Today we have Eurozone CPI, and we will hear from the Fed’s Bostic, Logan, Jefferson and Williams. With little in the way of key data, on Tuesday we have the opening of the Qatar Economic Forum (Tue-Thu), and a gathering of G-7 ministers and central bank governors. Central bank guidance includes the Fed’s Bostic, Daly, Hammack, and Musalem, the ECB’s Wunsch and Knot, and the BoE’s Pill. UK CPI will draw market attention on Wednesday, and we will hear from the ECBVs Guindos on the central bank’s financial stability review, and Lane discusses negative interest rates. A raft of manufacturing and services PMI readings are due on Thursday, and in the US we have jobless claims and existing home sales figures. Central bank chatter includes the ECB’s Vujcic, Holzmann and Pill, the Fed’s Williams and the BoE’s Breedan and Dhingra. Germany GDP, Japan CPI and US new home sales and building permits data feature on Friday and the ECB’s Pill lectures on “inflation and disinflation in the euro area”
Markets witnessed a calm start to last week amid progress in US-China trade discussions. The softer-than-expected US CPI and PPI figures supported market sentiment, albeit with limited tariff impact in April. The retail sales figures broadly surprised to the downside, while the retail sales control group reading, considered a more accurate gauge of consumer spending and monitored by the Fed, fell 0.2%, against expectations for a 0.3% rise. We heard from a number of Fed members who maintained the wait-and-see/patience approach. Then on Friday Moody’s downgraded the US’s credit rating by one notch to Aa1 bringing it in-line with S&P and Fitch’s AA ratings. Moody’s cited the ballooning debts and consequent high interest payments, and limited effort by the government to improve the fiscal position, saying it expected the US’s federal debt burden will rise to ~134% of GDP by 2035. The rating agency also noted that Trump tariffs will significantly hurt the nation’s long-term growth.
The reports unsettled markets with the yield on the 10-year rising 10bps to 4.48%, while the 30-year rose 11bps to 4.95%, and is currently trading through 5% this morning. Meanwhile, the S&P Index enjoyed a 5.27% rally last week, and the dollar gained 0.75%. Brent crude rose 2.35%, closing the week at $65.4 pb amid easing US-China trade tensions.
Over in China, data released this morning was mixed. Retail sales missed expectations, gaining 5.1%yoy while industrial production surprised to the upside gaining 6.1% in April. The property market remained weak despite government stimulus efforts including reduced mortgage costs. China’s home prices remained relatively flat in April – the 24th consecutive month without growth since May 2023. Year-over-year prices fell 4.0%, with property investment dropping 10.3% as the real estate sector continues its prolonged slump.
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