AI-Bubble in the Making?

The technology stocks were euphoric yesterday, but the rest of the sectors were much less appetizing. US debt ceiling talks continued, there was again some optimism on the headlines, but no deal has been reached and the clock is ticking louder into the June1st deadline. The US Treasury’s cash balance fell below $50bn on Wednesday, and as Janet Yellen warns so loudly, the US may not reach the mid-June safe zone, where the tax money will fall in, to avoid a default.

Tokyo Core-Core CPI Continues to Accelerate With USD/JPY Now Below Key 141.00

Tokyo consumer inflation data for May, a leading indicator for Japan’s nationwide price trends grew at a slower pace of 3.2% year-on-year for its core component (excluding fresh food) from an increase of 3.5% in April, slightly below the consensus forecast of 3.3%. But it has surpassed the Bank of Japan’s (BoJ) 2% inflation target for twelve consecutive months.

US: Spending Improves, Core Inflation Ticks up in April

Personal income grew 0.4% month-on-month (m/m) in April, in line with market expectations. This marked a slight acceleration from the prior month's gain of 0.3%. Gains were led by compensation to employees, which rose 0.5% in April – up from 0.3% in March.

Another Setback for Central Banks as Inflation Remains Stubborn and Spending Strong

Investors may have underestimated the pace of disinflation this year if economic data this week is anything to go by, with US figures today further enforcing the view that price pressures are stubborn and spending healthy.

Sunset Market Commentary

It was a waiting game for a series of US April data to be released today. They didn’t disappoint, in every sense of the word. Numbers were better or higher than expected across the board, starting with durable goods orders. The headline figure rose a monthly 1.1% compared to a 1% decline penciled in by analysts.

Week Ahead – Nonfarm Payrolls Eyed as Dollar Rides Fed Bets

With investors flirting with the idea of one final Fed rate increase this summer and the dollar making a comeback, there will be increased emphasis on the next round of US employment data on Friday. Debt ceiling negotiations will also be front and center as the clock ticks down to a US government shutdown, while in Europe, there’s a batch of inflation numbers to shape the euro’s fortunes.  

Week Ahead – Turkey Decides, Crucial US Jobs Report, X-Date Fast Approaching

Wall Street is starting to get nervous as we near the X-date.  A US default seemed unimaginable a couple of weeks ago and despite a lot of positive comments from both sides, negotiations will go down to the wire and that means the risk that it falls apart is growing.  Treasury Secretary Yellen will soon provide an update on the X-date and that could show talks might have an extra week from the current June 1st deadline to get a deal done.  

The Weekly Bottom Line: “Discretion” Is the Better Part of Valor in Washington

Thankfully, negotiators appeared close to a deal to raise the debt ceiling as of Friday morning. It looks like the two-year deal would cap discretionary spending and raise the debt ceiling through the 2024 election, avoiding the worst-case scenarios. However, ratings agency Fitch had cited the “failure of the U.S. authorities to meaningfully tackle medium-term fiscal challenges” as a reason for putting the U.S. on a negative watch, and this deal does not change that.

Weekly Economic & Financial Commentary: Long Holiday Weekend Clouded by Debt Ceiling

With a deal on the debt ceiling hanging in the balance, the near-term economic outlook remains uncertain. Data released this week suggest the real economy is showing resilience, as new home sales and durable goods orders stabilized, while real personal spending surprised to the upside.

BOJ Shifting Tone on YCC?

The USDJPY bumped against the technically important 140.00 handle, and the Japanese government took notice. Both BOJ Governor Ueda and Finance Minister Suzuki addressed the yen, and it has retraced a bit. Does this mean the BOJ could be looking at a policy change?