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Fourth Turning 2022: Bad-Moon Rising, Part 2

Fourth Turning 2022: Bad-Moon Rising, Part 2

Authored by Jim Quinn via The Burning Platform blog,

Read Part 1 here…

In Part 1 of this article I laid out how the global elite have used this covid flu to manipulate the weak minded into…

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Fourth Turning 2022: Bad-Moon Rising, Part 2

Authored by Jim Quinn via The Burning Platform blog,

Read Part 1 here...

In Part 1 of this article I laid out how the global elite have used this covid flu to manipulate the weak minded into a fear induced mass psychosis as a key element in their Great Reset plan to control the world and keep you technologically enslaved under lock and key. Now I will try to decipher how this mass hysteria might play out over the course of 2022 and beyond.

“Americans today fear that linearism (alias the American Dream) has run its course. Many would welcome some enlightenment about history’s patterns and rhythms, but today’s intellectual elites offer little that’s useful. Caught between the entropy of the chaoticists and the hubris of the linearists, the American people have lost their moorings.” – Strauss & Howe – The Fourth Turning

“The most effective way to destroy people is to deny and obliterate their own understanding of their history.” ― George Orwell

The American Dream, where all Americans, no matter the circumstances of their birth, had a legitimate opportunity to live a better life than their parents, based upon their own intelligence, work ethic, and good fortune, is an illusion in today’s world. The ruling elite have stolen the wealth of the nation and its citizens. This was not an accident, but a plan implemented over many decades, accelerating after Nixon closed the gold window and opened the door to unlimited amounts of debt being created out of thin air and backed by nothing.

One of the Fed’s only mandates was to maintain a stable currency. Since its inception in 1913 to 2020, the USD had lost 96% of its purchasing power. The USD has lost 7.5% of its purchasing power since 2020, as Powell and his cronies have lost control of inflation.

It is not a coincidence this Fourth Turning was launched due to the Federal Reserve and Wall Street bankers blowing the largest debt bubble in history (until now), issuing fraudulent mortgage loans to millions of willing and able dupes who could never pay them back, packaging the loans into toxic derivative debt time bombs, bullying and paying off the spineless rating agencies to rate these worthless derivatives AAA, and then selling them to oblivious pension plans and innocent little old ladies. But they eventually ran out of greater fools and clueless suckers. The entire control fraud blew sky high in September 2008, representing the debt catalyst for this Fourth Turning.

For the past thirteen years of this Crisis, the puppets at the Federal Reserve have done as instructed by the Wall Street cabal and globalist billionaire oligarchs. They have papered over an unpayable debt problem by creating $8 trillion more debt and shoveling the proceeds into the pockets of the ruling billionaire oligarchy. The billionaire oligarchs and Wall Street bankers aren’t on the hook for the $30 trillion national debt and the other $100 trillion of unfunded social welfare and pension liabilities.

You, your kids, your grandkids, and unborn generations of hard-working citizens are on the hook. Our standard of living had been in a gradual decline since the 1970s, but we have entered the suddenly stage referenced by Ernest Hemingway in The Sun Also Rises – “How did you go bankrupt?” Bill asked. “Two ways,” Mike said. “Gradually, then suddenly.”

The Fed’s balance sheet stood at $800 billion at the start of this Fourth Turning, and now is $8.8 trillion and rising every day. The Repo crisis in September 2019 revealed a systemic glitch in the Fed’s well-oiled machine to pump up stock markets and guarantee unlimited profits for Wall Street. Coincidentally, a pandemic that had been simulated (Event 201) in October by Gates and his WEF cronies, conveniently struck in March 2020, with its very own multi-billion-dollar marketing campaign, and fear propaganda spouted 24/7 from the Big Pharma captured corporate media.

After a faux crash in the markets, the Fed rode to the rescue and has proceeded to print $4.8 trillion in the last two years. Meanwhile, the national debt, which stood at $9 trillion at the start of this Fourth Turning, reached $23 trillion prior to the Covid pandemic, will reach $30 trillion in the next month.

The question that might come to mind for the average person is, “how did the Fed’s actions in the last two years benefit me?”. Well, if you are a billionaire, you did fantastic. The ten richest men in America more than doubled their net worth since the March 2020 launch of their plandemic. Do you think this was an accident? Gates made $36.5 billion off the most heavily marketed flu in history, and he was the lowest among the ten. While your local family-owned hardware store went out of business, Bezos and his Amazon empire got further enriched, with Jeff’s net worth soaring by $75 billion, as his Washington Post did their darndest pumping fear porn propaganda to the ignorant masses.

These ten men added roughly $1 billion per day to their net worth. Compare that to what you earn per day at your job. When ten people rake in $736 billion during a “health crisis”, in which millions of workers were forced out of work or fired, and hundreds of thousands of small businesses were bankrupted, you know the fix was in from the beginning. The Fed’s job was to protect and enhance the wealth of the richest people on earth, while 80-year-old grandmothers got 0.1% on the money market account if they weren’t murdered by a Democratic governor in their nursing home.

America, where a multi-millionaire can achieve the dream of becoming a billionaire by just letting the Fed do their job – pumping stocks. America created 116 new billionaires in less than two years during a “terrible pandemic”, a 19% increase. The American Dream achieved by knowing the right central bankers. Are you paying attention?

If you had any doubt all this “emergency” debt being created and bought by the Fed doesn’t have one sole purpose – to enrich their oligarch benefactors and banker bosses – just take a gander at this chart comparing the S&P 500 to the increase in the Fed’s balance sheet over the last 13 months. We’ve had 13 consecutive new highs on the S&P 500, matching the 13 new highs in the Fed balance sheet. I’m sure this is just a non-correlated coincidence. Right?

And it hasn’t just been the Fed. Since this entire scamdemic was created and fostered by the Davos globalist elite as their Build Back Better Great Reset scheme to allow you to live while owning nothing, the ECB had to do their part. While the Fed has added $5 trillion to their balance sheet since 2019, the ECB hasn’t been a slouch, as they’ve added $4.5 trillion.

They have bought mortgage bonds, junk bonds, Treasuries, and just about any crap derivative on the planet, driving interest rates to the lowest in history, and blowing bubbles in housing, the stock market, bond market, commercial real estate, collectibles, bitcoin, and NFTs (whatever the hell they are). It’s an Everything Bubble. When they all burst simultaneously, it will again be the average American worker who will get screwed.

Powell and his fellow apparatchiks at the Fed thought they could talk their way out of any predicament their massive printing created, because the Wall Street market makers and corrupt corporate media pretended debt doesn’t matter and the paper wealth creation was proof the economy was great. The illusion of recovery built on delusions of debt based faux wealth may have had something to do with the Fed creating 75% of all the money in U.S. history since the start of this Fourth Turning.

This coincides with 70% of all U.S. debt in history being created in the last fourteen years. Does any of this seem sustainable? Does any of it make sense from a fiscal perspective? Are those in control attempting to crash our economic system on purpose, in order to usher in their Great Reset plan? It sure appears so.

So far, 2022 is looking a little dicey for the markets. The millions of twenty and thirty something investment gurus have never experienced a bear market, as Uncle Jerome and the academic troll Yellen have guaranteed their unbeatable buy the dip “investment strategy” for the last decade. The markets are puking with just Fed jawboning about ending QE to infinity (until they restart it again) and possibly increasing interest rates by .25%.

NASDAQ high-fliers are tanking. Bitcoin has lost 50% in two months. The 10 Year Treasury yield has more than tripled in two years. Whenever the markets began to tank since 2009, the Fed came to the rescue with QE or slashing rates. That is why stock valuations have reached stratospheric levels exceeding the 2000 Dot.com bubble. They are now exceeding that historic bubble by 70%.

I’ve been expecting a market crash every year for the last twelve years, but the Fed has fended it off with their perpetual liquidity engine. But it appears they have fully shot their load and have backed themselves into a corner. There are no possible positive outcomes from any path they choose. Despite months of denying the inflationary tsunami sweeping the world is not transitory, but created by their reckless perfidy, the Fed and other central bankers around the world are trapped.

With the Biden administration wrecking the supply chain with their insane incompetence, driving energy prices sky high with their green new deal absurdities, trillions of new unfunded Federal spending, and trillions more of Covid related cash sloshing around the economic system, inflation is raging out of control.

Even the manipulated, massaged, engineered, and government sanctioned CPI is being reported as 7%, which means the savings accounts of senior citizens are providing a NEGATIVE 6.9% per year, and real wages for real people are in free-fall as food and energy costs keep surging higher. But it is far worse than official figures reveal. The Fed and government have methodically adjusted CPI downwards over the last forty years.

They created a fake calculation in order to suppress home price increases and ridiculous hedonic adjustments for car improvements that say automobile prices have barely risen over decades, even though the average price of a new car in 2000 was $22,000 versus $47,000 today.

Inflation headlines reference the highest rate in 3 or 4 decades, but the reality is if inflation was measured exactly as it was in 1980, it would be 15%, just as it was in 1980. One slight difference. Volcker had jacked the Federal Funds rate to 20% in order to crush the raging inflation. Spineless Powell still has the Federal Funds rate anchored at 0%. Our economic system is so saturated with debt, a 3% Feds Fund rate would result in a full-scale economic implosion and collapse of our financial system.

It looks like 2022 can go one of two ways – raging inflation, while markets surge higher, enriching the richest and impoverishing the middle class or a recession and market crash after the richest short the market, while the working class sees their 401ks obliterated once again. It’s almost as if this is being engineered for a crash landing, designed to produce maximum damage to the most people. Is it just part of the Great Reset master plan?

Just as the Event 201 simulation of a pandemic a few months before a pandemic was rolled out, a “war game” called Collective Strength was run by international bankers, the IMF, and BIS in Israel during December to simulate a global financial catastrophe caused by a cyber-attack. Last week the Fed issued their report on a central bank digital currency. If these two events don’t cause you concern, you aren’t paying attention.

During the pandemic, the government flogged fake coin shortage propaganda and told the ignorant masses covid lurked on their dollar bills. There are no coincidences. The ruling oligarchs are proceeding with their master plan of owning everything and enslaving you in a technological gulag controlled by the government surveillance state and policed by the social media tyrants, mega-corporation collaborators, fake news propaganda media, and crooked financial institutions.

They want every aspect of your life digitized, so they can control you, force you to get vaccinated, create your social credit score, monitor every financial transaction, and guarantee they get a piece of every transaction. If you disobey their commands, they will destroy your ability to work, buy food, enjoy entertainment, or transact any business. Sounds overly ominous, except it is already happening in New Zealand, Australia, France, Austria, and numerous other authoritarian regimes throughout the world. They really do want you to own nothing, and be happy with nothing, or else.

As we enter the fourteenth year of this Fourth Turning it appears all hell is about to break loose financially, domestically, and internationally. Will the three drivers of this Crisis – debt, civic decay, and global disorder - merge into one super-storm of destruction, destined to wipe the existing social order away and replace it with something far worse and Orwellian? Strauss and Howe perfectly captured what is happening today in their 1997 warning about an unavoidable generational Crisis.

Societal trust is imploding as the initial financial collapse catalyst is poised for a second more horrendous encore in 2022. Interconnected global financial systems, built on an unstable foundation of bad debt, will crumble as the approaching storms crash ashore. It is time to move to higher ground, batten down the hatches, deleverage, and do your best to distance yourself from this arbitraged, tentacled, corrupt financial system.

“As the Crisis catalyzes, these fears will rush to the surface, jagged and exposed. Distrustful of some things, individuals will feel that their survival requires them to distrust more things. This behavior could cascade into a sudden downward spiral, an implosion of societal trust. If so, this implosion will strike financial markets—and, with that, the economy. But as the Crisis mood congeals, people will come to the jarring realization that they have grown helplessly dependent on a teetering edifice of anonymous transactions and paper guarantees. Many Americans won’t know where their savings are, who their employer is, what their pension is, or how their government works. The era will have left the financial world arbitraged and tentacled: Debtors won’t know who holds their notes, homeowners who owns their mortgages, and shareholders who runs their equities—and vice versa.” – Strauss & Howe – The Fourth Turning

During the fourteenth year of the last Fourth Turning, the Battle of Midway turned the tide in the Pacific and Germany’s defeat at Stalingrad by the Russians turned the tide in Europe. Italy surrendered to the Allies and plans for the D-Day invasion were already underway. By the fourteenth year of the American Revolution Crisis the Treaty of Paris ending the war had been signed and the U.S. Constitution was written. The Civil War crisis was long over, as twenty years of animosity was jammed into five years of extreme bloodshed and tragedy.

I fear when future historians document the events of this era of deception, delusion, debt, and decay, 2022 will go down as a turning point in U.S. history, for good or for bad. The forces of evil appear to have the upper hand, but threat of living under the boot of globalist totalitarians has awakened a tireless minority of patriotic citizens, willing to fight these demonic, vile quislings of humanity to the death.

“Every record has been destroyed or falsified, every book rewritten, every picture has been repainted, every statue and street building has been renamed, every date has been altered. And the process is continuing day by day and minute by minute. History has stopped. Nothing exists except an endless present in which the Party is always right.” ― George Orwell, 1984

In Part Three of this article, I will examine how civic decay and global disorder will interconnect and provide the impetus for the next bloody chapter of this Fourth Turning. When your leaders are far more concerned about the border of a country 6,000 miles from U.S. shores than our own southern border, you can clearly see the plan is to create civic decay in the U.S. and further enrich the oligarchs by waging war in the Ukraine. Those pushing the Great Reset scheme are relentless and evil. The only way to defeat them is through force.

*  *  *

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Tyler Durden Mon, 01/24/2022 - 16:24

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Government

China Will Struggle To Reach Positive GDP This Quarter Premier Says, Warning Economy “To Some Degree” Worse Than 2020

China Will Struggle To Reach Positive GDP This Quarter Premier Says, Warning Economy "To Some Degree" Worse Than 2020

Over the weekend, we…

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China Will Struggle To Reach Positive GDP This Quarter Premier Says, Warning Economy "To Some Degree" Worse Than 2020

Over the weekend, we quoted Goldman's head of hedge fund sales Tony Pasquariello who had some very choice words for China, saying its economy was so bad, "it’s simply eye-popping (witness the worst IP print on record)", and prompted Goldman's sellside research desk to cut its expectation for 2022 Chinese GDP growth to just 4%, which ex-2020 would be the slowest growth rate since 1990! For the sake of balance, Pasquariello noted that Shanghai was set to reopen on June 1st which could be a potential upside catalyst at a time when foreign investors have largely written away Chinese equities.

Fast forward to today when we find that Pasquariello's hedging was not necessary, because on Wednesday, China's Premier Li Keqiang held a teleconference this afternoon under the topic of "stabilizing economic growth" with provincial, city-level and county-level local government officials across the country in which he had some very dismal comments about the current state of China's economy.

As Goldman notes, "while there are not many new measures being announced from this conference, the nature and scale of this conference is quite unusual. Chinese policymakers are in greater urgency to support the economy after the very weak activity growth in April, anemic recovery month-to-date in May, and continued increases in unemployment rates."

Specifically, premier Li said China’s economy is worse off to a “certain extent” than 2020 when the pandemic first emerged, urging efforts to reduce the unemployment rate which as we noted recently has soared to the highest level since the covid crash.

“Economic indicators in China have fallen significantly, and difficulties in some aspects and to a certain extent are greater than when the epidemic hit us severely in 2020,” Li said Wednesday following a meeting with local authorities, state-owned companies and financial firms to discuss how to stabilize the economy, Bloomberg reported.

China’s premier also said the world’s second-largest economy would struggle to record positive growth in the current quarter, urging officials to help companies resume production after Covid-19 lockdowns, according to the FT.

“We will try to make sure the economy grows in the second quarter,” Li said, according to a transcript that the Financial Times verified with three people briefed on the premier’s remarks. “This is not a high target and a far cry from our 5.5 per cent goal. But we have to do so.”

The last time China’s growth entered negative territory was when output plunged 6.9 per cent year on year in the first quarter of 2020 after the coronavirus pandemic ended an era of uninterrupted growth dating back more than 30 years.

The comments by Li Keqiang, to tens of thousands of officials on an internal videocast on Wednesday, underscore the difficulties President Xi Jinping’s administration will have in reaching its annual growth target of 5.5% while also battling Omicron outbreaks.

Concerned that the unemployment rate is approaching levels where the dreaded "social unrest" becomes a possibility, the premier urged officials to make sure the unemployment rate falls and the economy “operates in a reasonable range” in the second quarter of this year, state media cited him as saying. Earlier in May, Li warned of a “complicated and grave” employment situation after the nation’s surveyed jobless rate climbed to 6.1% in April, the highest since February 2020, and sent the yuan plunging to the lowest level since late 2020.

Today's meeting was the latest in a series of urgent calls by Li (who is quitting his job next March) to shore up the economy, which has come under enormous pressure from Covid outbreaks and lockdowns in recent months, threatening the government's growth target of about 5.5%. President Xi's stubborn commitment to Covid Zero means China is guaranteed to miss that goal this year: Economists now forecast gross domestic product growth will hit just 4.5%, according to a new Bloomberg survey, with Goldman predicting GDP will rise just 4.0% as noted above.

In hopes of offsetting some of the gloom and doom unleashed by Beijing's flawed covid policies, Li indicated that China will try to reduce the impact of its strict Zero-Covid policy on the economy. “At the same time as controlling the epidemic, we must complete the task of economic development,” he said.

Li also stressed implementation of current support policies, and said more detailed implementation measures would be issued by the end of this month. Somewhat bizarrely, he said that economic data for the second quarter would be released “accurately”, hinting that prior Chinese data was - gasp - inaccurate? Perish the thought.

As Bloomberg reported earlier this week, China's State Council outlined 33 support measures on Monday to help businesses struggling to cope with the lockdowns, including extra tax rebates, relief on social insurance payments and loans, and additional funding for aviation and rail construction. Local governments were told to spend most of the proceeds from special bonds -- used mainly for infrastructure -- by the end of August. Judging by the lack of market reaction, investors saw right through this latest mostly verbal attempt to prop up confidence in the country ahead of the 20th Party Congress later this year, where Xi's fate will be determine (amid some rumors that his political career may be cut short if China's economy does not stabilize).

The central bank and banking regulator also held a meeting with major financial institutions on Monday to urge them to boost loans.
Li met with local authorities in April, when Shanghai was in the middle of a lockdown, telling them to “add a sense of urgency” as they rolled out policy. During a trip to Yunnan province last week, he said they should “act decisively” to support growth. Of course, when banks artificially inject loans into an economy where there is no loan demand, what you end up getting is just another bubble.

Tyler Durden Wed, 05/25/2022 - 11:25

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Bonds

Futures Slide Before Fed Minutes, Dollar Jumps As China Lockdown Fears Return

Futures Slide Before Fed Minutes, Dollar Jumps As China Lockdown Fears Return

Another day, another failure by markets to hold on to even the…

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Futures Slide Before Fed Minutes, Dollar Jumps As China Lockdown Fears Return

Another day, another failure by markets to hold on to even the smallest overnight gains: US futures erased earlier profits and dipped as traders prepared for potential volatility surrounding the release of the Federal Reserve’s minutes which may provide insight into the central bank’s tightening path, while fears over Chinese lockdowns returned as Beijing recorded more Covid cases and the nearby port city of Tianjin locked down a city-center district. Contracts on the Nasdaq 100 and the S&P 500 were each down 0.5% at 7:30 a.m. in New York after gaining as much as 1% earlier, signaling an extension to Tuesday’s slide that followed a profit warning from Snap.

In premarket trading, Nordstrom jumped 10% after raising its forecast for earnings and revenue for the coming year suggesting that the luxury consumer is doing quite fine even as most of the middle class has tapped out; analysts highlighted the department store’s exposure to higher-end customers.Meanwhile, Wendy’s surged 12% after shareholder Trian Fund Management, billionaire Nelson Peltz' investment vehicle, said it will explore a transaction that could give it control of the fast-food chain. Here are the most notable premarket movers in the US:

  • Urban Outfitters (URBN US) shares rose as much as 5.7% in premarket trading after Nordstrom’s annual forecasts provided some relief for the beaten down retail sector. Shares rallied even as Urban Outfitters reported lower-than-expected profit and sales for the 1Q.
  • Best Buy (BBY US) shares could be in focus as Citi cuts its price target on electronics retailer to a new Street-low of $65 from $80, saying that there continues to be “significant risk” to 2H estimates.
  • Dick’s Sporting Goods (DKS US) sinks as much as 20% premarket after the retailer cut its year adjusted earnings per share and comparable sales guidance for the full year. Peers including Big 5 Sporting Goods, Hibbett and Foot Locker also fell after the DKS earnings release
  • 2U Inc. (TWOU US) shares drop as much as 4.3% in US premarket trading after Piper Sandler downgraded the online educational services provider to underweight from neutral, with broker flagging growing regulatory risk.
  • Verrica Pharma (VRCA US) shares slump as much as 61% in US premarket trading after the drug developer received an FDA Complete Response Letter for its VP-102 molluscum treatment.
  • Shopify’s (SHOP US) U.S.-listed shares fell 0.7% in premarket trading after a second prominent shareholder advisory firm ISS joined its peer Glass Lewis to oppose the Canadian company’s plan to give CEO Tobi Lutke a special “founder share” that will preserve his voting power.
  • Cazoo (CZOO US) shares declined 3.3% in premarket trading as Goldman Sachs initiated coverage of the stock with a neutral recommendation, saying the company is well positioned to capture the significant growth in online used car sales.
  • CME Group (CME US Equity) may be in focus as its stock was upgraded to outperform from market perform at Oppenheimer on attractive valuation and an “appealing” dividend policy.

US stocks have slumped this year, with the S&P 500 flirting with a bear market on Friday, as investors fear that the Fed’s active monetary tightening will plunge the economy into a recession: as Bloomberg notes, amid surging inflation, lackluster earnings and bleak company guidance have added to market concerns. The tech sector has been particularly in focus amid higher rates, which mean a bigger discount for the present value of future profits. The Nasdaq 100 index has tumbled to the lowest since November 2020 and its 12-month forward price-to-earnings ratio of 19.7 is the lowest since the start of the pandemic and below its 10-year average.

“The consumer in the US is still showing really good signs of strength,” said Michael Metcalfe, global head of macro strategy at State Street Global Markets. “Even if there is a slowdown it’s going to be quite mild,” he said in an interview with Bloomberg Television.

Meanwhile, Barclays Plc strategists including Emmanuel Cau see scope for stocks to fall further if outflows from mutual funds pick up, unless recession fears are alleviated. Retail investors have also not yet fully capitulated and “still look to be buying dips in old favorites in tech/growth,” the strategists said.

"Our central scenario remains that a recession can be avoided and that geopolitical risks will moderate over the course of the year, allowing equities to move higher,” said Mark Haefele,  chief investment officer at UBS Global Wealth Management. “But recent market falls have underlined the importance of being selective and considering strategies that mitigate volatility."

The Fed raised interest rates by 50 basis points earlier this month -- to a target range of 0.75% to 1% -- and Chair Jerome Powell has signaled it was on track to make similar-sized moves at its meetings in June and July. Investors are now awaiting the release of the May 3-4 meeting minutes later on Wednesday to evaluate the future path of rate hikes. However, in recent days, traders have dialed back the expected pace of Fed interest-rate increases over worse-than-expected economic data and the selloff in equities. Sales of new US homes fell more in April than economists forecast, and the Richmond Fed’s measure of business activity dropped to a two-year low. The yield on the 10-year Treasury slipped for a second day to 2.73%.

“Given the risks to growth and our view that positive real rates will be unmanageable for any significant length of time, we expect the Fed to deliver less tightening in 2022 overall than it and markets currently expect,” Salman Ahmed, global head of macro and strategic asset allocation at Fidelity International, wrote in a note.

In Europe, stocks pared an earlier advance but hold in the green while the dollar rallies. The Stoxx 600 gave back most of the morning’s gains with autos, financial services and travel weighing while miners and utilities outperformed. The euro slid as comments by European Central Bank officials indicated policy normalization will be gradual. The ECB is in the midst of a debate over how aggressive it should act to rein in inflation. Here are some of the most notable European movers today:

SSE shares rise as much as 6.3% after strong guidance and amid reports that electricity generators are likely to escape windfall taxes being considered by the U.K. government.

  • Air France-KLM jumps as much as 13% in Paris after falling 21% on Tuesday as the airline kicked off a EU2.26 billion rights offering.
  • Mining and energy stocks outperform the broader market in Europe as iron ore rebounded, while oil rose after a report that showed a decline in US gasoline stockpiles. Rio Tinto gains as much as 2.3%, Anglo American +2.6%, TotalEnergies +2.8%, Equinor +3.7%
  • Elekta rises as much as 9.3% after releasing a 4Q earnings report that beat analysts’ expectations.
  • Torm climbs as much as 12% after Pareto initiates coverage at buy and says the company may pay out dividends equal to 40% of its market value over the next 3 years.
  • Mercell rises as much as 104% to NOK6.13/share after recommending a NOK6.3/share offer from Spring Cayman Bidco.
  • Luxury stocks traded lower amid rekindled Covid-19 worries in China as Beijing continued to report new infections while nearby Tianjin locked down its city center. LVMH declines as much as 1.4%, Burberry -2.6% and Hermes -1.7%
  • Sodexo falls as much as 5.7% after the French caterer decided not to open up the capital of its benefits & rewards unit to a partner following a review of the business.
  • Ocado slumps as much as 8% after its grocery joint venture with Marks & Spencer slashed its forecast for FY22 sales growth to low single digits, rather than around 10% guided previously.

Earlier in the session, Asian stocks were steady as traders continued to gauge growth concerns and fears of a US recession. The MSCI Asia Pacific Index rose 0.1%, paring an earlier increase of as much as 0.5%, as gains in the financial sector were offset by losses in consumer names. New Zealand equities dipped on Wednesday after the central bank delivered an expected half-point interest rate hike to combat inflation. Chinese shares stabilized after the central bank and banking regulator urged lenders to boost loans as the nation grapples with ongoing Covid outbreaks. The benchmark CSI 300 Index snapped a two-day losing streak to close 0.6% higher.

Asian equities have been trading sideways as the prospect of slower growth amid tighter monetary conditions, as well as China’s strict Covid policy and supply-chain disruptions, remain key overhangs for the market. In China, the country’s strict Covid policy is outweighing broad measures to support growth and keeping investors wary. Its commitment to Covid Zero means it’s all but certain to miss its economic growth target by a large margin for the first time ever. The nation’s central bank and banking regulator urged lenders to boost loans in the latest effort to shore up the battered economy.

“The valuation is still nowhere near attractive and you have a number of leading indicators, whether its credit, liquidity or growth, which are not yet indicating that we want to take more risks on the market,” Frank Benzimra, head of Asia equity strategy at Societe Generale, said in a Bloomberg TV interview. He added that the preferred strategy in equities will focus on defensive plays like resources and income. Investors will get further clues on the Federal Reserve’s interest-rate policies with the release in Washington of minutes from the latest meeting on Wednesday. Concerns that the Fed’s tightening will plunge the nation into recession had spurred a sharp selloff in US shares recently.

Japanese stocks ended a bumpy day lower as investors awaited minutes from the latest Federal Reserve meeting and continued to gauge the impact of China’s rising Covid cases. The Topix fell 0.1% to close at 1,876.58, while the Nikkei declined 0.3% to 26,677.80. Nintendo Co. contributed the most to the Topix Index decline, decreasing 4.3%. Out of 2,171 shares in the index, 793 rose and 1,257 fell, while 121 were unchanged.

Meanwhile, Australian stocks bounced with the S&P/ASX 200 index rising 0.4% to close at 7,155.20, with banks and miners contributing the most to its move. Costa Group was the top performer after reaffirming its operating capex guidance. Chalice Mining dropped after an equity raising. In New Zealand, the S&P/NZX 50 index fell 0.7% to 11,173.37 after the RBNZ’s policy decision. The central bank raised interest rates by half a percentage point for a second straight meeting and forecast further aggressive hikes to come to tame inflation.

India’s key equity indexes fell for the third consecutive session, dragged by losses in software makers as worries grow over companies’ spending on technology amid a clouded growth outlook. The S&P BSE Sensex slipped 0.6% to 53,749.26 in Mumbai, while the NSE Nifty 50 Index dropped 0.6%. The benchmark has retreated for all but four sessions this month, slipping 5.8%, dragged by Infosys, Tata Consultancy and Reliance Industries. All but two of the 19 sector sub-indexes compiled by BSE Ltd. fell on Wednesday, led by information technology stocks. Out of 30 shares in the Sensex index, 12 rose and 18 fell. The S&P BSE IT Index has lost nearly 26% this year and is trading at its lowest level since June. 

In FX, the Bloomberg dollar spot index resumed rising, up 0.3% with all G-10 FX in the red against the dollar. The euro slipped and Italian bonds extended gains after comments from ECB officials. Executive board member Fabio Panetta said the ECB shouldn’t seek to raise its interest rates too far as long as the euro-area economy displays continuing signs of fragility. Board Member Olli Rehn said the ECB should raise rates to zero in autumn. The pound was steady against the dollar and gained versus the euro, paring some of its losses from Tuesday. Focus is on the long-awaited report into lockdown parties at No. 10. The BOE needs to tighten policy further to fight rising inflation, but it’s also wary of acting too quickly and risking pushing the UK into recession, according to Chief Economist Huw Pill. Sweden’s krona slumped on the back of a stronger dollar and amid data showing that consumer confidence fell to the lowest level since the global financial crisis. Yen eased as Treasury yields steadied in Asia from an overnight plunge.  China’s offshore yuan weakened for the first time in five days as Beijing recorded more Covid cases and the nearby port city of Tianjin locked down a city-center district.

New Zealand dollar and sovereign yields rose after the RBNZ hiked rates by 50 basis points for a second straight meeting and forecast more aggressive tightening, with the cash rate seen peaking at 3.95% in 2023.

Most emerging-market currencies also weakened against a stronger dollar as investors await minutes from the Federal Reserve’s last meeting for clues on the pace of US rate hikes.  The ruble extended its recent rally in Moscow even as Russia’s central bank moved up the date of its next interest-rate meeting by more than two weeks to stem gains in the currency with more monetary easing. Russia has been pushed closer to a potential default. US banks and individuals are barred from accepting bond payments from Russia’s government since 12:01 a.m. New York time on Wednesday, when a license that had allowed the cash to flow ended. The lira lagged most of its peers, weakening for a fourth day amid expectations that Turkey’s central bank will keep rates unchanged on Thursday even after consumer prices rose an annual 70% in April.

In rates, Treasuries were steady with yields slightly richer across long-end of the curve as S&P 500 futures edge lower, holding small losses. US 10-year yields around 2.745% are slightly richer vs Tuesday’s close; long-end outperformance tightens 5s30s spread by 1.4bp on the day with 30-year yields lower by ~1bp. Bunds outperform by 2bp in 10-year sector while gilts lag slightly with no major catalyst. Focal points of US session include durable goods orders data, 5-year note auction and minutes of May 3-4 FOMC meeting. The US auction cycle resumes at 1pm ET with $48b 5-year note sale, concludes Thursday with $42b 7-year notes; Tuesday’s 2-year auction stopped through despite strong rally into bidding deadline. The WI 5-year yield at ~2.740% is ~4.5bp richer than April auction, which tailed by 0.9bp.

In commodities, WTI pushed higher, heading back toward best levels of the week near $111.60. Most base metals trade in the red; LME aluminum falls 2.3%, underperforming peers. Spot gold falls roughly $10 to trade around $1,856/oz. Spot silver loses 1.1% to around.

Bitcoin trades on either side of USD 30k with no real direction.

Looking to the day ahead now, and central bank publications include the FOMC minutes from their May meeting and the ECB’s Financial Stability Review. Separately, we’ll hear from ECB President Lagarde, the ECB’s Rehn, Panetta, Holzmann, de Cos and Lane, BoJ Governor Kuroda, Fed Vice Chair Brainard and the BoE’s Tenreyro. Otherwise, data releases from the US include preliminary April data on durable goods orders and core capital goods orders.

Market Snapshot

  • S&P 500 futures little changed at 3,942.75
  • STOXX Europe 600 up 0.4% to 433.41
  • MXAP little changed at 163.41
  • MXAPJ up 0.3% to 531.42
  • Nikkei down 0.3% to 26,677.80
  • Topix little changed at 1,876.58
  • Hang Seng Index up 0.3% to 20,171.27
  • Shanghai Composite up 1.2% to 3,107.46
  • Sensex down 0.5% to 53,763.20
  • Australia S&P/ASX 200 up 0.4% to 7,155.24
  • Kospi up 0.4% to 2,617.22
  • German 10Y yield little changed at 0.94%
  • Euro down 0.5% to $1.0677
  • Brent Futures up 1.0% to $114.69/bbl
  • Gold spot down 0.5% to $1,856.22
  • U.S. Dollar Index up 0.30% to 102.16

Top Overnight News from Bloomberg

  • New Zealand dollar and sovereign yields rose after the RBNZ hiked rates by 50 basis points and forecast more aggressive tightening, with the cash rate seen peaking at 3.95% in 2023
  • The euro slipped and Italian bonds extended gains after comments from ECB officials. Executive board member Fabio Panetta said the ECB shouldn’t seek to raise its interest rates too far as long as the euro-area economy displays continuing signs of fragility. Board Member Olli Rehn said the ECB should raise rates to zero in autumn
  • The pound was steady against the dollar and gained versus the euro, paring some of its losses from Tuesday. Focus is on the long-awaited report into lockdown parties at No. 10
  • The BOE needs to tighten policy further to fight rising inflation, but it’s also wary of acting too quickly and risking pushing the UK into recession, according to Chief Economist Huw Pill
  • Sweden’s krona slumped on the back of a stronger dollar and amid data showing that consumer confidence fell to the lowest level since the global financial crisis
  • Yen eased as Treasury yields steadied in Asia from an overnight plunge

A more detailed look at global markets courtesy of Newsquawk

Asia-Pac stocks were mostly positive but with gains capped and price action choppy after a lacklustre lead from global counterparts as poor data from the US and Europe stoked growth concerns, while the region also reflected on the latest provocations by North Korea and the RBNZ’s rate increase. ASX 200 was led higher by commodity-related stocks despite the surprise contraction in Construction Work. Nikkei 225 remained subdued after recent currency inflows and with sentiment clouded by geopolitical tensions. Hang Seng and Shanghai Comp were marginally higher following further support efforts by the PBoC and CBIRC which have explored increasing loans with major institutions and with the central bank to boost credit support, although the upside is contained amid the ongoing COVID concerns and with Beijing said to tighten restrictions among essential workers.

Top Asian News

  • US SEC official said significant issues remain in reaching a deal with China over audit inspections and even if US and China reach a deal on proceeding with inspections, they would still have a long way to go, according to Bloomberg.
  • China will be seeing a Pacific Island Agreement when Senior Diplomat Wang Yi visits the region next week, according to documents cited by Reuters.
  • North Korea Fires Suspected ICBM as Biden Wraps Up Asia Tour
  • Luxury Stocks Slip Again as China Covid-19 Worries Persist
  • Asia Firms Keep SPAC Dream Alive Despite Poor Returns: ECM Watch
  • Powerlong 2022 Dollar Bonds Fall Further, Poised for Worst Week

In Europe the early optimism across the equity complex faded in early trading. Major European indices post mild broad-based gains with no real standouts. Sectors initially opened with an anti-defensive bias but have since reconfigured to a more pro-defensive one. Stateside, US equity futures have trimmed earlier gains, with relatively broad-based gains seen across the contracts; ES (+0.1%).

Top European News

  • Aiming ECB Rate at Neutral Risks Hurting Economy, Panetta Says
  • M&S Says Russia Exit, Inflation to Prevent Profit Growth
  • Prudential Names Citi Veteran Wadhwani as Insurer’s Next CEO
  • EU’s Gentiloni Eyes Deal on Russian Oil Embargo: Davos Update
  • UK’s Poorest to See Inflation Hit Near Double Pace of the Rich

FX

  • Buck builds a base before Fed speak, FOMC minutes and US data - DXY tops 102.250 compared to low of 101.640 on Tuesday.
  • Kiwi holds up well after RBNZ hike, higher OCR outlook and Governor Orr outlining the need to tighten well beyond neutral - Nzd/Usd hovers above 0.6450 and Aud/Nzd around 1.0950.
  • Euro pulls back sharply as ECB’s Panetta counters aggressive rate guidance with gradualism to avoid a normalisation tantrum - Eur/Usd sub-1.0700 and Eur/Gbp under 0.8550.
  • Aussie undermined by flagging risk sentiment and contraction in Q1 construction work completed - Aud/Usd retreats through 0.7100.
  • Loonie and Nokkie glean some underlying traction from oil returning to boiling point - Usd/Cad capped into 1.2850, Eur/Nok pivots 10.2500.
  • Franc, Yen and Sterling all make way for Greenback revival - Usd/Chf bounces through 0.9600, Usd/Jpy over 127.00 and Cable close to 1.2500.

Fixed Income

  • Choppy trade in bonds amidst fluid risk backdrop and ongoing flood of global Central Bank rhetoric, Bunds and Gilts fade just above 154.00 and 119.00.
  • Eurozone periphery outperforming as ECB's Panetta urges gradualism to avoid a normalisation tantrum and Knot backs President Lagarde on ZIRP by end Q3 rather than going 50 bp in one hit.
  • US Treasuries flat-line before US data, Fed's Brainard, FOMC minutes and 5-year supply - 10 year T-note midway between 120-21/09+ parameters.

Commodities

  • WTI and Brent July futures are firmer intraday with little newsflow throughout the European morning.
  • US Energy Inventory Data (bbls): Crude +0.6mln (exp. -0.7mln), Gasoline -4.2mln (exp. -0.6mln), Distillates -0.9mln (exp. +0.9mln), Cushing -0.7mln.
  • Spot gold is pressured by the recovery in the Dollar but found some support at its 21 DMA.
  • Base metals are pressured by the turn in the risk tone this morning.

US Event Calendar

  • 07:00: May MBA Mortgage Applications -1.2%, prior -11.0%
  • 08:30: April Durable Goods Orders, est. 0.6%, prior 1.1%
    • -Less Transportation, est. 0.5%, prior 1.4%
  • 08:30: April Cap Goods Ship Nondef Ex Air, est. 0.5%, prior 0.4%
  • 08:30: April Cap Goods Orders Nondef Ex Air, est. 0.5%, prior 1.3%

Central Banks

  • 12:15: Fed’s Brainard Delivers Commencement Address
  • 14:00: May FOMC Meeting Minutes

DB's Jim Reid concludes the overnight wrap

This morning we’ve launched our latest monthly survey. In it we try to ask questions that aren’t easy to derive from market pricing. For example we ask whether you think a recession is a price worth paying to tame inflation back to target. We also ask whether you think the Fed will think the same. We ask whether you think bubbles are still in markets and whether the bottom is in for equities. We also ask you the best hedge against inflation from a small list of mainstream assets. Hopefully it will be of use and the more people that fill it in the more useful it might be so all help welcome. The link is here.

Talking of inflation I had a huge shock yesterday. The first quote of three came back from builders for what I hope will be our last ever renovation project as we upgrade a dilapidated old outbuilding. Given the job I do I'd like to think I'm fully aware of commodity price effects and labour shortages pushing up costs but nothing could have prepared me for a quote 250% higher than what I expected. We have two quotes to come but if they don't come in nearer to my expectations then we're either going to shelve/postpone the project after a couple of years of planning or my work output might reduce as I learn how to lay bricks, plumb, tile, make and install windows and plaster amongst other things. Maybe I could sell the rights of my journey from banker to builder to Netflix to make up for lost earnings.

Rather like my building quote expectations, markets came back down to earth yesterday, only avoiding a fresh closing one-year low in the S&P 500 via a late-day rally that sent the market from intra-day lows of -2.48% earlier in the session to -0.81% at the close and giving back just under half the gains from the best Monday since January. Having said that S&P futures are up +0.6% this morning so we've had a big swing from the lows yesterday afternoon.

The blame for the weak market yesterday was put on weak economic data alongside negative corporate news. US tech stocks saw the biggest losses as the NASDAQ (-2.35%) hit its lowest level in over 18 months following Snap’s move to cut its profit forecasts that we mentioned in yesterday’s edition. The stock itself fell -43.08%. Indeed, the NASDAQ just barely avoided closing more than -30% (-29.85%) from its all-time high reached back in November. The S&P 500's closing loss leaves it +1.03% week to date as it tries to avoid an 8th consecutive weekly decline for just the third time since our data starts in 1928. Typical defensive sectors Utilities (+2.01%), staples (+1.66%), and real estate (+1.21%) drove the intraday recovery, so even with the broad index off the day’s lows, the decomposition points to continued growth fears.

Investors had already been braced for a more difficult day following the Monday night news from Snap, but further fuel was then added to the fire after US data releases significantly underwhelmed shortly after the open. First, the flash composite PMI for May fell to 53.8 (vs. 55.7 expected), marking a second consecutive decline in that measure. And then the new home sales data for April massively underperformed with the number falling to an annualised 591k (vs. 749k expected), whilst the March reading was also revised down to an annualised 709k (vs. 763k previously). That 591k reading left new home sales at their lowest since April 2020 during the Covid shutdowns, and comes against the backdrop of a sharp rise in mortgage rates as the Fed have tightened policy, with the 30-year fixed rate reported by Freddie Mac rising from 3.11% at the end of 2021 to 5.25% in the latest reading last week.

The strong defensive rotation in the S&P 500 and continued fears of a recession saw investors pour into Treasuries, which have been supported by speculation that the Fed might not be able to get far above neutral if those growth risks do materialise. Yields on 10yr Treasuries ended the day down -10.1bps at 2.75%, and the latest decline in the 10yr inflation breakeven to 2.58% leaves it at its lowest closing level since late-February, just after Russia began its invasion of Ukraine that led to a spike in global commodity prices. And with investors growing more worried about growth and less worried about inflation, Fed funds futures took out -11.5bps of expected tightening by the December meeting, and saw terminal fed funds futures pricing next year close below 3.00% for the first time in two weeks. 10 year US yields are back up a basis point this morning.

Over in Europe there was much the same pattern of equity losses and advances for sovereign bonds. However, the decline in yields was more muted after there was further chatter about a potential 50bp hike from the ECB. Austrian central bank governor Holzmann said that “A bigger step at the start of our rate-hike cycle would make sense”, and Latvian central bank governor Kazaks also said that a 50bp hike was “certainly one thing that we could discuss”. Along with Dutch central bank governor Knot, that’s now 3 members of the Governing Council who’ve openly discussed the potential they could move by 50bps as the Fed has done, and markets seem to be increasingly pricing in a chance of that, with the amount of hikes priced in by the July meeting closing at a fresh high of 32.5bps yesterday.

In spite of the growing talk about a 50bp move at a single meeting, the broader risk-off tone yesterday led to a decline in sovereign bond yields across the continent, with those on 10yr bunds (-4.9bps), OATs (-4.3bps) and BTPs (-5.9bps) all falling back. Equities struggled alongside their US counterparts, and the STOXX 600 (-1.14%) ended the day lower, as did the DAX (-1.80%) and the CAC 40 (-1.66%). The flash PMIs were also somewhat underwhelming at the margins, with the Euro Area composite PMI falling a bit more than expected to 54.9 (vs. 55.1 expected).

Over in the UK there were even larger moves after the country’s flash PMIs significantly underperformed expectations. The composite PMI fell to 51.8 (vs. 56.5 expected), which is the lowest reading since February 2021 when the country was still in lockdown. In turn, that saw sterling weaken against the other major currencies as investors dialled back the amount of expected tightening from the Bank of England, with a fall of -0.44% against the US dollar. That also led to a relative outperformance in gilts, with 10yr yields down -8.3bps. And on top of that, there were signs of further issues on the cost of living down the tracks, with the CEO of the UK’s energy regulator Ofgem saying that the energy price cap was set to increase to a record £2,800 in October, an increase of more than 40% from its current level.

Asian equity markets are mostly trading higher this morning with the Hang Seng (+0.64%), Shanghai Composite (+0.58%), CSI (+0.17%) and Kospi (+0.80%) trading in positive territory with the Nikkei (-0.03%) trading fractionally lower.

Earlier today, the Reserve Bank of New Zealand (RBNZ), in a widely anticipated move, hiked the official cash rate (OCR) by 50bps to 2.0%, its fifth-rate hike in a row in a bid to get on top of inflation which is currently running at a 31-year high. The central bank has significantly increased its forecast of how high the OCR might rise in the coming years with the cash rate jumping to about 3.4% by the end of this year and peaking at 3.95% in the third quarter of 2023. Additionally, it forecasts the OCR to start falling towards the end of 2024. Following the release of the statement, the New Zealand dollar hit a three-week high of 0.65 against the US dollar.

Elsewhere, as we mentioned last week, today marks the expiration of the US Treasury Department’s temporary waiver that allowed Russia to make sovereign debt payments to US creditors. US investors will no longer be able to receive such payments, pushing Russia closer to default on its outstanding sovereign debt.

To the day ahead now, and central bank publications include the FOMC minutes from their May meeting and the ECB’s Financial Stability Review. Separately, we’ll hear from ECB President Lagarde, the ECB’s Rehn, Panetta, Holzmann, de Cos and Lane, BoJ Governor Kuroda, Fed Vice Chair Brainard and the BoE’s Tenreyro. Otherwise, data releases from the US include preliminary April data on durable goods orders and core capital goods orders.

Tyler Durden Wed, 05/25/2022 - 08:00

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Economics

Is The Recent Rise In US Interest Rates Peaking?

After months of higher Treasury yields, the possibility that rates have peaked is a topical discussion, fueled by easing rates in recent days. Although…

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After months of higher Treasury yields, the possibility that rates have peaked is a topical discussion, fueled by easing rates in recent days. Although there are still three trading days to go this week, the widely followed 2- and 10-year Treasury yields look set to post their first run of three-weekly declines this year.

The modest drop in yields may be a temporary lull before the upswing resumes, although analysts are considering factors that may put a ceiling on further increases for the near term.

Perhaps the main catalyst that’s changing sentiment for bonds: an expanding wave of forecasts that US recession risk is rising. “The bond market is clearly putting a greater focus on the risk of a recession and less of a concern on sustained inflation,” says Mark Freeman, chief investment officer at Socorro Asset Management.

Bloomberg notes that US economic data has recently weakened overall, relative to expectations. The change has cut the Bloomberg US Economic Surprise Index to its lowest level since last September.

The Treasury market appears to be entertaining the possibility, iif only on the margins, that growth will stumble. The 10-year Treasury yield fell to 2.76% on Tuesday (May 24), the lowest in over a month. If the benchmark rate holds below last week’s close, it’ll mark the first time since November that the yield has slipped for three straight weeks.

A critical factor, of course, is how long the Federal Reserve raises interest rates. For a clue, let’s start with the policy-sensitive 2-year Treasury yield, which is also showing hints of rolling over (or at least temporarily topping out).

Fed funds futures are still estimating a high probability that the central bank will lift rates again at the June 15 FOMC meeting. The market is currently pricing in a 90%-plus probability for a 50-basis-point hike to a 0.75%-to-1.0% target rate.

But the outlook for additional rate hikes has turned cloudy. Futures are now forecasting a high probability (90%) of no change in rates for the July FOMC meeting.

Inflation’s future path will likely determine what the Fed does beyond the June meeting, which appears to be a done-deal in terms of a 50-basis-point hike. The Treasury market is effectively pricing in next month’s hike, but for now it’s a wait-and-see environment beyond June.

One reason is that there are several hints that the recent surge in US inflation has peaked. Even if true, that doesn’t mean that inflation will return to the low pre-pandemic levels soon. But if inflation data shows more signs of topping out, as it did in April, the Fed may be more inclined to put its rate-hiking plans on hold, at least temporarily. Market sentiment seems to be adjusting to this possibility.

The key debate ultimately centers on US economic strength and on this front there are mixed signals. On the one hand, it appears that output is set to rebound in the second quarter following the contraction in Q1. For example, the Atlanta Fed’s GDPNow model estimates Q2 growth will revive to a moderate 2.4% increase (seasonally adjusted annual rate) from a 1.4% slide previously.

Meanwhile, the New York Fed’s Weekly Economic Index continues to reflect slowing but still moderately positive growth through May 14. The implication: the easing in the US economic trend will take the edge off of inflation in the months ahead.

That’s also the implied message in yesterday’s PMI survey data for this month. “The early survey data for May indicate that the recent economic growth spurt has lost further momentum,” says Chris Williamson, chief business economist at S&P Global Market Intelligence. “Growth has slowed since peaking in March, most notably in the service sector, as pent up demand following the reopening of the economy after the Omicron wave shows signs of waning.”

The critical question is whether the hints of softer growth momentum will continue and translate to a further pullback in inflation from its recent peak – almost surely a necessary event to stay the Fed’s hand in raising rates beyond June.

Key updates to watch start with May inflation numbers, which arrive in a few weeks. The strength (or lack thereof) of the labor market will be closely read too. Next week’s update on nonfarm payrolls is expected to show that hiring slowed in May to a 340,000 monthly increase from 406,000 in April, based on the consensus forecast via TradingEconomics.com. That’s still a relatively solid gain to keep the economy moving forward, but it’s also enough of a slowdown to support the inflation-has-peaked narrative.

For the moment, the bond market’s on board with this view. The question is whether incoming data will give the crowd a reason to abandon this developing narrative?


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