While Wall Street hit new record highs yesterday, there's been a notable step back in global equities today. Even the high-flying, tech-heavy KOSPI index in South Korea recoiled, albeit partly due to domestic jitters about windfall taxes on AI-related profits.
The energy picture has created an anxious backdrop for the release later today of the April U.S. consumer price report, where forecasts already point to an acceleration in the headline rate of inflation to near-three-year highs of 3.7%.
That makes for uneasy reading heading into big auctions of 10- and 30-year Treasury debt today and later in the week.
The bond market mood was rattled further by the latest twist in the UK political drama.
Even though Prime Minister Keir Starmer insisted again today that he would stay on as premier despite his party's poor showing in UK local elections last week, key members of his cabinet have reportedly urged him to set out a timetable for his departure.
The uncertainty about what happens next and what a new PM might mean for the direction of UK fiscal and economic policy saw long-dated British gilt yields surge back to their highest level since 1998, with sterling also slipping.
Elsewhere, the dollar was generally firmer and the yen slipped even as U.S. Treasury Secretary Scott Bessent, who's visiting Tokyo, seemed to endorse the Bank of Japan's efforts to normalize monetary policy and stabilise the currency.
On the yen, Bessent said that "excess volatility is undesirable, and we have been in close contact with the Ministry of Finance, and we will stay in close contact with them."
Meantime, Federal Reserve Chair-apparent Kevin Warsh cleared a key procedural hurdle in the U.S. Senate on Monday, moving him closer to confirmation and a smooth handoff from outgoing Chair Jerome Powell, whose term ends on Friday.
With that, onto today's column.
