Daily market update May 4

Fed funds futures are pricing in 50 bp of hikes at each of the next 4 meetings on 4 May, 15 June, 27 July, and 21 Sep. The Fed funds rate at the end of the year is expected to be 2.9%, up from 0.33% currently and higher than the 2.5% indicated by some FOMC speakers over the last couple of weeks. There is no clear reason why the FOMC would want to disappoint the market and the odds strongly favor a 50 bp hike tonight. It will also be Powell's first in-person press conference in the post-pandemic era.

A large part of Asia - Japan, China, Indonesia, Thailand and Malaysia remains closed but markets in Europe and the US have seen some positive sentiment overnight.?The SPX remains below the 4200 level but the spike up in VIX earlier in the week has abated somewhat with the volatility index back below the 30 levels now.

Almost all sectors closed in the green overnight with Energy gaining strong at 2.8% despite Crude and broad commodities dipping on the day.

Europe is expected to unveil a new sanctions package against Russia later in the week. Some silver lining in Ukraine as civilians trapped in Mariupol have slowly started getting evacuated with about 100 freed so far. Macron has called on Putin to help continue the humanitarian corridors and hold back on the assault.

The US yield curve is showing stress again with the 2s10s dipping under the 20 bps and the 5s10s and 5s30s slightly inverted. The 10Y yield is a shade below the 3% mark as we head into FOMC tonight.

We also have services PMI and weekly crude inventories in the US today, a BOE rate decision tomorrow, and US NFP on Friday to close out the week.

Have a great day ahead

" Sometimes you’re going to make money and sometimes you’re going to lose money, but it’s important to have rules in place that dictate how much money you’re willing to lose."

George Soros