U.S. Indices were little changed (SPX -0.1%, NDX unchanged, DJIA -0.3%, RUT -0.1%) with markets now awaiting the outcome of US-China trade talks over the weekend. On the day, both stocks and Treasuries chopped to US President Trump floating the idea of a reduction in the China tariff to 80% from 145% but said it is up to the US Treasury Secretary Bessent. Thereafter, the upside at the US cash open was short-lived, gains pared in equities, and trading largely sideways for the remainder of the day, while Treasuries finished the day flat. Sectors were mixed, downside was led in Healthcare amid press reports suggesting that the White House is likely to announce the adoption of a Most Favored Nation model for Medicare Part B drug pricing. Meanwhile, Energy, Real Estate, and Consumer Discretionary led gains, with the former buoyed by higher crude prices. Similar to stocks, Treasuries were little changed, with trade the main focus in the immediate future. The PBoC said they will suspend Treasury bond buying and selling in phases; will resume buying and selling depending on market supply and demand situations. The session saw multiple remarks from Fed speakers, with the tone echoing Chair Powell’s post-FOMC appearance. FOMC members advocated for a wait-and-see approach to the evolving trade policy, called monetary policy moderately restrictive, and maintained the view of a solid/resilient economy, although Williams (Voter) said he’s hearing from business/others that there is some paring back of discretionary spending. In FX, the Dollar saw broad-based weakness against G10 peers, but the DXY finished the week higher for the third consecutive week amid a reintegration of optimism on US assets. CAD was the G10 outlier in the red amid a mixed jobs report, where the unexpected rise in the unemployment rate offset the larger-than-expected addition of jobs to the economy. As mentioned, crude prices were firmer with WTI finishing the week back above USD 60/barrel, paring some of the recent OPEC+ induced downside. Regarding geopolitics, tensions between India and Pakistan continue to grow, while Reuters reported via citing a source, that the US and EU are to propose a 30-day Ukraine-Russia ceasefire, where if Russia refuses, they’d face new US and EU sanctions. For Monday, price action and headlines are likely to centre around the outcome of the US-China trade talks, where Bessent is to lead the negotiations. Overall, whilst there was a deluge of Fed speakers on Friday that all sang from the same hymn sheet as Chair Powell in wake of the FOMC, noting that monetary policy is in a good place to adjust as conditions unfold, makes sense to maintain it, and continue the ‘wait-and-see’ approach. On the mandate, there was continued repetition that risks are elevated to the upside in both sides of the mandate, and there do not know the full effects of Trump’s tariff policies. As expected, the MPC cut the Base Rate by 25bps to 4.25% on Thursday. However, the decision was subject to more division than anticipated. The decision to cut the Base Rate was 7-2, with Mann and Pill voting to keep rates unchanged; in their view, holding the rate would ensure policy remained sufficiently restrictive to “weigh against stubborn inflationary pressures”. Of the seven who voted to cut, two voted for a 50bps reduction; Dhingra and Taylor. Their justification was there are factors pointing to “potential downward risks to global growth and world export prices” and the risk that over the medium term, a stance that is too restrictive could open up an “unduly large output gap”. The majority of the five who voted for a 25bps cut were mostly of the view that recent developments on trade were enough to push them to a cut. Certain members of the group of five saw a cut as being fairly clear, irrespective of recent updates. The statement reiterated that a “gradual and careful approach to the further withdrawal of monetary policy restraint remains appropriate”; some desks had speculated that this language could be removed. Furthermore, policy “will need to continue to remain restrictive for sufficiently long”. In the accompanying MPR, near-term inflation forecasts were lowered, the 2025 growth view was upgraded while 2026 was downgraded. However, these forecasts pre-dated the upcoming UK-US trade deal announcement. The follow-up press conference provided little in the way of additional insight. In short, a 25bps cut as expected but with much more division on the MPC than expected. The unchanged votes from Pill and Mann provided a hawkish takeaway with pricing for a June cut slipping from around 50% to 20% and a total of 60bps of cuts seen by year-end vs. 72bps pre-release. Elsewhere, Oil closed higher by 1.85% while Gold was flat following another volatile trading session.
To mark my 3175th issue of TraderNoble Daily Commentary I am offering a special 2-Year Rate of Euro 2750 for my Platinum Service which includes 1 to 4 updated emails throughout the trading day to demonstrate this value, a monthly subscription over the same period would cost 4440 euro in total This offer represents a 38% discount and is open to both new and existing members. If anyone is interested in this offer can you please email me on bryan@tradernoble.com for details
For anyone following my Platinum Service it made 1035 points on Friday and is now ahead by 2888 points for May after closing April with a gain of 7685 points after closing March with a gain of 2254 points while closing February with a gain of 4180 points. January ended with a gain of 2768 points while 1997 points were gained in December. October ended with a gain of 2179 points, after closing September with a gain of 4402 points, following a loss of 301 points in August. July gained 1908 points while June saw a gain of 2074 points. The Platinum Service made a record 9619 points in October 2022. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 2300 points. I have a YouTube Channel which contains recent interviews I have given This can be viewed by clicking HERE Please subscribe to this for new interview notification
Recent Comments