MEXICO: JP Morgan Base Case Remains For 50bp Banxico Rate Cuts In May And June
May-09 16:00
- With Banxico widely expected to keep the 50bp easing pace next week, JP Morgan expects the May statement to be similar to March, but with some potential differences. On the one hand, the US tariff plan is expected to add downside risks to growth, fuelling the dovish narrative. On the other, inflation has not substantially improved. JPM still expects the policy rate to end this year at 7%, and 6% next.
- Downside risks to growth are expected to cool demand-side CPI pressures. However, 2025 inflation expectations deteriorated in the most recent Banxico survey, especially for core. This framework won’t allow Banxico to turn increasingly dovish, but should provide enough ammunition to maintain the guidance.
- Another mention that monetary policy could be adjusted by similar magnitude ahead will be key to understand if 50bp cuts will remain as the base case for June, as JPM forecasts. Of note, in the latest minutes, some members stated that such recalibration could continue in the following meetings.
- JPM does not eye a meaningful revision to the inflation path - probably marginally up for both gauges. Meanwhile, they believe that a change of the restrictive stance to neutral will have to wait until global economic weakness is confirmed and core services inflation turns lower.
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US TSYS/SUPPLY: Preview: 10Y Auction Reopen
Apr-09 15:56
- Treasury futures are holding broadly weaker levels ahead midday, 10Y yield +.1458 to 4.4386% ahead of the $39B 10Y Note auction re-open, WI currently 4.441%, 13.1bp cheap to last month's 4.31% auction.
- March auction recap: Treasury futures inched off moderately weaker levels after the $39B 10Y note auction reopen (91282CMM0) stopped through: drawing 4.310% high yield vs. 4.314% WI; 2.59x bid-to-cover vs. 2.48x prior.
- Peripheral stats: indirect take-up receded to 67.41% vs. 71.55% prior; direct bidder take-up climbed to 19.51% from 13.61% prior; primary dealer take-up 13.08% vs. 14.84% prior.
US 10YR FUTURE TECHS: (M5) Monitoring Trendline Support
Apr-09 15:51
- RES 4: 114-10 High Apr 7 and the bull trigger
- RES 3: 113-09+ 76.4% retracement of the Apr 7 - 9 sell-off
- RES 2: 112-21+ 61.8% retracement of the Apr 7 - 9 sell-off
- RES 1: 112-08 High Apr 7
- PRICE: 110-26+ @ 15:50 BST Apr 9
- SUP 1: 110-01 Intraday low
- SUP 2: 109-29 Trendline support drawn from the Jan 13 low
- SUP 3: 109-13+ Low Feb 24
- SUP 4: 108-26+ 76.4% of the Jan 13 - Apr 7 bull cycle
A sharp sell-off in Treasury futures this week has resulted in a breach of both the 20- and 50-day EMAs. Attention is on trendline support at 109-29, drawn from the Jan 13 low. A clear break of this support would strengthen a bearish threat. Note that the steep sell-off could still be a corrective pullback that has allowed an oversold trend condition to unwind. Initial resistance to watch is 112-08, yesterday’s high. A break would highlight a possible early reversal.
US STOCKS: Early Equities Roundup: Off Lows Despite Retaliatory Tariff Volley
Apr-09 15:40
- Stocks have see-sawed off early overnight lows ahead midday despite China (84%) and the EU (E21B) announcing retaliatory tariffs against the US Wednesday morning. Currently, the DJIA trades down 3.06 points (-0.01%) at 37632.5, S&P E-Minis down 0.25 points (-0.01%) at 5020.25, Nasdaq up 126.9 points (0.8%) at 15391.6.
- Information Technology and Consumer Discretionary sectors outperformed in the first half, hardware and semiconductor makers buoyed the tech sector: Advanced Micro Devices +5.28%, Intel Corp +4.69%, Apple +3.90%, Skyworks Solutions +3.68% and Teradyne +3.05%.
- The Consumer Discretionary sector was supported by: Tesla +3.51%, Wynn Resorts +2.81%, Expedia Group +1.87%, Chipotle Mexican Grill +1.78% and MGM Resorts International +1.61%
- On the flipside, Utilities and Health Care sectors underperformed, alternative energy providers weighing on the former: Entergy Corp -3.52%, Evergy -3.32%, NiSource -2.91%, Duke Energy -2.72% and NextEra Energy -2.71%.
- Meanwhile, pharmaceuticals weighed on the Health Care sector: Bristol-Myers Squibb -5.73%, AbbVie -5.68%, Incyte Corp -4.88%, Regeneron Pharmaceuticals -4.77% and Eli Lilly -4.53%.
- Reminder, banks kick off the latest earnings cycle this Friday with Bank of New York Mellon, Wells Fargo & Co, JPMorgan Chase and Morgan Stanley reporting.
