Well, it’s Sunday which means normally, you’d be thinking about Monday, but this weekend you don’t have to because Sunday is actually Saturday and Monday is actually Sunday.
Someone forgot to tell North Korea though, because they just launched another missile. Kim will be disappointed to find out that no one in the US got the message because they can’t hear the news alerts on their iPhones over the roar of waves and the ocean breeze.
That said, I’m reasonably sure plenty of people “heard” Trump on Sunday morning. And by “heard” I mean read his tweetstorm which found that shrieking pumpkin we call “President” lambasting the media (again) and congratulating Montana on awarding their sole House seat to a guy who body slams reporters and believes dinosaurs were heterosexually married on Noah’s ark.
Meanwhile, Angela Merkel threw in the towel on America after being forced to spend more face time with Trump.
But if you can get past that and if you go ahead and accept the fact that they’ll invariably be all kinds of political drama hitting the wires over the next five days, there’s actually some fundamental-ish shit worth watching. Here to fill you in is Barclays.
Via Barclays
The rise in global DM yields after the French election and the pace of the equity markets rally have been rather contained. The 10y UST yields are the lower end of the recent range and equities, while making new highs, are showing a slower pace in their rally. While uncertainty over US politics and policy expectations may have weighed on the markets, the downturn in global economic momentum has been the fundamental driver behind these moves, in our view. The rise (since last summer and even before US election) and fall (since early 2017) in UST yields and the pace of global equity rally have been consistent with the global economic cycle (Figure 2 and Figure 3).
In this light, May manufacturing PMI/ISM from around the world this week will be keenly watched to assess whether the recent slowdown in global cycle has further room to go. In the FX markets, high-beta currencies (such as BRL, IDR, and TRY) are most sensitive to a further downturn while JPY and CHF are most likely to benefit, after controlling for commodity prices (Figure 1).
Another focus is the US April Core PCE deflator (Tuesday) and May nonfarm payrolls (Friday) as the final checkpoints before another 25bp hike at the June FOMC. According to the May FOMC minutes released last week, “most” members see another hike “soon” as appropriate, but there were some marginal concerns on the recent inflation softness. While this week’s data are unlikely to derail the prospect for the June Fed hike, which is already almost fully priced, weaker data could undermine tightening expectations further ahead and weigh on UST yields and marginally on the USD. Beyond the June meeting, we now expect the Fed to commence balance sheet reduction in September and deliver another hike in December.
The political situation in Brazil remains fluid. President Temer’s refusal to resign only delays progress in fiscal reforms and risks a slowdown in the economy. As we pointed out, Brazilian assets do not reflect sufficient risk premium, even after the sharp correction, leaving room for further potential downside if the situation deteriorates. Meanwhile, the BCB is likely to cut its policy rate by 100bp to 10.25% this week, in our view, in line with consensus and DI futures pricing, but the risk of a smaller cut (eg, 75bp) cannot be ignored, given the political situation and as the BCB sees fiscal reform as necessary condition to ensure the sustainability of disinflation progress.
Finally, here’s a full calendar from BofAML:
