Five Things You Need to Know to Start Your Day: Americas
Good morning. US stock futures are muted after a strong close on Friday, while treasuries drop as traders pare bets for rate cuts this year. Oil retreats from a five month high as gold climbs to a new record.
Eyes on earnings
US stocks are poised to post modest moves after Friday saw a boost from surprisingly strong jobs data. European stocks are broadly higher, led by miners on the back of rebounding iron ore prices, while US futures are slightly lower. Investors are now looking ahead to the next key economic indicator — CPI— on Wednesday, which is expected to show further evidence of a gradual cooling in inflation, as well as the start of first quarter corporate earnings kicking off on Friday. Big names reporting include JPMorgan, Citigroup and Wells Fargo.
Fading Fed cut bets
All the encouraging economic data recently has tipped bets toward fewer Fed rate cuts this year. Markets now favor just two reductions in interest rates, with swaps implying around 60 basis points of easing. That’s weighing on Treasuries with yields on 10-year debt within striking distance ofthe key 4.5% level some watch to determine whether rates revisit last year’s highs. Comments from Federal Reserve Bank of Dallas President Lorie Logan added to the more hawkish picture, after she said it’stoo early to consider cutting rates at all. On Friday, the chance of a third cut was still above 50%.
Oil retreats
Oil retreated from a five-month high after Israel said it would remove some troops from southern Gaza, with the forces recuperating and preparing for future operations, including an offensive on Rafah. Iran is also preparing a response to a suspected Israeli attack on its consulate in Syria. Escalating tensions in the Middle East and supply shocks have driven crude’s recent rally, raising the prospect of the global benchmark reaching triple figures. Still, the broader outlook remains indicative of rising prices. Elsewhere in commodities markets, gold reached a new record above $2,350 as geopolitical risks boosted its appeal and traders look for further indicators for the trajectory of rates.
Yellen in China
On the geopolitical front, US Treasury Secretary Janet Yellen is wrapping up four days of meetings in China as part of efforts to improve economic ties between the two countries. Yellen’s repeatedly framed China’s strategy of boosting its manufacturing capacity as a widespread global concern and urged leaders to focus instead on revving up domestic demand. While Chinese Premier Li Qiang on Sunday advised Yellen against turning “economic and trade issues into political” matters, meetings between the two sides have been cordial.
Chipmaker loans
Meanwhile, the US plans to award Taiwan Semiconductor Manufacturing $6.6 billion in grants and as much as $5 billion in loans to help the world’s top chipmaker build factories in Arizona. Under the preliminary agreement TSMC will construct a third factory in Phoenix, adding to two facilities in the state that are expected to begin production in 2025 and 2028. In total, the package will support more than $65 billion in investments at the three plants by TSMC, the go-to chipmaker for companies such as Apple and Nvidia. The award is one of the largest announced under the 2022 Chips and Science Act, marking another milestone in President Biden’s push to boost the US semiconductor industry.
What We’ve Been Reading
This is what’s caught our eye over the past 24 hours.
Biden ally opposes halting US weapons transfers to Israel.
Liquidity is paramount, UK’s outgoing debt office head warns.
UK stock funds have lost £5 billion this year.
Alibaba slashes cloud prices globally as AI demand quickens.
Yellen threatens sanctions for China banks that aid Russia’s war.
And finally, here’s what Joe is interested in this morning
There's a ton of focus on US-China trade these days, with all kinds of anxiety about Chinese overcapacity, and EVS, and semiconductor, and widebody planes and all that. In fact, Treasury Secretary Janet Yellen is just wrapping up a trip to China, with the aim of creating some kind of stability between the two nations despite the rising tension.
https://www.bloomberg.com/news/newsletters/2024-04-08/five-things-you-need-to-know-to-start-your-day-americas