Ian Reynolds
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Overnight
US Monthly PCE April 2025
Bond and USD rallied Friday as April PCE came in slightly better than expected, but not higher, and April's trade deficit was nearly halved and way below expectation. Finally evidence in the tariff narrative.
University of Michigan Consumer Sentiment May 2025
And consumer sentiment rebounded, per Conference Board, and most importantly inflation expectations lower but still elevated.
Exactly what the FED doesn't want. They've really painted themselves into a corner.
Elsewhere no-one's looking at inflation, apart from in Japan
Bank of Korea makes 25bp cut and lowers GDP forecast again [Central Banking]
The tariff's distraction continues as Trump / Bessent provide way too much commentary to a market that doesn't care any more.
Trump says he will double tariffs on US steel imports to 50% [FT]
Trump signals fresh trade tensions with China, accusing Beijing of violating a deal [ABC News]
US trade talks proceeding despite court rulings, China talks stalled- Bessent [investing.com]
Chinese, EU Trade Heads to Meet as Trump Tariff Tensions Rise [Bloomberg]
Equities were mixed which was a surprise.
US Equities
Breaking
Dimon warns US bond market will ‘crack’ under pressure from rising debt [FT]
Trump summons Fed's Powell, tells him he's making a mistake on rates [Reuters]
The first concrete evidence that tariffs are working went down well with bond markets but US$80B in one month is approximately a month of interest on the federal debt. Not saying it's bad, just such a along way to go.
The clause in the Beautiful Bill, about taxing foreign investments, will be very worrying for overseas investors and kind of crazy, seeing that the US can't afford to lose the wall of cash from Japan and the UK. China's out of this now.
And still the US Government is spending even more than before, and the bill allows them to do so. The debt ceiling will go up another 5 Trillion or so. Tax cuts means less tax revenue so income will be constrained. The math(s) just doesn't work.
So the reboot leaves markets looking at economic fundamentals. If Trump / Bessent can't inflate the debt away by growing GDP exponentially then there's no way back. A hard reset. Or bare metal rebuild.
It's all just a massive one-way bet. Grow GDP or go to hell. Everything else is just noise.
Precious Metals / Commodities
Gold and Silver are consolidating nicely. Asia continues to buy strongly but western portfolios are very underweight.
GOLD/ USD Daily
Oil looks precarious with even more rumours of OPEC output hikes.
SPOT BRENT Daily
Trump spurs questions about safety of Germany's gold in New York [Reuters]
Bitcoin (& Crypto)
Bitcoin looks tired after a big rally. The narrative of everyone wants in: companies, countries but retail is curiously silent. Getting above 100k should have created euphoria but only X accounts were cheering.
BITCOIN / USD Daily
CRE / Banks / CLOs
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Lots and lots of price discovery going on at significant haircuts.
United States
US Economic Indicators
The week could be summed up as Reality vs The FED. Reality told us that unemployment was inching up whilst consumer inflation was lower and consumers more perky. The FED sees stagflation through solid growth and elevated CPI. Revised Q1 GDP came in negative.
Meanwhile the USD consolidates at lower levels.
DXY Daily
Germany and Britain issue warnings about traveling to America [The Independent]
Ron DeSantis Signs Law Allowing Gold, Silver For Transactions In Florida, Citing 'Declining Dollar' Concerns [Yahoo! Finance]
China
Recent holidays and a reluctance to publish bad news gave us a week of zero updates from the world's second biggest economy.
Looks like outright war again when the 90 days wears off.
Bond yields are still dropping as 30 year rates consolidate below 2%. Despite the narrative from regulators that China has much better tech (they do), more modern and more advanced transport and energy (they do), the economy is fine and debt is under control (it's so not) - bond yields are telling us that China is in real trouble.
China 30 Year Bond Yield Monthly
Japan
Japan Economic Indicators
CPI is still ticking up, but tariff uncertainty and a stagnant economy has pushed the big manufacturers into real trouble.
Nissan Might Sell Its Home to Survive: Report [Motor 1]
Europe
EU Economic Indicators
CPI at 2%, better employment numbers and a growing confidence from EU leaders.Is this the phoenix appearing from the ashes? If so, it's about time because Europe needs leaders as the US influence in Ukraine wanes (they got the minerals deal).
Thus the Euro appears almost perky.
EUR / USD Monthly
EU to launch age-check app as pressure builds on Big Tech [FT]
Germany’s Merz Floats Cutting Off EU Funds to Fico’s Slovakia [Bloomberg]
United Kingdom
Surprisingly little economic data from the UK gives us a chance to look at consumer sentiment from one of the many excellent anecdotal data points.
CBI Distributive Trades Survey came at -27 for May which is a terrible number. The UK's better economic performance needs a lot more effort to be sustainable.
Proof that financial markets aren't the economy.
U.K. CBI Distributive Trades Survey May 2025
"The Confederation of British Industry (CBI) Distributive Trades Survey (DTS) measures the health of the retail sector. The reading is compiled from a survey of about 150 retail and wholesale companies. It includes measures of sales activity across the distributive trades. It is a leading indicator of consumer spending. The figure is the difference between the percentage of retailers reporting an increase in sales and those reporting a decrease.
A higher than expected reading should be taken as positive/bullish for the GBP, while a lower than expected reading should be taken as negative/bearish for the GBP."
To no-one's surprise trying to tax the rich just means less rich taxpayers. The Government's disconnect from economics, history and common sense, is absolute.
Capital gains tax receipts fall 10% as wealthy exit UK [The Times]
The IMF was quite nice though. "An economic recovery is underway. Growth is projected at 1.2 percent in 2025 and will gain momentum next year, although weak productivity continues to weigh on medium-term growth prospects."BoE governor urges UK government to seek closer trade ties with the EU [FT]
Canada
Canada Economic Indicators
OK GDP with declining wage pressure is nice. I bet Powell would like those stats.
But there is a lot of pain to go through.
RBC braces for rocky economy, boosts loan-loss provisions [American Banker]
King Charles' speech went down well with lawmakers but less so with indigineous leaders
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Affirmation of Canadian Sovereignty: King Charles underscored Canada's independence by stating, "The True North is indeed strong and free," a line from the national anthem that resonated as a direct rebuttal to U.S. annexation rhetoric.
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Emphasis on Democratic Values: The King highlighted Canada's commitment to democracy, pluralism, the rule of law, and self-determination, asserting that these principles are integral to the nation's identity and resilience.
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Call for Mutual Respect in International Relations: Acknowledging the evolving dynamics between Canada and the United States, the speech advocated for a "new economic and security relationship... rooted in mutual respect," aiming to redefine bilateral ties on equal footing.
Australia
Australia Economic Indicators
All talk is about taxing unrealised capital gains.
Interesting
What's Next?
Powell on the blower Tuesday will reiterate meeting minutes / committee members so stagflation is the fear.
Will the Bank of Canada and ECB make fools of the FED by cutting? I doubt it but currently at least they are leaning in the right direction.
Usual fun and games with NonFarm Payroll on Friday.
Markets are now actively ignoring Trump so all eyes are on anything that impacts the debt scenario.
This Week's Important Economic Indicators [London time]
![This Week's Important Economic Indicators [London time]](https://vip.suberia.capital/hs-fs/hubfs/01062025/indicators.jpg?width=658&height=793&name=indicators.jpg)
