• Risk-off sentiment continues
  • China’s exports decelerate and imports continue to stall…
  • …due to the COVID Zero policy and war in Ukraine
  • Putin’s wimpy speech was a total dud
  • Mexican inflation climbs again in line with expectations
  • Global Week Ahead

As a reminder, please see the Global Week Ahead—Breaking the Chains (here). The accompanying slide deck should be in your in-boxes. Highlights include the following:

  • A sweep of the evidence on global supply chain pressures
  • US CPI inflation is still running hot
  • China CPI is not
  • Has the door shut on PBOC easing?
  • Banxico still faces a steep hill to climb
  • Peru’s central bank expected to hike
  • Bank Negara to pause with hike guidance
  • The BoC on commodity effects
  • RBNZ inflation expectations will probably soar
  • India’s inflation to further pressure the RBI
  • UK, Chinese economies in focus

Risk-off sentiment continues. US equity futures are down by about 1½%, TSX futures are 1% lower, European cash markets are performing similarly and Asian markets started the week with declines of up to 2½% in Japan but mainland China stayed in the black. The dollar is broadly stronger against all major crosses. Sovereign bond front-ends are a bit richer in the US and Germany, slightly so in the UK and Canada, but 10s are cheaper by 3-7bps led by the US, UK and Italy. Oil is off by over $2.

The global calendar is very light to start us off. Chinese export growth plummeted in April and broadly in line with expectations (3.9% y/y, 14.7% prior, 2.7% consensus) in USD terms. Exports in yuan terms grew 1.9% y/y (12.9% prior, 3.1% consensus). Imports also remained weak (0% in USD, -2% y/y in yuan). China’s Covid Zero policies and the war in Ukraine are the culprits.

Putin’s wimpy speech was a dud this morning. There is something by way of poetical justice to note about how cloudy weather resulted in the cancellation of a military jet fly-by in a ‘Z’ formation. The speech was full of the usual lies and unfortunate twisting of events and history but did not involve any escalation such as formally declaring war on Ukraine.

Oil is slipping partly because of the broad risk-off tone across asset classes and because the Saudis reduced oil prices for Asian buyers as the EU is still working on a plan to bring Hungary onside a ban on Russian oil imports.

Mexico CPI inflation climb to 7.5% y/y (7.5% prior) in April which was broadly in line with expectations. Bi-weekly CPI for the back half of the month matched the monthly estimate. Core inflation also accelerated in line with expectations (7¼ % y/y). Chart 1 shows headline and core CPI and chart 2 breaks down core goods and core services.

The US and Canadian calendars will be quiet.


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