Morning Brew May 26 2023
Erik Schafhauser
Senior Relationship Manager
Summary: Long weekend ahead, expect sharp moves on debt ceiling, Inflation and position adjustments
Nividia gained 24% yesterday as was expected and pulled AI stocks higher, Intel dropped against the trend with a loss of 5%. AMD gained 10% and Microsoft 3.6%. The Nasdaq added 1.7% and the less tech laden S&P 0.9, the Dow fell by 0.1%. Turnover in Nvidia shares was USD 60 Bio, app. 20% of all volume in the S&P 500.
The Debt ceiling remains the key topic and as of yesterday there seems to be some progress. An agreement to raise the ceiling for two years while reducing spending in all but military and veteran affairs seems possible.
One of the key worries at the moment is what would happen with US Treasuries if the treasury department is not able to redeem them due to the debt ceiling – going into a long weekend this can cause serious disruptions.
Short term yields remain very high and the inversion of the yield curve significant with the 1 month at 6% and the 5 year below 4%. The expectation for the rest of the year has shifted quite a bit – the year end rate is now at 4.93% implying half a cut of 25 BPS from more than two cuts two weeks ago.
The Core PCE Deflator will be the key scheduled event today, the expectation in for 4.6% on an annual level and monthly 0.3%.
On the higher rates and safe haven trades, the USD has gained strength but seems to fade a little after news of a possible agreement in the debt ceiling. The USD Index hit 104.30 yesterday now 104.07, EURUSD is 1.0733, GBPUSD 1.2335 and USDJPY 139.70. Gold remains near key support. The Election in Turkey will be on Sunday and Monday is a US Market holiday so expect very limited liquidity in Turkish Lira until the results are clear.
Expect sharp moved today on any further progress on the debt ceiling negotiations and the US Inflation data, I would also expect position adjustments ahead of the long weekend.
Friday 26 May
Japan Tokyo CPI (May), Australia Retail Sales (Apr, prelim), United Kingdom Retail Sales (Apr)
United States Personal Income and Consumption (Apr), Core PCE Price Index (Apr), UoM Sentiment (May, final),
Earnings; Costco, Dollar Tree, Best Buy, Gap, Meituan, NetEase
Expiries
Physically Settled Futures
EMAM3 will expire 26 May 2023 at 13:00 GMT
FLGM3 will expire 26 May 2023 at 15:00 GMT
TTFMM3 will expire 29 May 2023 at 09:00 GMT
GCM3 will expire 30 May 2023 at 15:00 GMT
MGCM3 will expire 30 May 2023 at 15:00 GMT
STFM3 will expire 30 May 2023 at 02:00 GMT
TNM3 will expire 30 May 2023 at 15:00 GMT
UBM3 will expire 30 May 2023 at 15:00 GMT
Z3NM3 will expire 30 May 2023 at 15:00 GMT
ZBM3 will expire 30 May 2023 at 15:00 GMT
ZFM3 will expire 30 May 2023 at 15:00 GMT
ZNM3 will expire 30 May 2023 at 15:00 GMT
ZTM3 will expire 30 May 2023 at 15:00 GMT
HOM3 will expire 31 May 2023 at 15:00 GMT
RBM3 will expire 31 May 2023 at 15:00 GMT
Expiring CFDs
10YUSTNOTEJUN23 will expire 29 May at 15:00 GMT
30YUSTBONDJUN23 will expire 29 May at 15:00 GMT
GASOLINEUSJUN23 will expire 29 May at 15:00 GMT
GOLDJUN23 will expire 29 May at 15:00 GMT
HEATINGOILJUN23 will expire 29 May at 15:00 GMT
HK50MAY23 will expire 30 May at 02:00 GMT
CHINA50MAY23 will expire 30 May at 02:00 GMT
SINGAPOREMAY23 will expire 30 May at 02:00 GMT
OILUKJUL23 will expire 31 May at 15:00 GMT
LIVECATTLEJUN23 will expire 01 Jun at 15:00 GMT