Macro Matters – Weekly review, w/c May 1

TradeDay Macro Matters

Macroeconomic / Geopolitical Developments

• US recession warnings intensify

• Treasury yields remain volatile

• Renewed Russian threats over the Black Sea Grain Initiative

Recession Warnings in the US

The US economy faces growing recessionary risks due to the most aggressive monetary tightening in 40 years. Banking sector challenges have further strained lending, job losses are rising, and business confidence is declining. The ingredients for a harder landing than the “mild recession” predicted by the Fed are coming together.

Treasury Yields Fluctuate

Treasury market volatility remains elevated, with yields swinging between recession fears and inflation concerns. This leaves equity futures uncertain, with no strong directional trend.

Renewed Russian Threats Over Grain Deal

Russia has raised the threat of pulling out of the Black Sea Grain Initiative amid mounting Western sanctions. A collapse of the deal could disrupt grain exports, spike soft commodity prices, and renew inflationary pressures globally.

US

• The Fed is expected to deliver one final rate hike

• Tech earnings continue to prop up markets

• “Sell in May” sentiment looms

A Final 25bps Hike by the FOMC

Markets expect the Fed to raise rates by 25bps, supported by strong Q1 Employment Cost Index data and persistently high Core PCE inflation. However, signs of economic strain suggest this could be the last hike. Markets are pricing in one to two rate cuts by year-end.

Tech Earnings Prop Up Wall Street

Big Tech has driven recent gains in US equity markets, with impressive results from Microsoft, Meta, and Alphabet. However, with Apple the only major tech player reporting this week, the rally could lose momentum as investors shift focus to recession risks.

“Sell in May”?

As earnings season winds down, technical indicators suggest resistance at key levels for equities. A disappointing Non-farm Payrolls report or waning tech stock performance could lead to a shift toward the “Sell in May and go away” mentality.

What’s Next?

The Fed’s rate decision and forward guidance will dominate market focus, alongside the ISM data. Non-farm Payrolls at the end of the week are expected to show moderating job growth, reinforcing recession concerns.

Europe

• ECB expected to raise rates by 25bps

• Eurozone inflation and final PMIs in focus

ECB Set to Hike by 25bps on Thursday

The ECB’s hawkish stance has supported the EUR, with core inflation expected to remain at 5.7% in April. However, debate over the size of future hikes persists, with prominent ECB officials advocating for more aggressive action.

What’s Next?

Eurozone HICP inflation on Tuesday will set the tone for the ECB meeting. Final PMIs for April are unlikely to move markets significantly, with the focus remaining on inflation and ECB guidance.

Asia

• Dovish BoJ sends JPY lower

• RBA likely to maintain pause

BoJ’s Patience Sends JPY Tumbling

The Bank of Japan’s dovish stance continues under its new governor, with no signs of policy tightening. A review of monetary policy over the next 12–18 months suggests slow change, driving JPY underperformance.

Lower Inflation Leaves the RBA on Pause

The RBA paused rate hikes in April and is likely to maintain this stance in May, with inflation showing signs of moderation. The current cash rate of 3.60% could mark the peak of the tightening cycle.

What’s Next?

Chinese PMI data will impact market sentiment, with traders watching for potential volatility in thin liquidity post-May Day holidays.

Commodities

• Oil searches for support amid demand concerns

• Gold holds steady amid fluctuating yields

Oil Tries to Find Support

After a sharp decline, NYMEX WTI Crude has found a near-term floor. However, concerns about weakening demand weigh on the outlook, with further signs of a US slowdown potentially breaching key support levels.

Gold Holds Steady

Gold has been supported by fears of a US recession and subdued Treasury yields. Support at $1950 remains critical for maintaining a positive technical outlook.

On the Calendar

Central Banks

A busy week for central bank activity:

• Tuesday: RBA expected to hold rates at 3.60%

• Wednesday: Fed expected to hike rates by 25bps

• Thursday: ECB expected to raise rates by 25bps

Macro Data

• May 1: ISM Manufacturing

• May 2: Eurozone HICP inflation, US JOLTS, US Factory Orders

• May 3: ADP Employment, ISM Services, FOMC monetary policy

• May 4: ECB monetary policy, China Caixin Manufacturing PMI

• May 5: US Non-farm Payrolls

Corporate Earnings

• May 2: Pfizer, AMD, Ford, Starbucks

• May 3: Barrick Gold, Uber

• May 4: Moderna, Apple

• May 5: AMC Entertainment

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