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By Michael Every of Rabobank

Shellshock

Yesterday, the RBNZ held hawkishly and talked about a rate hike, with no cuts seen until end-2025. The UK’s inflation numbers were awful both headline and core, with services CPI at around 6%: yet the BOE evidently wants to cut rates as soon as it can. Then the Fed minutes from its May meeting made clear several FOMC members are still prepared to vote for a hike, or to keep rates on hold longer than markets expect. (See here for more from our Fed Watcher Philip Marey.)

Luckily for markets, however, the AI boom rolls on and on: because where would we be without our US asset bubble du jour?

However, there are still more potential shellshock for markets ahead from politics: Bloomberg’s Shuli Ren asks, ‘Has Xi changed His Mind on Housing and Consumption?’ The NOT neoliberal, but Marx-Lenin-Mao-Xi ideology of China’s political-economy was underlined by its release of an AI based entirely on Xi Jinping Thought, which some dub ‘Chat Xi PT’. However, were Beijing to reflate with serious fiscal stimulus, it would hamper Western central banks’ room for rate cuts: look at what commodity prices are doing without any Chinese version of the West’s Covid stimulus.

A smaller shellshock is the UK holding a rare summer election where polls say it’s “Gone on the 4th of July” for the Conservatives. Indeed, the logic of doing this now rather than waiting for November in the hope opposition support dips has political experts saying either PM Sunak has the inverse Midas touch, or there is a looming scandal so bad it’s prompted the worst-snap election since New Zealand’s drunk Prime Minister called a “Schnapps election” in 1984.

The larger UK shell shock is Shapps: the defence minister states, “Lethal aid is now, or will be, flowing from China to Russia into Ukraine.” Yes, China is helping the Russian economy by supplanting Western-centric industrial supply chains, and some of that has dual use, but actual lethal aid is supposedly a ‘red line’ that triggers US and EU secondary sanctions. Yet in January 2022 I warned these would either prove ineffective or bifurcate the world economy into complying/not complying blocs. Our post-invasion research underlined the same binary, and that it’s impossible to model how much economic damage would be done if secondary sanctions had real teeth. More recently, the IMF made the same point.

Markets may think even if this is correct that, like Shapps, ‘this too will pass’, and we can Keep Calm and Carry On Rate Cuts (and/or AI). Yet that’s the same pre-war naïve thinking I decried in 2022. After all, that would mean there are no red lines, so lethal aid can flow to Russia; its military position vis-à-vis Ukraine would be strengthened further; and it would leave Europe unwilling and unable to respond, and the US unwilling to because it has bigger Chinese fish to fry in Asia. Indeed, things already continue to escalate rapidly:

• Poland’s Prime Minister Tusk implies Russia may have started a Warsaw department store fire.

• Poland may shoot down Russian missiles near its border.

• Russia shifted its maritime boundaries with the EU in the Baltic Sea before deleting the text.

• Russia is rehearsing tactical nuclear drills near the Ukraine border.

• The US is reassessing if Ukraine can use US weapons to attack pre-2014 Russian territory.

Meanwhile, Taiwan’s new president Lai Ching-te gave an inaugural address that sailed dangerously close to the China’s red lines. The Global Times rails: “Lai shamelessly stated in his speech that "the Republic of China Taiwan is a sovereign, independent nation" and "the Republic of China and the People's Republic of China are not subordinate to each other," spewing various "Taiwan independence" fallacies and hostile provocations against the Chinese mainland… They are well aware that what they are doing now is pushing Taiwan into a dangerous pit of war and danger." China is already responding with the largest joint military drills around Taiwan for a year, "Joint Sword-2024A", which encircle it, and include actions around its outlying islands of Kinmen, Matsu, Wuxi, and Dongyin. This is as reports say ASML added kill switches to TSMC technology to be triggered if China invades Taiwan.

Moreover, as flagged in Tuesday’s ‘Wrath of Khan’ Daily, the international liberal order is fracturing further following the International Criminal Court’s (ICC) request for arrest warrants for the Israeli prime minister and defence minister, and three leaders of Hamas. The EU is split: Belgium, Spain, and Ireland back the ICC; France did too, then prevaricated; Italy and Austria are opposed, and the Netherlands’ Geert Wilders strongly backs Israel; and Germany said it didn’t agree with the Court… but would only obey its orders. Yet there is bipartisan support in the US, which President Biden won’t block, to sanction the ICC for its recent action. Naturally, Russia and China are making as much hay as they Khan, splitting the Global South further from the West in the process.

But, hey, “AI!”, right?

Boeing CFO Brian West confirmed at an industry conference Thursday morning that plane deliveries to China would be delayed due to Chinese regulatory reviews and stated that there would be no increase in second-quarter commercial jet deliveries compared to the first quarter. 

• BOEING DELIVERIES WON'T SEE STEP UP IN 2Q, WILL BE CLOSE TO 1Q

The big problem for Boeing is that not even China wants the jets. 

*BOEING CFO SAYS CHINA'S CAAC HAS ASKED FOR MORE CERTIFICATION

*BOEING CFO SAYS CHINA'S CAAC HAS ASKED FOR MORE CERTIFICATION

Not even China wants flying paperweights

West said the country's Civil Aviation Administration (CAAC) has requested more certification for 737 Max planes. 

• BOEING'S CFO SAYS CHINA'S CAAC HAS ASKED FOR MORE CERTIFICATION

Here are the most critical headlines (courtesy of Bloomberg) breaking on West's comments:

Following the comments, Boeing shares in New York plunged as much as 5.4% - the most in almost four months. 

*Developing... 

With a brand new set of polls showing Donald Trump leading in six of seven swing states, establishment media has stooped to new levels of transparent dishonesty in a desperate effort to derail his campaign.

The latest example? An all-out hoax that had major outlets telling Americans that Trump shared a video promising that his reelection would lead to the "creation of a unified Reich," in what was supposedly a shocking revelation of his intention to Make Nazism Great Again. 

Here's a sampling of the hysterical headlines: 

• Newsweek: Donald Trump 'Unified Reich' Video Leaves People Stunned
• MSNBC: Trump's Online Account Promotes 'Unified Reich' Video, Adding To Alarming Pattern
• The Hill: White House Slams ‘Sickening’ Video Shared By Trump Referencing ‘Unified Reich'
• CNN: Trump Posts Video Referencing 'Unified Reich' If Reelected

TV's talking heads gravely shared the news. ABC's George Stephanopoulos said Trump posted a video that "used language from Nazi Germany, the latest in a series of antisemitic and authoritarian statements from Trump and his campaign." Social media erupted in the latest round of bogus outrage, including this pearl-clutching tweet from archetypal deep-stater and Constitution-betraying mass surveillance architect Michael Hayden: 

UNIFIED REICH, My God. https://t.co/mfE6L37gJJ

The White House leapt headlong into the propaganda blitz. “It is abhorrent, sickening, and disgraceful for anyone to promote content associated with Germany’s Nazi government under Adolf Hitler,” said Deputy White House Press Secretary Andrew Bates. Piling dishonesty on dishonesty, here's Joe Biden recoiling in phony disbelief as he pretends to be seeing Trump's alleged abomination for the first time: 

BOOM! President Biden just responded to Donald Trump calling for a “unified reich” in his campaign ad saying “That’s Hitler’s language, not America’s!” He is absolutely right. Donald Trump is a disgrace to the country. pic.twitter.com/o3zNzhC1VF

So what actually happened? On Monday afternoon, Trump's Truth Social account reposted a video that had been created and posted by someone outside the campaign. The video used imagery of newspaper headlines to imagine a Trump victory in November and the beneficial consequences that would accompany it. 

The video was not created from scratch, but rather from a stock video template that anyone can buy online. Sold by Envato Elements, it's called "Newspaper Vintage History Headlines Promo." With its old-newspaper feel, whatever headlines are added to it are given a certain historical gravitas. Aside from the Trump-specific banner headlines, the video creator simply left intact all the minor, historical headlines that come with the template and serve as little more than background filler. 

For all the freaking out about Trump using the video to implicitly endorse the Third Reich, the vintage headline in question isn't even about that reich. It reads, "German Industrial Strength After 1871 Driven By The Creation Of A Unified Reich." 

"It's difficult to convey just how fake the establishment American media really is," said Newsmax's Rob Schmitt, in this segment that lays bare the utter dishonesty behind the latest baseless outrage: 

You've been duped again by the Fake News Media, America.

Add the "Unified Reich Hoax" to the list.

Newsmax's @SchmittNYC did a great job exposing the hoax. You're going to want to watch this. pic.twitter.com/GDrH2x3mAQ

Predictably, the so-called "fact checkers" at Snopes framed the video controversy in such a way that they could stamp "TRUE" on it, addressing merely whether Trump shared a video that contained the words "creation of a unified reich." Like many of the harpies on social media who've been called out for their deceptive descriptions of the video, Snopes blames the video creator for "fail[ing] to remove" the unified Reich headline -- as if that video creator had used Triumph Of The Will as their starting template.   

Meanwhile, with an article explaining why the video "isn't what people are making it out to be," The Atlantic's David Graham pleasantly surprised us -- only to then exasperate us by reinforcing one of the most persistent anti-Trump hoaxes of all. After explaining the benign nature of the video template, Graham proceeded to administer a Trump-mythology booster to The Atlantic's lefty readership, writing that "[Trump] called neo-Nazi marchers in Charlottesville, Virginia, in 2017 'very fine people.”  

See that blurry little headline on the left? That reference to German industry in 1871 is what this whole thing is about. 

Let's go to the transcript...again. In a feisty exchange with reporters, Trump -- referring to politically diverse protesters and counter-protesters who showed up in Charlottesville -- said:

"You had some very bad people in that group, but you also had people that were very fine people, on both sides...You had people in that group that were there to protest the taking down of, to them, a very, very important statue and the renaming of a park from Robert E. Lee to another name."

After questioning whether statues of historical figures should be removed solely because the person in question had some involvement with slavery, Trump said: 

"You’re changing history. You’re changing culture. And you had people -- and I’m not talking about the neo-Nazis and the white nationalists -- because they should be condemned totally. But you had many people in that group other than neo-Nazis and white nationalists. Okay? And the press has treated them absolutely unfairly."

Just as the "very fine people" hoax persists at The Atlantic and nearly everywhere else, we're guessing the "unified reich video" hoax will have staying power too. In any event, it looks like it's time for Scott Adams to issue another update to his hoax quiz...

I updated the Hoax Quiz.

Hoax Quiz

How many of these hoaxes do you still believe are true?

Russia Collusion Hoax

Steele Dossier hooker story

Russia paying bounties on US soldiers in Afghanistan

Trump called Neo-Nazis “Fine people.”

Trump suggested drinking/injecting bleach…

Authored by Simon White, Bloomberg macro strategist,

Political affiliation and wealth, it’s speculated, are making a recession look more likely than it really is by introducing systematic bias into the economic data. But this is a distraction. For the data that matters most in gauging the likelihood of a downturn, any potential bias matters little. A robust recession framework shows that the near-term risk of a slump remains low, but is prone to shifting higher quickly.

There is no such thing as unbiased data. How the data is procured and presented will always introduce user bias, and it’s no different with economic data. My colleague Simon Flint recently wrote that recession risk is being overstated due to data biases, while Cameron Crise has previously touched upon apparent political bias in survey data.

A reader also wrote in with an interesting conjecture that perhaps soft data is more geared to those who are less well off, and hard data the better off.

The recent worse performance of soft data – helping to inch up recession risks – is thus a reflection of worsening wealth inequality rather than a bona fide worsening in economic conditions.

We’ll get to these points, but first let’s answer what should be the prime question for investors, keen to avoid the worst equity-market drawdowns:

Is bias in the data overestimating recession risk?

The short answer is no.

Although there is some bias in economic data, it’s not enough to subvert recession prediction when done robustly. Near-term recession risk today remains low, but that risk could rise rapidly, independent of data bias.

A prevalent bias in some economic data is political. When it comes to some survey data, it can be significant. The Michigan Consumer Sentiment Survey provides a breakdown of political affiliation. Sentiment is being overwhelmingly driven by those who identify as Democrats, and who are currently wildly more optimistic than Republicans.

I am not aware of an explicit breakdown of affiliation in other survey data, but Cameron notes there is an inferable potential skew in the NFIB’s Small Business Optimism Index toward being higher when a Republican is in the White House. Similarly with the Conference Board’s Consumer Confidence Index.

This is all quite interesting, but the core question for investors remains: does it matter for when stock markets experience their worst falls, i.e. recessions?

To begin with, the Conference Board and Michigan’s gauges of consumer sentiment as well as the NFIB are tier-2 data when it comes to predicting downturns.

Much better is the manufacturing ISM. As a standalone indicator it excels at unequivocally turning down before a recession begins.

But that’s secondary; the ISM’s real importance stems from it sitting at the nexus between soft and hard data and how they interact to trigger recessions.

This is critical. Recessions metastasize when we get a negative feedback loop developing between hard and soft data. Hard data deteriorates, and this feeds into soft and market data. That in turn hits the wealth effect, which affects investment and spending and feeds back into worsening hard data. Unchecked, a recession typically develops.

The ISM’s role is as a key artery from survey data to the market, and thence ultimately into hard data. The other surveys simply don’t have the same influence, with all of them displaying a much weaker relationship with the S&P.

There is some reflexivity in that ISM-survey respondents’ level of optimism will be affected by the level of the market. But the market also responds to the ISM, as one of the first data points out each month.

Despite Cameron’s view that the ISM does not matter as much as it used to, it in fact remains one of the most important data points (I’ll write more on this very soon).

But we also needn’t overstate its importance. There is no single “killer” recession predictor. The ISM’s utility comes from it having a long history, being minimally revised, having an early release time and its role in facilitating recession-causing negative feedback loops. But other data matter too.

All that said, it would be problematic if the ISM displayed any systematic, significant political bias. There is no data on the political leaning of the survey’s respondents, but we can exploit another feature of recessions to get round any potential bias: their pervasiveness.

Things tend to start going bad everywhere at the same time in a recession. Several Fed member banks produce their own regional manufacturing surveys. The states they cover are fairly evenly balanced overall, with two Democrat strongholds, two Republican ones, and two states that are generally closely fought. This should help even out any potential bias.

A reliable and timely recession indicator, with only a few false positives, has been when all of the regional indexes have been in contraction. Even then this should not be used as a standalone signal. To reiterate, we need to see both hard and soft data self-reinforcedly deteriorating at the same time to trigger a recession.

In addition, therefore, we look for a pervasive worsening in hard data too, e.g. the jobs market across states. Unemployment claims in multiple states have picked up sharply ahead of previous recessions.

What about the notion that hard and soft data are biased by wealth inequality, with hard data more geared to the better off, and soft data to the less well off?

Again, there is little bias we can discern. Both better and worse-off households by net worth show a negligible relationship with both hard and survey-based data (even if we use different lags in the data).

Soft, market-based data does have a much stronger relationship with net worth. But, as the table below shows, stocks have a higher, not lower, R^2 with better-off households than less well-off ones. This is anyway as you would expect given the higher exposure of the wealthier to financial assets.

However, the net worth of less wealthy households has a higher R^2 to credit spreads than better-off ones. That may seem odd at first but is likely explained by credit-spreads’ closer relationship to unemployment.

It’s hard to pinpoint any systematic wealth bias in the data, and likewise it’s hard to find political bias in data that matters for recession prediction, or if so any that we can’t smooth out by exploiting state heterogeneity.

So while it’s recommended to “know your data,” when it comes to what matters - avoiding steep market drawdowns ahead of downturns - investors need not get distracted by second-guessing who votes for whom, and how well-off they might be.

Are you starting to see a pattern yet? 

First there was the introduction of gender fluid and LGBT ideology into public schools, then there were sexualized drag queen performances for children, then leftist activists demanded that pedophiles be referred to as "MAPS" (Minor Attracted Persons) because "they can't help who they are attracted to," then California passed a law reducing charges for adults engaged in sexual relations with minors. 

Now, the German Parliament has forwarded a bill that makes possession and distribution of child pornography a misdemeanor instead of a felony, greatly reducing diminishing possible penalties.

German officials claim the new law is meant to address inconsistencies in previous child pornography laws which are sometimes applied to people who "receive images or videos through email or social media without their permission."  They also cited instances where two minors traded images and were charged with creation or possession of child pornography. 

Critics of the bill argue that the German government could have easily made legal adjustments for those specific exceptions to avoid innocent people being wrongly imprisoned.  Instead, they are trying to institute sweeping changes that reclassify the crime and give greater legal protections to an array of child predators.  The new law does not make exceptions for adult offenders.   

According to the Bundestag (Parliament), the bill stipulates that “possession and acquisition should be punishable with a minimum penalty of three months’ imprisonment, and distribution with a minimum penalty of six months’ imprisonment, and distribution with a minimum penalty of six months’ imprisonment. The offenses regulated in Section 184b of the Criminal Code are therefore classified as misdemeanors and not as crimes.”

It should be noted that the criminal classification for possession of sexual materials related to minors has shifted a number of times in Germany, with felony status applied most recently in 2021.  In other words, the German government decided after only three years that punishing pedophiles with longer prison sentences was just not fair.

The move has already been celebrated by a German pro-pedophile activist group known as Krumme-13, or simply K13.  the activist group has been described as a “self-help” organization for “pedosexuals.”  In a blog post written by its founder and dated May 17, K13 laments that “no politician in all factions apologized to the thousands upon thousands of those affected who fell victim” to the 2021 law which had made possession of child sexual abuse materials a felony."

In 2019 the German Bundestag accepted a petition outlining "children’s rights" which was drafted by Krumme-13.  The lobby group advocated for lowering the age of consent to 12 years old and legalizing child pornography. They announced on their website that a resolution developed by the group’s founder, Dieter Gieseking, had achieved enough votes to be added to the constitution, or Basic Law. 

Gieseking’s petition amends Article 6 of the Basic Law to add statements regarding children’s rights, and states that “children should be viewed as legal subjects with their own rights.”  Article II of the petition includes the "right to sexual self determination."  In other words, the group petitioned the German government to give children legal adult status (making them fair game for pedophiles), and the government seems to be taking them seriously.

Beyond the natural inclination of all moral people to be inherently disgusted by those who fetishize children, beyond the fact that pedophiles have long been seen as dangerous and malicious parasites that need to be removed from society, the root legal argument is one of consent.  It is an argument which leftist activist groups and political parties continue to ignore. 

Children cannot consent.  They are not mentally and emotionally mature enough to be capable of informed consent, which means they can be easily targeted for exploitation if they are not protected by the law and by their parents.  

The fact that this is a debate we are having in 2024 is mind boggling until you recognize what kinds of people we have lurking in the halls of power.  It's not hard to see the tip-toe that is happening today, with the eventual end game being the total legalization of child sex abuse in the name of "inclusion."   

Via SchiffGold.com,

Copper has gone mad: Liquidated shorts from a flood of speculators, an AI bubble, a supply crisis, and a renewable energy craze have all combined with high global inflation to recently send it to historic all-time highs. While I believe there will be major corrections as some of these factors come back down to earth, the most important one — out-of-control inflation — will ultimately send copper even higher in the longer-term.

Yes, the market has taken on more froth than a Starbucks drink. Copper went high enough to wreck a batch of short sellers who betted that the party was over. The resulting short squeeze forced them to pony up, buying more paper copper to cover their positions and pushing prices even higher. Expect more volatility in the near-term, as the crowd of speculators looking to snatch short-term profits from copper are still here and will keep riding the wave.

Copper Futures (USD/lb) 6-Month

Source: Bloomberg

That’s because the bullish action has been too juicy to resist, and it has enough fundamentals to support more upward action in the medium and longer-term. 

High inflation and a supply shortage are conspiring with increased demand for electric vehicles, a boom in renewable energy tech, and an AI bubble to keep the price going up even without the flood of speculative money.

I suspect a cooldown in a few factors driving the copper frenzy: first, I expect the AI market coming come back down to earth. In the longer-term, I also expect practical revisions of renewable energy targets like the impossible “Net Zero,” which are more about making politicians look good in the short-term than being pragmatic and achievable long-term goals. But the demand will still be there, and the current supply squeeze and inflationary pressures are here to stay.

If you’re a buyer, waves of speculation along the way can provide buying opportunities for physical copper in the form of epic volatility and dramatic dips.

While the current narrative is that inflation is easing, any apparent relief from higher prices will be temporary. To avoid a banking and commercial real estate crisis, the Fed will have no choice but to cut interest rates at some point. This will invite a new torrent of inflationary expansion as the Fed ignores the pressure cooker that its policies helped create.

You can’t undo the effects of trillions’ worth of COVID money printing in just a few years or by briefly hiking interest rates to 4% or 5%. Taming that beast would require interest rates to be much higher than the Fed would ever raise them, as it knows that loan-dependent industries like real estate can’t survive with rates upwards of 8, 9, even 10%. The problem is worsened by sustained out-of-control budget deficits that are causing a confidence collapse in US Treasury bonds — in the “full faith and credit” of the US government.

When the Fed finally cuts rates, Americans spending devalued dollars will get slammed with higher prices for gas and food, along with surging commodities like copper and precious metals. Lower rates will also incentivize borrowing over saving for an already over-indebted population. It will encourage Americans to get in even more over their heads with loans they shouldn’t get to finance expenses they can’t afford, adding more upward price pressure for the goods they already don’t have enough money to buy.

It’s enough to make your head spin, and it can only possibly result in higher prices in the coming years — including for copper — even if the AI and renewables projections end up being only half what is currently predicted. That said, the broader renewable energy and AI trends are here to stay, and LLMs like ChatGPT require a lot more power than the internet’s current run-of-the-mill web searches:

A ChatGPT search requires 10x as much power as a traditional Google search pic.twitter.com/khdSbvxsOH

Copper supply woes will also continue throughout this year — and if you zoom out even more, interest rate cuts will all but guarantee higher prices even as shorter-term, speculation-fueled spikes and drawdowns cause the market to overheat.

Authored by Josh O'Sullivan via CoinTelegraph.com,

The U.S. Securities and Exchange Commission (SEC) began discussions with potential issuers of Ether exchange-traded funds (ETFs) on May 22, leading some to anticipate an imminent approval.

Journalist Eleanor Terrett noted that discussions between SEC staff and Ether ETF issuers about the S-1 forms concluded with the understanding that there was still “work to do.”

Source: Eleanor Terrett

S-1 forms are registration statements that companies have to file with the SEC, including detailed information about the company and the securities they intend to offer/issue.

Whereas 19b-4 forms are regulatory filings issued to the SEC for approval, used by self-regulatory organizations (SROs) like stock exchanges or trading platforms to propose new rules or change existing ones.

In a subsequent post, Terrett deferred to “the ETF experts” in a separate post.

Assuming that the SEC approves the 19b-4 forms on May 23, Terrett speculated that the SEC might work with Ether ETF issuers “on S-1’s over the next few weeks/months.” 

Eric Balchunas, a Senior ETF Analyst at Bloomberg, expects the SEC to issue an announcement on May 23, around the same time they did for the spot Bitcoin ETF.

This development follows the approval of the FIT21 crypto bill in the U.S. House of Representatives, which passed on May 22 with 208 Republicans and 71 Democrats in favor to 136 against.

Consensys CEO Joseph Lubin recently weighed in on the discussion in anticipation of the potential looming Ether ETF approvals.

Speaking exclusively to Cointelegraph at DappCon in Berlin, Lubin stated that Ether ETFs in the U.S. were “as good as done.”

According to Lubin, the 19b-4 applications filed by high-profile firms like BlackRock would be approved, but the process behind the S-1s “could drag on for a while.”

The Ethereum co-founder explained that pressure toward adopting a neutral stance is being applied to the SEC as we approach the upcoming U.S. presidential elections.

Hey @GaryGensler what time are you getting hacked today?

Considering where Ether price action might head in the event of an approval, trading firm QCP Capital put the upside potential at 60%.

“We think an approval is now highly likely with trading expected as early as next week,” it wrote in part of its latest update to Telegram channel subscribers.

The target of 60% higher than current spot price — approximately $6,000 — was based on Bitcoin’s performance in the months after its own U.S. spot ETF go-ahead in January.

Popular trader Jelle, meanwhile, was one of many assuming that the stars would align for Ether bulls on the day.

"ETF decision this afternoon, but the chart looks like it knows the outcome. Higher," he wrote in part of an X post on the topic.

Global markets rallied and US equity futures are sharply higher, poised to push the S&P to a new all time high, after blowout earnings from Nvidia reassured investors that the global artificial-intelligence juggernaut will keep powering equity markets. As of 7:30am, S&P futures were 0.6% higher and Nasdaq futs gained 1.0% entirely on the back of Nvidia's stunning results which saw the company not only hike its Q2 revenue guidance to a consensus-busting $28BN but also announced a 10:1 forward stock split. Elsewhere, the Bloomberg’s dollar index retreated after touching a one-week high while US Treasuries inched higher after losses on Wednesday; European bond markets showed little reaction to the latest PMI  report that revealed private-sector business activity at its highest in a year in the euro area, suggesting an economic rebound is taking hold. Oil was flat; bitcoin traded around $70k while Ethereum looked poised to break above $4,000 on today's SEC approval of an ETH ETF. It's a busy day on the macro front with data from the Chicago Fed, jobless claims, Mfg and Service PMIs and New Home Sales on deck.

In premarket trading, it was all tech and all thanks to Nvidia, whose shares rose 7% adding nearly $200 billion to its market cap and poised to add to its 90%-plus year-to-date rally after it reported first-quarter results that beat expectations and gave an outlook that was seen as strong. The company also announced a stock split and increased its dividend. The optimism also lifted peers such as Super Micro Computer and AMD (AMD +2.7%, Dell +5.7%, Super Micro Computer +4.4%, Intel +0.5%). Here are the other notable premarket movers

• DuPont shares climb 5% after the chemical company announced plans to split into three publicly traded companies. Morgan Stanley said this was a “logical decision,” while Ke
• Elf Beauty shares advance 0.6% after the cosmetics company reported fourth-quarter adjusted earnings per share and net sales that came ahead of consensus estimates. Although the company also issued annual projections for sales and profit that didn’t meet expectations, analysts are generally positive on the print.
• Greenwave shares soar 28% after the metal recycling facilities operator announced that it had eliminated all convertible debt.
• Hasbro shares rise 3.4% after an upgrade to overweight at JPMorgan,
• Live Nation shares slide 8.3% after Bloomberg reported that the US Justice Department and a group of states will sue the entertainment company for antitrust violations related to Ticketmaster’s unrivaled control of concert ticket sales, according to people familiar with the case.
• LiveRamp shares rise 14% after the marketing technology company forecast first-quarter an
• Snowflake (SNOW US) shares rise 3.7% after the software company reported first-quarter results that beat expectations and raised its full-year forecast for product revenue. Analysts flagged its margin forecast as a potential concern.
• Under Armour (UAA US) shares drop 1.3% after Oppenheimer downgrades the sportswear company to market perform to await clearer signs of improvements.
• VF Corp. (VFC US) shares plummet 15% after the owner of the Vans and North Face brands reported a loss and a seventh consecutive quarter of falling sales.
• Zuora (ZUO US) shares gain 6.5% after the cloud-based software developer boosted its adjusted earnings per share guidance for the full year; the guidance beat the average analyst estimate.

“This is another important milestone in the AI journey,” said Guy Miller, chief market strategist at Zurich Insurance Company. “Top-performing companies have to deliver and Nvidia has delivered.”  The earnings offer clear evidence of the growing importance of AI, and “that’s going to keeping this juggernaut going,” Miller said.

The Nvidia result overshadowed Wednesday’s release of somewhat hawkish Federal Reserve minutes, which showed officials are in no rush to cut interest rates.

European stocks also rose but losses in utilities, real estate and telecommunication names have capped gains. The Estoxx 50 gains 0.5% in early London session with info tech names leading the move higher as NVDA boosted the region’s semiconductor sector. Meanwhile, UK utilities and homebuilders fall after Prime Minister Rishi Sunak unexpectedly announced the general election for July 4 rather than in the autumn. The tech sector leads gains, while utilities post largest declines.  Here are some of the biggest European movers Thursday:

• Wizz Air rises as much as 6.8% after issuing income guidance for fiscal year 2025 ahead of expectations, and noted that summer demand is tracking well
• CTS Eventim advance as much as 8.8% after the events ticketing firm reported 12% revenue growth, boosted by an increase of tickets sold online
• Allegro rises as much as 4.8% as 1Q earnings beat showed higher profitability in Poland and reduced losses in international markets
• Mips surges 11% after an ABG Sundal Collier upgrade to buy from hold, saying it looks set for a strong growth acceleration in the second half of 2024
• Tate & Lyle gains as much as 5.8% after announcing its full-year results and the sale of its remaining stake in the Primient joint venture
• Hargreaves Lansdown gains as much as 18% after rebuffing a £4.7 billion takeover proposal. The stock rose above bid value, though Citi says the price is already “rich”
• Embracer falls as much as 11% after reporting weak cash delivery in 4Q. The group also announced that Johan Ekström will step down from his roles as CFO and deputy CEO
• National Grid falls as much as 9.5% after the UK utility said it plans to raise £6.8 billion to fund its £60 billion network spending plan over the next five years
• Orlen drops as much as 7.4% as 1Q earnings missed expectations and amid uncertainty over the new management’s strategy
• Dometic falls as much as 7% after Nordea double-downgrades to sell from buy, giving the RV and outdoor equipment maker its only negative analyst rating
• Julius Baer falls as much as 3.2% after reporting net new money of only CHF 1b, which is weak and well below consensus, according to Vontobel

Elsewhere, M&A news continues to flow in, with Hargreaves Lansdown the latest UK firm to receive a takeover bid. Shares in the investment platform soared after it rebuffed a $6 billion private equity offer. Anglo American shares inched higher as BHP Group was seen moving a step closer to a $49 billion takeover of its smaller rival. Millicom International Cellular SA’s Stockholm-listed depositary receipts jumped as France’s Atlas Investissement confirmed it’s exploring an all-cash tender offer for the firm.

Earlier, Asian equities were mixed as a selloff in Chinese and Hong Kong shares offset gains in regional semiconductor stocks following Nvidia’s latest bullish sales forecast. The MSCI Asia Pacific Index was little changed as of 5 p.m. Hong Kong time. Chinese tech shares bucked the broader rally in the sector amid concerns about an intensifying price war in the local AI market. Alibaba and Tencent were among the biggest drags on the regional benchmark. Alibaba is considering selling convertible bonds, to raise about $5 billion, that can be converted into US-listed stock. BHP was another big contributor to the declines as Asian mining stocks fell after copper and gold prices retreated. The Hang Seng China Enterprises Index slid 1.7% to lead regional losses on Thursday. Traders attributed the broad declines in indexes in China and Hong Kong to profit-taking amid a lack of fresh catalysts after a months-long rally. Benchmarks in Japan and Taiwan advanced, while South Korea’s Kospi fluctuated after central bank Governor Rhee Chang Yong said the potential for an interest-rate hike was limited.

In FX, The Bloomberg Dollar Spot Index drops 0.1% paring Wednesday’s 0.3% rise, its best gain this month. The gauge climbed the previous three sessions amid Fedspeak that showed officials want more evidence inflation is moving lower before considering a rate cut

• EUR/USD rises 0.2% to 1.0842, snapping a three-day decline; it fell to a day-low of 1.0812 following mixed PMI data out of France yet recovered as the German release beat analyst expectations
• GBP/USD up 0.2% to 1.2738 as UK composite PMI came softer than expected; pound and gilts largely looked past an earlier-than-expected UK election campaign, with analysts and investors citing the similar economic policies of the two main parties among reasons for its lack of impact on markets

In rates, treasuries were little changed on the day, with yields trading within one basis point of Wednesday’s session close following a rangebound overnight. US 10-year yields around 4.42%, close to Wednesday session close with bunds trading cheaper by 1.5bp in the sector and gilts trading richer by 1bp. European bond markets showed little reaction to purchasing managers indexes (PMI) that revealed private-sector business activity at its highest in a year in the euro area, suggesting an economic rebound is taking hold. Bunds were re lower after the PMI data with German 10-year yields rising 1bps; investors still continued to price the first European Central Bank rate cut in June. Gilts have erased an earlier drop after UK services PMI came in below estimates. UK 10-year yields fall 1bps. US session focus includes $16b 10-year TIPS reopening, which follows a decent 20-year bond sale on Wednesday which traded 0.2bp through the WI level. 

In commodities, oil edged higher but held near the lowest closing level in three months; WTI gained 0.5% to trade near $77.90. Gold and copper prices slid further off recent record highs.

Bitcoin trades fimer but remains under $70k while Ethereum continues to gain above $3.8. Overnight, the US House voted to pass the FIT21 cryptocurrency regulations bill that creates a path for cryptocurrencies to be exempt from many securities regulations if they achieve a sufficient level of decentralisation.

Looking at today's calendar, US economic data includes April Chicago Fed national activity index, initial jobless claims (8:30am), May S&P global manufacturing PMI (9:45am), April new home sales (10am) and May Kansas City Fed manufacturing activity (11am). Fed officials’ scheduled speeches include Bostic at 3pm

Market Snapshot

• S&P 500 futures up 0.5% to 5,354.75
• STOXX Europe 600 up 0.2% to 522.10
• MXAP little changed at 180.85
• MXAPJ down 0.3% to 566.81
• Nikkei up 1.3% to 39,103.22
• Topix up 0.6% to 2,754.75
• Hang Seng Index down 1.7% to 18,868.71
• Shanghai Composite down 1.3% to 3,116.39
• Sensex up 1.2% to 75,111.22
• Australia S&P/ASX 200 down 0.5% to 7,811.80
• Kospi little changed at 2,721.81
• German 10Y yield little changed at 2.57%
• Euro up 0.2% to $1.0843
• Brent Futures up 0.1% to $81.99/bbl
• Gold spot down 0.8% to $2,359.48
• US Dollar Index down 0.15% to 104.77

Top Overnight News

• Nvidia punched through $1,000 premarket, driving futures higher, after the chipmaker’s bullish sales forecast delivered on AI hopes. Analysts hailed the results as they raised their targets on the stock. Peers AMD, Dell, Super Micro and Intel advanced as well. South Korea set aside $19 billion to bolster its chip industry. BBG
• China announced “punishment” military drills around Taiwan in a bid to send a “warning”, just days following the inauguration of the island’s new president. SCMP  
• Israel said it would revive stalled cease-fire talks with Hamas after social media video showing female Israeli soldiers being abducted by the militants on Oct. 7 sparked a public outcry. BBG
• Eurozone wages rose 4.7% in Q1, an uptick from +4.5% in Q4 and a sign that compensation pressures remain elevated (most assumed wages would hold steady at +4.5% or even cool a bit). ECB
• White House support building for allowing Ukraine to utilize American weapons in striking missile and artillery launch sites just over the border in Russia (the UK has already lifted such restrictions). NYT
• Retailers begin cutting prices following years of increases in response to cooler consumer demand – Walmart and Target in the last week talked about how they are cutting prices in a bid to drive traffic. FT  
• Jamie Dimon told CNBC there’s a chance the US may see a “hard landing,” adding at a JPMorgan Shanghai summit that stagflation would be the worst outcome for the economy. BBG
• The White House emphasized its backing for the Fed’s independence, following heightened speculation over how Donald Trump may ramp up pressure on the central bank if he wins another term. BBG
• The slump in lithium prices took its toll on SQM, the world’s second-biggest producer, which slid to a quarterly loss. One price measure — for lithium carbonate in China — is about 80% below its peak in 2022, with the market still grappling with inflated inventories. BBG
• Tesla "broke ground" on megapack battery factory in Shanghai on Thursday, according to Chinese state media.
• 300 Boeing planes used by United (UAL) and American Airlines (AAL) have potentially fatal fault that could cause jets to explode, Daily Mail reports

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded mixed after the negative performance of cash markets stateside and with US futures boosted after hours owing to Nvidia's earnings which also helped some semiconductor names in Asia. ASX 200 was dragged lower by underperformance in the mining sector after recent declines in underlying metal prices and with industry giant BHP pressured after Anglo American rejected its latest proposal and gave it another 7 days to make an improved offer. Nikkei 225 was underpinned and reclaimed the 39,000 status with the index helped by recent currency weakness and as tech stocks were inspired by Nvidia's strong earnings report. Hang Seng and Shanghai Comp were subdued amid ongoing frictions after the USTR posted details of the proposed tariffs on Chinese imports and China’s took countermeasures against a dozen US firms.

Top Asian News

• BoK kept its base rate unchanged at 3.50%, as expected, with the decision unanimous, while it stated that consumption recovery is modest and it will maintain a restrictive policy stance for a sufficient period of time. BoK said exports are to sustain growth and it is to monitor trends of slowing inflation and risks to financial stability. BoK Governor Rhee said chances of a policy interest rate increase are "limited" and that one board member said the path to a rate cut should be opened for the next three months, while Rhee added it is unclear when they will start discussing interest rate cuts given the uncertainty in inflation path and they have not discussed the size of cuts needed.
• South Korea announced a KRW 26tln support package for the chip industry and President Yoon announced they are to establish a KRW 17tln semiconductor financial assistance program at state-run Korea Development Bank, while they will extend the tax credit for the semiconductor industry set to expire at the end of this year.
• MAS said the current policy stance remains appropriate and the prevailing rate of the exchange policy band is needed to keep restraining imported inflation and domestic cost pressures.
• RBNZ Governor Orr said it is disappointing how stubborn domestic component inflation remains and the biggest risk we run is that we don't get inflation low and stable, according to Reuters. RBNZ Governor Orr also commented in a Bloomberg interview that another rate hike would only be meaningful if they believed inflation was getting away from them and noted that patience on inflation is not exhausted. Furthermore, he said inflation will not hinge on any single piece of data and that they can start to ease before inflation hits 2%.

European bourses (Stoxx 600 +0.2%) hold a modest upward bias, and overall unreactive to the mostly well-received EZ Flash PMI data. European sectors are mixed with no overarching bias. Tech outperforms following NVIDIA's blockbuster earnings and 10-for-1 stock split yesterday. Utilities are dragged lower by National Grid announcing a GBP 7bln rights issue. US Equity Futures (ES +0.5%, NQ +0.8%, YM Unch. RTY +0.2%) are mostly firmer but to varying degrees with the ES and NQ benefitting the most from NVIDIA's (+7% pre-market) blockbuster earnings yesterday.
UBS expects Stoxx 600 year-end target to be 540 (currently 522)

Top European News

• Germany's DIHK expects German GDP to stagnate this year vs. prev. view of a 0.5% contraction; Inflation to fall to 2.3% in 2024 from 5.9%; Exports expected to stagnate this year; Private consumption to increase by 1% this year.
• IMF sees French GDP growth at 0.8% this year and 1.3% in 2025.
• ECB's de Guindos said a prudent approach would back a 25bp cut.
• HSBC and Deutsche Bank now expect the BoE to start cutting rates in August (vs prev. forecast of June).

FX

• Dollar is broadly modestly softer vs. peers after running out of steam ahead of 105 (printing a high at 104.96). FOMC minutes were seen as hawkish, though with focus on the upcoming data releases.
• EUR/USD was initially knocked lower by disappointing French PMI metrics before a better outturn for Germany and (to an extent) EZ undid some of the damage. As it stands, EUR/USD is a touch firmer but shy of yesterday's 1.0863 best. There was limited follow through to Eurozone asset prices following the higher than expected Q1 wages release.
• GBP is softer and towards session lows following a miss on services and composite PMI metrics. Cable currently at 1.2710, and still yet to test 1.2700 to the downside (also yesterday's trough).
• JPY is flat vs. the USD after pulling back from its 156.89 peak overnight; highest level since 1st May; and currently sits around 156.70.
• NZD/USD once again the best performer across the majors in the wake of yesterday's RBNZ hawkish hold decision and despite less hawkish commentary from RBNZ's Orr.

Fixed Income

• USTs are contained with only limited spill-over selling seen in the wake of EZ PMI data with US metrics looming large later in the session; For now, the Jun'24 contract remains tucked within yesterday's 108.28+-109.08 range.
• Bunds initially spiked higher in wake of the French PMIs before it took a tumble lower on account of better-than-expected German PMI metrics which saw beats across all three metrics and the composite measure moving further into expansionary territory; much of the downside has been pared in recent trade. There was limited follow through to Eurozone asset prices following the higher than expected release.
• Gilts remain pressured in the wake of yesterday's hot inflation print and spill over selling from European paper, though was unreactive to the UK PMI metrics. Jun'24 contract had been as low as 96.58 before recovering modestly.

Commodities

• Crude prices were initially subdued though climbed higher following upbeat German Flash PMIs in which now forecasts "solid growth" for Germany. Brent near session highs and just above USD 82/bbl.
• Precious metals are lower across the board in a continuation of the price action seen since the surge after last weekend, with major geopolitical developments light, keeping risk premiums at bay; XAU fell from a USD 2,383.79.oz high to a USD 2,354.98/oz low.
• Base metals are sliding across the board, again in a continuation of the recent losses with 3M LME copper now around USD 10,250/t.
• Russian Energy Ministry said Russian oil production was within OPEC+ guidelines in Q1 and Russia exceeded OPEC+ quota in April due to technical reasons in output cuts, while it added that Russia is to submit a plan soon on compensation to the OPEC secretariat, according to Reuters.

Geopolitics: China-Taiwan

• China's military began joint military drills surrounding Taiwan, according to Chinese state media.
• Chinese state broadcaster said Taiwan President Lai's May 20th speech was a 'complete confession' of Taiwan independence and seriously 'provoked' the One-China principle, as well as undermined peace and stability across the Taiwan Strait. China's state broadcaster stated that Lai's speech was 'extremely harmful' and used 'country' to refer to Taiwan throughout his speech, while Lai has no sincerity in promoting cross-strait exchanges and China's drills around Taiwan are 'punishment' for Lai's provocation.
• Taiwan Defence Ministry said it expresses strong condemnation of Chinese military drills and has dispatched forces, while it will take practical actions to protect freedom and democracy, as well as have the 'ability, determination and confidence to ensure national security'. Taiwan's Defence Ministry said ground forces have reinforced defence coordination and safety of military camps, while air defence and land-based missile forces are collecting intelligence on targets.
• Taiwan's Presidential Office said it is regrettable to see China threatening Taiwan's democratic freedoms and regional peace and stability with unilateral military provocation and Taiwan's consistent position is that maintaining regional peace and stability is the common responsibility and goal of both sides of the strait.
• Senior Taiwanese Security Official said around 30 Chinese military planes and a dozen military ships came close to Taiwan as of midday Thursday, some of which crossed the Taiwan Strait median line and approached close to areas of Taiwan contiguous zone

Geopolitics: Middle-East

• US Defense Secretary Austin advocated during a call with Israeli Defence Minister Gallant for an effective mechanism to deconflict humanitarian and military operations in Gaza, according to the Pentagon.

US Event Calendar

• 08:30: May Initial Jobless Claims, est. 220,000, prior 222,000
  • May Continuing Claims, est. 1.79m, prior 1.79m
• 08:30: April Chicago Fed Nat Activity Index, est. 0.13, prior 0.15
• 09:45: May S&P Global US Manufacturing PM, est. 49.9, prior 50.0
  • May S&P Global US Services PMI, est. 51.2, prior 51.3
  • Global US Composite PMI, est. 51.2, prior 51.3
• 10:00: April New Home Sales, est. 678,000, prior 693,000
  • April New Home Sales MoM, est. -2.2%, prior 8.8%
• 11:00: May Kansas City Fed Manf. Activity, est. -7, prior -8

Central Banks

• 15:00: Fed’s Bostic Participates in Student Q&A

DB's Jim Reid concludes the overnight wrap

Markets had an eventful day yesterday, with various headlines that drove swings in both directions. As we go to press this morning, sentiment has turned more positive, with futures on the S&P 500 up +0.65% following an upbeat outlook from Nvidia’s results after the close. However, markets had previously lost ground earlier in the day, with the S&P 500 (-0.27%) falling back after the minutes of the latest Fed meeting were on the hawkish side. Moreover, bonds had already sold off after the UK CPI print surprised on the upside earlier in the day, which served as a reminder that the path back to target may not be a smooth one, and led investors to dial back the chance of rate cuts across Europe. In addition, there was also big news on the political side, as UK PM Rishi Sunak announced a general election would take place on July 4, just six weeks from today. So that’s another election in a busy political calendar this year, particularly with the US presidential election in November.

In terms of how the day developed, it began with that UK CPI release shortly after we went to press yesterday. The print showed headline CPI falling to +2.3% in April, which is the lowest in almost three years, and down from +3.2% the previous month. However, the r eading was above the +2.1% expected by the consensus, and core CPI also surprised on the upside at +3.9% (vs. +3.6% expected). So from a market perspective, the focus was on the upside surprise, and investors pushed back the likely timing of a rate cut from the BoE in response. Indeed, the chance of a June cut fell from 52% the previous day to 12% by the close, so there was a clear shift in expectations. And looking further out, just 38bps of rate cuts were priced in by the December meeting, down from 55bps the day before. Following the release, DB’s UK economist now expects the Bank of England to start cutting rates in August, with just 50bps of cuts this year. See his full update here.

That upside inflation surprise led to a major selloff for UK gilts, with the 10yr yield up by a notable +10.3bps on the day, whilst the 2yr yield was up by an even larger +14.7bps. And this was echoed across Europe, where investors dialled back their expectations for ECB cuts as well. In fact, the amount of cuts priced in by the ECB’s December meeting fell by -4.4bps on the day to 64bps, the fewest so far this year. In turn, that prompted a rise in yields across the continent, with those on 10yr bunds (+3.6bps), OATs (+3.5bps) and BTPs (+3.1bps) all rising as well.

Whilst the CPI print provided the initial focus for markets, there was attention on the UK throughout much of the day, as Prime Minister Rishi Sunak unexpectedly announced that a general election would take place on July 4, just six weeks from today. The move came as a surprise relative to 24 hours ago, since an election didn’t have to be held until January 28 at the latest, and the general consensus was it was more likely to take place in the autumn at some point. In terms of the process, the UK has a parliamentary system, so voters vote for individual Members of Parliament rather than directly for the Prime Minister. But as it stands, Politico’s polling average puts the opposition Labour Party on 44%, with the governing Conservatives behind them on 23%. After the election, the transition of power in the UK is immediate if a new government can be formed, so if Labour won a majority of MPs in the House of Commons, then their leader Keir Starmer would become Prime Minister the following day on July 5.

Otherwise yesterday, the main development for markets came after the close with Nvidia’s results. The company exceeded Q1 estimates and provided stronger-than-expected guidance for Q2. They expect revenue of c.$28bn in the current quarter (vs. estimate of $26.8bn) and see demand for its products continuing to outstrip supply into next year. The company also announced a 10-for-1 stock split, with its shares gaining around +6% in after-hours trading and moving above the $1000 a share level. So Nvidia continued to beat expectations, even if less dramatically than its last set of results in February that saw a +16.4% share price rise the next day. Those results have also prompted a rise in US equity futures, with those on the S&P 500 (+0.65%) and the NASDAQ 100 (+0.97%) pointing higher.

Yet before Nvidia’s results came out, it was actually a weak day for equities, with the S&P 500 (-0.27%) coming off its all-time high from the previous session. That selloff came as a result of some hawkish commentary from the latest Fed minutes. In particular, they said that “various participants mentioned a willingness to tighten policy further” if needed. So that pointed to more hawkish concerns than the market had taken away from Powell at the press conference on May 1. Nevertheless, the minutes had only a modest impact on Treasuries, with yields moving 1-2bps higher in their aftermath. And by the close, 2yr yields were up +4.1bps on the day, with much of this rise coming earlier during the European session, while 10yr yields closed +1.1bps higher at 4.42%.

For equities, that weakness came in part from the Magnificent 7 (-0.61%), which posted its worst performance in three weeks. But there was also broader softness after the Fed minutes, with the small cap Russell 2000 (-0.79%) seeing its largest decline so far in May. Within the S&P 500, energy stocks struggled (-1.83%) as oil prices fell for a third consecutive day, with WTI oil down -2.13% to $77.57/bbl, its lowest level in over two months. And this weakness was also prevalent in Europe, with the STOXX 600 (-0.34%) posting a further decline, which came alongside losses for the FTSE 100 (-0.55%), the CAC 40 (-0.61%) and the DAX (-0.25%).

Overnight in Asia, equities have put in a mixed performance. On the one hand, there’ve been solid gains in Japan, with the Nikkei up +1.15%. That comes as the flash manufacturing PMI was up to 50.5 in May, marking its highest level in a year. And there was also a big milestone for Japanese government bond yields yesterday, as the 10yr yield exceeded 1% for the first time since 2012. Elsewhere in Asia though, there’s been a weaker performance, with the Hang Seng (-1.38%), the Shanghai Comp (-1.00%) and the CSI 300 (-0.89%) all losing ground this morning, whilst the KOSPI is only up +0.18% after the Bank of Korea left interest rates unchanged, in line with expectations.

In terms of other data, we’ll get the flash PMIs for May today, but overnight we’ve also had the Australian numbers, where the composite PMI fell to 52.6, down from 53.0 in April. Otherwise, US existing home sales in April fell to an annualised rate of 4.14m in April (vs. 4.23m expected).

To the day ahead now, and the main data release will be the global flash PMIs for May. Otherwise in the US, there’s the weekly initial jobless claims and new home sales for April, and in the Euro Area there’s the European Commission’s preliminary consumer confidence indicator for May. From central banks, we’ll hear from the Fed’s Bostic, the ECB’s Villeroy, and the BoE’s Pill.

Overnight, DailyMail reported that yet another fleet of Boeing jets has a potentially disastrous flaw. The 777, commonly called the Triple Seven, has poor electrical insulation near its fuel tank that can cause "fire or explosion."

Back in March, the Federal Aviation Administration raised concerns about the 777's safety and set a deadline of May 9 for Boeing and third-party experts to respond. However, it's still unclear whether the company has taken any action, as reported by DailyMail. 

"This condition, if not addressed, could result in an ignition source inside the fuel tank and subsequent fire or explosion," the Airworthiness Directives note states.

The FAA noted the safety fix includes "installing electrical bonding and grounding" to prevent short-circuiting "electrostatic discharge to the surrounding structure" around the air intake system near the 777's center-wing fuel tanks. The projected cost to fix the 292 vulnerable wide-body planes is around $700k. 

777 are flown across the world. Many of these jets are commonly used by American and United Airlines. This was the same jet earlier this week that abruptly dropped 6,000 feet during a London to Singapore flight. 

Last month, Boeing whistleblower Sam Salehpour told lawmakers on Capitol Hill about "serious concerns about the safety of the 787 and 777 aircraft." 

Salehpour is one of the lucky whistleblowers still remarkably alive after more than a month from his statement on Capitol Hill. At that time, he told lawmakers about "premature fatigue failure" on these planes and warned Boeing was "putting out defective airplanes."

In each passing week, problems for Boeing are growing, from the 777 earlier this week that abruptly dropped to a 747's engine that erupted in a fireball last week to these recent mishaps:

• Boeing 767 Cargo Plane Crash-Landed In Turkey
• Boeing 737 Crashes After Failed Takeoff At African Airport
• United Airlines Boeing 737 Makes Emergency Return To Japanese Airport After Wing Flap "Irregularity"

In markets, Boeing shares have been battered in the last 5.5 years following the twin Max 737 crashes (separate crashes) that killed 346 people. 

The optics for Boeing are terrible. This is why Boeing CEO Dave Calhoun is preparing to step down at the end of the year. 

As discussed in our preview, Nvidia has been called the mother of all earnings -- the "single most important stock on the planet" according to Goldman - and for good reason: it accounts for 5% of the S&P. This morning, Mizuho’s desk analyst even said “they are the market in AI in many respects.”

So intense is the interest in today’s print that according to Bloomberg, some investors and onlookers I’ve heard from are making assessments of Jensen Huang’s body language when I spoke to him on Bloomberg Television in Las Vegas on Monday. They want any and all clues about whether this is going to go well. My conclusion from that conversation: Nvidia knows it needs to make sales beyond just cloud providers and is seeking fortune in enterprise and government markets (with help from Dell).

So with that preamble for what may be the most important earnings release this quarter, if not this year, here is what NVDA just reported for Q1:

• Revenue $26.04 billion (up from $7.19 billion y/y) and destroying estimates of $24.69 billion
  • Data center revenue $22.6 billion vs. $4.28 billion y/y, smashing estimates of $21.13 billion. This is the all important one
  • Professional Visualization revenue $427 million, +45% y/y, missing estimates of $479.1 million
  • Automotive revenue $329 million, +11% y/y, beating estimates of  $292.4 million
     
• Adjusted gross margin 78.9% vs. 66.8% y/y, blowing away estimates of 77%
• R&D expenses $2.72 billion, +45% y/y, in line with estimate $2.73 billion
• Adjusted operating expenses $2.50 billion, +43% y/y, in line with estimates of $2.51 billion
   
• Adjusted operating income $18.06 billion vs. $3.05 billion y/y, crushing estimates of $16.46 billion
• Free cash flow $14.94 billion vs. $2.64 billion y/y, estimate $12.29 billion

While the company blew away Q1 expectations, attention was on Q2 and specifically the revenue bogey where we said earlier $28BN was the magical number that would determine if the stock would plunge or soar. Well, not surprisingly, here is what NVDA just previewed for the second quarter:

• Revenue is expected to be $28.0 billion, plus or minus 2%.

Or right on the screws, and judging by the company's track record, that "plus or minus" will be a "plus", so realistically we are looking at almost $29 billion! Here is the only chart that matters.

Other guidance for Q2 and full year was the following:

• GAAP and non-GAAP gross margins are expected to be 74.8% and 75.5% (+/- 50 basis points). For the full year, gross margins are expected to be in the mid-70% range.
• GAAP and non-GAAP operating expenses are expected to be approximately $4.0 billion and $2.8 billion, respectively. Full-year operating expenses are expected to grow in the low-40% range.
• GAAP and non-GAAP other income and expense are expected to be an income of approximately $300 million, excluding gains and losses from non-affiliated investments.
• GAAP and non-GAAP tax rates are expected to be 17%, plus or minus 1%, excluding any discrete items.

Going back to the results, we will ignore the non-Data Center results which are now largely de minimus for the company, and focus on the big driver for NVDA results, where the company reported the following:

First-quarter revenue was a record $22.6 billion, up 23% from the previous quarter and up 427% from a year ago.

• Unveiled the NVIDIA Blackwell platform to fuel a new era of AI computing at trillion-parameter scale and the Blackwell-powered DGX SuperPOD™ for generative AI supercomputing.
• Announced NVIDIA Quantum and NVIDIA Spectrum™ X800 series switches for InfiniBand and Ethernet, respectively, optimized for trillion-parameter GPU computing and AI infrastructure.
• Launched NVIDIA AI Enterprise 5.0 with NVIDIA NIM inference microservices to speed enterprise app development.
• Announced TSMC and Synopsys are going into production with NVIDIA cuLitho to accelerate computational lithography, the semiconductor manufacturing industry’s most compute-intensive workload.
• Announced that nine new supercomputers worldwide are using Grace Hopper Superchips to ignite new era of AI supercomputing.
• Unveiled that Grace Hopper Superchips power the top three machines on the Green500 list of the world’s most energy-efficient supercomputers.
• Expanded collaborations with AWS, Google Cloud, Microsoft and Oracle to advance generative AI innovation.
• Worked with Johnson & Johnson MedTech to bring AI capabilities to support surgery.

If all that was not enough to send the stock soaring to all time highs, this shoudl seal the deal: the company also announced a 10 for 1 stock split, which guarantees that in a few weeks time, all retail investors will be piling into the suddenly "cheaper" stock.

And with all that, it's hardly a surprise that the stock is surging after hours, and is up about 4% trading in the mid $970s having earlier nearly jumped above $1,000 to a new all time high.

And while the company may not hit 4 digits after the close, it's just a matter of days if not hours before it does just that.

Via Middle East Eye

Only around 30 to 35 percent of Hamas fighters have been killed after more than seven months of operations by Israel in the Gaza Strip, US intelligence sources told Politico.

According to Politico, the majority of fighters who were members of the Palestinian movement prior to the 7 October attack in southern Israel are still alive, even as the reported death toll in Gaza has reached over 35,000 dead, mostly women and children.

Via Reuters

In addition, around 65 percent of Hamas' tunnel infrastructure remains intact, Politico's sources said, and thousands of new members are said to have been recruited to the group in recent months.

The report comes as Washington has become increasingly concerned about the viability of Israel's stated aim of destroying the Palestinian group.

On Monday, General Charles Brown, chair of the joint chiefs of staff, criticized Israel's strategy in Gaza, warning that the failure of Israeli forces to both secure captured territory and eliminate Hamas from northern Gaza was hampering its ability to achieve its military objectives.

The comments by Brown were a rare note of criticism from the US military, which has aided Israel in its war on Gaza by providing military equipment and assistance through intelligence sharing.

That cooperation has polarized President Joe Biden's Democratic political base in an election year.

While the Biden administration has thrown its full-fledged support behind Israel's war efforts, some officials in the administration are beginning to offer more criticism of the Israeli government, particularly on its war strategy and the overall aid situation for the Palestinians in Gaza.

Around 128 people taken captive by Hamas and other Palestinian groups remain in Gaza. Israel's government insists that military pressure is the best way to free them, and says it will not end its war in Gaza until it "eliminates" Hamas. Dozens of the captives are believed to be dead.

This reporting affirms questions I've raised to the State Department numerous times about the possibility of Hamas recruitment going up amid Israel's US-backed war on Gaza.
Here's just over a week ago: https://t.co/mKOlfZT0S2 pic.twitter.com/Rjj3gpI1qn

There is growing discontent in Israel over the war's progress, with Israeli Prime Minister Benjamin Netanyahu accused of giving up on the Israeli captives.