2024.05.13 Weekly

Reexamining the bull-case

14 min readMay 13, 2024

Last week continued the trend of softer US data via Jobless claims and UoM consumer survey, and an improving trend in the UK (via manufacturing and construction data, big beat in GDP) and Europe (Services PMI revised higher, Sentix continues to improve).

I talked about stagflation concerns being premature for now and that US data coming off the boil would be a good thing for a market that is still very driven by Fed policy expectations and, that the “US being less exceptional” would help to support the broader risk complex via softening US yields and Dollar. I’m still very much in this camp.

Initial claims rose sharply last week to 231k from 209k the prior week.

UoM preliminary data showed a sharp turn in consumer sentiment which probably shouldn’t come as a surprise given the slump in the Conference Board data since the beginning of the year…

and much of that slump stems from future jobs availability and income prospects, which is reflected in other data (e.g. NFP as reviewed last week, PMI employment components, uptick in jobless claims) and bodes well for inflation easing.

UoM 1-year inflation expectations did rise sharply as well however, perhaps a lagged consumer response to the Q1 reacceleration and Fed cuts being pushed back.

We have the April CPI figures released this week and while it is expected to be strong at 0.4%, there is a sense that it will peak ahead of the summer with the May nowcast at 0.14%, though core is expected to remain sticky.

Rent inflation is one of those sticky components that makes up a large proportion of CPI. April saw the fastest monthly rise since May of 2022, but it does tend to peak around this time of year (shaded in Grey).

Used-car prices, also a sizeable contributor to CPI, has seen an big acceleration to the downside last month and keeping the broader trend negative over the past year.

Circling back to the April Conference board data, consumers expect to cull back on discretionary spending in areas that saw large post-covid pent-up demand that helped to drive services inflation. Banks are also reporting tighter consumer credit according to the Fed SLOOS as well as increasing ‘charge-offs’ as per bank earnings reports, while consumer-sector companies have been flagging decreasing demand.

Putting it altogether, inflation pressures are cooling and that’s great news for the Fed and for risky assets; granted this doesn’t paint a rosy picture for growth further down the line but inflation coming down should offset some of that negativity and it’s still much too soon to worry about it while the US economy is still in relatively good shape.

I continue to remain bullish on equities so long as CPI doesn’t come in above expectations. If it does come in on the hot side, I will partially cover my positions and look to reload on weakness on the above view that data is pointing to softening inflation pressures. If in-line or on the soft-side, then I think its rocket-blasters for risk til the June OPEX.



  • S&P 500 rebounds to less than 1% from a record after orderly three-week pullback (CNBC). Dow Extends Win Streak to Eight Days and best week of 2024 (Barrons). European Stocks Set Fresh Record; FTSE 100 Gains on BOE Signals (BBG). Wall Street expects rate hikes are off the table for now. Next week’s inflation data will test that thesis (CNBC). Morgan Stanley Strategists See Inflation as Key for Path of Stocks (BBG). Treasury yields end at one-week highs after data show inflation expectations are rising (MW). Gold prices settle at 3-week high as ‘soft’ U.S. data support rate cuts this year (MW). Morgan Stanley Says Buy Bonds in Bet That Inflation Will Retreat (BBG).
  • ‘September the New June’ Emerges as Wall Street’s Line on When the Fed Cuts (BBG). Citi Sees Fed’s Balance-Sheet Runoff Extending Into 2025 — Prior estimate was for end-2024 which is Street consensus (BBG). Fed’s Cook Says Private Credit Hasn’t Hurt Financial Resilience — watching auto, credit-card delinquencies (BBG). Fed’s Collins Says Reaching 2% Inflation Goal May Take Longer — Progress will likely require slower economic growth, ‘Methodical perseverance’ needed amid uneven progress (BBG). Inflation Will Keep Dropping in 2024, Chicago Fed’s Goolsbee Says (Barrons). Fed’s Barkin Says Full Impact of High Interest Rates Yet to Come (BBG). Fed’s Daly Says ‘More Time’ Needed for Restrictive Rates to Work — Considerable uncertainty over next few months’ inflation data (BBG). Fed’s Kashkari Says Rates Likely on Hold for ‘Extended Period’ — questions if rates are high enough to tame prices, Resilient housing market may indicate neutral rate is higher (BBG). Stubbornly High Rents Prevent Fed From Finishing Inflation Fight (WSJ).
  • Hedge Funds Pile Into Option Bets Yen Will Weaken Back to 160 — They’ve been buying reverse knock out call option contracts, These trades show market doubts over intervention (BBG). Vanguard Joins Pimco in Seeing More BOJ Hikes Than Market — sees BOJ at 0.75% by end-2024 (BBG). Ueda-Kishida Talks Fuel Bets BOJ to Act Fast, Lifting Yields — Japan 10-year yield’s rise to 1% would be first since 2013, BOJ seen reducing bond buying in June (BBG). BOJ’s Summary Hints at Hawkish Tilt With Yen Becoming Key Topic (BBG). BOJ’s Policy Board Becoming More Concerned About Effects of Weaker Yen (WSJ), Ueda Says Will Closely Monitor Weak Yen’s Impact on Prices (BBG).
  • Oil prices mark modest moves for the week with supply-and-demand risks in focus — Natural-gas futures log a second straight weekly climb (MW). Oil’s Fragile Outlook Spells Weaker Prices in 2025 — Demand growth is set to cool and will be more than satisfied by a surge in supply (BBG). Biden Restarts Plans to Refill US Oil Reserve as Prices Dip — Energy Department seeks 3.3 million barrels of oil for cache (BBG), Energy Department will pay as much as $79.99 barrel, up by $1 (BBG). Summer Gasoline Prices Seen Holding Steady in Relief for Drivers — EIA sees fuel averaging $3.68 a gallon in April to September, Summer consumption little changed from last year’s levels (BBG). Traders boost bullish bets on European gas prices (FT). Global Gas Glut to Be Delayed by Another Year — Markets were supposed to be flooded with LNG by 2025 but hiccups at new projects might postpone their start. (BBG). Wheat futures mark highest finish since July (MW). Bad Weather and War Are Straining the World’s Wheat Supply — Futures are near eight-month high as crop risks spook traders, Rain, drought and heat are threatening supplies in key growers (BBG). Robusta Coffee Rises as Vietnam’s Plantations Need More Rain (BBG).
  • Russia opens up new front with major ground assault near Ukraine’s second-largest city (CNBC). Israel pushes deeper into Rafah and battles a regrouping Hamas in northern Gaza (CNBC). Oil’s Geopolitical Risk Premium Vanishes as Fear of Wider Mideast Conflict Fades (BBG).


  • US weekly jobless claims highest in more than eight months as labor market eases — Weekly jobless claims increase 22k to 231k above 212k expected, Continuing claims rise 17k to 1.785 million (RTS). US online retail spending up 7% Jan-April, driven by demand for cheaper products — Adobe Analytics report showed on Thursday, driven by strong demand for groceries and cheaper discretionary items (RTS). US Consumer Borrowing Posts Small Gain, Limited by Credit Cards (BBG). Fed Says More Banks Tightened Loan Standards to Start 2024 (BBG).
  • US Rents Climbed 1.5 Times Faster Than Wages in Last Four Years — Florida has some of the most dramatic differences, Zillow says, Housing costs outpaced salaries in 44 of top 50 metro areas (BBG). Mortgage Rates in the US Decline for the First Time in Six Weeks — Average for 30-year loans drops to 7.09% (BBG). ‘Seriously Underwater’ Home Mortgages Tick Up Across the US — Southern states see jump in share of very underwater homes, A dozen states have at least 2,500 more than last year: ATTOM (BBG). US Renters Seeing Chance of Owning a Home at Record Low, NY Fed Survey Show (BBG).
  • Bank of Canada Says Households Can Cope With Higher Rates — Financial system remains resilient, bank says in annual review, Renters’ debt, stretched asset valuations flagged as key risks (BBG). Mexico Consumer Prices Rise More Than Expected — Annual inflation sped up to 4.65% in April; estimate was 4.63% (BBG). Mexico Central Bank Keeps Rate at 11% as Inflation Speeds Up (BBG).


  • UK Recession Ends With Strongest Growth Since Lockdown’s End — Services and manufacturing output bounce back from slump (BBG), UK GDP +0.6% in Q1 vs Reuters poll +0.4%, GDP in March +0.4% vs poll +0.1% (RTS), Tories seize on GDP rebound as they sell recovery story to sour electorate (FT). Bank of England clears path for its first rate cut since 2020 — Bailey says a cut in June is possible, says cuts could be deeper than investors expect, MPC splits 7–2 to keep Bank Rate on hold (RTS). BOE and Markets Fall Into Line Over Prospect of June Rate Cut (BBG). U.K. Can Expect Two Rate Cuts This Year, Breach of Fiscal Rules, Leading Economic Research Institute Says (WSJ). UK Construction Industry Grows at Fastest Pace in 14 Months — Construction PMI adds to signs of UK economy bouncing back (BBG). UK House Prices Stagnate in April as Mortgage Costs Climb (BBG). UK Mortgage Arrears Rise as Borrowing Rates Squeeze Homeowners — Loans in arrears climbed 3% in the three months through March, Homeowners behind on payments up 26% from a year earlier (BBG).
  • German services sector picks up pace in April, PMI shows — HCOB final services PMI rose to 53.2 from 50.1 in March, composite PMI climbed to 50.6 from 47.7; “German service sector which was still in the doldrums at the start of the year is recovering fast”; both input costs and output prices increasing faster than their historical average, “We interpret this pricing power as a further indication of the overall healthiness of the service sector” (RTS). German Industrial Production Falls for First Time This Year — falls 0.4% vs 0.7% decrease expected (BBG). German Factory Orders Drop in Sign of Enduring Weakness — falls 0.4% vs 0.4% gain expected (BBG). ECB’s Lane More Certain That Inflation Is Returning to Goal (BBG). ECB Can Cut Rates in June If Inflation Path Holds, De Cos Says (BBG). Guindos Says ECB Won’t Commit to Any Path Beyond June (BBG). ECB’s Simkus Expects Three Interest-Rate Cuts This Year (BBG).
  • Riksbank Kicks Off Easing With First Rate Cut Since 2016 — Policymakers are acting a month before the ECB may move too, Sweden’s krona weakens despite pledges of gradual easing (BBG). Europe must close productivity gap with US to lift growth, says Riksbank chief — Thedéen fuels debate on continent’s struggle to boost competitiveness (FT).


  • Japan’s Real Wages Slide, While Underlying Trend Stays Solid — Decline in nominal wages reflects 9.4% drop in bonuses, Gauge showing underlying wage trend increases by 2.3% (BBG). Japan’s Households Cut Outlays With Inflation Still Sticky — Households to see tax cuts, end of utilities subsidies, BOJ Foresees Expected Rise in Real Wages Supporting Outlays (BBG).
  • China’s consumer inflation edges upward in signal of slow economic recovery — Third straight month of price growth points to strengthening consumer demand despite falling factory prices (FT). China’s services activity eases in April but still solid — Caixin Services PMI eased to 52.5 from 52.7 in March, Caixin survey is skewed more towards smaller, export-led firms than the much broader official PMI, which showed a sharp slowdown in services sector activity for last month (RTS). China’s exports and imports return to growth, signalling demand recovery — China’s April exports meet forecasts, imports handily top expectations, Trade upturn suggests welcome demand recovery at home and abroad, analysts skeptical about strength of both exports, import growth, China’s industrial overcapacity problematic for factories (RTS). China’s trade returns to growth on back of AI equipment imports — Chinese exports returned to growth while imports surged (FT). Shenzhen Eases Home Buying to Revive Sales in China Tech Hub (BBG).
  • US set to impose 100% tariff on Chinese electric vehicle imports (FT). US is now Germany’s biggest trading partner — taking over from China (CNBC). China’s Trade With Europe Sinks as Xi Seeks to Rebuild Ties (WSJ). Chinese competition a ‘defining challenge’ for EU companies — European businesses in China say profits hit by weak demand and increasingly sophisticated local rivals (FT). China tech is seeking growth in the Middle East (FT). South Korea prepares support package worth over $7 billion for the chip industry (CNBC).
  • RBA Retains Neutral Policy Bias as Key Rate Held at 12-Year High — Bank raises near-term inflation forecasts, lowers unemployment, Currency, yields fall as statement not as hawkish as expected (BBG). Australia’s central bank says higher inflation could push rate cuts to 2025 (FT). Australia Will Only Cut Rates in Late 2025, Ex-RBA Official Says (BBG). RBNZ Has Limited Scope to Cut Cash Rate This Year, OECD Says — Comments in ‘OECD Economic Surveys: New Zealand 2024’, Nation needs restrictive monetary policy, fiscal consolidation (BBG).


Global equities broadly positive last week, Europe in particular on a tear.

All-Countries World Index and EAFE Developed markets printed new ATH and close last week, EEM Emerging markets pushed 2yr highs.

The DOW outperformed SPX and NDX last week…

as Value outperformed Growth.

The rally looks reasonably healthy with Small/Mid-caps maintaining a bullish bias…

while mega-tech stocks still looks constructive for more upside after consolidating just under ATH for most of last week, perhaps awaiting CPI…

US cyclical sectors grinding away higher…

and put premiums are slammed back to the lows.

Meanwhile in Europe, stocks are ripping higher to new ATHs — DAX is up +4.28% last week putting in the strongest weekly performance since last November (+4.49%) as with other major European indices, and STOXX cyclicals index has breezed past its prior high closing just under the 127.2 fib which warrants close attention this week.

Sweden’s OMX has broken decisively higher after consolidating around a key area over the past month.

HSI has almost completed its technical objective returning to a key pivot area as with the Shanghai Composite, its not showing any sign of letting up just yet but does warrant some attention around these levels.

Finally the Nikkei, has been performing underwhelmingly. I was intent on squaring up shorts last week but watching it perform much weaker vs broader markets as well as seeing a huge bounce back in China equities (which was part of the original short thesis), I’ve decided to sit on it being comfortable with having 2 way exposure against my aggressive NDX longs.


Commodities were broadly up last week, biggest gains was in Precious metals +3.82% followed by Agriculturals +1.59%, Energy +0.56%, and Industrial metals +0.46%.

Crude fell short of its downside objective nearer the 76 handle. Last week’s doji printing around this pivot level does suggest the sell-off could be over…

while the front 2-month spread has bounced higher. I’ve had buy orders in the mid to low 76s which wasn’t reached but ended up chasing the bounce with smaller size. I intend to add if revisits the lows again towards the 50fib ahead of the JMMC meeting at the end of the month.

Gold has made the 61.8 fib retracement — I’m largely disinterested in trading Gold but looking at the chart, I could be tempted into a quick trade between now and CPI if it trades below the 2354 50fib level.


Yields were largely unchanged last week, until the UoM printed higher than expected inflation expectations moving the front end of the curve higher.

The 10yr is consolidating above support at ~4.45% with next major support around 4.20-4.25%. Unless CPI comes in hot, I expect yields to trade quietly sideways around current levels.


Spread between German and US yields (Red: last week close, Yellow: prior week close) widened at the front-end and narrowed from 10yr outwards. Although CPI could change the picture, I’d expect an inline print to continue narrowing the spreads leading to USD consolidating lower.

EMFX is looking much more constructive after the bounce back from the breakdown that could prove to be a false-break.

G8FX is looking technically tricky and though US CPI could change things, I assume no CPI surprises for the thoughts below:

  • USD — mildly bearish on slowing economic data to narrow the US exceptionalism divergence with other major economies. USDCHF trend is showing exhaustion against the 0.91 handle, and USDJPY I think would look complacent if it rallies above the 156 handle without the support of US yields (USDJPY is up almost 400pips from the lows while US10yr has barely moved from a sideways range).
  • EUR — very mildly positive on EURUSD and bearish on the crosses as my preferred funder over the USD on lower carry cost and Europe still having its fair share of challenges and vulnerabilities. On the plus side, data has been resilient, sentiment improving, and ECB cuts amply priced in for now.
  • GBP — GDP strongly beat expectations and though data isn’t particularly great, it is not looking as horrible as was feared. Expectations for Payrolls on Tuesday is on the pessimistic side and should it be a positive surprise, I see cable trading above 1.26 and EURGBP back to recent range lows with relative ease.
  • Commodity-dollars — bullish AUD, mildly bearish NZD, bearish CAD. China recovering and high beta to equities to support AUD, and NZD should benefit from those crosswinds while there is a lot of negativity in the price; CAD but for the strong payrolls report last week, inflation, consumer spending and growth is softening and BoC is getting incrementally more dovish and likely to cut sooner than the Fed, and softening USD crosswinds could weigh in also.

That’s all for now, good luck trading.