Ahead Today
G3: Trump-Xi Summit
Asia: India WPI
Market Highlights
The dominant macro story was a sharply hotter-than-expected US April PPI print - up 6% year-on-year, the fastest since 2022 and above all economist’s estimates - driven by war-related energy costs feeding into freight prices. Core PPI also beat, hitting its highest since December 2022. Nonetheless the components that feed directly into core PCE which is the Fed’s key inflation indicator were more benign and estimates suggest this would mechanically imply a modest 0.3%mom rise in core PCE print. More broadly, the higher-than-expected CPI and PPI readings this week pushed traders to price in approximately 20 basis points of additional Fed tightening over the coming year, drove 10-year Treasury yields to their highest since July, and sent 30-year Treasuries clearing at 5%. Boston Fed President Collins flagged that rate hikes may be necessary if inflation pressures broaden, though she noted the current shock has masked evidence that underlying inflation was still trending down. Kevin Warsh was confirmed as Fed Chair in a 54–45 Senate vote but he faces a more divided FOMC and complex picture in terms of navigating the path ahead including the inflation picture.
The dollar extended gains for a third consecutive session on the hawkish repricing, with the yen bearing the brunt, weakening to 157.88 against the dollar and approaching the May 6 high of 157.94. The yuan was a notable exception, extending its rally to a tenth consecutive day with USD/CNH falling to 6.7876 — its longest losing streak since September 2017 — defying broader dollar strength ahead of the Trump–Xi summit. Elsewhere in Asia FX, the Korean won was supported by the Kospi's 2.6% rebound and a dip in oil prices, while India more than doubled gold and silver import duties to defend the rupee amid FX reserve pressure. Equities shrugged off the inflation data, with the S&P 500 and Nasdaq closing at fresh records on Wednesday, driven by AI optimism and Cisco's 15% surge after a strong earnings beat and raised guidance.
In geopolitics, President Trump arrived in Beijing on Wednesday for a 36-hour summit with Xi Jinping, accompanied by at least 17 US executives including Nvidia's Jensen Huang, Apple's Tim Cook, Tesla's Elon Musk, and Boeing's Kelly Ortberg. The agenda may cover Iran, trade, and also AI chip policy. The US and China are reportedly expected to launch a "Board of Trade" mechanism, with each side potentially identifying $30 billion worth of goods on which tariffs could be cut, though major breakthroughs are seen as unlikely. Secretary of State Rubio separately said the US hopes China will play a "more active role" in resolving the Iran conflict by helping reopen the Persian Gulf. In the Philippines, gunshots were fired inside the Senate building on Wednesday evening during a standoff involving Senator Ronald "Bato" Dela Rosa — a former national police chief sheltering in the complex to evade an ICC arrest warrant for alleged crimes during the Duterte-era drug war. The incident is the latest flashpoint in a broader political crisis: the House voted 257–25 on Monday to impeach Vice President Sara Duterte for a second time over alleged fund misuse and threats against President Marcos, with Duterte-aligned senators simultaneously installing a new Senate president in a surprise move that raises uncertainty over the upcoming trial.