Treasury Yields, U.S. Dollar Pull Back After Post-CPI Ramp 

European stock markets trade tentatively higher on Thursday morning with Treasury yields and the dollar pulling back a bit after the post-CPI ramp. The gold price is steady at $2,375, oil has found some footing after a sharp 3% decline in the previous session, and the euro and others have bounced a wee bit against the dollar.  

Bitcoin has tested $60,000 support and the charts don’t look great. US unemployment claims data, Philly Fed, and lots of Fed speakers on the sheet. 

Wall Street fell for a fourth straight day, with the S&P 500 index now down about 4% from the recent all-time high, led by a fall for chipmakers on soft figures from ASML. Nvidia declined almost 4% for the session, whilst Tesla stock extended its losses by a further 1% after soft sales figures. Both the Nasdaq and S&P 500 index are down 3% for the week. 

US Treasury yields pulled back a bit, with the 10-year back to 4.58% after coming close to touching 4.7% this week. Two-year Treasury yields, which touched 5%, were last at 4.92%. That eased some of the upward pressure on the dollar, and let Asian equities recover overnight.  

European stock markets have also risen to start Thursday, with the FTSE 100 index recovering half a per cent to 7,885 in early trade, though it remains down 1% for the week. 

Oil Prices Find Support After Major Drop on Wednesday 

Oil prices found some support after sinking by its most in two months. WTI and Brent both dropped 3% on Wednesday on a couple of points – one is demand, the other the lack of any immediate escalation in the Middle East, which has taken some of the wind out of the geopolitical risk premium.   

Of note, crude oil futures have now given up all the gains since the attack on the Iranian consulate in Damascus on April 1. On the demand side, JP Morgan said oil consumption in April was 200k barrels per day (bpd) below its forecast. Meanwhile, inventory data was a tad bearish – the EIA reported that oil inventories rose by 2.7mn barrels in the week ending April 12, about double the expected rise.  

And Iran: exports from the country have hit a six-year high, with sales averaging 1.56mn a day, it’s been reported. 

“Serious Concerns” Over Decrease of Japanese Yen, Korean Won as Fed Returns to “Higher for Longer” Signals

Finance ministers from the US, Japan and South Korea issued a joint statement saying they will “consult closely on foreign exchange market developments in line with our existing G20 commitments while acknowledging serious concerns of Japan and the Republic of Korea about the recent sharp depreciation of the Japanese yen and the Korean won."

It’s not quite Plaza Mk2, but there are clear concerns about relative dollar strength as the Fed pivots back to its old “higher for longer” messaging. 

 No interest rate cuts until next year? Here’s Bank of America:

“We think the bias on the committee is still to get started this year and expect the first cut in December. But one challenge for December is unfavourable base effects on core PCE inflation. Powell said the year-on-year rate is the most important measure. If we take him at his word, there is a real risk that the Fed may not cut until March 2025 at the earliest.”

The Japanese yen recovered a bit, but USDJPY remains very near those multi-decade highs. 

Finally, trade wars are not going anywhere, whoever wins in November. President Biden called for a tripling of tariffs on Chinese steel and aluminium as he also pledged US Steel would remain “a totally American company”. 

Bitcoin – looking for the 50% retracement at $35,000? Chart pattern looks ominous.

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