US: Decline In US Global Reputation Could Impact US Business Interests
A new survey from Morning Consult has found that, “U.S. businesses have been targeted for overseas boycotts in recent months as a result of anger in other countries over U.S. government actions and rhetoric, including tariffs... Increased boycott likelihood has gone hand-in-hand with the United States’ declining reputation globally, suggesting the two are related.”
- A new Pew Research Center survey of 25 nations found, “Trump receives mostly negative ratings… More than half in 19 of these countries say they lack confidence in Trump’s leadership of world affairs.”
- Semafor notes: “Trump has upended US foreign policy paradigms since returning to office through his transactional approach and skepticism of traditional alliances — shifts that are expected to define a meeting of the Group of Seven major industrial democracies next week in Canada. “All eyes will be on Trump” at the G7 summit, the Council on Foreign Relations wrote.”
Figure 1: Global Average Net Favourability Towards the US
Source: Morning Consult
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BONDS: EGBs-GILTS CASH CLOSE: Selling Resumes, Shrugging Off Benign Data
Tuesday saw further weakness across European bonds, despite seemingly FI-benign data releases.
- Following Monday's sell-off following a de-escalation of the US-China trade war, European core FI remained on the back foot as a risk-on tone persisted in equities.
- Brisk supply on both the corporate and sovereign (Netherlands, Germany, Italy, EU) fronts in Europe weighed on the space.
- The Gilt front-end/belly outperformed, with the latest labour market report bringing a downside surprise on the wage front (and little in market-moving commentary by BOE's Pill). And in the most closely-watched release of the day globally, US CPI came in softer than expected.
- In the end, the data didn't hold sway, with cross-asset moves in a lower USD and higher equities after the US CPI release instead dragging Bunds and Gilts to/near session lows by the cash close.
- The German and UK curves both bear steepened, with the UK belly/short end outperforming overall as noted.
- Spreads tightened modestly on the EGB periphery/semi-core, with BTPs leading gains.
- Wednesday's calendar includes some final April HICP readings, while we also get multiple ECB speakers including Villeroy and Holzmann.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 2.3bps at 1.936%, 5-Yr is up 2.3bps at 2.245%, 10-Yr is up 3.2bps at 2.68%, and 30-Yr is up 4.5bps at 3.126%.
- UK: The 2-Yr yield is down 2bps at 3.98%, 5-Yr is up 0.5bps at 4.131%, 10-Yr is up 2.7bps at 4.67%, and 30-Yr is up 3.6bps at 5.427%.
- Italian BTP spread down 1.1bps at 101.8bps / Spanish down 0.7bps at 61.9bps
EURUSD TECHS: Pierces The 50-Day EMA
- RES 4: 1.1625 1.500 proj of the Feb 28 - Mar 18 - 27 price swing
- RES 3: 1.1608 High Nov 9 2021
- RES 2: 1.1440/1573 High Apr 23 / 21 and the bull trigger
- RES 1: 1.1256/1381 20-day EMA / High May 2 - 6
- PRICE: 1.1173 @ 16:47 BST May 13
- SUP 1: 1.1082/65 50-day EMA and a pivot level / Low May 12
- SUP 2: 1.1026 38.2% retracement of the Feb 3 - Apr 21 bull cycle
- SUP 3: 1.0943 Low Apr 10
- SUP 4: 1.0857 50.0% retracement of the Feb 3 - Apr 21 bull cycle
EURUSD maintains a softer tone and the pair traded sharply lower Monday. Recent weakness appears corrective and key trend signals remain bullish. However, the pair has breached the 20-day EMA and pierced 1.1082, the 50-day EMA. A clean break of the average would strengthen a bear threat. A key resistance to watch is 1.1381, the May 2 - 6 high. Clearance of this level would signal the end of the correction.
OPTIONS: Euribor. Sonia Call Structures Prevalent Tuesday
Tuesday's Europe rates/bond options flow included:
- ERN5 98.18/98.37/98.50 broken c fly, sold at 3 in 3k
- ERU5 98.50/98.75cs, bought for 1 in 7k
- ERU5 97.87/98.00cs, sold at 9.5 in 10k
- ERU5 98.37/98.50/98.62c fly, bought for 1 and 1.25 in 8k
- ERZ5 98.37/98.50cs, bought for 2.5 in 17.5k (ref 98.18, 8% del)
- SFIZ5 96.40/96.80 call spread vs. 96.00 puts paper paid 2 on 5K, buying the call spread
