US STOCKS: Late Equities Roundup: Support Wanes Late

• RES 4: 151.21 High Mar 28 and a key resistance    
• RES 3: 150.49 High Apr 2
• RES 2: 149.28 High Apr 3
• RES 1: 148.54/59 76.4% of Mar 28 - Apr 22 bear leg / High May 12
• PRICE: 148.18 @ 16:38 BST May 12
• SUP 1: 146.19/144.26 50- and 20-day EMA   
• SUP 2: 142.36 Low May 6 
• SUP 3: 141.97 Low Apr 29  
• SUP 4: 139.89 Low Apr 22 and a bear trigger

The primary trend condition in USDJPY is bearish and gains since Apr 22 appear corrective. However, resistance at the 50-day EMA, at 146.19, has been cleared today. The breach highlights a stronger reversal and has exposed 148.54, a Fibonacci retracement (pierced). On the downside, a reversal lower would expose 142.36, the May 6 low. Clearance of this level is required to signal the end of the correction.    

A general theme behind the breakdown of analyst expectations for CPI inflation components is a partial reversal of the March report being surprisingly weak across all main components except shelter. Two large sequential upside drivers are expected to come from CPI-specific items (airfares and vehicle insurance) but with significant contributions from other items that do also feed into core PCE (lodging away from home, for example). 

* denotes a PPI-equivalent feeds into core PCE instead, with any surprises likely to be ultimately downplayed

• Lodging away from home (+ve): Analysts see lodging prices broadly flat in April (median 0.2% but mean -0.1%) after a heavy -3.5% M/M in March in what was its sharpest decline since Jan 2022 for the volatile series. The -3.5% M/M dragged -0.06pps off core CPI in March.
• Airfares* (+ve): Analysts look for a circa 2% decline in April for a smaller drag than the particularly heavy -5.3% M/M in March (sharpest decline since Sep 2021), which had also followed -4.0% M/M in Feb. The -5.3% in March directly dragged -0.06pps off core CPI.
• Vehicle insurance* (+ve): Seen accelerating to 0.6% M/M after a much weaker than expected -0.8% M/M in March, with the series unusually volatile in recent months. It accounts for a non-trivial 4% of the core CPI basket and 11% of supercore, but not PCE.
• Used cars (+ve): Used car prices are seen flat to up slightly (0.0% median, 0.2% mean) after -0.7% M/M in March. There’s another reasonably wide range this month, from -0.6% to +2.0% M/M. Some uncertainty will likely stem from how quickly higher wholesale prices feed through, with Manheim prices jumping 2.8% M/M in April after two months of -0.7% M/M.
• Apparel (+ve): Seen re-accelerating to +0.5% M/M on average moderating to 0.37% M/M in March although there is a decent range of 0.1-1.0% presumably on different tariff passthrough assumptions. Apparel started the year on a volatile but weak setting, sliding -1.4% in Jan (weakest since Mar and Apr 2020) before rising 0.6% in Feb (strongest since Sep 2024).
• Rents (-ve): Owners’ equivalent rent (OER) in particular is seen reverting to a well-centered 0.3% reading after a surprise acceleration in March, a rate that would extend recent moderation. We see average estimates for OER of 0.32% (range 0.28-0.40) after 0.40% and primary rents at 0.30% (range 0.28-0.32) after 0.33%.

European curves bear flattened Monday, with periphery / semi-core EGBs outperforming.

• A tentative trade war truce between China and the US saw Bund and Gilt yields gap higher at the start-of-week reopen as equities soared in relief.
• Bear steepening was the order of the day, as ECB/BOE rate cuts were priced out, pressuring the short end.
• Elsewhere, headlines from the BOE Watchers' conference were prevalent following last week's 3-way split (ultimately 5-4 in favour of a 25bp cut).
• Lombardelli called the decision to cut 25bp "finely balanced"; Greene said she would still have voted for a 25bp cut if she knew about the US and UK/China trade developments; Taylor, who had voted for a 50bp cut, noted that he could reconsider support for lower rates if "there was a surprising amount of progress on the international trade war situation".
• Bunds underperformed Gilts. Periphery / semi-core spreads narrowed by around 2bp across the board.
• Tuesday's agenda includes UK labour market data - MNI's preview is here. We also get US CPI data.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 12.8bps at 1.913%, 5-Yr is up 12.3bps at 2.222%, 10-Yr is up 8.6bps at 2.648%, and 30-Yr is up 6.2bps at 3.081%.
• UK: The 2-Yr yield is up 9.2bps at 4%, 5-Yr is up 9.9bps at 4.126%, 10-Yr is up 7.6bps at 4.643%, and 30-Yr is up 4.5bps at 5.391%.
• Italian BTP spread down 1.8bps at 102.9bps / French OAT down 2.3bps at 68.1bps