Good morning. Markets prepare for a CPI-Fed double whammy, IEA sees a major oil surplus and politics is upending Europeâs bond market hierar [View in browser](
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Good morning. Markets prepare for a CPI-Fed double whammy, IEA sees a major oil surplus and politics is upending Europeâs bond market hierarchy. Hereâs what traders are talking about. â [David Goodman]( Want to receive this newsletter in Spanish? [Sign up to get the Five Things: Spanish Edition newsletter](. Calm before the storm US equity futures were [little changed on Wednesday](before a huge day for markets that sees inflation data landing just hours ahead of the Federal Reserveâs interest rate decision â  a phenomenon that has happened only seven times since 2014. Treasuries were little changed after rising on a solid $39 billion sale yesterday, while European markets were also calm after a volatile two days caused by political upheaval in France. CPI day The first major event of todayâs [double whammy]( is US CPI, due at 8:30 a.m. in New York. Economists expect expect the May CPI print to give the Fed some additional reassurance inflation is slowing, but the readings have a history of surprising on the upside this year. The outcome could have a big impact on markets, as well as Fed projections due a few hours later that may not be finalized until after the report drops. Fed day too That brings us to the second big release of the day â the Fedâs June decision. No change in rates is expected, and disappointing inflation data since the projections were last updated in March are almost certain to [prompt a downgrade]( to the number of rate cuts officials envision for this year.  The rate decision, and the projections, will be released at 2 p.m. in Washington. Fed Chair Jerome Powell will hold a press conference 30 minutes later. Oil surplus Global oil markets face a â[major](â surplus this decade, leaving the biggest buffer of spare output since the depths of the Covid-19 lockdowns, the International Energy Agency said. The shift away from fossil fuels will see world consumption  âlevel offâ at 105.6 million barrels a day in 2029, about 4% higher than last yearâs level, while production capacity continues to surge. The IEA said it will be a âstaggeringâ 8 million barrels a day higher than demand by the end of the decade. European hierarchy Markets may be calmer today, but the hierarchy of[European sovereign debt markets is being reordered]( as a flareup in French political risk puts the nationâs bonds on a par with those once at the heart of the regionâs debt crisis. French bonds, traditionally considered one of the safest assets in the euro area, have sold off so sharply since President Emmanuel Macron called snap elections on Sunday that some now yield more than debt from Portugal and just a handful of basis points less than those issued by Spain. What weâve been reading This is whatâs caught our eye over the past 24 hours. - UK [economy stalls]( in run-up to July election.
- The EU will slap [additional tariffs]( on EVs shipped from China
- A backlash in the Tory heartlands [risks historic defeat for Hunt](.
- [The tiny trades]( that brought down Segantiiâs giant hedge fund.
- Family office imposters [lurk among Asiaâs billionaires.](
- JPMorgan risk swap [ends up at a familiar place:]( rival banks. And finally, here's what Joeâs interested in this morning Good morning and happy CPI & Fed Day. Economists are predicting a 0.1% increase in headline CPI and a 0.3% increase in core for the month of May. Then with the Fed, it's a Dots Day, so we'll see how many cuts (if any) the FOMC is still expecting in 2024. Here is a [great preview from Steve Matthews](, which lays out the possibilities. According to a Bloomberg survey, 41% of economists are expecting the FOMC to signal two cuts still to come this year. Another 41% of respondents expect either just one cut or no cuts at all. While 2024 hasn't quite delivered as much disinflation as people hoped for at the beginning of the year, there continue to be signs of labor market deceleration. With last week's Non-Farm Payrolls report, the unemployment rate is at 4%, which is the highest since January 2022. It's not dramatic softening, but it is noticeable, and similar ideas are reflected across a range of metrics (like JOLTS). And modest softening can turn into more serious softening. So it'll be interesting to hear in the press conference about the symmetry of risks. Maybe we're not there yet, but at some point the Fed will start to get concerned about the employment side of the mandate slipping away if trends were to continue. So that's the macro. And one other thing that's on my mind right now. General Motors. Its stock is at a 2-year high. All you hear about these days is the absolute dominance of the Chinese auto companies, and yet here's the old legacy US player on a tear. Of course, there's not some real contradiction here, we're just talking about two different models. China's players are running flat out, expanding and investing like crazy, pushing prices down, and expanding their footprint across the globe. BYD may be playing a big part in pushing China further out on the technological frontier, but there's not much left over for shareholders. Over the last two years, BYD shares are down over 20%. Meanwhile, [GM just authorized $6 billion more]( in stock buybacks, though thereâs more to GM's recent run. It's doing well in bread-and-butter truck and SUV sales. GM also believes that next year, its EV business will be profitable on an operating business basis (before interest and taxes). Still, part of the story here is that EV-related investments are going to slow here, so the company can distribute more cash to shareholders (in the form of buybacks and dividends). In US policy circles, there's obviously a lot of anxiety about the rise of Chinese auto OEMs (hence all the tariffs). But it's not clear whether the US legacy players can really *compete* technologically (or on cost) so long as shareholder-friendly capital allocation decisions are prioritized over a higher pace of sustained internal investment. Perhaps it's fine. We'll see. Joe Weisenthal is the co-host of Bloombergâs Odd Lots podcast. Follow him on X [@TheStalwart]( Like Bloomberg's Five Things? [Subscribe for unlimited access]( to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. [Bloomberg Markets Wrap: The latest on what's moving global markets. Tap to read.]( Follow Us Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. Before itâs here, itâs on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals canât find anywhere else. [Learn more](. Want to sponsor this newsletter? [Get in touch here](. You received this message because you are subscribed to Bloomberg's Five Things to Start Your Day: Americas Edition newsletter. If a friend forwarded you this message, [sign up here]( to get it in your inbox.
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