Murmurs ahead of Meet! (FOMC)
Angst revved up into high gear ahead of FOMC - equity markets appear got frightened mainly due to a hot ECI and of course beginning of May. Since 1950, approximately 60% of negative monthly returns, including declines of greater than –10%, occurred during May to October, which lends some credence to the Sell in May strategy.
In the current context, murmur in the street is about the very little probability that Fed could talk about idea of rate hikes.
ECI reading is yet another data point that shows inflation slowdown that began this time last year had stalled out-hefty upside surprise 1.2% magnifying persistence of inflation. Compensation costs up 4.2% y/y- not a good sign as labour costs is the biggest input cost in service sector-led economy.
Bad news further: Consumer confidence dropped to 97.0, second lowest in past three years - tough to explain as to how the consumer spending stays so strong even as morale is so low.
Two-year contraction in Dallas mfg index, which followed continued softness from NY and a rebound in Philly and Chicago April mfg index posted at 37.9.When the components are reweighted to the national index, this reveals a huge decline in the ISM
EZ economy expanded by 0.3% q/q in the first quarter, highest since 3Q22. Inflation remains subdued still exposed to the vagaries of energy prices. -break below the 1.0675 confirms bear flag, setting the stage for a move towards year-to-date low at 1.0601, and testing 2023 low of 1.0448.
Typically, "no one reads" piece gives some bad news - RedFlag alert research shows the speed at which financial distress has accelerated in UK. Level of ‘significant’ financial distress leapt 30.8% y/y in Q124 -554,554 companies affected (Q123: 424,041)- they go on to say Despite optimism in the markets, there has been continuation of same pressure - GBP is a macro Sell for sure - another Yen in the making - for now can test Friday's 1.2448 low and 1.2299 April low.
Rumours BOJ sold around $35bln on Monday - contradictory reports from Asian names who refuse to believe intervention say the trading algorithms -after reading the word "Intervention" multiple times- could have accounted for the swing. Anyway, Monthly close is above 152.20- stay patient for 170.