U.S. Indices extended on gains seen on Monday, as largely cooler-than-expected US CPI provided an additional fillip to US equity futures, albeit only being short-lived. Thereafter, as sentiment continued to improve through the US afternoon, broad-based risk-on trade was seen, with US Indices closing at highs, as did the crude complex. Meanwhile, the Dollar reversed a lot of yesterday’s gains to the benefit of all G10 FX, with Antipodeans outperforming. Treasuries were lower across the curve with greatest weakness in the long-end, as the initial gains seen in wake of the aforementioned CPI were put aside as the Fed is likely to remain patient. On that, both Barclays and JPM moved their first Fed rate cut to December, from July and September, respectively, while Refinitiv money market pricing has the first full Fed 25bps cut for October. Sectors closed largely in the green, although Health was the distinct laggard and weighed on by UnitedHealth (UNH) (-17.8%), announcing leadership changes and suspending 2025 outlook. Technology sat atop the sectorial breakdown. Elsewhere, US President Trump spoke in the Middle East, where he announced a USD 600 Billion investment commitment from Saudi Arabia and stated how strong the ties are between the two countries. Note, there was no Fed speak on Tuesday as attention turns to Waller (Wed) and Chair Powell (Thurs). The April inflation report was largely cooler than expected, with monthly metrics for core and headline inflation at 0.2% (exp. 0.3%, prev. 0.1%) and 0.2% (exp. 0.3%, prev. -0.1%), respectively. Similarly, headline Y/Y was beneath expectations, rising 2.3%, below the forecasted and prior 2.4%. Meanwhile, Core Y/Y, as expected, was unchanged from the March figure at 2.8%. Despite CPI coming in soft, the report is likely to keep the Fed in its patient and wait-and-see approach to resume policy easing, given that members will want to ascertain the impact tariffs will have on prices before making a move. At ING, one economist thinks it might take until June for the April tariffs to show up in prices, and remember, Fed’s Barkin has made the case in the past that businesses usually have between 60-90 days of inventory. As such, businesses may wait until current inventories are exhausted to pass on costs to the consumer. Note, since the announced 90-day reduction in tariffs between the US and China, remarks have been made by Fed’s Kugler and Goolsbee. The former believes the shift in tariff policy is still likely to lead to higher prices and slower growth, though not to the same rate as before. Kugler also thinks the tariff rates are still pretty high and believes there could be some permanency from price increases related to tariffs. While the pause is likely to trim inflationary effects, the uncertainty that lingers with a 90-day pause is a strong reason for the Fed to maintain its stance of uncertainty over the economic outlook. Post-CPI, Morgan Stanley now sees April core PCE at 0.23% Y/Y, and 2.59% Y/Y. Note, PCE projections are likely to be updated again after PPI on Thursday. Elsewhere, both Oil and Gold closed higher on Tuesday by 2.8% and 0.37% respectively.
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For anyone following my Platinum Service it lost 200 points yesterday and is now ahead by 1878 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
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