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A mistrial was declared in the case of an Arizona rancher accused of fatally shooting an illegal immigrant on his property near the US-Mexico border, after the jury failed to reach a unanimous decision following two full days of deliberation.

George Alan Kelly, 75, was charged with second-degree murder in the Jan. 30, 2023 shooting of 48-year-old Gabriel Cuen-Buitimea, who was in the United States illegally.

"Based upon the jury's inability to reach a verdict on any count," said Arizona Superior Court Judge Thomas Fink, adding "This case is in mistrial."

According to one of Kelly's defense attorneys, Kathy Lowthorp, just one juror was voting 'guilty,' which is why their legal team pushed for deliberations to continue.

"There was one hold out for guilt, the rest were not guilty. So seven not guilty, one guilty," said Lowthorp. "We believe in our gut that there was no way the state proved beyond a reasonable doubt."

George Alan Kelly’s defense attorney Kathy Lowthorp says the mistrial was caused by one holdout juror who believed Kelly to be guilty. She says the other 7 wanted to vote for acquittal. pic.twitter.com/BvS88AupcX

The Santa Cruz County Attorney's office can still retry Kelly for any charge, or drop the case. 

Prosecutors accused Kelly of recklessly firing nine shots from an AK-47 rifle toward a group of men who were trespassing on his cattle ranch after running from Border Patrol agents, roughly 115 yeards away. He was also accused of providing inconsistent statements throughout the investigation - initially failing to tell officials that he had fired his weapon, and then allegedly claiming that the illegal immigrants were part of a group of 10-15 people armed with AR-style rifles - and that he'd heard gunshots.

Kelly's attorney said that he had fired "warning shots."

"He does not believe that any of his warning shots could have possibly hit the person or caused the death," she said at the time. "All the shooting that Mr. Kelly did on the date of the incident was in self-defense and justified.

After Monday's ruling, Consul General Marcos Moreno Baez of the Mexican consulate in Nogales, Arizona, said he would wait with Cuen-Buitimea's two adult daughters on Monday evening to meet with prosecutors from Santa Cruz County Attorney's Office to learn about the implications of a mistrial.

"Mexico will continue to follow the case and continue to accompany the family, which wants justice." said Moreno. "We hope for a very fair outcome."

Kelly's defense attorney Brenna Larkin did not immediately respond to an emailed request for comment after the ruling was issued. Larkin had asked Fink to have jurors keep deliberating another day. -CBS News

Following the mistrial, Kelly said: "Let me go home, okay? That alright with y’all? It is what it is and it will be what it will be. I will keep fighting forever. I won’t stop."

“Let me go home,” George Alan Kelly speaks after the mistrial was declared. The Mexican Consulate said they hope the state will re-try the case and justice will be served. pic.twitter.com/IDYpaM806C

After a mixed bag from preliminary April European PMIs (Services strong-er, Manufacturing weaker-er, surging prices)...

“Accelerated increases in input costs, likely driven not only by higher oil prices but also, more concerningly, by higher wages, are a cause for scrutiny Concurrently service-sector companies have raised their prices at a faster rate than in March, fueling expectations that services inflation will persist. ”

and after March US PMIs exposed the end of the disinflation narrative...

"Most notable was an especially steep rise in prices charged for consumer goods, which rose at a pace not seen for 16 months, underscoring the likely bumpy path in bringing inflation down to the Fed's 2% target. ”

...S&P Global's preliminary US f°r April just dropped and they were ugly with both Manufacturing and Services disappointingly dropping further as the former    dropped back into contraction:

• •    Flash US Services Business Activity Index at 50.9 (Exp: 52.0; March: 51.7) - 5-month low.

• •    Flash US Manufacturing PMI at 49.9 (Exp 52.0; March: 51.9) - 4-month low.

Source: Bloomberg

Commenting on the data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said:

“The US economic upturn lost momentum at the start of the second quarter, with the flash PMI survey respondents reporting below-trend business activity growth in April. Further pace may be lost in the coming months, as April saw inflows of new business fall for the first time in six months and firms’ future output expectations slipped to a five-month low amid heightened concern about the outlook.

“The more challenging business environment prompted companies to cut payroll numbers at a rate not seen since the global financial crisis if the early pandemic lockdown months are excluded.

After March showed accelerating prices, flash April data confirmed the trend

“Notably, the drivers of inflation have changed.

"Manufacturing has now registered the steeper rate of price increases in three of the past four months, with factory cost pressures intensifying in April amid higher raw material and fuel prices, contrasting with the wagerelated services-led price pressures seen throughout much of 2023.”

So slower growth and much faster inflation - that does not sound like a recipe for rate-cuts... in fact quite the opposite.

Bidenomics 101: the American dream of owning a home has become the American nightmare for almost half the US population.

As housing specialist Redfin reports, rising home prices and mortgage rates "are making it harder to believe in the American dream of homeownership. Lack of affordability is the most commonly cited reason renters don’t believe they’ll ever own a home."

The details are dire: Nearly two in five (38%) U.S. renters don’t believe they’ll ever own a home, up from roughly one-quarter (27%) less than a year ago. 

This is according to a Redfin-commissioned survey of roughly 3,000 U.S. residents conducted by Qualtrics in February 2024. This report focuses on the 1,000 respondents who indicated they are renters. The relevant questions were: “Do you believe that you will ever own your own home in the future?” and “Which of the following are reasons you aren’t likely to purchase a home in the near future?” The 27% comparison is from a Redfin survey conducted in May and June 2023. 

Lack of affordability is the prevailing reason renters believe they’re unlikely to become homeowners. Nearly half (44%) of renters who don’t believe they’ll buy a home in the near future said it’s because available homes are too expensive. The next most common obstacles: Ability to save for a down payment (35%), ability to afford mortgage payments (33%) and high mortgage rates (32%). Roughly one in eight (14%) simply aren’t interested in owning a home. 

Buying a home has become increasingly out of reach for many Americans due to the one-two punch of high home prices and high mortgage rates. First-time homebuyers must earn roughly $76,000 to afford the typical U.S. starter home, up 8% from a year ago and up nearly 100% from before the pandemic, according to a recent Redfin analysis. Home prices have skyrocketed more than 40% since 2019, due to the pandemic homebuying frenzy and a shortage of homes for sale. And the current average 30-year fixed mortgage rate is 6.82%. While that’s below the 23-year-high of nearly 8% hit in October, it’s still more than double the record low rates dropped to in 2020. 

Home prices have risen 7% in the last year alone, and monthly mortgage payments have risen more than 10%, which helps explain why renters today are more likely than they were last year to say they don’t see themselves owning a home anytime soon. 

Many renters can’t fathom homeownership because they’re already struggling to afford their monthly housing costs. Nearly one-quarter (24%) of renters say they regularly struggle to afford their housing payments, and an additional 45% say they sometimes struggle to do so.

Rents have soared over the last few years because so many people moved during the pandemic, upping demand for rentals. The median U.S. asking rent is roughly $2,000, near the record high hit in 2022–but the good news for renters is that prices aren’t growing nearly as fast as they were during the pandemic, partly because an influx of apartment supply is taking some of the heat off prices. 

“Housing costs are high across the board, but renting is a more affordable and realistic option for many Americans right now–especially those who have never owned a home and aren’t able to tap into equity from a previous sale,” said Redfin Chief Economist Daryl Fairweather. “While owning a home is usually a sound longterm investment, the barriers to entry and upfront costs of buying are higher than renting. Buying typically requires a sizable down payment and approval for a mortgage–things that are difficult for many people today, when the typical down payment is near $60,000 and mortgage payments are sky-high. The sheer expense of purchasing a home is causing the American Dream of homeownership to lose some of its shine.” 

Gen Z renters are most likely to believe they’ll own a home

Broken down by generation, Gen Z renters are by far the most likely to believe they will become homeowners (maybe it's because they are also the dumbest). Just 8% of Gen Z renters believe they’ll never own a home, compared to 22% of millennials, 40% of Gen Xers and 81% of baby boomers.

Europe's study in paradoxical contrasts continues. On the same day, ECB's de Guindos said a June rate cut looks like a set deal (unless there are surprises) with the end of inflation fight is in sight, the Euro-area's private-sector activity advanced to the highest level since May 2023, driven by a buoyant services sector and Germany's return to growth; UK firms also reported the strongest growth in almost a year

Here are the details: 

France

• Services Flash PMI (Apr) 50.5 vs. Exp. 49.0 (Prev. 48.3);
• Manufacturing Flash PMI (Apr) 44.9 vs. Exp. 47.0 (Prev. 46.2);
• Composite Flash PMI (Apr) 49.9 vs. Exp. 48.8 (Prev. 48.3);
  • "Overall, our HCOB nowcast model for the second quarter points to a recovery of the French economy, driven by the services sector".

Germany

• Manufacturing Flash PMI (Apr) 42.2 vs. Exp. 42.9 (Prev. 41.9);
• Services Flash PMI (Apr) 53.3 vs. Exp. 50.5 (Prev. 50.1);
• Composite Flash PMI (Apr) 50.5 vs. Exp. 48.6 (Prev. 47.7);
  • "Factoring in the PMI numbers into our GDP Nowcast, we estimate that GDP may expand by 0.2%".

UK

• Services PMI (Apr) 54.9 vs. Exp. 53.0 (Prev. 53.1);
• Manufacturing PMI (Apr) 48.7 vs. Exp. 50.4 (Prev. 50.3);
• Flash Composite PMI (Apr) 54.0 vs. Exp. 52.7 (Prev. 52.8)

Euro-Area

• Services Flash PMI (Apr) 52.9 vs. Exp. 51.8 (Prev. 51.5);
• Manufacturing Flash PMI (Apr) 45.6 vs. Exp. 46.6 (Prev. 46.1);
• Composite Flash PMI (Apr) 51.4 vs. Exp. 50.8 (Prev. 50.3);
  • "Considering various factors including the HCOB PMIs, our GDP forecast suggests a 0.3% expansion in the second quarter".

Putting it all together, the Euro area composite flash PMI increased by 1pt to 51.4 in April, above the 50.7 consensus estimate, in expansion (>50) for the second straight month and the highest since May 2023. As shown in the chart below, the improvement in the composite index was skewed heavily towards the services sector, where the index rose (by 1.4pt) to 52.9, while the manufacturing PMI continued to sink.

Across countries, the improvement in the area-wide index was driven by Germany - which was above that key 50 expansion mark for the first time in 10 months driven by services (even as manufacturing continued to shrink, though at a slower pace than the month before) defying analysts who had expected another sub-par reading - and France, partially offset by a slight deceleration in the periphery.

In the UK, the composite flash PMI improved notably to 54.0, above consensus expectations of a decline, on the back of a pick-up in services activity, where the index grew by 1.8pt to 54.9, which was partly offset by a slowdown in manufacturing activity.

Commenting on the results, Goldman saw three main takeaways from today's data.

• First, there are continued improvement in the Euro area headline numbers, coupled with continued, but moderating, optimism for the upcoming year.
• Second, the PMI price components ticked up in April, driven by both sectors, with the risks to cost inflation coming from higher wages and oil prices.
• Lastly, the UK saw another month of expanding activity, also driven by the services sector, which should support growth momentum going forward.

While output prices ticked up only marginally in both the Euro area and the UK, it is important that firms' pricing behavior remains supportive for the disinflationary process, Goldman's economists noted.

The positive figures suggest that the euro area will probably expand by 0.3% in the second quarter, matching the rate of growth in the January-March period, said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank. That’s a more upbeat prediction than the Bloomberg consensus, which sees just 0.1% growth at the start of the year, with data due on April 30.

“It appears that the recession was predominantly concentrated within the manufacturing sector, while the broader economy may have narrowly skirted such a downturn,” de la Rubia said. “The service sector may serve as a catalyst for the overall economy.”

After contracting in the final quarter of last year, Germany was long expected to have had a shallow recession over the winter. But the Bundesbank last week said output may have grown slightly in the first three months of the year because of a pickup in industrial production, exports and construction — meaning the country would avoid such a scenario.

De la Rubia agreed, saying a Nowcast model points to economic expansion of 0.1% in the first quarter followed by 0.2% in the second. German bonds fell across the curve and money markets reduced wagers on the scope for interest-rate cuts after data for the country were published. The two-year maturity, which is sensitive to changes in monetary policy, rose as much as three basis points to 2.99%.

The overall performance was also better in France, where activity remained broadly stable after contracting for 10 months. That development was also driven by services, where rising demand resulted in the first expansion in almost a year. New orders placed with factories fell at the steepest pace since January, increasing the wedge between manufacturers and services firms.

“The French services sector is the workhorse of the economy,” said Norman Liebke, an economist at Hamburg Commercial Bank. “French manufacturing output stays subdued, but we expect it will soon follow the path of the services sector. The manufacturing sector delays the overall economy’s recovery for now, though.”

But the better momentum in both countries was flanked by stronger price pressures, which as Bloomberg notes is a potential source of concern for European Central Bank officials who are gearing up for a first interest-rate cut in June. That development was also centered on the services sector, where rising wages are playing a bigger role.  Diverging fortunes were equally visible in the labor market. While German and French services firms added workers at a quicker pace, factories shed jobs.

Overall though, the currency bloc’s top two economies couldn’t keep pace with the rest of the region, which appears to be recovering after the energy crisis that stifled its post-Covid rebound.

The rise in power costs — triggered by Russia’s war in Ukraine — also fanned inflation, though consumer-price growth has since slowed markedly. The purchasing-manager data showed that price pressures “intensified slightly” this month.

“The PMI figures are poised to test the ECB’s willingness to cut interest rates in June,” de la Rubia said. “Accelerated increases in input costs, likely driven not only by higher oil prices but also, more concerningly, by higher wages, are a cause for scrutiny. Concurrently, service-sector companies have raised their prices at a faster rate than in March, fueling expectations that services inflation will persist.”

Still, he doesn’t expect that to derail a well-telegraphed easing at the ECB’s next monetary-policy meeting. “However, we doubt that the central bank will adopt a ‘pragmatic speed,’ as suggested by Francois Villeroy de Galhau” de la Rubia said. “Instead, we expect a more cautious approach.”

As noted above, comments by ECB Vice President Luis de Guindos earlier on Tuesday reinforce that approach. “The level of uncertainty makes it very difficult to say,” he told Le Monde, according to a transcript on the ECB website. “I already mentioned June. As for what happens afterwards, I’m inclined to be very cautious.”

A separate set of data for the UK showed the economy’s recovery from recession unexpectedly gathered pace at the start of the second quarter as private-sector firms reported the strongest growth in almost a year. PMIs are closely watched by markets as they arrive early in the month and are good at revealing trends and turning points in an economy. A measure of breadth of changes in output rather than depth, business surveys can sometimes be difficult to map directly to quarterly GDP.

US figures later are set to show continued growth. Earlier numbers from Australia, India and Japan pointed to faster expansion.

Authored by Simon White, Bloomberg macro strategist,

Focus has been on the growing short position in the yen. But the total size is likely to be small in the scheme of things. The real story is the lack of domestic hedging leading to a large structural short in the yen which will drive the currency much higher when it is covered.

There has been some back and forward internally about the extent of the yen short position. FX positioning is hard to get good visibility on unless you are in the flow. The go-to for most people that aren’t is the CFTC data. This certainly shows that yen short-positioning versus the dollar has risen in recent months.

The chart measures the net short versus open interest. Although the short is high, we can see it has been higher, especially in the late 1990s when USD/JPY rose to ~150.

But COT data is based on flows of FX futures, which are low compared to spot and other flows. The net short for the speculator category - which aims to catch hot flows that are more likely to be price moving on a shorter-term basis, and will mainly be CTA flows – is only about $13.4 billion, not earth shattering.

More important for the longer-term outlook is how the yen’s steadily weakening path is leading to domestic investors to allow their foreign asset positions to become underhedged. As a proxy, we can look at the behavior of life insurers, who are among the largest hedgers of their overseas positions. Their hedging ratios have slipped to under 50%.

Japan is the world’s largest net creditor, with over $3 trillion of assets held abroad. Domestic investors’ flows dominate flows of foreigners buying Japanese assets.

Thus, the large and building structural yen short of Japanese investors will be what ultimately sets the path for the currency.

When the wind changes, the yen is primed to change direction with vigor.

Monday into Tuesday saw the Israel Defense Forces (IDF) intensify its operations in central and northern Gaza, following a cooling of tensions with Iran after the two almost went to war. Tuesday marks the 200th day of Israel's war in Gaza, in response to the Oct.7 Hamas terror attacks.

"Israel bombarded northern Gaza overnight in some of the heaviest shelling in weeks, panicking residents and flattening neighborhoods in an area where the Israeli army had previously drawn down its troops, residents said on Tuesday," Reuters reports.

Image via United Nations

This strongly suggests that even once the IDF has cleared an area, Hamas has the capability of moving back in - also given its capabilities utilizing Gaza's vast tunnel network.

"Tanks made a new incursion east of Beit Hanoun on the northern edge of the Gaza Strip, though they did not penetrate far into the city, residents and Hamas media said. Gunfire reached some schools where displaced residents were sheltering," Reuters continues.

Starting Sunday night, the IDF launched a 'surprise operation' in the central Gaza corridor, the military confirmed, happening over the Passover holiday: 

The IDF says the “surprise operation” that began Sunday night is aimed at “deepening the achievements” in the Netzarim corridor.

The corridor, built around a road south of Gaza City, enables the IDF to carry out raids in northern and central Gaza while allowing Israel to control access to the north for Palestinians seeking to return after fleeing south.

"The forces are carrying out targeted raids and are thwarting terror in the area," the IDF says in a statement.

The IDF confirmed the return of Hamas militants to areas which had previously been clear enough to halt operations. 

⚡️The moment of the bombing of Al-Sahaba Tower on Al-Wahda Street in the center of Gaza City. pic.twitter.com/p0UcrJNS2Z

"Nahal troops spotted several gunmen amid the raid, and called in airstrikes by fighter jets against them and the buildings they were spotted operating at," an IDF statement continued.

As for Rafah in the south, so far it seems the IDF's planned offensive appears to be on pause. An estimated 1.5 million civilians are sheltering in the city, and the White House has urged the Netanyahu government not to attack it. Humanitarian aid groups currently say they don't know what to expect.

The US has urged that Israel evacuate civilians first, but these plans are anything but clear at this point. "I have no idea what the plan with the procurement of tents by the Israelis is," the head of the UN humanitarian office in Gaza, Andrea de Domenico, told Al Jazeera. Recent days have seen dozens of casualties due to shelling of some areas, but a full assault is expected to be a humanitarian nightmare for the refugees there.

Authored by J.G. Collins via The Epoch Times (emphasis ours),

Epoch Times reporter Tom Ozimek recently wrote in these pages of former President Donald Trump’s encounter with Kayla Montgomery, a young Republican political consultant whose business is to “engage young, black professionals, students, and community members” in the Atlanta area. The ex-president and Ms. Montgomery met at a Chick-fil-A restaurant during an impromptu campaign stop in Atlanta. Ms. Montgomery was effusive in her praise of President Trump, saying, “I don’t care what the media tells you, President Trump—we support you!” A video of Ms. Montgomery and the former president hugging soon went viral, even as the media and Democrats quickly dismissed the interaction as “staged.”

Supporters of former President Donald Trump walk near his residence at Mar-A-Lago in Palm Beach, Fla., on Aug. 9, 2022. (Giorgio Viera/AFP via Getty Images)

Then, last week, President Trump left his trial in Manhattan to visit a bodega in Washington Heights, a mostly black and immigrant community on the Upper West Side of Manhattan and received a hero’s welcome from the working people there.

Whether the Chick-fil-A event was staged or not is open to debate. What is undeniable, though, is that polling shows Donald Trump has upended much of the black and Hispanic voting support Democrats have enjoyed since at least Lyndon Johnson’s “Great Society” and, at least in some instances, back to FDR’s New Deal.

A Wall Street Journal poll showed that President Trump’s support among black men in swing states had moved to 30 percent earlier this month compared to just 11 percent of black men nationally in 2020. Among black women, those same percentages went from 6 percent in 2020 to 11 percent in April.

‘It’s the Economy, Stupid!’

Political pundits and editorial pages all seem flummoxed by President Joe Biden’s erosion of support among the traditional Democrat coalition.

But no one seems more upset by the erosion of black support than Democrat political strategist James Carville, “the Ragin’ Cajun,” who engineered Bill Clinton’s 1988 victory over incumbent George H.W. Bush. That’s ironic, because it was Mr. Carville who added the memorable phrase “It’s the economy, stupid!” to the American political lexicon when he pinpointed President Bush’s greatest vulnerability 36 years ago.

Between January 2021, when President Biden took his oath of office, up to March of this year, average rents have increased by 20 percent. By comparison, residential rents increased just 12 percent during President Trump’s entire term. The increased costs hit blacks and Hispanics disproportionately because of the vast disparity in home ownership, as illustrated below.

Blacks and Hispanic workers also disproportionately occupy positions in production and transportation/material moving jobs at higher rates (17.8 percent and 16.7 percent, respectively) than whites (12.1 percent). But those are the jobs most vulnerable to being taken by the influx of the purported asylum seekers who typically work for less and are less likely to join unions or file complaints with the authorities against their employer. The asylum seekers have exploded since President Biden lifted U.S. border restrictions.

As Well as Crime ...

Blacks and Hispanics tend to be disproportionately affected as victims of recidivist criminals let go by criminal justice initiatives championed by leftist Democrat “progressives” in so-called “blue” states. As shown in the chart above, black victims of crime actually decreased during the Trump presidency. (The chart is from a study that has not been updated for later years.)

By the same token, black-owned businesses were among the many businesses looted and destroyed by “progressive” George Floyd rioters in 2020.

… and Education

President Trump made permanent a commitment of $255 million in annual funding for historically black colleges and universities, and he increased funding for the Federal Pell Grant program by signing the FUTURE Act.

Within the states, Republican legislators and governors have championed school choice and a “back-to-basics” approach to K-12 that even Democrats acknowledge. Jorge Elorza, the CEO of Democrats for Education Reform and its affiliate Education Reform Now, a think tank, said: ”We’ve lost our advantage on education because I think that we’ve failed to fully acknowledge that choice resonates deeply with families and with voters.”

Meanwhile, Education Week, the Left-leaning magazine for K-12 teachers, summarized President Biden’s policies as follows:

“[He] passed stricter rules for charter schools seeking federal grant funding; awarded $1 billion to boost school safety and students’ mental health; and proposed an overhaul of Title IX that would give LGBTQ+ students explicit protection under the landmark sex discrimination law and bar outright bans on transgender youth who want to join athletic teams that align with their gender identity.”

Summary

Black and Hispanic voters are moving toward President Trump for a simple reason: their pocketbook and their well-being. The viewpoints of mainstream media pundits—college educated, overwhelmingly white, and mostly liberal—have long maintained a soft bigotry of racial expectations without understanding much of the economy of people who work in blue-, pink-, and green-collar jobs. The pundits don’t understand that blacks and Hispanics, like the rest of the country, have experienced a near 20 percent cumulative erosion in the purchasing power of their dollar and rising crime. They see K-12 education policies that deny school choice and that serve teachers’ unions, special interests, and Democrat party gender identity dogma far more than children and parents.

Black and Hispanic voters have every reason to depart from their traditional voting patterns.

It’s common sense.

US equity futures are higher for the second day, even as small-caps underperform after bond yields rise about +4bps and trade near session highs. As of 7:40am S&P and Nasdaq futures were 0.3% higher after Wall Street’s rebound from a $2 trillion selloff; European stocks also rose on broad-based strength, with only commodity-related sectors in the red; the UK’s FTSE 100 index hit a record high as a rebound that took hold on Monday gathered momentum. Ahead of Tesla's earnings today, the Mag7 are mixed with semis higher pre-mkt after the recent rout. Commodities are stronger led by Ags and Energy with a flat USD. The macro data focus is on Flash PMIs, Home Sales, Regional Mfg Activity indicators; earnings are skewed towards the Industrials sector with TSLA the first Mag7 stock set to report. We will see if the last few trading sessions sufficiently squared positions and if realized stock moves can match the implied moves, expected to be the largest in 1.5 years.

Early results Tuesday were mostly positive, with shares of United Parcel Service and General Motors rising in premarket trading after earnings beats. PepsiCo slipped after reporting falling volumes in North America. But the main event will be the “Magnificent Seven” cohort of tech megacaps, with Tesla set to be the first to report after today’s market close. Next up is Meta Platforms on Wednesday, followed by Microsoft and Alphabet on Thursday. Here are some other notable premarket movers:

• Abeona Therapeutics shares slumped 48.1% after the biotechnology company’s drug for a rare connective tissue disorder failed to win approval from the US Food and Drug Administration.
• Cadence Design shares drop 5.8% after the maker of semiconductor design software’s revenue and adjusted earnings per share forecast for 2Q fell short of average analyst estimates. Additionally, the company reported 1Q product and maintenance revenue that missed expectations.
• JD Sports shares gained after the British sportswear and sneakers retailer agreed to buy Hibbett (HIBB US) for about $1.1 billion to speed up its US expansion, in a deal expected to be accretive in the first full year of ownership. Hibbett gained 19%.
• Roblox shares rose 4.2% after the game maker was upgraded to overweight from neutral at JPMorgan, which said it sees a “compelling” entry point for a company that has bookings growth of around 20%, exiting a heavy investment cycle and ramping new revenue streams in advertising as well as commerce.
• Sunnova Energy shares fell 2.4% after the renewable energy company is cut to sector weight from overweight by KeyBanc Capital Markets. The downgrade reflects a cautious industry-wide stance, despite Sunnova’s “undemanding valuation,” analyst Sophie Karp writes in a note.

Earnings will stay front and center of investors’ minds this week with about 180 companies — over 40% of the S&P 500 market value — report results. The focus on corporate profits comes after a rout fueled by geopolitical fears and signals the Federal Reserve will be in no rush to lower rates. "Whether markets see further consolidation from here is likely to hinge on the assessment of the sustainability of AI demand ahead following the earnings releases," said Eddie Cheung, a senior strategist at Credit Agricole CIB.

The challenge to S&P 500 returns is that companies will have to produce earnings, and outlooks, that support the already elevated multiples. Profits for the Magnificent Seven are forecast to rise 38% in the first quarter from a year ago, dwarfing the overall S&P 500’s 2.4% anticipated year-over-year earnings growth, according to Bloomberg Intelligence. But excluding Nvidia, the leading chipmaker for AI technology, expected net income growth for the group falls to 23%. Nvidia, which Goldman Sachs Group’s trading desk dubbed “the most important stock on planet Earth,” doesn’t report its earnings for another month.

“We remain focused on the current earnings season, which could re-focus investor attention on solid underlying fundamentals,” Citigroup Inc. strategists Mihir Tirodkar and Beata Manthey wrote in a note. “We would view the recent pullback as a buying opportunity."

Meanwhile, Investor positioning on megacap growth and tech stocks continues to be cut, down from the 97th percentile in early March to the 77th percentile now, according to Deutsche Bank strategists. The group is still the only sector where positioning is above historical average, even if no longer extreme, the strategists wrote, countering the self-serving and incorrect observations by JPM's Marko Kolanovic.

In Europe, the Stoxx 600 index climbed 1%, with technology and retail shares leading gains, while the mining sector lagged. SAP SE jumped more than 4% as a boom in demand for artificial intelligence fueled the German software company’s growth. Drugmaker Novartis AG added as much as 5% after lifting full-year guidance. Here are some other notable premarket movers:

• JD Sports shares gain as much as 7.5% after the British sportswear and sneakers retailer agreed to buy Hibbett for about $1.1 billion to speed up its US expansion
• Novartis shares advance as much as 5%, the most in more than 9 months, after the Swiss drugmaker reported results for the first quarter that impressed analysts
• Nordnet rises as much as 9.7%, the most since October, after the digital bank reported its first-quarter results. Both Citi and Morgan Stanley highlight the company’s higher-than-expected brokerage income
• SAP shares jump as much as 4.4% in Frankfurt after the software company reported quarter-over-quarter acceleration in the growth rate of current cloud backlog, a key indicator of cloud revenue to be booked within next 12 months
• Akzo Nobel shares fall as much as 6.6%, to the lowest since November, after the coatings maker failed to raise its profit forecast for the year. The stock had risen in five of the six sessions leading up to Tuesday’s earnings report
• DNB falls as much as 3.9%, the most since October, after the Norwegian lender reported a net interest income miss for the third quarter in a row, with analysts also flagging a low-quality profit beat due to it being attributable to provision income
• Anglo American falls as much as 3.9% in London after the miner reported first-quarter earnings. Analysts noted that sales were behind production in copper and iron ore, leading to temporary inventory builds
• Kuehne + Nagel shares drop as much as 3.9% after reporting first-quarter earnings in which pricing and cost performance were offset by lower volumes, according to Citigroup
• Boliden declines as much as 5.9% after its first-quarter results, with analysts flagging that headline operating profit missed, but underlying operations performed reasonably well
• OVH shares slide as much as 17%, the biggest drop since March 2023, as weaker-than-expected 2Q growth led the IT services provider to lower its forecast for growth and capex for the year

PMI data on Tuesday reinforced the positive mood in Europe. Private-sector activity advanced to the highest level in almost a year, driven by a buoyant services sector and Germany’s return to growth. And yet, barring any economic surprises, a rate cut in June is a “fait accompli,” European Central Bank Vice President Luis de Guindos said.

Earlier in the session, Asian stocks also rose for a second day as sentiment toward China continued to improve, with easing fears of a wider Middle East conflict offering additional support. The MSCI Asia Pacific Index rose as much as 0.8%, with TSMC and Tencent among the biggest boosts. Most regional markets advanced, though mainland China stocks fell for a third day and Japanese shares trimmed gains as the yen strengthened after Finance Minister Shunichi Suzuki’s comments on possible intervention. Hong Kong stocks led the region’s gains after UBS upgraded Chinese stocks to overweight, citing resilient earnings and a growing focus on shareholder returns. Investors are turning more upbeat on the nation’s assets thanks to green shoots in the economy as well as signs of improving corporate performance.

• Hang Seng and Shanghai Comp. were mixed with outperformance in Hong Kong due to tech strength, while the mainland lagged amid the PBoC's continued tepid liquidity operations and with the US drafting sanctions that threaten to cut some Chinese banks off from the global financial system for aiding the Russian war effort.
• Nikkei 225 traded indecisively and on both sides of 37,500 after briefly wiping out all of its opening gains.
• ASX 200 was led by strength in real estate and tech, while the latest flash PMIs from Australia were varied.

“What makes us more positive now on earnings are the early signs of a pick-up in consumption,” UBS strategists including Sunil Tirumalai wrote in a note. “Any rebound in consumer confidence for us means the possibility of household savings flowing into consumption” and eventually markets.

In rates, treasuries are under modest pressure with front-end yields higher by ~2bp before a flurry of bond auctions that will test investors’ appetite after yields hit the highest in 2024: the latest weekly supply cycle (2-, 5- and 7-year auctions) is set to kick off with record $69b 2-year later today. US 10-year yields around 4.645%, higher by nearly 4bps on the day. In Europe, gilts underperform their German counterparts after the UK raised its planned gilt issuance for the fiscal year more than expected, as the government’s budget shortfall overshot forecasts; the belly of gilts curve cheapened after DMO announcement, with 5-year UK yields higher by around 2bp. Treasury coupon auctions resume at 1pm New York time with $69b 2-year, followed by 5- and 7-year notes Wednesday and Thursday. The WI 2-year yield at around 4.965% is ~37bp cheaper than last month’s, which tailed by 0.5bp

In commodities, oil prices advance, with WTI rising 0.4% to trade near $82.20. Gold extends Monday’s drop, down 1% on the day; Monday’s 2.7% drop was biggest in nearly two years. Bitcoin is modestly softer and holds around the USD 66k mark.

Looking at today's calendar, US economic data slate includes April Philadelphia Fed non-manufacturing activity (8:30am), S&P manufacturing and services PMIs (9:45am), March new home sales and April Richmond Fed manufacturing index (10am). From central banks, we’ll hear from the ECB’s Panetta and Nagel, and the BoE’s Haskel and Pill as Fed members have entered quiet period ahead of May 1 policy announcement. Finally, today’s earnings releases include Visa, Tesla, PepsiCo, General Electric, UPS and General Motors.

Market Snapshot

• S&P 500 futures up 0.1% to 5,052.75
• STOXX Europe 600 up 0.6% to 505.15
• MXAP up 0.6% to 170.25
• MXAPJ up 0.9% to 524.40
• Nikkei up 0.3% to 37,552.16
• Topix up 0.1% to 2,666.23
• Hang Seng Index up 1.9% to 16,828.93
• Shanghai Composite down 0.7% to 3,021.98
• Sensex up 0.3% to 73,852.66
• Australia S&P/ASX 200 up 0.4% to 7,683.51
• Kospi down 0.2% to 2,623.02
• Brent Futures up 1.0% to $87.85/bbl
• Gold spot down 0.9% to $2,305.32
• US Dollar Index down 0.14% to 105.93
• German 10Y yield little changed at 2.50%
• Euro up 0.2% to $1.0680

Top Overnight News

• The U.S. is drafting sanctions that threaten to cut some Chinese banks off from the global financial system, arming Washington’s top envoy with diplomatic leverage that officials hope will stop Beijing’s commercial support of Russia’s military production, according to people familiar with the matter. WSJ
• Chinese universities and research institutes recently obtained high-end Nvidia artificial intelligence chips through resellers, despite the U.S. widening a ban last year on the sale of such technology to China. RTRS
• China QE drumbeat grows louder as the country’s finance minister expresses support for the PBOC to resume trading gov’t bonds (although many doubt this would lead to Fed/ECB-style QE). WSJ
• AAPL's iPhone sales in China fell 19% during the March quarter, according to data from an independent research firm that marked the gadget’s worst performance there since Covid struck around 2020. BBG
• Japanese Finance Minister Shunichi Suzuki said last week's meeting with his U.S. and South Korean counterparts has laid the groundwork for Tokyo to act against excessive yen moves, issuing the strongest warning to date on the chance of intervention. RTRS
• ECB’s Luis De Guindos says a June cut is all but guaranteed, but what happens beyond that could depend on the actions of the Fed. WSJ
• Europe’s flash PMIs for April point to firmer growth (and inflation), with the slump in manufacturing showing signs of easing while services rose to 52.9 (up from 51.5 in Mar and above the Street’s 51.8 forecast), and overall price pressures intensified slightly. S&P
• Tesla headlines today’s earnings after seven straight days of declines. Margins, its robotaxi and the fate of its lower-cost EV will be the focus. The company is also being sued in California by a former employee who claims it failed to provide required notice for layoffs. BBG
• MSFT launches smaller AI models that provide “good enough” capabilities for many, but at a fraction of the cost (the models don’t need high-end Nvidia chips to function). NYT

Earnings

• Nucor Corp (NUE) Q1 2024 (USD): EPS 3.46 (exp. 3.66), Revenue 8.14bln (exp. 8.26bln). Expects earnings to decrease in Q2 vs Q1 due to decreased earnings in the steel mills segment. Average scrap and scrap substitute cost per gross ton USD 421 (exp. 399.58). Sales tons to outside customers 6.22mln (exp. 6.41mln).
• SAP (SAP GY) Q1 24 (EUR): Adj. EPS 0.81 (exp. 0.89), adj. revenue 8.04bln (exp. 8.03bln). Adj. cloud and software revenue EUR 6.96bln (exp. 6.93bln). Adj. cloud revenue EUR 3.93bln (exp. 3.94bln). Adj. cloud revenue in constant currencies +25% (exp. +24.5%). Adj. operating profit EUR 1.53bln (exp. 1.7bln). GUIDANCE: Cloud revenue view between 17.0-17.3bln (prev. 13.66bln in 2023). Cloud and software revenue view at EUR 29.0-29.5bln (prev. 26.92bln in 2023) Adj. Operating profit view EUR 7.6-7.9bln (prev. 6.51bln in 2023). Raises 2023 dividend 7% to EUR 2.20/shr vs 2022 dividend. (Newswires) SAP ADR (SAP) rose 2.1% in the US after-hours. Index Weightings: DAX 40 (10.9% - largest), Euro Stoxx 50 (5% - third largest), Stoxx 600 (1.3%).
• Renault (RNO FP) Q1 (EUR): Revenue 11.71bln (exp. 11.7bln). Sales +2.6% Y/Y. Strong order book in Europe, reflecting a very good start to the year. Co. is progressing well toward its target of cost reduction to lower EV costs by 40%. The EV market is a bit slower than had expected a few years ago. Talks with Geely and Aramco on the ICE powertrain JV are at an advanced stage.
• Novartis (NOVN SW) Q1 (USD): Revenue 11.8bln (exp. 11.5bln). Core EPS 1.80 (exp. 1.73); Raises FY24 Net Sales and Core Operating Income guidance. Strong sales momentum in Entresto (+36% cc), Cosentyx (+25% cc), Kesimpta (+66% cc), Kisqali (+54% cc), Pluvicto (+47% cc) and Leqvio (+139% cc). Free cash flow 2.0bln (-24%) - declined due to a prior-year one-timer and timing of payments. Novartis proposes Dr. Giovanni Caforio as Chair of the Board of Directors at AGM 2025. Index Weightings: SMI (15.9% - second largest), Stoxx 600 (2%). Net Sales are expected to grow high-single to low double-digit digits. Core operating income is expected to grow low double-digit to mid-teens.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded with a mild positive bias after the tech-led rebound stateside. ASX 200 was led by strength in real estate and tech, while the latest flash PMIs from Australia were varied. Nikkei 225 traded indecisively and on both sides of 37,500 after briefly wiping out all of its opening gains. Hang Seng and Shanghai Comp. were mixed with outperformance in Hong Kong due to tech strength, while the mainland lagged amid the PBoC's continued tepid liquidity operations and with the US drafting sanctions that threaten to cut some Chinese banks off from the global financial system for aiding the Russian war effort.

Top Asian News

• US is reportedly drafting sanctions that threaten to cut some Chinese banks off from the global financial system as it hopes to stop Beijing's commercial support of Russia's military production, according to WSJ.
• BoJ Governor Ueda reiterated that monetary policy will be data dependent and will depend on the economy and inflation, while he said they don't have any pre-set idea on the timing and pace of future rate hikes and if trend inflation accelerates in line with their forecast, they will adjust the degree of monetary support through an interest rate hike. Ueda also stated if their price forecast changes, that will also be a reason to change policy but noted it is hard to say beforehand how long the BoJ should wait in gathering enough data to change policy and would like to leave some scope for adjustment by not pre-committing to a certain policy too much.
• Japanese Finance Minister Suzuki said the government is ready to respond appropriately to excessive FX moves and is closely watching FX moves with a high sense of urgency, while they won't rule out any option and will deal appropriately with excessive FX moves. Suzuki also said he closely communicated with the US and South Korea on forex in Washington and won't deny that last week's discussions in Washington have laid the groundwork for Japan to take appropriate FX action.
• Senior Japanese ruling party official said recent JPY falls are excessive and out of line with fundamentals; said Japanese authorities could intervene to prop up the JPY at any time
• Japan Business Lobby Keidanren Chair Tokura said he think Government will make appropriate decision on intervention, via Kyodo

European bourses, Stoxx600 (+0.6%) began the session on a strong footing, and has remained at elevated (albeit contained) levels throughout the European morning. There was little reaction to the EZ Flash PMI data. European sectors hold a positive tilt; Tech takes the top spot, benefiting from US tech gains in the prior session, and post-earning strength in SAP (+3.9%). Basic Resources is found at the foot of the pile, amid broader weakness in metals prices. US Equity Futures (ES +0.1%, NQ +0.2%, RTY U/C) are tentative ahead of a busy earnings slate and the key US PMI data.

Top European News

• ECB's de Guindos said a June rate cut looks like a set deal, if there are no surprises; end of inflation fight is in sight; largest remaining threat stems from services inflation. There's a clear slowdown in wage dynamics. Inclined to be very cautious what happens after June. Need to take into account what's happening in the US. What the Fed decides is crucial for the global economy. Beed to take impact of FX movements into account. Indicators point toward modest H2 Euro-area recovery.
• BoE's Haskel said UK food price inflation is "unusually high"; UK labour market is is "extremely tight", via Bloomberg. Inflation will stay high unless the job market weakens.
• Kantar UK Supermarket update (Apr): Grocery price inflation has fallen to 3.2% over the four weeks to 14 April, marking the fourteenth monthly drop in a row

FX

• DXY softer having briefly dipped under 106 amid gains in the EUR. Ultimately though, the index is in consolidation mode ahead of GDP and PCE metrics later this week and FOMC on May 1st. For now, the next downside target comes via last week's low at 105.74.
• EUR is boosted by PMI metrics which saw strong services and composite PMIs overshadow a soft outturn for the manufacturing sector. EUR/USD as high as 1.0695 with the 1.07 level not breached since 12th April; 1.0729 was the high that day.
• GBP: After a soft session yesterday which dragged the pair to a low of 1.23, Cable is on the front foot thanks to a strong showing for services PMI. 1.2388 is the high watermark thus far.
• JPY is steady vs. the USD but made another multi-decade high at 154.85. The closer the pair moves to 155, the louder the calls for intervention will get. For now, jawboning is providing minimal help for JPY.
• Antipodeans are varied the USD with slight outperformance in Aussie after AUD/NZD extended above 1.0900. AUD/USD saw little follow-through from PMI data overnight with the pair lingering around yesterday's best levels after printing a YTD low on Friday.
• PBoC set USD/CNY mid-point at 7.1059 vs exp. 7.2437 (prev. 7.1043).

Fixed Income

• USTs initially remained in overnight ranges, though succumbed to selling pressure, sparked by EZ-PMIs, which dragged EGBs lower. USTs matched yesterday's 107.31 high earlier in the session before pulling back to circa 107.25, and further downside could bring Monday's 107.17 low into view.
• Bunds looked as if they wanted to venture higher in early trade in an extension of yesterday's gains and with de Guindos labelling June as a done deal. However, EZ-wide and regional PMIs acted as a drag thereafter with a strong showing for the services sector, helping composite metrics to beat expectations. 131.47 was the peak before prices made a low at 130.98.
• Gilts started the session on the back foot thanks to an unwind of yesterday's Ramsden-induced gains and higher-than-expected public borrowing figures which saw the UK DMO revise higher its 2024/25 Gilt issuance remit. Gilts down as low as 96.90 with yesterday's trough at 96.71.
• UK DMO revises higher its 2024/25 Gilt issuance remit to GBP 277.7bln (prev. GBP 265.3bln)
• Italy sell EUR 2.5bln vs exp. EUR 2-2.5bln 3.20% 2026 BTP Short Term and EUR 2.5bln vs exp. EUR 2-2.5bln 1.50% 2029 & 1.80% 2036 BTPei:
• Germany sells EUR vs exp. EUR 5bln 2.90% 2026 Schatz: b/c 2.7x (prev. 2.31x) & avg. yield 2.91% (prev. 2.84%) and retention 18.6% (prev. 17.7%)

Commodities

• Upside across the crude complex underpinned by the Flash PMIs from Europe which (although manufacturing fell short of expectations) pointed to a services-led recovery; however, prices have pulled back from best levels in recent trade. Brent June meanwhile trades in a USD 86.97-97.95/bbl range.
• Softer trade across precious metals despite the softer Dollar as the geopolitical unwind from yesterday continues, with relatively broad-based losses seen across spot gold, silver and palladium; XAU fell under USD 2,300/oz to find current intraday support around USD 2,291/oz.
• Base metals are lower across the board with sizeable intraday losses despite the softer Dollar and risk-on tone across the rest of the market. There has been no obvious catalyst for this pullback but some desks cite Asian investors being cautious of the recent rally driven, in part, by speculative trading.
• Anglo American (AAL LN) Q1 Copper Production 198k tonnes (exp. 191.3k tonnes)

Geopolitics: Middle East

• Israeli occupation forces reportedly stormed the city of Jericho in the eastern West Bank, while it was also reported that Israeli gunboats targeted the seashores in the city of Khan Younis in the southern Gaza Strip. In relevant news, sirens sounded in the town of Metulla and the Kiryat Shmona area in northern Israel on suspicion of rocket fire, according to Al Jazeera.
• Hezbollah fired dozens of rockets into northern Israel on Monday which drew retaliatory strikes, while it said its attack was in response to recent Israeli strikes on towns and villages in southern Lebanon, according to Associated Press.
• Israeli raids were reported on the town of Yaroun in southern Lebanon, according to Al Jazeera.
• Hamas said it condemns the statements of US Secretary of State Blinken and his attempt to hold the group responsible for obstructing reaching an agreement, according to Sky News Arabia. Hamas said Blinken's statements contradict the fact that the movement has provided flexibility more than once to facilitate an agreement, while it added that the movement's demands are a permanent ceasefire, the withdrawal of the occupation and the return of the displaced to their homes in all areas of the Gaza Strip.
• US defence official said the Al-Asad airbase in Iraq came under attack from an Iranian proxy group today which is the second attack on a US base in two days, according to Fox.

Geopolitics: Other

• UK PM Sunak is to unveil an extra GBP 500mln of military funding to Ukraine and announce the largest supply of munitions to Kyiv on Tuesday as he travels to Poland and Germany, according to FT.
• North Korean state media reported that leader Kim guided the first nuclear counterstrike drills, while it stated that the drills are a clear warning sign to enemies.

US Event calendar

• 08:30: April Philadelphia Fed Non-Manufactu, prior -18.3
• 09:45: April S&P Global US Composite PMI, est. 52.0, prior 52.1
• 09:45: April S&P Global US Services PMI, est. 52.0, prior 51.7
• 09:45: April S&P Global US Manufacturing PM, est. 52.0, prior 51.9
• 10:00: Revisions: Retail Sales
• 10:00: April Richmond Fed Business Conditio, prior -8
• 10:00: April Richmond Fed Index, est. -8, prior -11
• 10:00: March New Home Sales MoM, est. 1.1%, prior -0.3%
• 10:00: March New Home Sales, est. 669,000, prior 662,000

DB's Jim Reid concludes the overnight wrap

It may not be saying a lot, but markets had their best performance in some time yesterday, as investors became a bit more optimistic about the near-term outlook. Equities recovered, and the S&P 500 (+0.87%) finally managed to advance after a run of 6 consecutive declines. Adding to the positive sentiment were growing hopes that a further escalation in the Middle East would be avoided, and Brent crude oil prices (-0.33%) fell back to their lowest level so far this month, at $87.00/bbl. So there were several pieces of better news for investors, but there’ll be no let-up on the calendar today, as we’ve got lots of earnings reports, including Tesla after the US close. While the Magnificent 7 were up +0.94% yesterday, Tesla was down -3.40%, extending its decline this year to -42.8% and having halved since last July. It's maybe a slight warning for the darlings of the current AI boom that things can change quickly if profits don't follow very high expectations as new technologies grow. Talking of which Nvidia bounced back from their -10.0% decline on Friday and rose +4.35% yesterday.

On top of earnings today, we’ll get an initial indication about how the global economy has performed in Q2, as the April flash PMIs are coming out for the major economies. These will be of particular interest for assessing the nascent recovery in the euro area economy. In March the composite PMI rose above the 50 level for the first time in 10 months. There will also be attention on the price components within the PMIs, especially in the US, where the composite output price index posted a 10-month high of its own last month.

We’ll have to see how those events pan out, but before all that, risk assets managed to post a strong recovery on both sides of the Atlantic. That made a change after three weeks of losses for global equities, with the major indices including the S&P 500 (+0.87%), the NASDAQ (+1.11%) and the STOXX 600 (+0.60%) all advancing. Information technology (+1.28%) and financials (+1.20%) outperformed within the S&P 500. Alongside that, the VIX index of volatility (-1.8pts) fell to 16.94pts, which is its lowest level since Iran launched their recent missile strike on Israel . And here in the UK, the FTSE 100 (+1.62%) even closed at an all-time high, aided by the weakness in sterling (-0.19%), which hit its weakest level against the US Dollar since November.

Henry did a piece yesterday (link here) looking at what happens next after the S&P 500 has seen 6 consecutive declines as we saw before last night's positive close. The subsequent 1-month and 6-month performances have mostly been positive in recent history. Moreover, if the S&P had posted a 7th consecutive decline yesterday, that would have taken us into unusual territory, as it’s something we haven’t seen since February 2020 as Covid-19 spread globally. Indeed, the examples of 7 consecutive losses for the S&P 500 (in the 21st century at least) have either been during a crisis (GFC, US debt ceiling crisis, Euro Crisis, Covid-19) or in anticipation of a pivotal event with significant uncertainty (2016 US election).

As discussed at the top, sentiment was bolstered by the lack of any further escalation in the Middle East. Indeed, yesterday saw Iran’s foreign ministry spokesman say that Israel had received the “necessary response at this stage”. The apparent easing in tensions helped oil prices fall back, and there was also a sharp move lower in gold (-2.59%), which had its biggest daily decline since June 2021. It's down another -0.90% this morning.

The more positive tone was evident across sovereign bonds too. They were supported by the drop in oil prices, which added to hopes that any spike in inflation would prove temporary, and the 1yr US inflation swap (-1.2bps) fell back for a 4th session to 2.71%. In turn, that meant investors grew a bit more hopeful about the prospect of rate cuts, and the amount of Fed rate cuts priced by the December meeting (+1.2bps) inched up to 40bps. Similarly at the ECB, the number of rate cuts priced by December’s meeting (+4.2bps) rose to 78bps.

With more rate cuts being priced in, that helped to push down yields, with those on 10yr bunds (-1.4bps), OATs (-2.7bps) and BTPs (-8.7bps) all moving lower. Admittedly, there was a decent intraday turnaround, as the 10yr bund yield had risen to 2.55% at one point, its highest level since November, before reversing course and ending the day lower at 2.48%. Meanwhile in the US, there was a decline in the 2yr Treasury yield (-1.5bps) to 4.97%, whilst the 10yr Treasury yield (-1.2bps) fell to 4.61%, as it also pared back its earlier losses, having still being above at 4.66% as Europe finished lunch.

In Asia the Hang Seng (+1.64%) is leading gains on a broker upgrade, with the Nikkei (+0.27%), the KOSPI (+0.20%) and the S&P/ASX 200 (+0.41%) seeing minor gains. Chinese stocks are the worst performers with the CSI (-0.56%) and the Shanghai Composite (-0.41%) both trading lower. US stock futures are broadly flat as I type.

Early morning data showed that key gauges of Japan’s manufacturing and service activity improved in April to its highest levels in nearly a year. The au Jibun Bank flash manufacturing PMI rose to 49.9 in April, as against a level of 48.2 in March. The services PMI advanced to 54.6 in April up from 54.1 in March indicating that the service sector continues to remain the primary driver of growth.

Elsewhere, Australia’s Judo Bank PMI data for April showed the manufacturing PMI rising to 49.9 from 47.3. Meanwhile, the service sector PMI came off slightly from 54.4 to 54.2, though still registering a decent growth environment. The composite PMI hit a 24-month high of 53.6 in April, an improvement from the previous month's 53.3.

To the day ahead now, and the main data highlight will be the April flash PMIs from Europe and the US. Elsewhere, we’ll get US new home sales for March, UK public finances for March, and the Richmond Fed’s manufacturing index for April. From central banks, we’ll hear from the ECB’s Panetta and Nagel, and the BoE’s Haskel and Pill. Finally, today’s earnings releases include Visa, Tesla, PepsiCo, General Electric, UPS and General Motors.

Apple shares are marginally lower in premarket trading in New York following a report that first-quarter iPhone sales in China had been the worst since early Covid. This comes ahead of an earnings report from the world's most valuable company next week and other souring reports from independent research firms tracking the slide in iPhone sales in China. 

Counterpoint reports that overall, China, the world's largest handset market, recorded growth upwards of 1.5% year-over-year in the first quarter, marking the second consecutive quarter of positive year-over-year growth. Huawei is a rising star and the best performer of all major brands, growing 69.7% year-over-year, mainly because of the release of its 5G-capable Mate 60 series last fall. Meanwhile, Apple iPhone sales tumbled 19% in the quarter. 

Here are the highlights of the report:

• China's smartphone sales grew 1.5% YoY and 4.6% QoQ in Q1 2024, marking the second consecutive quarter of positive YoY growth.
• Huawei stood out as the best performer among all OEMs during the quarter, enjoying 69.7% YoY growth; HONOR also saw double-digit growth.
• vivo took the top spot, followed by HONOR and Apple.
• Apple's sales dropped 19.1% YoY in Q1 as Huawei's comeback directly impacted the premium segment.
• The market is expected to see low single-digit YoY growth in 2024.

"Momentum seems to be building on a recovery as China's smartphone sales continued their growth trajectory and grew 4.6% QoQ in Q1 2024. The sales promotions during the Chinese New Year festivities were the biggest growth driver. The average weekly sales during the four weeks leading up to the Chinese New Year saw a robust growth of 20% when compared to a normal week, according to Counterpoint's China Smartphone Weekly Model Sales Tracker," Counterpoint's Associate Director Ethan Qi wrote in a statement. 

Counterpoint's Senior Research Analyst Ivan Lam said on the iPhone recovery story, "We are seeing slow but steady improvement from week to week, so momentum could be shifting. For the second quarter, the possibility of new color options combined with aggressive sales initiatives could bring the brand back into positive territory; and of course, we are waiting to see what its AI features will offer come WWDC in June. That has the potential to move the needle significantly longer term."

Counterpoint's data was published one week after International Data Corporation reported that iPhone shipments plunged by 10% in the quarter. 

Since early January, institutional desks, Barclays, Piper Sandler, and Jefferies have warned about a downturn in iPhone sales, mainly because of a slowdown in the world's largest handset market. 

While Goldman removed Apple from its "Conviction List" and Evercore ISI dropped Apple from its "Tactical Outperform" list earlier this year, Bank of America analyst Wamsi Mohan named Apple the top pick for 2024, citing a "rich catalyst path with defensive cash flows." 

Apple shares have been widely underperforming the S&P500 index on numerous reports this year on weaker iPhone demand in China. 

Just 56% of the analysts tracked by Bloomberg have buy ratings on Apple, while the percentage of bulls for Microsoft, Nvidia, Alphabet, Amazon, and Meta Platforms is around 85%.

Besides waning iPhone sales in China, investors have been given the impression that the company lags in the artificial intelligence race. Just weeks ago, there were reports that the company nuked its car project. Plus, the $4,000 Apple Vision Pro goggles do not appear to be taking off as expected. 

Mortgage rates in the United States climbed to the highest level since November 2023 last week, as higher-than-expected inflation readings have dashed hopes of the Fed starting to cut rates soon.

As Statista's Felix Richter reports, according to Freddie Mac, the average rate for a 30-year fixed mortgage increased to 7.10 percent in the week ended April 18, making it difficult for many would-be homebuyers to afford a house.

You will find more infographics at Statista

Along with the Fed's aggressive rate hikes, mortgage rates have climbed by almost 4 percentage points since the beginning of 2022, threatening to push more and more potential buyers out of the market, especially as high rents and other costs of living make it increasingly difficult to save for a significant down payment.

Making things even more difficult, high mortgage rates don't just affect the demand side of the market.

Supply is also constrained as prospective sellers stay put to avoid taking out a new mortgage at a much higher rate than their current one.

Source: Bloomberg

This in turn has kept home prices elevated, or at least kept them from fully reflecting the significantly higher mortgage rates compared to two years ago.

"When rates go up, people hunker down and don’t spend," mortgage broker Rocke Andrews told Realtor.com.

"They’ve been told for so long that rates are coming down, so they just postpone."

And they made need a little more patience.

Last week, Fed chair Jerome Powell said that policymakers were in no rush to cut rates, making it unlikely for mortgage rates, which tend to follow the same trajectory as the Fed's policy rate, to come down meaningfully anytime soon.

In fact, according to brokerage Redfin, U.S. homebuyers face the prospect of having to pay a “record” amount in monthly mortgage payments to buy a house amid extremely high prices and elevated mortgage rates.

“The median U.S. home-sale price increased 5 percent from a year earlier during the four weeks ending April 14, bringing it to $380,250 - just $3,095 shy of June 2022’s all-time high,” said an April 18 press release from Redfin.

“The average daily mortgage rate this week surpassed 7.4 percent, the highest level since last November, after a hotter-than-expected inflation report and the Fed’s confirmation that interest-rate cuts will be delayed.”

The 12-month inflation had jumped 0.3 percent, to 3.5 percent in March.

“The combination of high mortgage rates and prices have brought homebuyers’ median monthly housing payment to a record $2,775, up 11 percent year over year.”

According to a recent analysis by Bankrate, Americans now need an annual income of $110,871 to afford a median-priced home of $402,343. This is an almost 50 percent increase over a period of just four years.

A six-figure annual income is now mandatory to afford a median-priced home in 22 states and the District of Columbia.

Four years ago, only six states and the District of Columbia had such a high requirement.