Plenty Of Noise But Little Signal

WHERE WE STAND – A bit of an odd day, yesterday, with plenty of catalysts, but little by way of significant market moves outside of FI.

Trade was, on the whole, relatively choppy and indecisive, though the most notable move came in the Treasury complex, where benchmarks caught a bid across a steeper curve, with he belly outperforming on the day. There seemed little rhyme or reason for the chunky gains, 5- and 10-year yields fell at least 8bp apiece, though the moves simply take us back to where we were on Tuesday, so perhaps aren’t worth getting all that excited about.

I still find it hard to have a high conviction bond view right now, though it seems that, for the time being at least, the bears might have run out of steam, especially with the 30-year rapidly backing away from the 5% handle intraday. That said, deficit worries clearly haven’t gone away, and fiscal conservatism is for all intents and purposes dead, as the GOP plan a $4tln debt ceiling increase. Yes, that’s trillion, with a ‘T’.

We did have plenty of potential catalysts on the data front yesterday, though this deluge of US releases provided much more by way of ‘noise’ than it did ‘signal’. Retail sales were a touch better than expected at the headline level, though the control group metric was soft; PPI came in cool, in line with CPI earlier in the week; jobless claims were as near as makes no difference unchanged WoW; Philly Fed mfg. sentiment beat expectations, but the NY Fed’s mfg. gauge fell to 2-month lows, and industrial production missed expectations.

All that said, the vibe with US data remains one where good news is exactly that, and where bad news can simply be ignored, and explained away by tariffs which are – by and large – no longer in place, at least temporarily.

With that in mind, peak tariff uncertainty in the rear view mirror, and FOMO seeing an increasing number of buyers join the party now we’re back above the 200-day moving average, I remain of the view that the path of least resistance for equities leads to the upside. For spoos, 6,000 is the obvious near-term upside target, with a break there putting us on course for fresh highs.

Yesterday also brought the latest read on UK GDP, with the economy expanding 0.7% QoQ in the first three months of the year. Almost all of this, though, was a result of activity being pulled forward ahead of the April NI hike, and front-running of US tariffs – exports to the states rose 16% QoQ. Despite Chancellor Reeves running victory laps, this is probably as good as it’ll get in terms of growth for UK Plc this year, with risks now tilting clearly to the downside, and there being a distinct possibility of a contraction in Q2. The figures, though, had next-to-no impact on the quid, with the entire G10 FX space – excluding a notably firmer JPY – in a bit of a snooze for most of Thursday.

Gold, though, was wide awake, with the yellow metal gaining over 1% and reclaiming $3,200/oz. It had, briefly, looked as if bullion’s salad days were coming to an end as we tested the 50-day moving average to the downside, though that proved solid support, as buyers stepped in en masse, always believing that luck will leave them standing so tall. I remain bullish here, and happy to buy on dips, especially as reserve diversification looks set to continue for the foreseeable.

LOOK AHEAD – A light data docket lies ahead to wrap up the week.

The European data slate is barren, while the US will release the latest housing starts, building permits, and consumer sentiment figures from the University of Michigan. This latter print is, probably, the most important, though sentiment is now likely to have bottomed, and inflation expectations to have topped out. That said, neither of those factors make the data any more useful, as the small sample size, and huge political skew, make the numbers worth taking with a pinch of salt.

Otherwise, the standard reminder about potential weekend gapping risk must apply, but more importantly the sun is set to be shining once more in London, meaning time to find a suitable beer garden for a cold beverage later on.