SignalPlus Macro Analysis: BTC EFT continues to outflow, the market is pinning its hopes on the May FOMC meeting and CPI data

24-04-29 18:29

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Original title: "SignalPlus Macro Analysis (20240429): Core PCE data continues to be high"

Original source: SignalPlus

Last Friday, U.S. Treasury yields took a breather. The core PCE data basically met analysts' high expectations (overall and core increased by 0.3% month-on-month, and increased by 2.7%/2.8% year-on-year). At the same time, core services increased by 0.39% month-on-month, higher than 0.19% in February. Actual personal consumption expenditures also rose unexpectedly. Economic and price pressures were more stubborn than expected, bringing further hawkish pressure to the FOMC meeting later this week. The U-M Consumer Confidence Index basically remained at 77.2, but the 1-year inflation expectation rose again from 2.9% in March to 3.2%, and the 5-10 year inflation expectation also rose from 2.8% to 3.0%.

However, as US Treasury positions were close to being extremely bearish and PCE results were no worse than market expectations, interest rates fell by about 3 basis points across the board, and the Nasdaq rose 2% on yield trends and strong tech earnings. On the other hand, the Japanese yen attracted more attention, and the Bank of Japan still chose to maintain a dovish stance relative to the hawkish Fed. The yen exchange rate is now above 159 and approaching a 25-year high of around 160.

The FOMC meeting will be the focus this week, but the market will also be affected by the US JOLTS and non-farm payrolls before and after the meeting, while CPI and Nvidia earnings are expected to be the biggest market influencers later this month, when the chip giant will seek to reverse its worst monthly performance since October last year. In addition, WSJ reported that allies of former President Trump are busy developing a secret plan to enable him to "eliminate" the independence of the Federal Reserve after his re-election. Of course, this situation is difficult to happen, but it is also an interesting idea in some atypical scenarios (BTC to 200,000?).

Despite the uncooperative US economic data last week, US corporate profits have once again become a bright spot, and the strong performance so far has led to a 3.3% upward revision of profits in the first quarter of 2024. In addition, the resumption of dividends by some companies (Meta, Google) has also brought new growth momentum to SPX and others. At present, other technology companies are also under pressure to start dividend plans or convert some stock repurchases into cash payments, especially considering that many SPX companies have strong balance sheets and are fully capable of distributing dividends regularly.

On the crypto side, no major ETF products saw significant buying interest, with $84 million of outflows on Friday following $218 million of outflows last Thursday. Additionally, while still well above 2023 levels, CME BTC futures open interest has retreated significantly from recent all-time highs, with mainstream FOMO sentiment clearly slowing, especially as the likelihood of rate cuts becomes increasingly elusive. Native user interest remains focused on BTC runes/memecoins and ETH's L2 restaking and other yield-growth areas that are relatively new to the general investor. We remain cautious on near-term price action and prefer a wait-and-see approach until the dust settles on the FOMC meeting and CPI data later in May.