Saxo Spotlight: Liquidity risks from US debt ceiling deal, Nvidia and China big tech earnings – May 22-26

Saxo Spotlight: Liquidity risks from US debt ceiling deal, Nvidia and China big tech earnings – May 22-26

APAC Research

Summary:  The debt ceiling clock is ticking and creating jitters about a default, but even if a deal is reached, the ensuing liquidity crunch could keep risk assets under pressure. The Fed’s preferred inflation gauge, PCE, is likely to reaffirm that inflationary pressures remain elevated but Powell’s recent pause signal makes data and FOMC minutes irrelevant. UK CPI is likely to soften from a spate of double-digit prints while Japan’s Tokyo CPI will signal another firm nationwide CPI is incoming. In FX, NZD strength may be tested if RBNZ takes a dovish turn. Earnings focus turns to NVIDIA and China big tech stocks like Meituan, Xiaomi and NetEase.

US debt ceiling talks bring volatility and liquidity drainage risks

Treasury Secretary Yellen told lawmakers that the Treasury would be running a cash balance below the minimum (generally considered as USD30 billion) by early June (can be as soon as June 1) and would be at risk of default. If there is no resolution to raise the debt ceiling towards the end of May, markets will be rattled. If 2011 is any guide, equities markets could be sold off significantly and bond yield rose as investors turn into a risk-off mode and recession fear escalates. The market so far is pricing in a resolution and a default will be avoided. However, even if that is the case, asset markets are still likely to be volatile after the debt ceiling is raised. It is because there will be a large liquidity drain from the economy as the Treasury replenishes its cash balances held at the Federal Reserve from the then USD30 billion or so to the normal level of USD550 to USD600 billion within a short period of time. When the Treasury issues T-bills and deposits the proceeds to the Fed, the banking system’s excess reverse falls and it drains liquidity from the financial system. This could be negative for risk assets such as equities and credit.

US: PCE and FOMC minutes to continue the Goldilocks

Market is likely to remain focused on the debt ceiling drama this week, and economic data will therefore take a back seat unless the message is loud and clear. After firm retail sales and lower-than-expected jobless claims last week continuing the Goldilocks, this week’s data will hardly be any different. The Fed’s preferred inflation gauge, PCE, is out for April on Friday and expected to show that inflationary pressures remain firm. Bloomberg consensus expects core PCE to remain unchanged at 4.6% YoY and 0.3% MoM in April. A second revision of the Q1 GDP is also scheduled for release on Thursday. Ahead of that, the FOMC minutes from the May meeting will be released on Wednesday, and strength of the pause signal for June as well as views around the debt ceiling concerns and banking crisis will be key to watch. However, with Powell having re-confirmed his inclination for a pause on Friday against Logan and Bullard’s hawkish signals last week, the minutes will now look stale.

UK: Softer inflation could tilt the next BOE meeting to a pause

UK’s April CPI is due to be released on Wednesday and the headline print is finally expected to bid goodbye to double-digit prints that were seen consecutively for the last seven months. Bloomberg consensus expects headline CPI to cool to 8.2% YoY from 10.1% YoY in March, but the core still remaining firm at 6.2% YoY. A lot of the slowdown will likely be driven by base effects, as massive surge in household energy bills from last year is lapped. But it will be more important to watch the strength of the services inflation print to indicate any clear shift in BOE expectations for the June meeting. For now, a 25bps rate hike is priced in with 76% probability. Retail sales will also be out on Friday and shed further light on the consumer after a depressed March print suggested inflation may be straining the consumers.

Japan: Tokyo CPI is unlikely to spell any respite

Japanese equities have been outperforming the S&P 500 and other Asian markets solidly this year, and one of the reasons underpinning that is the return of inflation. Further evidence of that will be out this week when Tokyo CPI for May is released, where Bloomberg consensus expects a firm print of 3.4% for the headline (vs. 3.5% in April) and 3.9% for the core (vs. 3.8%). This would likely affirm that nationwide CPI for May could see further strength, creating some more pressure on the Bank of Japan to remove some easing, but they have emphasised that they will wait for firmer wage pressures. A higher-than-expected print could see further expectations of BOJ tightening, bringing JPY gains but debt ceiling talks hold a bigger say in the path of yen this week.

New Zealand: Tough decision ahead for RBNZ

New Zealand’s inflation expectations for Q2 came in much lighter than Q1, and fell back in the forecast range of 1-3%. This started to build the case for a pause from the Reserve bank of New Zealand, but the latest budget update have again tipped the odds in favour of a rate hike at this Wednesday’s meeting. The budget announcement last week indicated higher fiscal spending on reconstruction to boost growth and the Treasury expecting that the economy can avoid a recession. That means the central bank still has room to tighten policy, although statement may start to indicate that a pause is likely ahead. NZDUSD has been stuck in a range around 0.62 since March and a break below 200DMA at 0.6157 could trigger a deeper pullback.

Nvidia, Lowe’s, and discount stores are the focus of US earnings

The most monitored results announcement in the U.S. market will be from NVidia on Wednesday. The chipmaker’s share price jumped 114% and was the biggest winner within the S&P 500 in 2023. Investors had high expectations of the company’s advantageous position in the rapid development in AI and the resulting demand for computing power. With home improvement giant Lowe’s and discount retailers Costco, Best Buy, and Dollar Tree reporting, investors could have a better gauge about the purchasing power of U.S. consumers.

Meituan expected to deliver stellar Q1 results with robust revenue growth and profit turnaround

Earnings flow from Chinese big tech stocks this week, commencing with Kuaishou on Monday, followed by Xiaomi on Wednesday, and concluding with Meituan on Thursday. Notably, market attention will be primarily directed towards Meituan, as it prepares to unveil its financial results on Thursday. According to Bloomberg consensus, expectations are high for Meituan, with a projected 24% year-on-year surge in Q1 revenues, totalling RMB57.5 billion. In addition, the company's non-GAAP net profit is anticipated to soar to RMB1.9 billion, a remarkable turnaround from the RMB3.6 billion loss reported in the corresponding period last year. These impressive gains are forecasted to stem from solid growth in food delivery order volume, registering low-double-digit expansion, as well as substantial margin improvement within this sector. Furthermore, an upward trajectory is anticipated in in-store service revenue, with a projected year-on-year increase exceeding 20%, propelled by heightened demand for in-person services subsequent to the easing of Covid restrictions.


Earnings this week:

  • Monday 22 May: ZOOM, Kuaishou
  • Tuesday 23 May: Lowe’s, Kingsoft
  • Wednesday 24 May: Xiaomi, XPeng, Lenovo
  • Thursday 25 May: Costco, Dollar Tree, Best Buy, Gap, Meituan, NetEase


Key economic events this week:

Monday 22 May

  • China 1Y and 5Y Loan Prime Rate (May)
  • Hong Kong Inflation (Apr)
  • Eurozone Consumer Confidence (May, flash)

Tuesday 23 May

  • UK S&P Global/CIPS Flash PMI, Manufacturing & Services
  • Eurozone Flash PMI, Manufacturing & Services
  • US S&P Global Flash PMI, Manufacturing & Services
  • Singapore CPI (Apr)
  • United States New Home Sales (Apr)
  • United States Building Permits (Apr)

Wednesday 24 May

  • New Zealand RBNZ Official Cash Rate (May)
  • United Kingdom Inflation (Apr)
  • Germany Ifo Business Climate (May)
  • United States Fed FOMC Minutes (May)

Thursday 25 May

  • Germany GDP (Q1, final)
  • United States GDP (Q1, 2nd est.)
  • United States Initial Jobless Claims (May 20)
  • United States Pending Home Sales (Apr)

Friday 26 May

  • Japan Tokyo CPI (May)
  • Australia Retail Sales (Apr, prelim)
  • United Kingdom Retail Sales (Apr)
  • United States Personal Income and Consumption (Apr)
  • United States Core PCE Price Index (Apr)
  • United States UoM Sentiment (May, final)

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (
- Full disclaimer (

40 Bank Street, 26th floor
E14 5DA
United Kingdom

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo is a registered Trading Name of Saxo Capital Markets UK Ltd (‘Saxo’). Saxo is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.

©   since 1992