Rise and shine everyone & Happy Monday!

It’s a quiet start to an otherwise busy macro week. We have several treasury auctions, PPI on Thursday, the Michigan Sentiment data on Friday and of course, the CPI and the Fed on Wednesday. We also have the BAnk of Japan decision on late Thursday night / early Friday morning.

Today we have some stock events - the Nvidia 10-for-1 split has gone in effect and Apple reveals its AI offering - Apple Intelligence.

Things are hotter in the Euro Area right now. The euro fell below $1.076, reaching a one-month low due to renewed political uncertainty in Europe after far-right parties gained momentum in the European Parliament elections.

French President Emmanuel Macron called for a snap election following a significant defeat to Marine Le Pen’s National Rally party. In Germany, Chancellor Scholz’s Social Democrats dropped to third place behind the far-right Alternative, and in Italy, Giorgia Meloni's Brothers of Italy secured 28.8% of the vote, surpassing the 26% they achieved in the 2022 national ballot. Equities are also lower this morning - with France’s CAC leading the way lower.

Asian markets are quieter this morning with several markets closed - Australia, China, Hong Kong, Taiwan. India recovers after Modi is sworn in as Prime Minister for a third term.

Japan is higher with a slightly weaker Yen earlier today. Japan's Q1 final GDP QoQ decreased by -0.5%, inline with expectations. The annualized GDP QoQ dropped by -1.8%, slightly better than the anticipated -2.0% decline. Business spending fell by -0.4%, outperforming the expected -0.7% decrease. Additionally, Japan's current account surplus for April was ¥2.1 trillion, surpassing the forecasted ¥1.738 trillion.

US Equity Futures are seeing some pressure this morning, with UST yields higher after last week’s NFP print. The US Dollar index is also firmer after the pullback in the EUR. Commodities are mostly trading higher, except Gold, and a few softs.

Chart of the Day

The performance of small caps has been the worst YTD for the US. With inflation decelerating more clearly in the Euro Area and UK, small caps have seen performance pick up in the hopes of central bank easing. The ECB’s first cut last week may not mean an aggressive easing cycle from here but, it’s still a path and small caps are likely to continue performing in the Eurozone and the UK. Meanwhile, in the US, we see small caps remaining somewhat under pressure until we see a clearer path to sustained disinflation and Fed rate cuts.

Calendars

(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics)