Macro Wrap

The DJIA fell 0.6%, while the S&P500 and the Nasdaq Composite Index rose 0.7% and 1.6% respectively. The Eurostoxx 50 gained 0.4%. The Dollar Index fell 0.8% to 101.00. The US 2Y yield dipped 1bp to 4.00% and the 10Y yield also edged down less than 1bp to below 4.47%. The German 10Y yield rose 3bp to 2.68% and the UK 10Y yield also gained 3bp to 4.67%. Brent crude oil prices rose 2.6% to USD66.63. Gold rose 0.4% to USD3,250. The Fed Funds Futures are pricing in no rate cut in June. They are pricing in 10bp cut by July, 25bp cut by September, and a total cut of 53bp by year-end.

The US headline and core inflation rose at slower pace of 0.2% in April m/m, lower than the consensus forecast of 0.3% as services housing inflation remained firm last month, while goods, food, and energy prices were flat or lower for the most part. The annual CPI stood at 2.3% and annual core inflation at 2.8%. overall tariffs have not (yet) had any major impact. We continue to expect a tariff-related price surge in the coming months. However, inflation had obviously calmed down noticeably before the trade conflict. This increases the chances that the inflation shock will not get out of hand. Sentimentally negative for USD.

The Eurozone ZEW economic sentiment jumped to 11.6 in May, up a whopping 30.1 points m/m on optimism over the new government, some progress in the tariff disputes and a stabilising inflation rate. Notably, outlook improved for the banking industry and export -intensive sectors such as the automobile and chemical industries, as well as metal, machine and steel production. Sentimentally positive for Euro and industrial commodities

Data watch : Germany April CPI, China April Money Supply, EIA weekly crude oil inventory.