Some Encouraging News on the Inflation Front

Highlights

• Falling inflation expectations in Europe point to an ECB rate cut in June

• Mean-reversion in the U.S. personal savings rate will prove to be disinflationary

• Pay attention to widening CCC spreads

• Downward revisions are a glaring non-confirmation to the economic data

While We Were Sleeping

We kick off the day with U.S. equity futures modestly in the green and with a tilt toward growth over value. European markets, in aggregate, are basically flat. Asia turned in a rather uninspiring session: China’s Shanghai Composite (-0.5%), Thailand (-0.3%), and Japan’s Nikkei 225 (-0.1%). Hong Kong, Korea, and India were all little changed. Bond markets are range-bound — little movement in core Europe but we are seeing a -4 basis point move lower in the 10-year gilt to 4.20% and nearly -2 basis points in the U.S. to 4.45% (even with some more fairly hawkish comments out of Minneapolis FRB President Neel Kashkari — he wants to see “many more months” of receding inflation data before cutting rates and even suggested a hike is not off the table).

Even so, the DXY dollar index is softer by -15 pips to 104.44 — losing ground for three days in a row — and now back to testing the 200-day moving average in this most recent corrective mode. Even with the U.S. dollar weakness, gold is off -0.3% to $2,345 per ounce, Brent crude is little changed, and Bitcoin has succumbed to a -2.4% loss so far to $67,958. Copper has recovered +2.0% after dropping -3.2% last week — the worst week since last February (all market quotes are time-stamped to 4:30 a.m. ET).