US MARKET WRAP: Stocks sideways amid a lack of catalysts; attention moves on to NVDA's earnings next week, and FOMC minutes

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  SNAPSHOT: Equities flat/up, Treasuries lower, Crude up, Dollar flat.


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  REAR VIEW: RDDT partners with OpenAI; AMD added to 'Wolfe Alpha List'; Bowman maintains she is willing to hike if inflation progress stalls; Chinese property support measures; Mixed Chinese activity data.


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  COMING UP: Holiday: Whit Monday; Holiday: (Germany, Switzerland, Norway, Denmark, Austria & Hungary are closed) Data: Chinese LPR Speakers: BoE’s Broadbent; Fed’s Bostic, Barr Supply: Japan Earnings: Ryanair, Palo Alto Networks.


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  WEEK AHEAD: Highlights include FOMC minutes; ECB retreat; PBoC, RBNZ, CBRT rate decisions; UK, NZ CPI. To download the report, please click here.


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  CENTRAL BANK WEEKLY: FOMC and RBA minutes; PBoC, RBNZ, CBRT; ECB retreat. To download the report, please click here.


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  WEEKLY US EARNINGS ESTIMATES: [MON] PANW; [TUES] LOW, AZO; [WED] TGT, ADI, TJX, SNOW, SNPS, NVDA; [THURS] NTES, MDT, INTU, WDAY. To download the report, please click here.

MARKET WRAP

An exceedingly quiet session, with no tier 1 releases and no major incremental newsflow saw S&P 500 futures traverse sideways through much of the session. Some downside in NVDA (ahead of its key earnings report next Wednesday) in the afternoon brought the index to lows, but the move was fleeting, and the ES pared downside to resume its horizontal trading shortly afterwards. The US leading index for April was the sole data highlight, and disappointed expectations – the latest indicator to show cooling activity in the US. Fedspeak came by way of voter Bowman, who reiterated that she would be willing to lift rates if inflation progress stalled, but that doesn’t seem to be her base case; markets were unreactive to her comments. Treasuries drifted lower through the course of the session, bottoming out later in the day. The Dollar Index was around flat, allowing high beta FX to enjoy some limited upside, while haven FX underperformed. Base metals continue their ascent, with silver topping USD 30/oz, and gold topping USD 2,400/oz, and copper topping USD 5.00/lb, a dynamic helped along by bouts of dollar weakness through the day, and supporting stocks of metals producers. Crude futures were also lifted, and trading was choppy, though there did not seem to be a specific headline catalyst driving the moves. Attention now moves on to next week’s risk events, where the FOMC meeting minutes and earnings from NVDA are the highlights.

US

FED's BOSTIC (voter) is pleased with inflation progress in April but Fed is not yet there, adding the Fed will get to 2% and if the Fed moves the goal posts at this point, it would undermine the central bank's credibility. Looking ahead, the Atlanta Fed President stated the outlook right now is for a continued fall in inflation which would make it appropriate to reduce rates later in the year, but nothing is locked in. He added they have to be open to a broad range of possibilities with several different scenarios that could play out.

FED's BOWMAN (voter) reiterated her prior stance noting she is monitoring data to assess if policy is sufficiently restrictive, and continued with her view that she is willing to hike if inflation progress stalls or reverses. Bowman previously stated this at the beginning of May, before the CPI report, but she is seemingly sticking with this, for now. In addition, Bowman echoed her baseline outlook is that inflation will decline further with steady policy rates, but sees risks. On inflation, Bowman added they have not seen further progress this year.

LEADING INDEX: US leading index in April declined -0.6%, deeper than the expected, and forecasted, -0.3% and outside the bottom end of the forecast range, -0.5%. On the data set, Oxford Economics notes, "The weakness in the April leading index was broad-based. Declines in equity markets and deteriorating consumer sentiment were the largest culprits behind the decline, but the persistent drag from yields coupled with slower new orders and tighter financial conditions also dragged the index lower."

FIXED INCOME

Treasuries were lower on Friday and curve steepened in thin trade. At settlement, 2s +3.4bps at 4.825%, 3s +3.7bps at 4.607%, 5s +4.2bps at 4.441%, 7s +4.6bps at 4.429%, 10s +4.5bps at 4.422%, 20s +4.2bps at 4.663%, 30s +4.2bps at 4.560%.

INFLATION BREAKEVENS: 5yr BEI +1.9bps at 2.340%, 10yr BEI +1.7bps at 2.337%, 30yr BEI +1.4bps at 2.340%

THE DAY: T-Notes were horizontal overnight, despite bullish leads from JGBs after the BoJ maintained the size of its Rinban operation, but through Europe and the US session they were sold on possible profit-taking as traders await the next risk events, with FOMC Minutes, a 20yr note auction and Nvidia earnings next week. On the Minutes, traders may be awaiting any further insight into possible rate cuts, albeit unlikely and slightly behind given the recent inflation data. Today, Fed’s Bowman (voter) re-iterated her view that she is monitoring data to assess if policy is sufficiently restrictive, and remains willing to hike if inflation progress stalls or reverses. On the week, T-Notes remain well within weekly ranges at settlement, ahead of the aforementioned risk events.

NEXT WEEK'S AUCTIONS: US Treasury to sell USD 16bln 20yr bonds on 22nd May, and USD 16bln of 10yr TIPS on 23rd May; both settling on 31st May.

STIRS:• SR3M4 +0.0bps at 94.755, U4 +0.0bps at 94.955, Z4 -2.0bps at 95.110, H5 -3.5bps at 95.355, M5 -4.5bps at 95.580, U5 -5.0bps at 95.760, Z5 -5.5bps at 95.895, H6 -6.0bps at 95.990, M6 -6.0bps at 96.055, M7 -5.5bps at 96.175, M8 -5.0bps at 96.155.• NY Fed RRP op demand at USD 0.449tln (prev. 0.410tln) across 73 counterparties (prev. 72).• SOFR at 5.31% (prev. 5.31%), volumes at USD 2.001tln (prev. 1.936tln).• EFFR at 5.33% (prev. 5.33%), volumes at USD 78bln (prev. 78bln).

CRUDE

WTI (N4) SETTLED USD 0.84 HIGHER AT USD 79.58/BBL; BRENT (N4) SETTLED USD 0.71 HIGHER AT 83.98/BBL

The crude complex was choppy but saw gradual upside through the US afternoon as the Dollar hit lows with seemingly no headline catalyst. As such, WTI and Brent hit highs of 79.58/bbl and 83.97/bbl, against earlier troughs of 78.58/bbl and 83.08/bbl. Benchmarks struggled to gain any real direction amid the tentative broader risk tone, USD strength and Chinese support measures. On the OPEC front, according to Energy Intelligence sources, Kuwait could emerge as a producer that might seek an adjustment to its quota baseline for 2025. Elsewhere, geopolitical updates were sparse to end the week. And in Russia, the Tuapse oil refinery (240k BPD capacity) in the Krasnodar region was shut after a Ukrainian drone attack. Lastly, the weekly Baker Hughes rig count saw oil down 1 to 497, natgas unchanged at 103, leaving the total rising 1 to 604.

EQUITIES

CLOSES:

SECTORS:

EUROPEAN CLOSES: DAX: -0.17% at 18,707.28, FTSE 100: -0.22% at 8,420.26, CAC 40: -0.26% at 8,167.50, Euro Stoxx 50: -0.17% at 5,063.65, IBEX 35: +0.25% at 11,327.70, FTSE MIB: -0.03% at 35,398.82, SMI: +0.69% at 12,028.70.

EARNINGS:

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  Applied Materials (AMAT): EPS and revenue beat, with Q3 guidance better-than-expected.


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  Globant (GLOB): Next quarter and FY outlook light.


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  DXC Technology (DXC): Outlook for both next quarter and FY exceedingly light.


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  Take-Two (TTWO): Initially lower pre-market after very disappointing guidance and narrowing GTA VI release to fall 2025. But, EPS and revenue topped.


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  Doximity (DOCS): Profit and revenue surpassed Wall St. consensus.

STOCK SPECIFICS:

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  AMD (AMD): Wolfe Research added it to 'Wolfe Alpha List,' replacing Nvidia (NVDA) given the relative move in shares YTD.


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  Reddit (RDDT): Partners with OpenAI, where OpenAI is to become a Reddit advertising partner and will bring Reddit content to ChatGP and other products.


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  Tesla (TSLA): Reportedly developing plans to construct a data centre within China, as an option to train AI for self-driving systems, according to Reuters citing sources.


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  GameStop (GME): Files mixed-securities shelf, Q1 prelim sales short and it may sell up to 45mln shares of Class A stock.


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  Robinhood (HOOD): Double upgraded at BofA to Buy from Underperform.


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  Cracker Barrell (CBRL): Slashed dividend and guidance.


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  Avangrid (AGR): Iberdrola (IBE SM) is reportedly nearing a deal to acquire the remainder of Avangrid that it does not already hold for USD 35.75/shr, via Reuters citing sources. Note, AGR closed Thursday at USD 37.53/shr.

US FX WRAP

The Dollar was flat to end the week, albeit choppy, in thin trade and light newsflow as participants seemingly await the next risk event, whether it be Nvidia earnings, FOMC minutes, or Core PCE. Back to Friday, there was no tier 1 US data although the April leading index was dismal and declined 0.6% M/M (exp. -0.3%) and below the bottom end of the forecast range. Fedspeak came via Fed’s Bostic (voter), after-hours Thursday, and Bowman (voter), with the latter continuing to note she is monitoring data to assess if policy is sufficiently restrictive and willing to hike if inflation progress stalls or reverses (previously said this early May, pre-CPI). Looking to next week, FOMC Minutes and Nvidia earnings are the US highlights.

JPY and CHF were the G10 laggards against the Buck, with USD/JPY hitting a high of 155.98, as the Yen managed to fend off 156.00, for now. Overnight, BoJ Governor Ueda said there is no immediate plan to sell BoJ's ETF holdings and must spend some time deciding the fate of the BoJ's holdings including whether to unload them in the future.

Antipodeans and GBP saw slight strength, and benefitted from the weakness in the Buck as opposed to anything currency-specific. Highlighting this, the Aussie and Kiwi were initially softer - and the G10 underperformers - as they were weighed on by mixed Chinese activity data. Following this, the support measures out of China helped to lift the Yuan, which did not initially filter through into the Antipodes, but as base metals climbed higher, it helped lift the couple. NZD/USD and AUD/USD reached highs of 0.6136 and 0.6692, respectively, vs. earlier lows of 0.6102 and 0.6649. To next week, UK and NZ CPI are the highlights.

EUR and CAD were flat vs. the Buck. The Euro was unreactive to the final EZ inflation figures, while Loonie was pretty unperturbed to the firmer oil prices. On the Central Bank footing, ECB's Vasle, Kazaks, de Guindos, and Schnabel were all on the wires, but said little new. EUR/USD went as low as 1.0836, dragged down by the initial broader Dollar strength, before hitting a later high of 1.0878.

EMFX was mixed. COP, RUB, and the Yuan were flat, with the latter seeing some modest strength in wake of further Chinese property support measures. Prior to this, economic data was mixed with Industrial Output better-than-expected but Retail Sales disappointed. CLP, ZAR, BRL, MXN, and TRY all firmed vs. the Buck, with the former buoyed by surging copper prices with the South African Rand also seeing tailwinds from rising spot gold prices as it topped USD 2.4/oz. For the Mexican Peso, Deputy Governor Espinosa noted she does not foresee a likely rate cut in June; and she is not in a rush to make more rate cuts and will depend on data. Espinosa added March rate cut was premature and delayed inflation's convergence target to target by two quarters, and as a reminder she was the only dissenter.

17 May 2024 - 21:03- Fixed IncomeData- Source: Newsquawk