Today's Update 05-06-2025
Key Points and Metrics
Key Points and Metrics:
Key Economic Events and Metrics
United States
US Treasury Secretary Bessent Testimony:
Debt Ceiling:
The U.S. government will never default; plans to raise the debt ceiling.
Estimates the "X-date" for reaching the debt ceiling is approaching.
Economic Outlook:
Expects Q1 GDP data to be revised upwards.
Tax collections anticipated to be robust, enhanced by AI technologies.
No indications of a current recession in the U.S. economy.
Trade Negotiations:
Engaged in negotiations with 17-18 key trade partners; no engagement with China yet.
Anticipates substantial reductions in tariffs on U.S. goods.
IRS Modernization:
Aims to reduce paper processing costs from $450 million to below $20 million by the end of the term.
Cut $2 billion from the IRS IT budget without operational disruptions.
Economic Indicators:
Trade Balance (March 2025):
Actual: -$140.5 billion
Forecast: -$137.15 billion
Previous: -$123.2 billion (revised from -$122.7 billion)
Redbook Index YoY:
Actual: 6.9%
Previous: 6.1%
Effective Federal Funds Rate (May 5th): 4.33%
Secured Overnight Financing Rate (SOFR): Decreased to 4.33% from 4.36%
Canada
Economic Indicators:
Ivey PMI (April 2025):
Actual: 47.9
Previous: 51.3
Trade Balance (March 2025):
Actual: -0.51 billion CAD
Forecast: -1.6 billion CAD
Previous: -1.41 billion CAD (revised from -1.52 billion CAD)
Fitch Ratings Update:
Forecasts a recession in Canada due to the impact of U.S. tariffs.
Anticipates Canadian GDP to decline for three quarters starting from Q2.
Europe
Germany:
Political Development:
Friedrich Merz falls short of the majority needed to become chancellor in the first round of parliamentary voting.
A second vote is scheduled for later in the day.
Economic Indicators:
5-Year Bobl Yield:
Actual: 2.07%
Previous: 2.06%
5-Year Bobl Bid-to-Cover Ratio:
Actual: 1.2
Previous: 1.4
Composite PMI Final:
Actual: 50.1
Forecast: 49.7
Services PMI Final:
Actual: 49.0
Forecast: 48.8
Eurozone:
Economic Indicators:
Composite PMI Final:
Actual: 50.4
Forecast: 50.1
Services PMI Final:
Actual: 50.1
Forecast: 49.7
Producer Price Index (PPI) MoM:
Actual: -1.6%
Forecast: -1.35%
PPI YoY:
Actual: 1.9%
Forecast: 2.5%
France:
Economic Indicators:
Services PMI:
Actual: 47.3
Forecast: 46.8
Composite PMI:
Actual: 47.8
Forecast: 47.3
Industrial Production MoM:
Actual: 0.2%
Forecast: 0.3%
Italy:
Economic Indicators:
Services PMI:
Actual: 52.9
Forecast: 51.3
Composite PMI:
Actual: 52.1
Forecast: 50.2
United Kingdom:
Economic Indicators:
Composite PMI Final:
Actual: 48.5
Forecast: 48.2
Services PMI Final:
Actual: 49.0
Forecast: 48.9
Trade Agreements:
Free Trade Agreement with India:
Expected to boost bilateral trade by £25.5 billion a year.
UK GDP to increase by £4.8 billion annually by 2040.
India to reduce tariffs on 90% of UK imports over a decade.
Asia and Other Regions
China:
Diplomatic Relations:
President Xi Jinping expresses readiness to expand mutual openness with EU leaders.
China and the European Parliament lift restrictions on mutual exchanges.
Upcoming Events:
Officials, including the PBOC, to hold a briefing on financial policies to support the market.
Japan:
Bank of Japan (BoJ):
Plans to launch a wage trends survey as early as 2027.
Switzerland:
Swiss National Bank (SNB):
Chairman Schlegel Statements:
Prepared to implement negative interest rates if necessary.
Acknowledges significant appreciation of the Swiss Franc.
Committed to price stability and ready to intervene in the FX market.
Energy and Commodities
European Union (EU):
Energy Policy:
Plans to phase out all remaining Russian gas and LNG imports by the end of 2027.
Will propose a legal framework in June to ban new Russian gas deals and existing spot contracts by end-2025.
Russia:
Oil Exports:
ESPO blend oil exports from Kozmino port set at 4.2 million tons for May, up from 3.8 million tons in April.
Middle East:
Israel and Yemen:
Israel conducts airstrikes on Sanaa airport in Yemen.
Markets and Indices
Fear & Greed Index:
General Market: 58/100 (Greed)
Cryptocurrency Market: 59/100 (Greed)
Currency Strength Ranking (Strongest to Weakest):
i.New Zealand Dollar (NZD)
ii.Euro (EUR)
iii.British Pound (GBP)
iv.Japanese Yen (JPY)
v.US Dollar (USD)
vi.Canadian Dollar (CAD)
vii.Australian Dollar (AUD)
viii.Swiss Franc (CHF)
Corporate Earnings Estimates
May 6th:
Advanced Micro Devices (AMD):
Time: 16:15 ET
Estimated EPS: $0.94
Estimated Revenue: $7.1 billion
May 7th:
The Walt Disney Company (DIS):
Time: 06:40 ET
Estimated EPS: $1.20
Estimated Revenue: $23.1 billion
Uber Technologies (UBER):
Time: 06:45 ET
Estimated EPS: $0.51
Estimated Revenue: $11.61 billion
May 8th:
ConocoPhillips (COP):
Time: 07:00 ET
Estimates Pending
Key Geopolitical Events
US and International Relations:
Trade Negotiations:
US-India trade talks progressing positively.
EU targets €100 billion of US goods with tariffs if talks fail; EU considers US tariffs as unfair.
Russia-Ukraine Situation:
Discussions about territory and settlement are ongoing.
Russia's President Putin to meet with leaders from Serbia and Slovakia on May 9th.
US and China Relations:
Putin and China's President Xi to discuss Ukraine and US relations on May 8th.
European Union Initiatives:
Legal Proposals:
Plans to ban imports under new Russian gas deals by end-2025.
Annual EU-UK summits to strengthen relationships.
Trade Policies:
EU Parliament approves fast-track approval of softer car CO₂ emission targets.
Other Notable Events
Economic Data Releases:
Swiss Unemployment Rate:
Unadjusted: 2.8% (Forecast: 2.9%)
Adjusted: 2.8% (Forecast: 2.8%)
US Redbook Index YoY:
Actual: 6.9%
Effective Federal Funds Rate:
Maintained at: 4.33%
Financial Institutions:
European Central Bank (ECB):
Forex reserves increased by €200 million to €341.9 billion.
Settled €270.7 billion in corporate bond purchases.
Bond holdings under PEPP at €1.53 trillion.
International Institute of Finance (IIF):
Global debt increased by approximately $7.5 trillion to over $324 trillion in Q1 2025.
Emerging markets' debt-to-GDP ratio reached a record high of 245%.
Market Movements:
US Trade with China:
March trade deficit at $17.93 billion, down from $21.17 billion in February.
MOO (Market On Open) Imbalance:
S&P 500: -$303 million
Nasdaq 100: +$24 million
Dow 30: -$49 million
MAG 7: +$16 million
Trade War Escalation
Treasury Secretary Bessent announced negotiations with 17-18 key trade partners, notably excluding China. The EU is preparing retaliatory measures targeting up to €100 billion of US goods if talks fail. This signals a significant escalation in global trade tensions.
Energy Markets Transformation
The EU Commission plans to phase out Russian gas imports completely by 2027, with immediate bans on new contracts by 2025. This structural shift will reshape European energy markets and supply chains.
Debt Ceiling Concerns
Treasury Secretary Bessent warned we're on the "warning track" for reaching the debt ceiling, though he assured markets that "the US government will never default." This creates potential volatility ahead of the X-date announcement.
Economic Outlook
Fitch forecasts a Canadian recession beginning in Q2 due to US tariff impacts. Meanwhile, global debt has reached a record $324 trillion in Q1 2025, with emerging markets' debt-to-GDP ratio hitting an all-time high of 245%.
Fed Decision Watch
Markets remain cautious ahead of tomorrow's Federal Reserve interest rate decision, with Wall Street in risk-off mode following disappointing economic data and corporate earnings.
Final Thoughts
The markets are at a critical inflection point with the Fed decision looming and trade tensions escalating rapidly. Treasury Secretary Bessent's comments suggest potential trade deals could be announced as early as this week, which could provide relief. However, the widening US trade deficit (-$140.5B) and deteriorating global economic indicators point to challenging conditions ahead. Investors should prepare for heightened volatility as these competing forces play out, with particular attention to tomorrow's Fed decision as the potential catalyst for the next major market move. The debt ceiling situation adds another layer of uncertainty that could impact Treasury markets in the coming weeks.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Always do your own research and consider your financial situation before making investment decisions.
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Harry