Stocks lower ahead of CPI while debt limit talks remain in limbo


: Equities down, Treasuries down/flat, Crude up, Dollar up.


NFIB reaches decade low, Ryanair confirms BA order worth USD $40bln, Russia oil production cuts almost reached its pledged goal by April. Reports suggest Biden will begin filling the SPR after maintenance is complete. Republicans and White House are against a short term debt limit extension.

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Stocks were lower on Tuesday, with the Nasdaq 100 leading the way. Technology was the sector that underperformed, but stocks were lower all around, with the S&P equal-weighted in the red and most sectors lower as well, except for Industrials and Energy which saw only marginal gains. The price of crude oil settled higher after Russia announced that its oil production cuts had almost reached its goal for April. (Note: reports from March indicated little evidence in March suggesting the data did not meet pledged reductions.) Meanwhile, reports suggest Biden will begin filling up the SPR when maintenance is complete. Treasuries reversed overnight gains amid hawkish ECB comments and nerves before the CPI. Losses were capped by a 3yr auction with a record-breaking strength. Williams, Fed's Williams, pushed back on views that the Fed had paused and said they were prepared to hike further. However, he stressed data dependencies and credit conditions would be key for future policy decisions. The debt limit is still a major issue. Biden met with congressional leaders, despite reports that both Republicans and White House were against extending the short-term limit.



Capital Economics reports that export growth in April slowed, almost reversing the entire increase in March. This indicates weak global demand. CapEco noted that import volumes dropped unexpectedly to their lowest level in 12 months. However, CapEco predicted a rebound due to a reopening economy driving domestic consumption. It still believes that China's surplus will decline and a recession in developed economies is expected later this year. ING reports that crude oil imports fell in April to an average 10.36mln BPD compared with the previous month. It attributes the lower operating rates to maintenance.


NFIB's measure of small-business optimism dropped to 97.4 from 98.7 last month, marking a decade-low. The report noted that small businesses continue to have difficulty finding skilled workers. Inflation is still a big issue, even though it has eased a bit. Oxford Economics points out that the report does not show any signs of a credit crunch. Only 6% of companies reported credit was difficult to obtain in April. The Senior Loan Officer Survey (SLOOS), a measure of bank lending, shows a sharp decline in lending during the second half. The consultancy says that despite the tightening of labour markets, wage and price expectations are still moderate. This is consistent with a slowdown in wage inflation and wages.


Williams (voter).

He said that he was confident that the Fed will achieve its target of 2% inflation. They are relying on data and are concerned about the impact tighter credit conditions have on the economic outlook. He reiterated his April forecasts where he expects inflation to fall to 3.25% by 2023, and to 2% by the year 2025. The unemployment rate will still rise to 4.0-4.5%. Williams said that inflation pressures are still "too high", and core services inflation, excluding housing, is persistent at 4.5%, having been running since August last year. "It will take the most time to reduce". He anticipates modest growth in the economy this year. He expects a growth of less than 1% this year, while affirming that job growth is robust despite signs of a slowing in demand for workers. NY Fed President said the Fed had not yet declared it was done raising interest rates, but that it has made tremendous progress in monetary policy. He noted he would be willing to raise rates again if necessary but did not see a reason to reduce rates this year. He said that tighter credit could limit the Fed's rate hikes. Williams says tighter credit is affecting the economy. He adds that CRE valuations could be understating the pressure on the sector, but the Fed has a strong focus on CRE-related risks.

Jefferson (voter).

Jefferson, the Fed vice chair who will replace Brainard, said that the US banking system was sound and resilient. The banks had also begun to increase lending standards. This is typical of where the US economy is at in its cycle. Jefferson stated that the US economy is slowing down in a controlled manner, but inflation will continue to fall as the economy grows.

Fixed Income


Treasuries reversed O/N recovery amid hawkish ECB comments and pre-CPI nervousness with losses capped off by a record strength 3-yr auction

At settlement: 2s +1.6bps, 3s -0.3bps, 5s -0.7bps, 7s –0.7bps, 10s –0.7bps, 20s –1.3bps, 30s -16bps.

Inflation breakevens

5yr BEI at 2.235% -1.4bps, 10yr BEI at 2.237% -0.4bps, 30yr BEI at 2.239% -0.5bps


The treasuries recovered gradually during the APAC session on Tuesday, with little reaction to the weak China trade data. After the hawkish remarks from ECB Kazaks, and Kazimir, there was some spillover pressure from EGBs. T-Notes printed highs of 115-15 after the NFIB Small Business Index fell. The index saw little improvement as owners struggled to find workers, and inflation remained a major concern for small business, although it was showing signs of easing.


The T-Notes fell below the NFP's low of 115-13+ as US players arrived. After Nagel's hawkish comments, contracts found support at the Monday low of 115-05. In the NY afternoon, new lows were set in preparation for the 3yr Auction and positioning ahead of the Wednesday CPI. There was a lot informal chatter about a hot print. Williams (v), Fed's Williams, said in his Q&A that the Fed can do more hikes as needed. This also backed up the selling led by the front end. The T-Notes hit a low of 115-01+, before the strong 3yr auction capitulated losses. If the gap between JOLTS and T-Notes continues to narrow, it could close at 114-26 on May 2nd.


The Treasury's USD 40bln 3yr auction was very strong despite the M/M richening to the lowest stop since Sept 2022. In addition, the relative value profile is becoming increasingly unattractive, although the sector offers a pick-up in duration. The bid/cover of 2.93x is well above the previous and average 2.60x. Dealers had a meager 13% of the market (prior 17.7%, and average). The increase in indirects (from 61.3% to 73.4% last month) is a sign of a strong demand from end users. The April data showed an increase in foreign accounts. This could continue to drive this month.


The US will sell USD 35bln in 10yr notes and USD 21bln in 30yr bonds, on the 10th of May.


: (Weds)


; (Thurs)



Preview here

The BoJ Summary of Opinions; Chinese Inflation (March/Q1); French CPI (March/Q1); US Import Prices (US Prelim. ); Fed's Daly and Jefferson.



SR3H3 +0.0bps at 95.060, M3 -2.0bps at 94.910, U3 -2.0bps at 95.220, Z3 -2.5bps at 95.645, H4 -2.0bps at 96.170, M4 -0.5bps at 96.620, U4 +0.5bps at 96.915, Z4 +0.5bps at 97.070, H5 +0.5bps at 97.145, H6 +0.0bps at 97.145.

Volumes fall from USD 1.517tln to USD 1.497tln, a 5.06% flattening.

Demand for NY Fed RRP Ops at USD 2.223tln. (prev. Demand for NY Fed RRP op at USD 2.223tln (prev. 104).

Volumes fall to USD111bln, EFFR is flat at 5.08% (prev. 112bln).


The US Treasury has announced that the size of its bill auctions for 4 weeks and 8 weeks will be reduced to USD 35bln from previously US$ 50bln. The US Treasury announced that the sizes of its 4-week and 8-week bill auctions would be reduced to USD 35bln each (previously, 50bln), respectively. Both will be sold on May 11th with settlement scheduled for May 16th. Both will be sold on the 11th of May and settled on the 16th. The CMB also announced that a USD 45bln CMB will be issued on May 11th to settle May 16th. The new CMB forms part of a three-part plan to issue ad-hoc CMBs totaling USD 100-150bln over the next two or three weeks.



The crude oil complex ended up firmer on Tuesday, mainly due to reports that Russian output cut almost reached its goal for April and Biden will start filling the SPR again after maintenance.

Oil was lower throughout the European morning session and the beginning of the US session, but not because of anything specific to crude. Instead, it was due to the lacklustre Chinese data and the continued US economic woes. (Banking sector jitters as well as debt ceiling talks) The EIA STEO report for May was released, as were the Saudi Aramco earnings. (More details below). In addition, the UAE Energy minister stated that the UAE is less concerned about the short-term, and is instead more concerned about long-term investments, while voluntary cuts have been made to balance the markets. Bloomberg reports that the Biden administration will begin purchasing oil for refilling the SPR once maintenance is completed this year. This move, which provides support to the crude complex, will also provide support to the crude complex. The key events for this week include the US CPI on Wednesday and the BoE on Thursday, accompanied by any Fed talk and the weekly oil update, which includes EIA data after private inventories, and is expected to show: Crude – 0.9mln; Gasoline- 1.2mln; Distillate- 0.8mln.

EIA STEO for May

The forecast for 2024 was reduced by 130k BPD, resulting in a 1.72mln BPD increase Y/Y. In the meantime, US crude production is expected to rise 640k BPD in 2023 (prev. Forecasts for a rise of 660k BPD were made last month. Meanwhile, 2024 US crude production is expected to increase by 160k BPD. Rise of 210k BPD. See the full EIA headlines.

Please click here



Aramco's profit fell 19% year-over-year in Q1 due to lower crude oil prices. Aramco has made major investments to advance its strategic downstream expansion on key global markets. Its global downstream strategy also is gaining momentum. Aramco also said that the company will continue to expand its capacity and maintain the same long-term outlook.



: SPX -0.46% at 4,119, NDX -0.68% at 13,201, DJIA -0.17% at 33,561, RUT -0.27% at 1,749.


Consumer Staples – 0.3%, Utilities – 0.2%, Consumer Discretionary – +0.02% Energy +0.04% Industrials +0.17%.


: Euro Stoxx 50 -0.59% at 4,323, FTSE 100 -0.18% at 7,764, DAX 40 +0.02% at 15,955, CAC 40 -0.59% at 7,397, FTSE MIB -0.16% at 27,383, IBEX 35 -0.31% at 9,183, SMI -0.36% at 11,553.



Ryanair (RYA ID)

The company confirmed that it has ordered 300 new

Boeing (BA)

The 737 Max-10 aircraft are worth USD 40 billion.

Coty (COTY)

Beat on EPS, revenue and lifting FY23 guidance for EPS.

Palantir Technologies (PLTR)

The CEO stated that the demand for AI platforms is 'unprecedented'. Note that Q2 guidance fell short of expectations.

Skyworks Solutions (SWKS),

The Q3 forecast was disappointing, despite the fact that EPS and revenue were in line with expectations.

Under Armour (UAA),

Inventory rose by 44%, to 1.2 billion dollars. The FY23 revenue outlook is for a flat or slightly up-tick, while the initial FY24 earnings outlook was below expectations.

PayPal (PYPL).

Despite a strong report, the Q2 EPS outlook was marginally disappointing.

McKesson (MCK)

Top and bottom line exceeded Wall Street consensus along with raising long-term profit targets.

Citizens Financial Group (CFG)

The company said that total deposits increased slightly in April, and it reaffirmed their commitment to medium-term goals. Pierre Lassonde has confirmed that the company made an investment offer in

Teck Resources (TECK)

The coal industry is a way to stop

Glencore (GLEN ln)


Amazon (AMZN).

Reuters cites an executive who said that the company plans to increase its headcount and build more warehouses in Europe.


A Delaware jury trial resulted in the defeat of a US Government lawsuit worth billions of dollars over HIV prevention drug patents.

Paramount (PARA),

The domestic cable network reportedly cut 25% of its staff

Electric Vehicles

After weak earnings from and updates by

Lucid (LCID), Nikola NKLA, and Fisker FSR

Lucid's results were below expectations, but the company reiterated its plans to produce 1k+ cars this year. Lucid said that Q2 deliveries would increase sequentially while supply chain problems will ease during the remainder of the year. Fisker reported a larger loss per share that was expected and cut its FY production guidance from 32-36k to 32-36k. Fisker announced that it would delay the launch of its second EV to 2025. It beat revenue. Nikola's revenue fell short, and it announced that production would be halted to streamline its assembly line in its Arizona factory due to the lagging demand for its batteries-powered trucks. Note that NKLA's loss per share is in line.


The Dollar

DXY hit a high of 101.84 on Tuesday, ahead of CPI. UST yields also moved from their lows. The US CPI will be released on Wednesday. Debt limit negotiations between Biden, the GOP, and Dem leaders are also scheduled for tonight. House Speaker McCarthy (R), citing the tight deadlines, believes Congress needs to reach a consensus in principle by the end of next week in order to raise the debt ceiling. Williams and Jefferson, both from the Fed, spoke on Tuesday. They noted that the banking system was sound and resilient. Williams said he was focused on tighter credit conditions and is seeing signs that it is affecting economy. He stressed the importance of data in the upcoming meetings, and maintained his April inflation predictions of 3.25% by 2023 and 2 % by 2025. Kaskhari will be arriving after hours.

The Euro

On Tuesday, the dollar was weaker. It fell below the psychological 1,10 handle and hit a low at 1.0942. Then it recovered above a fib of 1.0959. Analysts at ING highlighted that CFTC data showed that Euro was the most overbought in G10 currency and that speculators continued to add net-longs for EUR/USD in the week ending May 2nd. This is a concern for the short term. While we are resolutely positive on EUR/USD over the long run due to the US-eurozone divergence (and Fed-ECB), we caution that positioning may be a reason to remain cautious. On Tuesday, the ECB had a number of speakers (Kazaks Kazmir Lane Vujcic Vasle Villeroy Schnabel). The vast majority noted that rate hikes were not over. Nagel, however, said he would have expected a 25bp hike but was okay with the 50bp hike.

The Yen

USD/JPY was flat against the Dollar, tracking US yield movements. USD/JPY reached a low of 1353.73, with UST yields near their lowest levels, but as US session yields reversed, USD/JPY also hit a high 135.35 as the yields reversed. Overnight, BoJ Governor Ueda said that if the price targets are met in a sustainable way, BoJ would end YCC, and then shrink their balance sheet. They noted they were seeing some positive signs, including inflation expectations, but they remain high.

Cyclical currencies

The GBP, CAD and NZD were all relatively unchanged compared to the dollar. AUD and CAD lag behind while NZD is marginally down. The Australian underperformance was a result of the recent budget decision, which predicted a larger budget surplus than expected for 2022/23 at AUD 4,2bln. The GDP is expected to rise by 1.5% between 2023-2024, before increasing to 2.5% and then 2.50%. Inflation is projected at 3.25%. Retail trade fell, but in line with the expectations. The NZD and AUD both fell in the wake of China trade data, which showed a surprising drop in Chinese imports. NZD traders are also looking forward to the comments from the Finance minister ahead of the NZ Budget. CAD recovered from its lows after the oil price rebounded following Russian comments about production cuts and news that the US would be refilling SPR in this year.


SEK was stronger than the Euro, but NOK showed weakness. In the Riksbank Minutes, several members raised the issue that a strong SEK is desirable when there are high levels of uncertainty and the risk that inflation will become entrenched. The minutes also stated that members agreed on the need to tighten policy and keep it contractionary to bring inflation back to target. Floden spoke also later, saying he did not expect rate cuts in this year. Norges Bank Governor Bache spoke as well, noting that there was considerable uncertainty regarding the outlook, and the future path of the policy rate will depend on the economic developments.


MXN gained against the Dollar, despite inflation data that was more or less as expected. BRL was also firmer despite the dovish comments from BCB Nominee Galipolo. COP's weakness was pronounced after the Finance minister said that it could start to discuss rate cuts in H2, and noted it is willing to compromise on labor and pension reforms. Yuan's weakness against the Dollar was marginal after overnight trade data showed that a lack domestic demand boosted its trade surplus, while the drop in exports raised concerns about global demand. TRY showed marginal weakness against the Dollar, but the implied vol for the 1-week USD/TRY options rose ahead of the Sunday election.