Today is a big day for US data

Both the 2-year and 10-year yields hit the lowest in three weeks. The stock market may choose to believe talk of some trade deals, but the bond market is not so easily led down the garden path. Risk aversion is still the name of this game and traditionally it sends funds into US assets and the dollar. Not this time. Confidence in the US is broken.

Today is a big day for US data. We get April consumer confidence from the Conference Board, March trade and March JOLTS (with openings the critical number to watch). Later we also get the Atlanta Fed GDPNow for Q1.

About consumer sentiment: the final revision to the University of Michigan survey on Friday is a worsening to 52.2, an 8% plunge in April.  The survey director noted “While this month’s deterioration was particularly strong for middle-income families, expectations worsened for vast swaths of the population across age, education, income, and political affiliation. Consumers perceived risks to multiple aspects of the economy, in large part due to ongoing uncertainty around trade policy and the potential for a resurgence of inflation looming ahead.”

We await the budget from Congress but we already know conditions are dire. Yesterday the Treasury announced it will need to borrow $514 billion in Q2, or $391 billion more than projected in Feb. It’s not clear this will change the refunding plan tomorrow, in part because we do not have any true tariff revenues yet.

Don’t forget that Thursday is the International Workers holiday and markets in all of Europe (including London) are closed. It’s also a holiday in India.

Reuters notes that the Citibank “surprise index” has tipped back to positive (=less bad) for the first time since mid-February. “The rebound in the index likely says as much about the extent to which forecasts have been slashed due to tariff-related uncertainties as it does about any upturn in activity per se. But financial markets price expectations, so the fact that expectations are no longer being undercut by the actual numbers has helped calm the horses, at least for now.”

Forecast

We got some not very reliable hints that a trade deal might be in the offing and the stock market turned around yesterday on the story, but not the Treasuries or the dollar. A turnaround Tuesday is still possible if more good news comes out today and is credible. Short-run, the dollar can correct to the upside. Long-run, it’s still toast.

Opinion is divided about whether Trump retreats from extreme positions or lashes out with something, anything even worse to draw attention from his dismal poll rankings. He called pollsters “negative criminals” (a meaningless statement) and called for investigation into voting interference. There is no voting for more than A year, so also meaningless as well as a violation of the First Amendment free speech rights of the poll publishers. From this some analysts expect something even worse, but you can never tell with this guy, which is The Problem in the first place. 

Whatever Trump does on the positive side, like actually starting talks with China instead of lying about it or getting a deaL with India, it won’t be enough to remove the stink from the dollar.

Tidbit: HSBC had good Q1 earnings but warned that loan demand and credit quality could suffer from the broader fallout of the trade war. Hmm. What about local US banks that lend to small companies which depend on imports from China?

Tidbit: China is making progress on making the yuan a numeraire for trade in SE Asia, according to Reuters. It has a payment network named China UnionPay that uses a QR code and it has been widely adopted by some 30 countries—“cross-border yuan payments surged to a record in March” and “analysts say there is renewed appetite for a global yuan as aggressive tariffs shake faith in the U.S. currency and other U.S. assets.”

Tidbit: 1362 days to the end of the Trump presidency. Zuckerberg surely did not intend his “move fast and break things” to apply to governance. 

Tidbit: The “magazine cover” indicator is being picked up in several places. The thesis is that by the time the mainstream press (The Economist, Newsweek, et al.) get it, it’s already over. Since literally everything is deeply negative today, that must mean it’s time to buy. Buy stocks. Buy bonds. Buy the dollar.

Here’s the problem: it ain’t over. We still have over 1300 days of the reckless Drumpf to go. It does seem as though nothing can get any worse. But it can. We just can’t forecast it. Example: Trump lets Russia invade some more and keep the new territory as well as what it already grabbed. China takes that as a sign it’s okay to ignore sovereign borders—and invades Taiwan. 

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