Sunset Market Commentary

Markets struggled for direction. A backloaded calendar is at least part of the reason. First up are European, British and US PMI business confidence indicators. They’ll gain much attention as the May edition will have captured the effect, if any, of the financial turbulence in full. For all three regions, they are expected to come in at solid levels (for the services sector at least).

US Debt Ceiling Drama Begins to Weigh on Markets

The S&P500 index has stopped near the 4200 level many times in the last two years. There was a pause on the way up from April to June 2021; then, it became significant support in March and May 2022; and over the last twelve months, it has been the resistance level.

Debt Ceiling Update: A Big Week Ahead

The debt ceiling drama has reached a fever pitch in recent weeks. As of May 17, the U.S. Treasury had roughly $68 billion of cash on hand and another $92 billion of untapped extraordinary measures. Taken together, Treasury had just $160 billion of additional borrowing capacity remaining under the debt ceiling.

It's Like Watching an American Film

Yesterday was just another day with the same topics. The US debt ceiling talks continued; US President Joe Biden expressed optimism about reaching a deal. US Treasury Secretary Janet Yellen said that the Treasury will soon be running out of money and won’t be able to service its debt.

Fed's Two Biggest Hawks Yesterday Coloured Trading

The Fed’s two biggest hawks yesterday coloured trading which until then turned out to be non-directional. Kashkari from the Minneapolis Fed said it’s a close call between a pause and a hike in June, adding that the former wouldn’t mean tightening is over per se. St. Louis Fed president Bullard called US recession worries overstated and expects some 50 bps more rate hikes sooner rather than later this year.

Crypto Attracts Buyer Interest, But Reversal Needs Proof

Crypto market capitalisation rose 1.4% over the last 24 hours to $1.138 trillion. After quiet trading on Monday, most gains came on Tuesday morning. The timing of the move is due to news on the US debt ceiling, where there is no deal yet, but Biden notes progress in negotiations. Ether is up 2.3% at $1856, with the top altcoins gaining between 0.3% (Solana) and 3% (Polygon).

UK CPI to Drop, But Will It Change BoE?

UK CPI will finally fall below double digits when the April report is issued tomorrow. Unless there is an unprecedented catastrophe, that is. While policymakers and politicians might cheer the results, the components are likely to keep the BOE on track to hike at the next meeting.

Short-term Negatives from PMIs Do Not Cause ECB to Change Course

Preliminary readings of the PMIs for business activity in the euro area generally revealed a worse-than-expected deterioration. According to the composite index, the last time the euro area industry suffered this badly was in 2008-2009, when the economy was in a sharp downturn.

Forget Default, is a Debt Ceiling Deal the True Risk for Stocks?

With US lawmakers unable to reach a deal on the debt ceiling, investors are laser-focused on the risk of a catastrophic default. However, the real problem for markets might be what happens after an agreement is found. That's when the Treasury will scramble to raise its cash levels, which can drain liquidity out of the financial system and in the process, inflict damage on riskier assets such as stocks. 

Sunset Market Commentary

At first sight, EMU May PMI’s were close to expectations. The composite measure eased slightly from 54.1 to 53.3 (vs 53.5 expected), but still suggests solid growth. The dichotomy between a further contraction in manufacturing (44.6 from 45.8) and strong services growth continues (55.9 from 56.2). This divergence was also visible in pricing behavior.