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More of the same today after last week's tepid payrolls and dovish Powell with gold, stocks, and bonds bid as rate-cut hopes inched higher.

The market is now pricing in two rate-cuts in 2024 and three more cuts in 2025...

Source: Bloomberg

For now the market appears to prefer the 'bad news' from declining growth expectations to the 'bad news' from soaring inflation prints...

Source: Bloomberg

But, hey, for now, as Goldman's trading desk noted, the market feels "squeezey" and 12% gains for the basket of 'most shorted' stocks in the last three days would support that thesis (and overall activity was lower than average)...

Source: Bloomberg

That helps explain why Small Caps (dominated by the heavily shorted names) outperformed but Mag7 stocks also continued higher today with all the majors green on the day (Dow lagged)...

All the majors rallied back above their 50DMAs (but The Dow fell back to test its key technical level)...

A mixed picture in bonds today with the short-end underperforming (2Y +1.5bps, 30Y -2bps), but the whole complex sold off from its US open...

Source: Bloomberg

The dollar ended basically unchanged on the day, recovering small losses from overnight...

Source: Bloomberg

An early surge in bitcoin - up to $65,500 - was quickly sold following headlines that Robinhood had received a Wells Notice...

Source: Bloomberg

As a reminder, we saw huge net inflows into ETFs on Friday, so it will be fascinating to see what happened today...

Source: Bloomberg

Oil prices roller-coastered amid confusing headlines in Israel-Hamas peace deal proposals but ended the day higher with WTI finding support at $78...

Source: Bloomberg

Gold prices completed 'ye olde 'W' formation' extending gains from Friday's bounce...

Source: Bloomberg

Finally, Goldman's Vol Panic Index has tumbled back to 'normal...

...just as the buyback-blackout window lifts...

...and with CTAs back in 'buy mode' and sentiment back off its extremes, short-term tacticals (until a hot CPI print) remain positive.

But bear in mind....

...there's a reason why Warren Buffett has a record cashpile here.

Authored by Patricia Tolson via The Epoch Times,

Florida Republican Gov. Ron DeSantis has signed a bill into law on May 2 banning “indoctrination” programs for teachers.

The measure, HB 1291, prohibits programs, courses, and curricula in teacher training from “distorting” historical events or promoting political ideologies regarding race, sex, and gender.

Accredited postsecondary institutions can seek Florida Department of Education approval to create institutes to educate teachers on improving classroom instruction and meeting requirements for certification or recertification.

They can also seek approval for instruction on educating existing and potential substitute teachers on how to perform classroom duties and to teach those with baccalaureate degrees how to become certified.

However, teacher preparation, training, and certification programs will not be allowed to teach “identity politics” or to make claims that systemic racism, sexism, oppression, or white privilege are inherent in America’s culture.

In addition, Gov. DeSantis’s office said in a statement that he is working with Attorney General Ashley Moody’s office to safeguard Florida’s workforce from being subjected to ideological discrimination and harassment.

The governor said he does not believe that companies have the right to force their employees to attend training courses designed to convince them that they are “inherently racist or sexist” or to diminish their sense of self-worth because of their religious or social upbringing.

At a press briefing and signing ceremony at the VyStar Tower in Jacksonville, Mr. DeSantis said he did not want teacher-preparation programs “to become captive to someone’s ideological agenda.”

“This bill prohibits the indoctrination in teacher preparation,” he summarized.

“So, there’s not going to be DEI [diversity, equity and inclusion]. There’s not going to be any of the bogus history. It’s just going to be standard, teacher preparation without having an ideological agenda.”

The law becomes effective on July 1.

‘You Have to Be Precise’

In an interview with The Epoch Times, Jonathan Butcher, the Will Skillman Senior Research Fellow in Education Policy at The Heritage Foundation, said there is ambiguity in the legislation that should be addressed.

It isn’t readily clear in the bill’s introduction which kind of teachers are subject to the mandates. He said it isn’t until the list at the bottom of page two of the bill that you learn it applies to substitute teachers, teachers’ assistants, baccalaureate holders who want to become certified teachers, and college graduates who didn’t major in education.

It applies to part-time and full-time, non-degreed teachers for “career programs” associated with higher education programs, such as technical colleges.

Given the context of this bill, he said, it will be important to make sure definitions are clear and that enforcement is kept “within the bounds of appropriate civil rights law.”

“You have to be precise in your language,” he said. “I think the intent of the bill is laudable. Evidence is clear that teacher training programs regularly use materials that is Marxist in nature.”

“When you look at the terms used in these provisions,” he explained, “it will be incumbent on the State Board of Education to say very precisely what they mean by ‘identity politics’ and what they mean by the word ’distort,‘ because the language says they ’may not distort significant historical events.’

“You should define that whole thing. What does ‘distort’ mean? What does ’significant' mean?”

Other parts of the legislation, he said, are sound, such as the requirement that training courses for teachers cannot  teach students that the United States is built upon racism and is a racist nation.

He noted that Paulo Freire’s “Pedagogy of the Oppressed” has been one of the most assigned books in teacher training programs for 50 years.

“Pablo Freire’s stuff is Marxist. Critical race theory is racially discriminatory,” he said.

Federal grant programs also encouraged teaching critical race theory until public backlash caused them to strip the words from the grant descriptions. But they simply changed the name to social emotional learning.

The U.S. Department of Education announced in 2023 that President Joe Biden’s administration was awarding $14 million in federal grant money to foster more inclusive diversity programs to address racial inequity.

Grants offered by nonprofit organizations like FIRST also push DEI policies in education.

“There is no disputing the idea that teacher training programs use radical ideas that are being passed on to prospective teachers,” Mr. Butcher said.

Mr. Butcher adds that he expects the law to be challenged by leftist groups whose goal, he said, is to establish protected classes, not equality under the law.

The first quarter Fed's Senior Loan Officer Opinion Survey (SLOOS) - the one place where every three months investors go to find information on changes to both loan demand and bank lending tightness - was released and revealed more of the same: despite daily propaganda of economic improvement, the SLOOS found that more US banks reported stricter credit standards in the first quarter, while loan demand declined. As a reminder, without ease credit and without rising loan demand, it is virtually impossible for an economy - especially one that is as financialized as the US - to grow; and yet we are bombarded day after day with lies to the contrary.

Taking a closer look at the SLOOS survey which was conducted between March 25 and April 8, we find that the net share of US banks that tightened standards on the all important C&I (commercial and industrial) loans for mid-sized and large businesses rose to 15.6% in the first three months of the year, from 14.5% in the fourth quarter.

Other types of loans that saw tightening lending standards include New and Used Auto Loans (tighter standards at 9.8% from 6.3%), and small firm credit (19.7% from 18.6%). At the same time credit eased modestly - even if it was still tighter relatively to baseline - for Consumer Credit Card loans, Construction loans, Multifamily residential loans and nonfarm residential loans.

(for those unfamiliar, the figures in the SLOOS report are calculated as net percentages, or the shares of banks reporting tighter conditions or stronger demand minus the proportion of banks reporting easier standards or weaker demand).

On the demand side, the picture was mixed as well: while demand declined across the board relative to baseline, it dipped modestly for C&I loans at 23.0, down from 22.4, with Credit card loan demand, auto loan demand and C&I loan demand all dropping sequentially, while demand for jumbo loans (both qualifying and non-qualifying) seeing a notable jump.

Excerpting from the report we find the following:

• Survey respondents reported tighter standards regarding loans to businesses, and weaker demand for commercial and industrial (C&I) loans to firms of all sizes. Meanwhile, banks reported tighter standards and weaker demand for all commercial real estate (CRE) loan categories.
• Banks also responded to a set of special questions about changes in lending policies and demand for CRE loans over the past year. For all CRE loan categories, banks reported having tightened all queried lending policies, including the spread of loan rates over the cost of funds, maximum loan sizes, loan-to-value ratios, debt service coverage ratios, and interest-only payment periods.
• For loans to households, banks reported that lending standards tightened across some categories of residential real estate (RRE) loans while remaining unchanged for others on balance. Meanwhile, demand weakened for all RRE loan categories. In addition, banks reported tighter standards and weaker demand for home equity lines of credit (HELOCs); finally, standards reportedly tightened and demand weakened for credit card, auto, and other consumer loans.
• While banks, on balance, reported having tightened lending standards further for most loan categories in the first quarter, lower net shares of banks reported tightening lending standards than in the fourth quarter of last year across most loan categories

Banks have been tightening credit standards since the second quarter of 2022, following a string of high-profile regional bank failures. Meanwhile, the Fed hiked its rate last year to a two-decade high in a bid to curb inflation, and high borrowing costs have weighed on businesses and households.

And here is the bit on the "special question" asked regarding changes in banks’ credit policies on commercial real estate loans over the past year.

A set of special questions asked banks about changes in their credit policies for each major CRE loan category over the past year. These questions have been asked in each April survey for the past eight years.

Banks reported having tightened all the terms surveyed for each CRE loan type. The most widely reported change in terms, cited by major net shares of banks across all CRE loan types, was the widening of interest rate spreads on loans over the cost of funds. Additionally, significant net shares of banks reported tightening maximum loan sizes, lowering loan-to-value ratios, increasing debt service coverage ratios, and shortening interest-only payment periods for all CRE loan types. In addition, significant net shares of banks also reported tightening the maximum loan maturity for nonfarm nonresidential and multifamily loans, and a moderate net share of banks reported doing so for construction and land development loans. Furthermore, significant net shares of banks reported reducing the market areas served for nonfarm nonresidential and construction and land development loans, while a moderate net share of banks reported doing so for multifamily loans. Foreign banks reported tightening across almost all terms for each CRE loan type.9

The most cited reasons for tightening credit policies on CRE loans over the past year, cited by almost all banks, were less favorable or more uncertain outlooks for CRE market rents, vacancy rates, and property prices. Additionally, major net shares of other banks cited a reduced tolerance for risk, increased concerns about the effects of regulatory changes or supervisory actions, and a less favorable or more uncertain outlook for delinquency rates on mortgages backed by CRE properties.

The survey also asked banks about the reasons why they experienced weaker or stronger demand for CRE loans over the past year. More banks responded with reasons for weakened demand than for strengthened demand for CRE loans. The most frequently cited reasons for weaker demand, as reported by major net shares of banks, were an increase in the general level of interest rates, a decrease in customer acquisition or development of properties, and a less favorable or more uncertain customer outlook for rental demand. Of the smaller but sizable share of banks that reported stronger demand, the most frequently cited reasons for stronger demand, as reported by significant net shares of banks, were an increase in customer acquisition or development of properties, a shift in customer borrowing to respondent banks from other banks and non-bank sources, and a decrease in internally generated funds by customers.

Banks also tightened lending standards for consumers: “a significant net share of banks reported increasing minimum credit score requirements for credit card loans, while moderate net shares of banks reported doing so for auto loans and other consumer loans,” the Fed said.

In summary: the US economy remains badly credit-constrained on both the supply (fears of renewed bank shocks) and demand (lack of faith and visibility into the economic future and concerns how the Biden admin will further destroy the economy) side. Which is ironic because if one listens to Biden's department of propaganda, the US economy has rarely had it this well. It makes one wonder: is it all the latest bubble craze, namely private credit that is funding economic growth, or is there no conundrum at all and all the data is simply manipulated to make it seem that the economy is stronger than it is until the election... and which point we get the long-overdue Wile E. Coyote moment.

Shares of the Toronto-Dominion Bank have fallen nearly 8% since last Thursday's Wall Street Journal report that revealed the bank's involvement in a $653 million drug money-laundering scheme. 

The WSJ said a Justice Department investigation was opened into TD Bank's anti-money-laundering controls, specifically concentrating on how Chinese crime groups and drug traffickers used the Canadian lender to launder money from US fentanyl sales. 

The investigation was launched after agents uncovered an operation in New York and New Jersey that laundered hundreds of millions of dollars in proceeds from illicit narcotics through TD and other banks, according to court documents and people familiar with the matter. In that case and at least one other, prosecutors also allege the criminals bribed TD employees. 

While TD disclosed a Justice Department probe into its anti-money-laundering practices last year, the focus on money laundering related to illegal drug sales hasn't been previously reported. -WSJ. 

On Monday, Jefferies analyst John Aiken warned TD's anti-money-laundering case risks the bank "entering a lost decade." 

"With the bank allegedly a focal institution in a drug money-laundering scheme, the worst-case scenario has become more likely with TD potentially entering a lost decade," Aiken told clients, adding, "Growth in the US will likely be constrained, and the timeline for a fix is extended by several years." 

Last Friday, the bank announced that $450 million was set aside to resolve regulatory penalties. However, Aiken said "simple math" suggests the lender will have to pay as much as $2 billion in fines. 

In a statement, Chief Executive Bharat Masranis said the bank's anti-money laundering program "fell short and did not effectively monitor, detect, report or respond." 

Shares of TD trading in Canada have fallen 7.9% since the WSJ report.

Largest weekly decline since early 2020.

Shares are touching early 2021 levels. 

Meanwhile, Keefe Bruyette & Woods analyst Mike Rizvanovic told clients, "While optics around the new anti-money-laundering details are negative, we believe the market has overreacted." He cut his price target to C$88 from C$92.

By Bas van Geffen, Senior Macro Strategist at Rabobank

Last Wednesday, Powell said that there had been a lack of further progress toward the Fed’s 2% inflation objective. Indeed, both the latest CPI and PCE prints had already dashed hopes that the Fed would cut rates by summer. It would, therefore, take more time for the FOMC to gain enough confidence to start cutting rates, the Fed Chair added.

Just two days later, the April employment report gave policymakers quite the confidence boost.

The growth in non-farm payrolls slowed substantially to 175,000. The data suggest that jobs creation peaked at 315,000 in March. Sectors like construction and leisure and hospitality were strong drivers of employment growth, but job growth in these sectors virtually came to a standstill in April. The largest increase in new jobs came from healthcare, which is a non-cyclical sector. What’s more, the household survey reported even weaker employment growth, resulting in an increase in the unemployment rate from 3.8% to 3.9%. In line with the slowing demand for labour, average hourly earnings growth slowed down to 0.2% m/m or 3.9% y/y.

The employment report therefore puts both doors to a first rate cut a bit further ajar: the deceleration in wages should give the FOMC more confidence that inflation will continue to slow in the coming months, and a deterioration in the employment metrics could also convince policymakers that a rate cut is warranted. This strengthens our conviction that the Fed will cut rates in September and December.

The market seems to agree. Following the release of the non-farm payrolls, yields plummeted across the board as traders brought forward their expectations of a first rate cut from November to September. European markets are holding on to this rate cut optimism amidst relatively quiet trading this morning, with equities posting modest gains and bond yields taking another leg down.

Authored by Jonathan Turley,

A disbarred, serial perjurer walks into a courtroom and asks to take an oath . . . No, seriously, this is not a joke. Michael Cohen will soon appear in a Manhattan courtroom in what is sure to be one of the most bizarre moments in legal history.

Cohen nearly comprises the prosecution’s entire case against former President Donald Trump under a criminal theory that still has many of us baffled. It is not clear what crime Trump was supposedly trying to conceal by making “hush-money” payments to former porn actress Stormy Daniels.

What is clear is that none of the witnesses called in recent weeks has had any direct involvement with Trump on the payments.

The witnesses had a lot to say about Cohen, and most of it was not good. They described an unprofessional, self-proclaimed “fix-it man” who created a shell corporation to buy out Daniels with his own money. The money was later paid back by Trump after the election, with other legal expenses.

So Cohen will now make the pitch to the jury that they should put his former client in jail for following his own legal advice.

This would be difficult even for a competent and ethical lawyer. For Cohen, it is utter insanity. But Bragg is betting on a New York jury looking no further than the identity of the defendant to convict.

Cohen has an impressive history of lies and exaggerations that may be unparalleled. Just weeks ago, another judge denounced him as a serial perjurer who was still gaming the system.

This is not the defendant, mind you, but Alvin Bragg’s star witness.

I have been an outspoken critic of Cohen going back to when he was still representing Trump. His unethical acts were matched only by his unprofessional demeanor.

In 2015, after students on the Harvard Lampoon played a harmless prank on Trump, Cohen was quoted by a student on the Lampoon staff as threatening them with expulsion.

When a journalist pursued a story Cohen did not like, he told the reporter that he should “tread very f—ing lightly because what I’m going to do to you is going to be f—ing disgusting. Do you understand me?”

It is not hard to “understand” Cohen. He has long marketed his curious skill of voluntarily saying whatever the highest bidder wants him to say.

He is a convicted perjurer who seems to lie even when the truth would do. Each time he is caught lying, he claims to be the sinner who has finally seen the light, seeking redemption.

When he was called before the House to testify against Trump soon after his plea agreement with the Justice Department (for lying), Cohen was again accused of perjury. House Oversight Chairman Elijah Cummings (D-Md.), warned Cohen repeatedly that he had better tell the truth this time. Cohen then testified that Trump wanted him to work in his administration and offered him multiple jobs, which he turned down. He also claimed, “I have never asked for, nor would I accept, a pardon from President Trump.”

Multiple sources have said that Cohen’s lawyer pressed the White House for a pardon, and that Cohen unsuccessfully sought a presidential pardon after FBI raids on his office and residences last year.

Even after being stripped of his law license and sentenced to three years in prison, Cohen continued the pattern. In 2019, Cohen failed to appear to testify before the Senate Intelligence Committee, citing an inability to travel due to surgery. He was then seen partying before the hearing date with five friends.

Even while in jail, Cohen was accused of lying to a court, in violation of an order for early release due to medical problems. He was ordered back into custody after being spotted at a high-end restaurant.

But the most impressive moment came when Cohen was put back on the stand under oath and matter-of-factly claimed that he had lied in his prior hearing, when he pleaded guilty to lying.

In his 2018 guilty plea before U.S. District Judge William Henry Pauley III, Cohen admitted to this conduct under oath.

Then, when Cohen was asked by Trump’s counsel, “Did you lie to Judge Pauley when you said that you were guilty of the counts that you said under oath that you were guilty of? Did you lie to Judge Pauley?”

Cohen responded, “Yes.”  He was then again asked “So you lied when you said that you evaded taxes to a judge under oath; is that correct?” He again responded, “Yes.”

Most of us expected the Justice Department to bring new perjury charges at that point. It is rare that a defendant will actually take the stand and confess to perjury. However, Cohen was now useful again. This time, he was willing to deliver Trump. The Justice Department and Manhattan prosecutors were clearly willing to tolerate a little perjury for that prize.

Cohen’s conduct has already loomed large in the Manhattan proceedings. When Keith Davidson took the stand — the attorney who represented both Stormy Daniels and former Playboy model Karen McDougal — he recounted how Cohen was furious about not being offered a job in the White House. That directly contradicts Cohen’s congressional testimony. Davidson said that Cohen believed he might be named attorney general.

The account, if true, shows that Cohen is not only unethical, but also delusional. Cohen was found incapable of being an attorney, let alone an attorney general.

As prosecutors set the table for the grand arrival of their star witness, the testimony only got worse. David Pecker, the former owner of the National Enquirer, said charitably that Cohen was “prone to exaggeration.”

Davidson described Cohen’s profane and unprofessional conduct, stating that “the moral of the story is nobody wanted to talk to Cohen.” That may be the first time the word “moral” was used in the same line with Cohen.

Former Trump associate Hope Hicks mocked Cohen on the stand. She said that he constantly tried to insinuate himself into the campaign, without success, and that he “used to like to call himself Mister Fix It, but it was only because he first broke it.”

Mind you, these were his fellow prosecution witnesses, not the defense.

These witnesses also contradicted the basis for the prosecution. Pecker said that he killed stories for various celebrities for years, and that he did so for Trump for over a decade before he ran for office. Davidson testified that he did not consider the deal to be “hush money” but simply “consideration” to kill bad press.

Hicks testified that she believed Trump wanted to kill the stories in significant part to protect his family from embarrassment.

Cohen could not even maintain a consistent position during the trial. Many of us have denounced the gag order on Trump that prevents him from responding to Cohen’s unrelenting attacks in the media. Cohen then promised to stop any further comments. That promise may have set a record for Cohen. He kept it for roughly three days before being accused of trolling for dollars on social media by attacking Trump.

District Attorney Bragg will now call this disbarred, serial perjurer to make the case against a former president.

Under New York law, the oath administered by the court is supposed “to awaken the conscience and impress the mind of the witness in accordance with that witness’s religious or ethical beliefs.”

Before the bailiff administers the oath to Cohen, Judge Juan Merchan may have to warn spectators in the courtroom not to laugh. For anyone familiar with Cohen, it will sound like the ultimate punchline to a bad joke.

Authored by Paul Joseph Watson via Modernity.news,

Hungarian Foreign Minister Peter Szijjarto has warned that French President Emmanuel Macron’s threat to send NATO troops to Ukraine risks sparking World War III.

In an interview with The Economist last week, Macron said the question of sending western troops to Ukraine would “legitimately” arise if Russia broke through the Ukrainian front lines and Kyiv made such a request.

Kremlin spokesman Dmitry Peskov reacted by describing Macron’s statements as “very dangerous.”

Now Hungarian diplomat Peter Szijjarto warns that the French leader’s comments represent a stunning escalation.

“If a NATO member commits ground troops, it will be a direct NATO-Russia confrontation and it will then be World War Three,” said Szijjarto.

He also drew attention to the fact that such a conflict would likely escalate into nuclear confrontation.

“Let’s be clear: if there is a nuclear war, everything and everyone will be lost. If there is a nuclear war, everyone will die and everything will be destroyed, which no one with any common sense can wish for,” said Szijjarto.

Meanwhile, senior Italian government officials have joined the growing number of prominent voices condemning Macron over his comments.

“Sending Italian soldiers to fight outside the EU borders? Follow the obsessions of some dangerous and desperate European leader like Macron? No thanks, never in the name of the League,” remarked Deputy Prime Minister Matteo Salvini.

Italian Defence Minister Guido Crosetto also told the Corriere della Sera newspaper, “I don’t judge a president of a friendly country like France, but I don’t understand the purpose and usefulness of these declarations, which objectively raise tensions.”

As we previously highlighted, the former commander of the UK’s Joint Forces Command General Sir Richard Barrons said Ukraine is at “serious risk” of having to admit defeat to Russia this year.

Barrons said that pessimism is starting to set in amongst the population, generating a general malaise and a feeling that Ukraine “can’t win.”

*  *  *

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One of the recent positives for bonds and non-energy stocks could have run its course after Saudi Arabia raised the price of its flagship crude to Asia for a third consecutive month, according to Bloomberg markets live reporter Garfield Reynolds

Over the weekend, state-owned Saudi Aramco raised the June official selling price of Arab Light crude for customers in Asia by 90 cents to $2.90 a barrel above the regional Oman-Dubai benchmark, Bloomberg reported. It compares with an increase of 60 cents forecast in a Bloomberg survey of six refiners. Prices for other lighter and heavier varieties were also increased from May.

The hike highlights Saudi Arabia’s efforts to keep the market tight amid fading war risk in the Middle East, which has helped drive oil prices in London lower. Most traders and analysts predict that the Organization of the Petroleum Exporting Countries and its allies will extend their output curbs, potentially to the end of the year.

Crude took a marked step lower last week thanks to a surge in US inventories and optimism that Middle East tensions can cool further, but there’s a decent chance it’s busy finding a new floor rather than settling in for sustained declines according to Reynolds who notes that if Israel and Hamas can agree on a truce — a substantial if with the status of talks unclear after the latest round in Cairo — that would likely set off a fresh, rapid drop in the short term for crude.

But even then it looks as though Saudi Arabia and the other producers would be likely to respond with further efforts to trim supply to prop up prices.

With two-year US inflation swaps sitting at ~2.5% that shows bonds remain vulnerable to sticky oil prices even with WTI under $80/barrel.

After a whirlwind two weeks which saw both the latest FOMC decision and the April jobs report, not to mention the peak of earnings season when all of the top tech companies reported, the calendar takes a quieter turn after the deluge of macro events last week, and the focus shifts on whether markets can continue to find a more solid footing. The latter half of last week saw strong gains for most asset classes thanks to an FOMC meeting that avoided hawkish surprises coupled with a softer payrolls report on Friday that reignited hopes of a soft landing for the US economy. 10yr Treasury yields saw their largest weekly decline of the year so far (-15.5bps) while the S&P 500 posted its best 2-day run in 10 weeks (+2.18%).

Looking forward, the health of the US economic cycle will remain in focus with today’s Senior Loan Officer Survey from the Fed. The SLOOS has seen a gradual improvement in the past few quarters after the sharp tightening following the regional banking stress last March. A key question is whether the rise in yields since the start of the year could derail the nascent improvement in bank credit conditions. Later in the week, the University of Michigan consumer survey will attract attention on Friday given the recent softening in US consumer confidence indicators.

The main macro event in Europe will be the latest BoE decision on Thursday. Our UK economist expects this week’s meeting to set the stage for the first rate cut in June and foresees dovish shifts in the MPC’s modal CPI projections and its forward guidance. You can see the full preview here. We will also have the RBA decision on Tuesday (see our economists' preview here), while on Wednesday the Riksbank could deliver the first rate cut of the cycle there. Finally, we’ll have the accounts of April ECB meeting due on Friday. These are unlikely to deliver major surprises, with April's clear if conditional signal of a June rate cut having solidified in recent ECB commentary. But we will watch for any hints on the ECB reaction function beyond June, including on what sort of data might justify consecutive ECB cuts.

The earnings season will begin to taper off this week, with almost 400 of S&P 500 members having already reported. Notable releases will include Walt Disney, Vertex, Uber and Airbnb in the US, Ferrari, Telefonica and Leonardo in Europe and Toyota and Nintendo in Japan.

Day-by-day calendar of events

Monday May 6

• Data : China April Caixin services PMI, Italy April services PMI, Eurozone March PPI
• Central banks : Fed's SLOOS, Barkin and Williams speak, ECB's Villeroy, Nagel and Panetta speak
• Earnings : Vertex, Palantir, Williams Cos, Simon Property Group, Realty Income

Tuesday May 7

• Data : US March consumer credit, UK April construction PMI, new car registrations, China April foreign reserves, Germany March trade balance, factory orders, April construction PMI, France Q1 wages, private sector payrolls, March trade balance, current account balance, Eurozone March retail sales, Switzerland April unemployment rate
• Central banks : Fed's Kashakari speaks, ECB's De Cos speaks, RBA decision
• Earnings : Walt Disney, BP, Arista Networks, Duke Energy, McKesson, Occidental Petroleum, Kenvue, Nintendo, Ferrari, Electronic Arts, Rockwell Automation, Leonardo, Reddit, Lyft
• Auctions : US 3-yr Notes ($58bn)

Wednesday May 8

• Data : US March wholesale trade sales, Italy March retail sales, Germany March industrial production
• Central banks : Fed's Cook, Jefferson and Collins speak, ECB's Wunsch speaks , Riksbank decision
• Earnings : Toyota, Arm, Uber, Airbnb, Emerson Electric, Teva, Shopify, Vistra, Affirm, Siemens Energy, AB InBev
• Auctions : US 10-yr Notes ($42bn)

Thursday May 9

• Data : US initial jobless claims, UK RICS house price balance, China April trade balance, Japan March leading and coincident index, labor cash earnings
• Central banks : BoE decision, April DMP survey, Pill speaks, BoJ summary of opinions April MPM, ECB's Cipollone and Guindos speak, BoC's financial system review
• Earnings : Constellation Energy, Roblox, Telefonica, Enel, Warner Bros Discovery, Warner Music Group
• Auctions : US 30-yr Bonds ($25bn)

Friday May 10

• Data : US May University of Michigan survey, April monthly budget statement, UK Q1 GDP, March monthly GDP, trade balance, industrial production, index of services, construction output, China Q1 current account balance, Japan March trade balance, current account, household spending, April Economy Watchers survey, bank lending, Italy March industrial production, February industrial sales, Canada April jobs report, Norway, Denmark April CPI
• Central banks : Fed's Goolsbee, Barr and Bowman speak, ECB's account of the April meeting, Cipollone speaks, BoE's Pill speaks
• Earnings : Tokyo Electron

* * *

Finally, looking at just the US, Goldman notes that the key economic data release this week are the University of Michigan report on Friday. There are several speaking engagements by Fed officials this week, including remarks from Vice Chair Jefferson, Vice Chair for Supervision Barr, Governors Cook and Bowman, and Presidents Barkin, Williams, Kashkari, Collins, and Goolsbee.

Monday, May 6

• 12:50 PM Richmond Fed President Barkin (FOMC voter) speaks: Richmond Fed President Thomas Barkin will deliver a speech on the economic outlook in Columbia, South Carolina. Audience and media Q&A are expected. On April 10, Barkin said “of course it’s conceivable that we’re going to get to a soft landing, the numbers in a big picture have been great… We need to be humble about how easy it is to get there.”
• 01:00 PM New York Fed President Williams (FOMC voter) speaks: New York Fed President John Williams will participate in a fireside chat conversation at the Milken Institute Global Conference. A Q&A is expected. On April 18, Williams said “I definitely don’t feel urgency to cut interest rates.” He went on to say, “I think interest rates will need to be lower at some point but the timing of that will be based on the economy.”
• 02:00 PM Senior Loan Officer Opinion Survey 2023Q4

Tuesday, May 7

• There are no major economic data releases scheduled.
• 11:30 AM Minneapolis Fed President Kashkari (FOMC non-voter) speaks: Minneapolis Fed President Neel Kashkari will participate in a fireside chat at the Milken Institute Global Conference. A Q&A is expected. On April 4, Kashkari said “in March I jotted down 2 rate cuts this year. But if inflation continues moving sideways, that would make me question whether we need to do those rate cuts at all.”

Wednesday, May 8

• 10:00 AM Wholesale inventories, March final (consensus -0.4%, last -0.4%)
• 11:00 AM Fed Vice Chair Jefferson speaks: Vice Chair Philip Jefferson will participate in a moderated discussion on careers in economics. On April 16, Jefferson said “my baseline outlook continues to be that inflation will decline further, with the policy rate held steady at its current level, and that the labor market will remain strong, with labor demand and supply continuing to rebalance.” He went on to say that “the outlook is still quite uncertain, and if incoming data suggests that inflation is more persistent than I currently expect it to be, it will be appropriate to hold in place the current restrictive stance of policy for longer.”
• 11:45 AM Boston Fed President Collins (FOMC non-voter) speaks: Boston Fed President Susan Collins will provide remarks to MIT students followed by a fireside discussion. Speech text and a Q&A are expected. On April 11, Collins said “I expect to see further evidence that inflation is durably, if unevenly, returning toward 2 percent, and that the economy is coming into better balance, with demand and supply more closely aligned amid a healthy labor market.”
• 01:30 PM Fed Governor Cook speaks: Fed Governor Lisa Cook will discuss the Fed’s latest semi-annual Financial Stability Report at an event hosted by Brookings. Remarks will be followed by a panel discussion. A Q&A is expected. On March 25, Cook said “the path of disinflation, as expected, has been bumpy and uneven, but a careful approach to further policy adjustments can ensure that inflation will return sustainably to 2% while striving to maintain the strong labor market.”

Thursday, May 9

• 08:30 AM Initial jobless claims, week ended May 4 (GS 215k, consensus 212k, last 208k): Continuing jobless claims, week ended April 27 (consensus 1,785k, last 1,774k)

Friday, May 10

• 09:00 AM Fed Governor Bowman speaks: Fed Governor Michelle Bowman will speak on financial stability risks at the Texas Bankers Association Annual Convention. Speech text and a moderated Q&A are expected. On May 3, Bowman said “with annualized 3-month core PCE inflation jumping to 4.4 percent in March, well above average inflation in the second half of last year, I expect inflation to remain elevated for some time,” but went on to say “my baseline outlook continues to be that inflation will decline further with the policy rate held steady, but I still see a number of upside inflation risks that affect my outlook.”
• 10:00 AM Dallas Fed President Logan (FOMC non-voter) speaks: Dallas Fed President Lorie Logan will speak in a moderated Q&A to the Louisiana Bankers Association Annual Conference in New Orleans. On April 5, Logan said “I’m increasingly concerned about upside risks to the inflation outlook. To be clear, the key risk is not that inflation might rise – though monetary policymakers must always remain on guard against that outcome – but rather that inflation will stall out and fail to follow the forecast path all the way back to 2 percent in the timely way.”
• 10:00 AM University of Michigan consumer sentiment, May preliminary (GS 76.2, consensus 76.8, last 77.2); University of Michigan 5-10-year inflation expectations, May preliminary (GS 3.1%, consensus 3.0%, last 3.0%): We expect the University of Michigan consumer sentiment index decreased to 76.2 in the preliminary May reading. We estimate the report's measure of long-term inflation expectations rose 0.1pp to 3.1%, reflecting higher gasoline prices and the higher-than-expected price data reported in 2024. The transition to web-based interviews could also exert upward pressure.
• 12:45 PM Chicago Fed President Goolsbee (FOMC non-voter) speaks: Chicago Fed President Austan Goolsbee will speak in a moderated Q&A at the Economic Club of Minnesota luncheon. On April 19, Goolsbee said “so far in 2024, that progress on inflation [we saw in 2023] has stalled. You never want to make too much of any one month’s data, especially inflation, which is a noisy series, but after three months of this, it can’t be dismissed."
• 01:30 PM Fed Vice Chair for Supervision Barr speaks: Fed Vice Chair for Supervision Michael Barr will give a commencement speech for American University School of Public Affairs Graduation.

Source: DB, Goldman

Ten years ago this week, we posted one of out most viral stories, highlighting the over-capacity in the auto industry:  "Where the World's Unsold Cars Go To Die," which highlighted the 'endgame' of automakers' 'channel stuffing' efforts to disguise the sudden lack of demand for all the exciting new models that they had forecast would boom to the moon...

And now, as MishTalk's Mike Shedlock reports,  we are seeing similar pictures across Europe...

"Some are parked here for a year, sometimes more."

Le Monde reports Belgium’s ports drowning under glut of Chinese electric cars: ‘Some are parked here for a year, sometimes more’

Due to China’s overcapacity in production – as it aims to capture a quarter of the European electric vehicle market – the ports of Antwerp and Zeebrugge are inundated.

You probably need to see it to appreciate the challenges the automobile industry faces in transitioning to electricity. You also need to come here to understand how the Chinese industry’s overcapacity has flooded the European market. That morning, as the sun unexpectedly lit up the maze of highways leading to this remote arm of the port of Antwerp, Belgium, a huge cargo ship from the Norwegian company Höegh Autoliners unloaded thousands of cars at one of the terminals of International Car Operators (ICO), a subsidiary of the Japanese group Nippon Yusen Kaisha.

Alongside Swedish-Norwegian Wallenius Wilhelmsen, it is one of the main operators of the now merged port of Antwerp-Bruges, the world’s largest automotive terminal, through which the production of some 40 brands used to transit. But that was before the emergence of their Chinese competitors.

Car Parks

Quartz reports Cars are piling up at European ports at an alarming rate

Imported vehicles are seriously piling up at European ports, turning them into “car parks.” Automakers are distributors are struggling with a slowdown in car sales as well as logistical bottlenecks that make it hard to alleviate the buildup of new, unsold vehicles.

Some Chinese brand EVs had been sitting in European ports for up to 18 months, while some ports had asked importers to provide proof of onward transport, according to industry executives. One car logistics expert said many of the unloaded vehicles were simply staying in the ports until they were sold to distributors or end users.

“It’s chaos,” said another person who had been briefed on the situation.

This is another part of the escalating trade war between China and the rest of the world.

China Produces 55 Percent of All Steel, Biden and Trump Eye Tariffs

Yesterday, I commented China Produces 55 Percent of All Steel, Biden and Trump Eye Tariffs

On April 22, I cautioned A Big Deflationary Push From China But Will Biden or Trump Allow That?

China keeps returning to a well that has run dry, using exports as a means for growth. China is about to hit a brick wall, with global consequences.

My #1 issue looking ahead to 2025 is a global trade war with serious repercussions.

The carbon credit con band plays on...

The most recent chapter in the 'green' initiative has been supermajor Shell being found to have sold 'phantom' carbon credits that were twice the volume of emissions the company actually avoided, according to FT.

Shell has reportedly sold millions of carbon credits, tied to CO₂ removal, to Canada’s main oil sands companies, despite doubts arising over the validity of the claimed emissions reductions.

Keith Stewart with Greenpeace Canada commented: “Selling emissions credits for reductions that never happened . . . literally makes climate change worse.”

Under a subsidy initiative by Alberta's provincial government to support the industry, Shell was permitted to register and sell carbon credits double the amount of emissions purportedly avoided by its Quest carbon capture facility from 2015 to 2021. However, this subsidy was phased out by 2022.

Consequently, Shell managed to register 5.7 million credits which were then sold to leading oil sands producers including Chevron, Canadian Natural Resources, ConocoPhillips, Imperial Oil, and Suncor Energy.

Alberta's environment ministry stated that the crediting support scheme did not lead to "additional emissions" by industrial polluters.

Energy firms globally, including those in Canada, are advocating for increased government backing for carbon capture and storage initiatives. Alberta, known for its vast and carbon-intensive oil resources, has seen a surge in production, hindering Canada's efforts to meet emission reduction goals.

The Financial Times report noted that the Quest facility, operated by Shell Canada and co-owned by Canadian Natural Resources, Chevron, and Shell Canada, is integral to the Scotford processing and refining complex. At Quest, CO₂ is extracted during hydrogen gas production, crucial for converting bitumen from oil sands into synthetic crude oil.

Canada offers substantial incentives for CCS projects, yet the industry's profitability remains challenging. Quest's annual report revealed a total cost of $167.90 per tonne of carbon avoided in 2022, compared to Alberta's $50 carbon price for major industrial emitters.

Documents obtained by Greenpeace Canada, shared with the Financial Times, disclosed that Shell initially sought a three-for-one deal on carbon credits at Quest. Alberta introduced a two-for-one scheme in 2011, exclusively for plants operational by the end of 2015, such as Quest. The incentive decreased to three-quarters of a credit by 2022 and was eventually phased out with the rise in carbon prices.

“At the end of the day, the oil and gas sector and the oil sands firms in particular need to get going with respect to emissions reductions,” concluded Jonathan Wilkinson, Canada’s minister of energy and natural resources.

Authored by Andrew Korybko via Substack,

Sputnik reported on Monday that the Russian General Staff is preparing to carry out drills for practicing the use of tactical nuclear weapons, which follows Foreign Ministry spokeswoman Zakharova warning over the weekend that NATO’s “Steadfast Defender” drills are possible preparations for war with Russia. Italy’s La Repubblica also reported over the weekend that NATO might conventionally intervene in Ukraine if Russia crosses into there from Belarus or carries out “provocations” against fellow members.

These developments follow GUR deputy chief Skibitsky telling The Economist last week that the front lines might soon collapse, which aligns with the Ukrainian Intelligence Committee’s worst-case scenario that they shared in late February. It’s also worth mentioning that Macron just reaffirmed his threat from that time to intervene in Ukraine (most likely around Odessa) in that event, that Poland is no longer ruling out doing the same, and the Ukrainian premier just said that he might request NATO troops.

It's little wonder then that Russia interpreted these signals as preconditioning the Western public to accept that possibility, ergo why its General Staff is now preparing to carry out drills for practicing the use of tactical nuclear weapons. La Repubblica’s report claimed that a whopping 100,000 NATO troops could flood into Ukraine if the decision is made, with the only realistic way to stop them from going beyond the Dnieper and directly clashing with Russian troops is to use tactical nukes in self-defense.

Everything is moving so fast that nobody can say with confidence exactly what will or won’t happen, but a reminder of each side’s interests as their policymakers conceive them to be can help obtain a better idea of how likely certain scenarios might be.

Russia wants to demilitarize and denazify Ukraine while NATO wants to stop them, with neither being able to achieve their maximum goals in this respect. The game-changing variable, however, will be what each does if/when the front lines collapse.

Russia will at least move to secure the full administrative borders of its four recently reunified regions, but it might go beyond that and potentially also open up more fronts in the north (whether from Belarus and/or around Sumy-Kharkov) in order to achieve as much of its aforesaid goals as possible. Should that happen, then NATO might panic depending on how far and fast Russia advances, thus serving to justify whatever pretext they concoct for commencing a conventional intervention in Ukraine.

The NATO-Russian security dilemma, which frames the abovementioned sequence of events, would unprecedentedly worsen since Russia might then panic depending on how far and fast NATO advances. The bloc might just occupy everything west of the Dnieper, but it could also cross the river and place its forces in position to attack Russia’s. Any perceived move in that direction, let alone actual ones, could prompt Russia to preempt that with tactical nukes. If they’re dropped, then the whole world will change.

The most effective way to defuse this apocalyptic security dilemma is for a neutral third party like India or the Pope to mediate between each side and discover their intentions to pass along to the other. If Russia doesn’t plan to march on Kiev once again and NATO doesn’t plan to cross the Dnieper, then neither might panic and overreact by inadvertently crossing the other’s red lines. A semi-orderly Ukrainian military withdrawal over the Dnieper to demilitarize the east as a buffer zone could then occur.

That would be the best-case scenario for de-escalating these dangerous dynamics, though it of course can’t be taken for granted since nobody is presently mediating between them, and one or the other might lie to whoever does in order to deceive their opponents. Nevertheless, hopefully someone steps up to try before the front collapses and their noble efforts are sincerely welcomed by both sides, since the reluctance to do so could doom the world to destruction in the worst-case scenario.