Market drivers and catalysts
Equities: US equities under renewed pressure yesterday as Trump pressures Fed to cut rates
Currencies: The USD smashed to new lows on Trump pressure on Fed to cut rates
Fixed Income: Trump pressure on Fed fails to spark decline in short US yields, though long US treasuries under pressure
Commodities: Gold powers higher as Trump challenges Fed independence
Macro events: Fed speakers, US 2-year auction & EZ Consumer Confidence
Macro data and headlines
Further pressure from President Trump on Fed Chair Powell to lower interest rates raised fears about Fed independence, especially as NEC Director Hassett indicated Trump is exploring ways to dismiss Powell, sparking a risk-off session. “But there can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW,” Trump said, referring to Powell. In other words, as the WSJ puts it: “Trump put the country on notice that he will make the Fed a scapegoat for any economic fallout from his trade war and also delegitimize the institution if it doesn’t cut rates.”
The rhetoric from Trump saw Gold ripping to new all-time highs against all major currencies, the US dollar sharply lower, long US treasury yields higher and equities in a fresh sell-off, although Japan’s equity market has taken the JPY strengthening quite well with a sideways session overnight.
Fed's Goolsbee (2025 voter) highlighted rising short-term inflation expectations, while long-term ones remain stable. He stressed focusing on this year's economic outlook, noting tariffs are one factor with potentially modest macroeconomic impact.
Macro calendar highlights (times in GMT)
1400 – Eurozone April Consumer Confidence
1400 – Richmond Fed Manufacturing Index
1700 – US Treasury to auction 2-year notes
Fed speakers: Jefferson (1300), Harker (1330) & Kashkari (1830)
Earnings events
Today: Tesla, SAP, GE Aerospace, Verizon, RTX Corp, Intuitive Surgical, Danaher, Lockheed Martin, Moody’s, 3M, Capital One Financial, Kimberly-Clark, Baker Hughes, EQT
Tomorrow: Philip Morris, IBM, AT&T, Thermo Fisher Scientific, ServiceNow, Boston Scientific, NextEra Energy, Texas Instruments, Boeing, CME Group, GE Vernova, Lam Research, O’Reilly Automotive, Amphenol, General Dynamics, Chipotle Mexican Grill, Newmont, Volvo, Samsung Biologics, Waste Connections, Norfolk Southern
Equities
US: US stocks ended sharply lower yesterday as Donald Trump’s pressure on the US Federal Reserve to cut rates was the focus, further fuelling what one Bloomberg opinion piece calls the “sell America” trade. The S&P 500 ended the day 2.36% lower, while the Nasdaq 100 lost 2.58% yesterday. A key test for the US stocks lies ahead with today’s Tesla earnings report after the close today, with the 215-220 level (the post US election lows) in that stock in focus as Tesla faces challenges in its auto business amidst negative consumer backlash on CEO Elon Musk’s loud support of the Trump agenda, including public sector spending cuts.
Europe and Asia: European equities face an interesting opening today after the long four-day holiday weekend, as they wake up Tuesday with a sharply higher Euro and in the wake of a steep sell-off in yesterday’s US session, although Japan’s equity market was quite steady overnight despite considerable drama in the currency market as the Japanese yen rose to a new high versus the US dollar.
Fixed Income
Despite Donald Trump’s railing against Fed Chair Powell to cut rates, the front end of the US yield curve has remained relatively stable, with the 2-year treasury yield benchmark only dipping a few basis points lower yesterday to a local low of 3.72% before rebounding to unchanged around 3.77%. A 2-year treasury auction is up today.’
Longer US treasury yields rose sharply yesterday, and a bit further overnight in the Asian session as the US 10-year treasury benchmark yield tacked on about 10 basis points from last Thursday’s close before the long weekend, trading 4.42% this morning. The recent high for that benchmark was the spike to 4.6% on April 11.
The Bloomberg high yield corporate bond spread we track rose 14 basis points yesterday to 412 bps (versus the recent cycle high of 454 bps on April 8.
Commodities
Gold surged to a fresh all-time high near USD 3,500 overnight, a 7.7% gain in the last week alone, on US economic stability concerns as Trump continues to challenge the independence of the Federal Reserve, calling for Chair Powell to be sacked and rates to be cut, conveniently making him the scapegoat of an incoming US economic slowdown if he doesn't. Thin market conditions during the Easter break have probably made matters worse, with the USD and US stocks tumbling. With traders losing confidence in the US and Asian buyers scrambling to accumulate gold, the yellow metal will likely remain bid until more clarity on multiple issues—from tariffs and stagflation risks to the Fed—are resolved.
Crude oil trades higher following an Easter Monday slump, when thin liquidity exacerbated selling triggered by Trump’s attack on the Federal Reserve. While a weaker dollar is providing some support, the overall demand outlook remains challenged with increased production from OPEC+ also weighing on sentiment.
Currencies
The US dollar weakened broadly yesterday on Trump’s demands for the Fed to cut interest rates after Powell’s hawkish message last week. EURUSD jumped to new highs well above 1.1500, trading as high as 1.1573, a new high since 2021. USDJPY is testing the pivotal 140.00 level, with not much chart support below that level until the late 2022 low of 127.23.
USDCNH traded largely sideways despite the broadly weaker US dollar, suggesting that China is allowing its currency to weaken against a basket of currencies. The official CNY basket is testing the mid-2023 lows, which are the lowest level for the basket since the beginning of 2021...
