Ian Reynolds
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Overnight
Japan GDP Q1 2025
Japan's GDP goes negative and more than expected. Nowhere has the tariff war impacted more than Japan.
University of Michigan Consumer Sentiment May 2025
Even higher inflation expectations and lower consumer sentiment highlight the difference between the economy and the financial markets. Hot money flooding into stocks versus a stagnating economy.
US Equities
Breaking
Moody’s cuts America’s pristine credit rating, citing rising debt [investing.com]
U.S. Loses Last Triple-A Credit Rating [Wall St Journal]
SNB Will Only Take Rates Negative If Necessary, Schlegel Says [Bloomberg]
EU readying new sanctions to increase pressure on Russia, von der Leyen says [investing.com]
Under The Radar
AAA no more, but who cares? Masked by the Middle East deals and bubbling stock markets, treasury yields spiked and yet no panic.
In 2011 when S&P took the US off AAA there was a massive smash up. All those derivative products that mentioned AAA had to be unwound, but this work was done 14 years ago.
When Fitch did the same a few years ago, almost no-one noticed.
But now Moody's, the last of the credit agencies.
Structurally it shouldn't matter but it is a line in the sand. Investors should lend to Microsoft as opposed to the United States. All those collateral trades, repo etc, does this make Microsoft paper super valuable?
We've been prepared for this since Scott Bessent started suddenly mentioning the "creditworthiness' of the US a few weeks ago. And Moodys will have tipped him off.
And the buyback program is ready to absorb liquidity, particularly in off-the-run treasuries which are illiquid in market turbulence.
US Treasury Looks to Revamp Buyback Program After Recent Tumult [Bloomberg]
And recent auction's have been support by the FED's buying, which has been put down to balance sheet management but also has the effect of keeping on-the-run securities scarce.
Also recent de-dollarisation by China and others offloading securities, has added for the need for what effectively is Yield Curve Control, and probably a forerunner to capital controls.
Moody's Ratings downgrades United States ratings to Aa1 from Aaa; changes outlook to stable [Moodys]
China Drops to No. 3 Holder of Treasuries, Falling Behind UK [Bloomberg]
And the current bill being blocked in the senate to raise the debt ceiling by $5T is just an unfortunate hurdle for the administration as yields spike to danger levels. 30 year rates back to the highest since COVID at just under 5%.
US 30 Year Government Bond Yield Daily
Precious Metals / Commodities
Gold's pullback as viewed from the monthly chart, is just a rare red candle in a sea of green ones. There is still massive demand.
GOLD / USD Monthly
Bitcoin (& Crypto)
BTC switching from risk asset to pure monetary hedge has changed the price action profile and we seem to be going higher with well controlled steps.
BITCOIN / USD Daily
CRE / Banks / CLOs
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More liquidations and price discovery.
United States
US Economic Indicators
Benign inflation across the range of indicators but Truflation, which has foretold everything that has come to pass in CPI etc, now sees a spike. With tariff pricing coming through and those consumer expectations, the last thing the long end of the curve needs is inflation.
Truflation US Inflation Index
The USD, as portrayed by the DXY, has risen from 70 to 114 since the GFC, and recently lost 10% to 100 this year. There's plenty of support down to the mid 90s but look out for a big break lower if support gives way. Given that the USD has barely strengthened with the bond yield rises, the canary in the mine is actually the USD not yields as yields are much easier to manipulate.
DXY Monthly
China
China Economic Indicators
Soaring money supply, along with PBoC buying, has kept markets afloat for now and we're waiting for the outcome of the initial tariff tussle. Even a few weeks shutdown can cause massive disruption, as COVID taught us.
Japan
Japan Economic Indicators
Falling GDP and inflation now, and suddenly Japan is in a world of pain yet again. Just when things seemed to be going their way for once, and now JGB yields are soaring. You can't trust the 10 year as it's manipulated but further out does't bode well.
Japan 30 Year Government Bond Yield Daily
Europe
EU Economic Indicators
Peace and tranquillity in the EU as the eye of the storm in US / China plus good news in the Middle East.The economy is doing a little better but we still need peace in Ukraine. Tariff negotiations with Trump are just starting.
United Kingdom
UK Economic Indicators
The lucky recipient of a tariff deal already, and the economy doing better, Starmer has had to refocus on domestic policy. He's super unpopular but doesn't seem to care.
Canada
Canada Economic Indicators
Still in the void and Carney has swerved having to have a spring budget. Look out for those rating agencies!!
A new government without a new budget [Globe & Mail]
Australia
Australia Economic Indicators
A mixed bag economically this week but solid employment and inconvenient wage price inflation may cause the RBA to pause on Tuesday.
Interesting
Scientists turn lead into gold for 1st time, but only for a split second [ABC News]
Federal Reserve to slash staff by 10% over several years [FT]
What's Next ?
With most economic data out of the way, markets can get back to trading headlines again, so expect volatility.
This Week's Important Economic Indicators [London time]
![This Week's Important Economic Indicators [London time]](https://vip.suberia.capital/hs-fs/hubfs/18052025/indicatorsa.jpg?width=658&height=535&name=indicatorsa.jpg)
