The financial markets have been fighting the Fed since October of last year, especially since the start of this year, in two ways. The first involves bidding-up stock prices in anticipation of a ‘Fed pivot’, which is probably a self-defeating strategy. The second involves factoring lower interest rates into bond prices.
The backdrop is mounting economic uncertainty as Finance leaders of the Group of Seven (G7) nations warned on Saturday in a subdued end to a three-day meeting overshadowed by concerns about the U.S. debt stalemate and fallout from Russia’s invasion of Ukraine.
The gathering in the Japanese city of Niigata came as global policymakers – already preoccupied by U.S. bank failures and efforts to reduce reliance on China – are now forced to grapple with a potential default by the world’s largest economy. While the communique made no mention of the U.S. debt ceiling stalemate, it figured constantly in discussions.
U.S. stocks ended slightly lower on Friday, led by weaker megacap shares following their recent rally, as data showed U.S. consumer sentiment dropped to a six-month low. The Dow was barely lower in its fifth straight day of declines, the blue-chip index’s longest losing streak in two months.
May consumer sentiment dropped to its lowest since November. The University of Michigan’s consumer sentiment reading for May came in at 57.7, much lower than the 63 expected and down from 63.5 in April.
Treasury yields rose in the bond market following the consumer-sentiment report. The yield on the 10-year Treasury erased an earlier dip and climbed to 3.46 per cent from 3.39 per cent late Thursday. It helps set rates for mortgages and other important loans.
The risks are building, and recession is becoming more likely!
CONTENT
0:00 Start
0:15 Introduction
0:50 G7 Warnings
4:44 US Markets
6:50 US Consumer Sentiment Crashes
7:50 Bonds
9:15 Debt Default?
11:22 Europe
13:40 Oil and Gold
15:40 Asia
17:45 Australia
21:20 Bitcoin Halving
23:16 Summary and Conclusion
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