strengthened further in April, and more importantly, the USDCNY spot drifted higher, as one would expect when there is capital flight... Oh, and Bitcoin traded at its record high above $70K.

And while Chinese policymakers are still keen on maintaining FX stability (or at least create that impression) as the countercyclical factors in the daily CNY fixing remained deeply negative and front-end CNH liquidity tightened notably in recent weeks, the reality is that with China desperate to boost its exports at a time when its great mercantilist competitor, Japan, has hammered the yen to the lowest level in 3 decades, it is only a matter of time before the currency devaluation advocates win, as they did in 2015. 

We hope that we don't have to remind readers that the first big trigger for bitcoin's unprecedented eruption higher starting in 2015 was - you guessed it - China's August 2015 FX devaluation, as we correctly noted at the time when we predicted that bitcoin would explode from $250 to the tens of thousands.

So don't be surprised if in the next 6 months Bitcoin doubles again, and the move has nothing to do with ETF inflows, the halving, or frankly anything else taking place in the US... and instead is entirely driven by China's massive wall of money which at last check was almost 3x bigger than the US.

Authored by Jonathan Turley,

Below is my column in Fox.com on the approaching end of the Trump trial in Manhattan. With the dramatic implosion of Michael Cohen on the stand on Thursday with the exposure of another alleged lie told under oath, even hosts and commentators on CNN are now criticizing the prosecution and doubting the basis for any conviction. CNN anchor Anderson Cooper admitted that he would “absolutely” have doubts after Cohen’s testimony.

CNN’s legal analyst Elie Honig declared “I don’t think I’ve ever seen a star cooperating witness get his knees chopped out quite as clearly and dramatically.”

He previously stated that this case would never have been brought outside of a deep blue, anti-Trump district. Other legal experts, including on CNN and MSNBC, admitted that they did not get the legal theory of the prosecution or understand the still mysterious crime that was being concealed by the alleged book-keeping errors.  The question is whether the jury itself is realizing that they are being played by the prosecution.

Here is the column:

In the movie “Quiz Show,” about the rigging of a 1950s television game show, the character Mark Van Doren warns his corrupted son that “if you look around the table and you can’t tell who the sucker is, it’s you.”

As the trial of former President Donald Trump careens toward its conclusion, one has to wonder if the jurors are wondering the same question.

For any discerning juror, the trial has been conspicuously lacking any clear statement from the prosecutors of what crime Trump was attempting to commit by allegedly mischaracterizing payments as “legal expenses.” Even liberal legal experts have continued to express doubt over what crime is being alleged as the government rests its case.

There is also the failure of the prosecutors to establish that Trump even knew of how payments were denoted or that these denotations were actually fraudulent in denoting payments to a lawyer as legal expenses.

The judge has allowed this dangerously undefined case to proceed without demanding greater clarity from the prosecution.

Jurors may also suspect that there is more to meet the eye about the players themselves. While the jurors are likely unaware of these facts, everyone “around the table” has controversial connections. Indeed, for many, the judge, prosecutors, and witnesses seem as random or coincidental as the cast from “Ocean’s Eleven.” Let’s look at three key things.

1. The Prosecutors

First, there are the prosecutors. Manhattan District Attorney Alvin Bragg originally (as did his predecessor) rejected this ridiculous legal theory and further stated that he could not imagine ever bringing a case where he would call former Trump personal attorney Michael Cohen, let alone make him the entirety of a prosecution.

Bragg’s suspension of the case led prosecutor Mark F. Pomerantz to resign. Pomerantz then wrote a book on the prosecution despite his colleagues objecting that he was undermining their work. Many of us viewed the book as unethical and unprofessional, but it worked. The pressure campaign forced Bragg to green-light the prosecution.

Pomerantz also met with Cohen in pushing the case.

Bragg then selected Matthew Colangelo to lead the case. Colangelo was third in command of the Justice Department and gave up that plum position to lead the case against Trump. Colangelo was also paid by the Democratic National Committee for “political consulting.” So a former high-ranking official in the Biden Justice Department and a past consultant to the DNC is leading the prosecution.

2. The Judge

Judge Juan Merchan has been criticized not only because he is a political donor to President Biden but his daughter is a high-ranking Democratic political operative who has raised millions in campaigns against Trump and the GOP.

Merchan, however, was not randomly selected. He was specifically selected for the case due to his handling of an earlier Trump-related case.

3. The Star Witness

Michael Cohen’s checkered history as a convicted, disbarred serial perjurer is well known. Now, Rep. Dan Goldman, D-N.Y., is under fire after disclosing that “I have met with [Cohen] a number of times to prepare him.”

Goldman in turn paid Merchan’s daughter, Loren Merchan, more than $157,000 dollars for political consulting.

Outside the courtroom, there is little effort to avoid or hide such conflicts. While Democrats would be outraged if the situation were flipped in a prosecution of Biden, the cross-pollination between the DOJ, DNC, and Democratic operatives is dismissed as irrelevant by many in the media.

Moreover, there is little outrage in New York that, in a presidential campaign where the weaponization of the legal system is a major issue, Trump is not allowed to discuss Cohen, Colangelo, or these conflicts. A New York Supreme Court judge is literally controlling what Trump can say in a presidential campaign about the alleged lawfare being waged against him.

The most striking aspect of these controversial associations is how little was done to avoid even the appearance of conflicts of interests. There were many judges available who were not donors or have children with such prominent political interests in the case. Bragg could have selected someone who was not imported by the Biden administration or someone who had not been paid by the DNC.

There was no concern over the obvious appearance of a politically motivated and stacked criminal case. Whether or not these figures are conflicted or compromised, no effort was taken to assure citizens that any such controversies are avoided in the selection of the key players in this case.

What will be interesting is how the jury will react when, after casting its verdict, the members learn of these undisclosed associations. This entire production was constructed for their benefit to get them to convict Trump despite the absence of a clear crime or direct evidence.

They were the marks and, like any good grift, the prosecutors were counting that their desire for a Trump conviction would blind them to the con.

Bragg, Colangelo and others may be wrong. Putting aside the chance that Judge Merchan could summon up the courage to end this case before it goes to the jury, the grift may have been a bit too obvious.

New Yorkers are a curious breed. Yes, they overwhelmingly hate Trump, but they also universally hate being treated like chumps. When they get this case, they just might look around the courtroom and decide that they are the suckers in a crooked game.

Authored by Simon White, Bloomberg macro strategist,

Copper’s recent rally has been most pronounced in the US, taking the futures curve there into extreme backwardation. That typically precedes a supply response and lower prices. Nonetheless, the long-term bullish case for copper is intact.

Copper trades in three main exchanges:

1. Comex in the US,
2. the London Metal Exchange and
3. the Shanghai Futures Exchange.

It has risen globally in recent weeks, but the rally at Comex has eclipsed the other two.

While stocks in Shanghai have risen sharply this year, and in London they have fallen but remain well above zero, at Comex warehouses they have fallen to near zero. This has led to massive short squeeze in US copper, with the metal trading at its highest ever premium to LME copper at over $800 per tonne (and much higher on an intraday basis).

This has pushed the Comex copper futures curve into massive backwardation, i.e. spot prices trading well above futures prices.

However, this often eventually leads to a self-correction. High spot prices encourage more supply to come on to the market, depressing the spot price and normalizing the curve. Today’s level of backwardation suggests this could be more pronounced than normal.

It’s ironic this comes at a time of ultra-bullish copper calls. Even though the thesis is sound – there is likely to be huge demand for copper from AI and green capex (with plenty of global fiscal stimulus as support – there will probably be a better time to start to set longs.)

Also, as noted Thursday, copper might face medium-term headwinds from the US economy potentially looking more recessionary, although this should be taken in consideration with China’s recovery, which is finally gaining some momentum.

Authored by Steve Watson via Modernity.news,

Joe Biden’s chief economic advisor refused to admit Thursday that the president keeps telling a huge lie by claiming that inflation was at 9 percent when he took office when it was really at 1.4 percent and shot up to 9 percent under Biden himself.

During an interview on Fox Business, host Neil Cavuto grilled Jared Bernstein, and told him directly “you’re lying,” and “just as bad” as Biden when he tried to dodge the matter.

CAVUTO: Why does Biden keep claiming inflation was 9% when he took office — when it was actually 1.4%?

BERNSTEIN: "The president talked about how concerned he was for households struggling with prices."

CAVUTO: "That's not what I asked you. Why does he keep misrepresenting… pic.twitter.com/lMaKNfeSOV

After Biden took office inflation surged to rates unseen since the early 1980s, peaking at an annual rate of 9.1 percent in June 2022, a full 17 months after he became president.

Yet, he keeps claiming it was ALREADY at 9 percent and that he inherited a weakened economy from Trump.

“Jared, why does he keep saying that?” Cavuto asked, following up “You’re the head of the Council of Economic Advisers. Do you ever whisper in his ear, ‘Mr. President, just to be technical about it, it wasn’t at 9% when you assumed office, it was 1.4%. It got as high as 9% in 2022, you brought it down from that, but it was never ever ever 9% when you came into office.’ So why does he keep saying it?”

Bernstein responded “Well, first of all, let me point out that in that very quote you played, the president talked about how concerned he was, uh, for households struggling with prices that he consistently—”

“That’s not what I asked you. That’s not what I asked you,” Cavuto interjected, again asking “Why does he keep misrepresenting this?”

“He’s making the point, uh, that that factors that caused inflation to climb to 9% were in place when he took office,” Bernstein claimed.

Credit to Cavuto, he was having none of it.

“No, that’s not what he said! He said it was at 9%… So if I can’t trust him with quoting data in real-time, why should I believe what he’s talking about now?”

“No it wasn’t — it was not at that! You’re almost as bad as he is,” Cavuto further charged when Bernstein attempted to claim that the annual inflation in 2021 was “about 9 percent.”

“Why can’t you just say, ‘It was high, it got as high as 9%’ — you’d be accurate in saying that — And we have now brought it down, or were struggling around the 3% area, but it’s better than it was,’” Cavuto continued.

“But instead to hang it on his predecessor that you inherited something that was through the roof when we were in the middle of Covid, it just seems to the American people whether you’re a Republican or a Democrat — you’re lying!” The host concluded.

Biden really seems to believe that he has rescued the economy, when in reality he’s overseen an unmitigated disaster.

*  *  *

Your support is crucial in helping us defeat mass censorship. Please consider donating via Locals or check out our unique merch. Follow us on X @ModernityNews.

Authored by Michael Snyder via The Economic Collapse blog,

I never imagined that we would ever see a time when it takes $177,798 for a family of four to live comfortably in the United States.  Unfortunately, that day has arrived.  Our leaders have been pursuing highly inflationary policies for many years, and now we have reached a point where inflation is wildly out of control.  In fact, the latest wholesale inflation figure that was released on Tuesday came in much higher than expected.  Sadly, this is just the beginning and we are in far more trouble than most people realize.

According to an incredibly shocking new study, most Americans do not make enough money to “live comfortably” in the highly inflationary environment that we find ourselves in today…

A recent study has revealed the incomes needed for families to live comfortably across the United States – and the stark contrast in the cost of living between states is startling.

The study revealed that in the most expensive states, families need nearly $300,000 to simply live ‘comfortably.’

The least expensive state requires about half that salary – still over $100,000.

Meanwhile, the average annual salary in the US is $59,428, or $28.34 per hour, as of May 2024.

The study determined that Massachusetts is the most expensive state.

It takes a whopping $301,184 a year for a family of four to “live comfortably” there.

The least expensive state is Mississippi.

In the Magnolia State, it only takes $177,798 a year for a family of four “to cover their expenses and maintain a satisfactory quality of life”.

This is our country now.

I feel like I have been banging my head into a wall.  For more than a decade I have warned that this would happen, and now it is here.

And even more inflation is on the way…

Americans already contending with persistent and stubbornly high inflation just got more unwelcome news on Tuesday: There are more price hikes likely coming down the pike.

Wholesale inflation picked up in April to its highest rate in a year, according to Bureau of Labor Statistics data released Tuesday.

In April, inflation at the wholesale level jumped 0.5 percent in just one month…

Inflation at the wholesale level rose much more than expected in April, the latest sign that price pressures within the economy remain elevated and difficult to tame.

The Labor Department said Tuesday that its producer price index, which measures inflation at the wholesale level before it reaches consumers, rose 0.5% in April from the previous month.

If you multiply that figure by 12 months, you get 6 percent.

And of course you need to approximately double any number that the Biden administration gives us in order to come up with a figure that is anywhere close to accurate.

By now, just about everyone realizes that the rate of inflation in this country is massively understated.

For example, Joe Biden insists that the rate of inflation has been “low” for quite some time, but home prices have risen by more than 47 percent since the start of this decade…

Home prices have surged 47.1% since the start of 2020, easily outstripping the gains seen in recent decades.

That’s according to a recent analysis by ResiClub of the Case-Shiller National Home Price Index, which showed that house prices in the 1990s and 2010s grew a respective 30.1% and 44.7%.

Let’s all be honest with one another.

The truth is that we are in the midst of a raging cost of living crisis that has no end in sight.

And this should not surprise any of us.  Our politicians continue to borrow and spend trillions upon trillions of dollars, and all of this borrowing and spending is extremely inflationary…

An economic specter haunts America. It’s also one that many American politicians – Republican and Democrat – say a great deal about but are reluctant to address.

The name of that shadow is the United States National Debt: what the US Treasury Department defines as “the amount of money the Federal Government has borrowed to cover the outstanding balance of expenses incurred over time.”

If you go to the Treasury’s website, you can see just how big that debt is. In mid-May, it was 34.5 trillion dollars. The pace of the growth in that debt is equally stunning. Approximately 1 trillion dollars is being added to America’s National Debt every 100 days.

Borrowing and spending another trillion dollars every 100 days is a completely and utterly insane thing to do.

We really are in the endgame.

Earlier this week, Fed Chair Jerome Powell warned that interest rates may have to stay high for an extended period of time in order to fight inflation…

Federal Reserve Chair Jerome Powell said Tuesday that “it may take longer than expected” for high interest rates to lower inflation and gave no hint that a recently slowing labor market could mean earlier rate cuts.

“We’ll need to be patient and let restrictive policy do its work,” Powell said during a session at a Foreign Bankers Association meeting in Amsterdam. “It may be that (high interest rates) take longer than expected to do its work and bring inflation down.”

So far, higher rates have not solved our cost of living crisis, and that is because our politicians continue to spend money like drunken sailors.

But higher rates are crushing the overall economy.

Yesterday, I wrote about the “restaurant apocalypse” that is starting to sweep across America.

This week, it got even worse.

We just learned that at least 99 Red Lobster locations have been shut down and will be auctioned off…

At least 99 locations of Red Lobster are being auctioned off amid questions about the stalwart seafood chain’s long-term future.

In a post Monday on LinkedIn, Neal Sherman, founder and CEO of TAGeX Brands, a liquidation firm, announced he was leading the closure of more than 50 Red Lobster locations, with the restaurants’ equipment to be auctioned off.

A web page dedicated to the liquidations showed closure locations across the U.S. including in Denver; Indianapolis; Rochester, New York; Sacramento, California; San Antonio; and San Diego.

On Tuesday, Restaurant Business Magazine reported 99 locations were closing.

For the Red Lobster workers that just lost their jobs, the end came very suddenly…

A third Red Lobster employee took the news in stride, posting: ‘red lobster just laid all of us off without notice and closed for good LMAOO.’

The employee added in replied that Red Lobster didn’t tell managers until 8am yesterday.

Of course it isn’t just restaurant chains that are closing locations.

In fact, even Walmart is closing stores and auctioning off inventory…

After announcing that it would be shutting its doors for good, one Ohio Walmart auctioned off its remaining inventory, including flat-screen televisions, laptops and furniture, for a bargain.

The Walmart at 3579 S. High St. in Columbus opted not to renew its lease in a once-bustling strip plaza. Representatives announced the closure in February, claiming the store had failed to ‘meet financial expectations’.

Last week, the store offloaded its merchandise through a liquidation auction. Bidding closed the morning of May 10, with some items like laptops going for under $20.

If interest rates stay high, we are going to see a lot more of this sort of thing.

But the Federal Reserve is very hesitant to cut rates at this point because of the cost of living crisis.

Officials at the Fed really are caught in a “deer in the headlights” moment right now.

But no matter which way they ultimately choose to go, in the short-term more “stagflation” is ahead.

And in the long-term, the exceedingly foolish policies that our leaders have been pursuing are going to result in a systemic collapse of absolutely epic proportions.

*  *  *

Michael’s new book entitled “Chaos” is available in paperback and for the Kindle on Amazon.com, and you can check out his new Substack newsletter right here.

US equity futures are flat to end a torrid week which saw all indexes hit a fresh all-time high while the terminally anachronistic Dow Jones briefly topped 40,000. Pre-market, MegaCap Tech are mixed: AMZN +20bp, MSFT +20bp, META -22bp, GOOGL -18bp. WMT is down 27bps pre-mkt, after its +7.0% rally post-earnings yesterday. As of 7:00am S&P and Nasdaq futures are unchanged while bond yields are largely flat. Commodities are mixed: oil is lower; metals/ags are higher. Overnight, China reported mixed April macro data (IP beat, Retail Sales miss) and also announced a new rescue plan to support housing; as a result base metals rallied (Copper +2.0%; Iron Ore +1.4%). Today, key macro focus will be on comments from the Fed’s Christopher Waller, Neel Kashkari and Mary Daly for further clues about the path for interest rates as well as the data from the leading index due at 10:00am (est -0.3%).

In premarket trading, GameStop and AMC rebounded following two sessions of losses, as the meme-stock rally shows fresh signs of life. While GameStop shares rise as much as 9.2% in premarket trading on Friday, AMC jumps as much as 9.5% — both stocks pared some of those early gains. Reddit shares rise 14% after the firm partnered with OpenAI to bring its content to the popular ChatGPT chatbot. Analysts note that this deal will boost the social media company’s data licensing business. Here are the other notable premarket movers:

• Applied Materials share edge lower, falling 0.9% as the largest US maker of chipmaking machinery’s forecast failed to live up to high investor expectations following the stock’s 32% year-to-date rally.
• Baidu ADRs tick up 0.4% in premarket trading, after rising 1.7% on Thursday. The search engine operator is set for weak growth in advertising revenue for coming quarters, Morgan Stanley says in a note that downgrades the stock to equal-weight from overweight.
• Cracker Barrel shares trade 11% lower after the restaurant chain reduced its quarterly dividend as the company increases investment in its business. Additionally, the company also sees third- and fourth-quarter results coming below prior expectations, citing weaker-than-anticipated customer traffic as the main driver.
• Doximity shares rise 14% after the application software company gave a first-quarter forecast that is stronger than expected. It also reported fourth-quarter results that beat expectations.
• DXC Technology shares sink 23% after the IT services company gave a full-year forecast that was weaker than expected for both revenue and adjusted earnings. It also reported its fourth-quarter results.
• Snowflake shares slip 1.3% after Bloomberg reported that the software firm is in talks to acquire startup Reka AI for more than $1 billion, according to people familiar with the matter.
• Take-Two shares drop 2.8% after the video-game giant issued a weak full-year forecast, reflecting a later release date for the highly-anticipated Grand Theft Auto VI video game. The Rockstar Games title is now expected to release in fall 2025, which is in fiscal year 2026 rather than fiscal year 2025 as some analysts had expected.

Friday’s tentative mood reflected a repricing of US rate cut expectations to only one reduction in 2024. Several Fed policymakers said the the central should keep borrowing costs higher for longer as they await more evidence that inflation is easing.

“The markets are now at a bit of a crossroads,” said Stuart Cole, head macro economist at Equiti Capital. “With the central banks all very much in a data-dependence mode, the markets will be also adjusting expectations to each piece of relevant data that comes out.”

Investors will be tracking comments from the Fed’s Christopher Waller, Neel Kashkari and Mary Daly due later Friday for further clues about the path for interest rates.

European stocks slid for a second day weighed down by rates-sensitive sectors such as tech and real estate as traders pared back bets for policy easing after several Fed speakers suggested interest rates should stay high for longer. The Stoxx 600 dropped 0.4% but was off its worst levels, as construction, industrials and tech underperformed after ECB Executive Board member Isabel Schnabel warned against back-to-back interest rate cuts in June and July. Swap traders continue to price in three ECB rate cuts this year, with a first reduction likely next month. Luxury group Here are Europe's top movers:

• Richemont shares rise as much as 6.9%, the most in four months, after the Swiss watch and jewelery maker’s full-year sales beat estimates.
• Bavarian Nordic shares jump as much as 5.6%, the most in 10 weeks, after US authorities warned that cases of a new clade of the Monkeypox virus are increasing in the Democratic Republic of the Congo.
• Siemens shares fall as much as 2.4%, declining for a second day after the German industrial giant’s earnings on Thursday disappointed investors.
• Lanxess shares decline by as much as 5.3% after both Jefferies and BNP Paribas Exane cut stock to underperform, with the former citing risks around demand recovery and also cutting Ebitda outlook.
• Azelis shares decline by as much as 13%, the most on record, after EQT and PSP Investments Holding Europe offered to sell shares worth approximately 11% of total outstanding in the chemicals distributor, according to terms seen by Bloomberg.
• Scor shares tumble as much as 13% after the French reinsurer’s first-quarter net income fell short of expectations, with analysts flagging a hit from one-offs including an impact on the firm’s L&H reinsurance division from volatility in US mortality claims.
• Auto Trader shares slide as much as 5.3% as Morgan Stanley analysts cut their rating on the stock to underweight, saying the market is expecting too much too soon from the online auto marketplace’s Deal Builder product.
• Engie shares fall as much as 2.2% after the French utility reported a miss in results that was somewhat expected after a warm winter pushed energy prices lower.
• Haleon shares slip as much as 1.7% after GSK agreed to sell its remaining stake in the consumer health company for £1.25 billion, completing the drugmaker’s separation from the company.

Earlier in the session, property stocks in mainland China rose to the highest since November after the government announced a rescue package — its most forceful attempt yet to shore up the troubled sector. Elsewhere, Asian markets saw mild losses, though still on pace for weekly gains, as a late rally in Chinese stocks was not enough to offset weakness in tech-heavy markets of South Korea and Taiwan. The MSCI Asia Pacific Index declined 0.1%, to cut its weekly gains to 2.2%. Chipmakers TSMC and Samsung Electronics were among the biggest drags Friday. Benchmarks in South Korea, Taiwan and Australia posted among the largest declines in the region.

China’s mainland shares rallied to close at their highest level since Oct. 12 after the world’s second-largest economy announced its most forceful attempt yet to shore up the beleaguered property market, easing mortgage rules and encouraging local governments to buy unsold homes from developers for conversion into affordable housing. The new measures sent a Bloomberg index of Chinese property developers to its highest level since November.

“The lowering of down-payment ratio is beyond market expectations, while scrapping the minimum mortgage rate is well expected by the market,” said Shujin Chen, head of China financial and property research at Jefferies Hong Kong Ltd. “Investors are more willing to chase property stocks on speculation of a series of upcoming supportive policies before the Third Plenary Session in July,” she said.

In FX, the Bloomberg Dollar Spot Index rose 0.2%, but was still on track to end the week 0.5% lower after US CPI data earlier in the week cemented the view that the Fed will cut rates later this year. ING strategists say markets may have oversold the greenback following this week’s CPI and PPI data.  “We still think there is not enough thrust from US data to justify a significantly weaker greenback just yet,” they wrote in a note. USD/JPY climbed as much as 0.4% as the Bank of Japan left the amount of debt purchases unchanged. Leveraged-currency accounts bought dollars against the yen after the BOJ kept debt purchases unchanged in its regular operations Friday following a surprise reduction on Monday, according to an Asia-based FX trader.

In rates, the 10-year Treasury yield inched up 1bp to 4.39%, bouncing off 4.31% hit on Thursday, its lowest in nearly six weeks. Swaps imply a 76% chance of a quarter-point rate cut from the Fed in September, compared with 73% earlier in the week; around 44bps of cuts are priced in total through the end of the year, from around 40bps at the start of the week. Meanwhile in Europe, money markets trimmed ECB interest rate-cut wagers after policymaker Isabel Schnabel warned against back-to-back rate cuts.

In commodities, WTI trades within Thursday’s range at around $79.31. Most base metals trade in the green; LME nickel outperforms peers. Spot gold rises roughly $8 to trade near $2,385/oz.

Market Snapshot

• S&P 500 futures down 0.1% to 5,314.00
• STOXX Europe 600 down 0.4% to 521.29
• German 10Y yield little changed at 2.48%
• Euro down 0.2% to $1.0842
• Brent Futures up 0.4% to $83.57/bbl
• Gold spot up 0.3% to $2,383.06
• US Dollar Index up 0.29% to 104.76
• MXAP down 0.1% to 181.46
• MXAPJ down 0.1% to 569.53
• Nikkei down 0.3% to 38,787.38
• Topix up 0.3% to 2,745.62
• Hang Seng Index up 0.9% to 19,553.61
• Shanghai Composite up 1.0% to 3,154.03
• Sensex up 0.4% to 73,983.35
• Australia S&P/ASX 200 down 0.8% to 7,814.37
• Kospi down 1.0% to 2,724.62

Top Overnight News

• European stocks retreated for a second day as dialed-down bets for Federal Reserve policy easing weighed on risk sentiment.
• China announced its most forceful attempt yet to shore up the beleaguered property market, easing mortgage rules and encouraging local governments to buy unsold homes from developers for conversion into affordable housing.
• Investors are divided on the likelihood of the Bank of Japan repeating its surprise move earlier this week by reducing purchases of government bonds in a regular buying operation this morning.
• China’s economic recovery tilted even further toward manufacturing, leaving it more vulnerable to trade barriers and highlighting the stakes of a new bid to shore up domestic demand.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were mostly subdued following the mild losses on Wall St where the major indices pulled back after printing fresh record levels, while participants also digested mixed activity data from China. ASX 200 was pressured as losses across most industries overshadowed the gains in the mining and materials. Nikkei 225 declined but was off worst levels amid a weaker currency and after the BoJ refrained from further cutting its bond purchases. Hang Seng and Shanghai Comp were indecisive with early outperformance in Hong Kong owing to tech strength before briefly wiping out all of its gains, while the mainland was constrained as the focus centred on a slew of data including a further deterioration in Home prices which saw the steepest monthly drop in 9 years, while activity data was mixed as Industrial Production topped forecasts but Retail Sales disappointed. Modest extension of/return of strength in the Hang Seng and Shanghai Composite on the announcement of various Chinese property support measures, incl. a cut to the housing fund loan level.

Top Asian News

• China's Vice Premier He Lifeng says must effectively ensure the delivery of homes, adds local governments can purchase some homes for affordable housing at 'reasonable' prices, according to Xinhua.
• PBoC announces it will lower interest rates on provident housing fund loans by 25bps and China will abolish the lower limit of interest rates for housing provident fund for first and second homes at the national level.
• PBoC to create a CNY 300bln relending loan for affordable housing, expected to drive bank lending of CNY 500bln.
• China stats bureau spokesperson said complexities and uncertainties in the external environment grew outstandingly and continued economic recovery and improvement still face many challenges, while April economic operations were stable even though some indicators slowed due to a high base and holiday factors. China's stats bureau said with macro policies taking effect and economic momentum recovering, China's economic improvement will be further consolidated and strengthened but also noted that China's property sector continues to be under adjustments.
• BoJ Governor Ueda said there is no immediate plan to sell BoJ's ETF holdings and must spend time deciding the fate of BoJ's holdings including whether to unload them in the future, according to Reuters.
• BoJ may raise rates as many as three more times this year with the next move potentially coming as early as June given how much room there is to adjust its “excessively” easy settings, according to former BoJ chief economist Sekine cited by Bloomberg.

European bourses, Stoxx600 (-0.2%) are mostly on the back foot, continuing the broad weakness seen in APAC trade overnight. European sectors are mostly lower; Telecoms are found at the top of the pile, building on the prior day's outperformance; Tech lags.
US Equity Futures (ES -0.1%, NQ -0.1%, RTY -0.1%) are flat, with price action circulating on either side of the unchanged mark.

Top European News

• ECB's de Guindos sees inflation moving toward the 2% goal in 2025. Favourable stance on cross-border consolidation in the banking sector.
• Riksbank's Thedeen says recent data does not change the picture for rate cuts.
• UK Chancellor Hunt will claim that only the Conservative Party will cut the tax burden after the election, according to FT.
• ECB's Schnabel said depending on incoming data, a rate cut in June may be appropriate, but the path beyond June is much more uncertain, while she added that a rate cut in July does not seem warranted based on current data. Schnabel also stated that with inflation risks still being tilted to the upside, front-loading of the easing process would come with a risk of easing prematurely and cannot pre-commit to any particular rate path due to very high uncertainty, according to Nikkei.

FX

• DXY is firmer, continuing to reclaim lost ground following the dovish US CPI report on Wednesday, which led the index as low as 104.07. The index currently sits towards the upper end of a 104.77-49 range.
• EUR is modestly softer vs USD, and overall unreactive to the final EZ inflation figures. EUR/USD dips beyond the lows of Thursday, printing a trough at 1.0842.
• GBP is slightly softer vs the Dollar, largely a factor of broader Greenback strength, rather than UK-related newsflow; trading towards the bottom end of today’s 1.267-264 range.
• JPY continues to trundle lower, with USD/JPY going as high as 155.98, just shy of the round 156.0 level. USD/JPY was supported after the BoJ refrained from making any further reductions in Rinban purchase amounts.
• Antipodeans are both softer vs the Dollar, with the Aussie the G10 underperformer. Chinese activity data overnight was mixed, and subsequent support measures which lifted the Yuan failed to prop up the Antipodes.
• PBoC set USD/CNY mid-point at 7.1045 vs exp. 7.2222 (prev. 7.1020)

Fixed Income

• USTs are modestly softer, and to a lesser degree than EGBs; bullish-impetus from the BoJ maintaining its Rinban purchase amount is weighed up against hawkish commentary from ECB's Schnabel. Currently only a handful of ticks lower at around 109-14.
• Bunds are weighed on by remarks from ECB's Schnabel overnight who said that the data does not currently point to a cut in July. Bunds down to a 131.01 base, but with someway to go before the WTD trough from Tuesday at 130.24.
• Gilts are taking impetus from EGBs and as such are at session lows of 98.08 but again well above Tuesday's WTD base at 97.23; potential focus on extensive fiscal commentary from Chancellor Hunt, though nothing fundamentally new just yet.

Commodites

• Crude benchmarks were incrementally firmer but have been drifting from best levels as the USD picks up; WTI & Brent Jul'24 at the low-end of the day's range at USD 78.80/bbl and USD 83.37/bbl respectively.
• Precious metals are a touch firmer, torn between the stronger USD/somewhat higher yields and a general downtick in risk appetite. XAU at USD 2380/oz, still yet to test USD 2400/oz.
• Base metals are in the green, support derived from the extensive Chinese property support measures announced across the APAC/European sessions transition, despite the mixed read from the region's data overnight.

Geopolitics

• US Official says the US will agree to the Rafah operation but on conditions, via Al Arabiya; adds, the US' warnings to Israel about the operation in Rafah are serious. "The Biden administration will accept a full Israeli attack in Rafah aimed at liquidating Hamas".
• Iraqi armed factions said they targeted a "vital target" in Eilat, southern Israel, according to Asharq News.
• Israel presented a proposal to Egypt to reopen the Rafah crossing with the participation of Palestinians from Gaza and UN personnel, according to Israeli media cited by Asharq News.
• US Defence Secretary Austin reinforced to Israeli counterpart in a phone call the necessity to protect civilians and ensure uninterrupted aid flow before any potential Israeli military operation in Rafah.
• Yemen's Houthis say they downed US MQ9 plane on Thursday evening Maareb Governorate.
• North Korean leader Kim's sister denied arms exchanges with Russia and said North Korea has no intention to export its arms, while she added that rocket launchers and missiles recently unveiled are for defence against South Korea, according to KCNA.
• South Korea said North Korea fired at least one ballistic missile towards the Sea of Japan.

US Event Calendar

• 10:00: April Leading Index, est. -0.3%, prior -0.3%

Central Bank Speakers

• 10:15: Fed’s Waller Speaks on Payments Innovation
• 10:15: Fed’s Kashkari Gives Brief Introduction of Waller
• 12:15: Fed’s Daly Gives Commencement Speech