Daily Game Plan

TODAY’S GAME PLAN:  from the trading
desk, this is not research

TODAY’S ECONOMIC DATA:  8:30ET Personal Income, Personal Spending, PCE Price Index, Core PCE, Advance Goods Trade
Balance, Wholesale Inventories, Retail Inventories; 9:45ET MNI Chicago PMI; 10:00ET U. of Mich. Sentiment; 1:30ET Trump press conference with Elon Musk; 4:45ET Fed’s Daly speaks

Core PCE probably rose by a modest 0.1% in April as service components dragged.

Highlights and News:  

• Bessent Says US-China Talks ‘Stalled,’ Pushes for Trump-Xi Call
• TRUMP SAYS CHINA VIOLATED ITS AGREEMENT WITH US
• GREER: US VERY CONCERNED WITH CHINA NON-COMPLIANCE ON TRADE
• China plans to allocate $70 billion for a new financing tool to fast track infrastructure projects
• Fed’s Logan Signals It May Be Quite Some Time Before Fed Adjusts Rates
• Hundreds of Thousands Told Not to Drink Alcohol in 3 States as a severe heat wave hits – Newsweek
• Russia to Attend Fresh Talks as Ukraine Demands Peace Proposals
• US GOODS IMPORTS FALL 19.8% M/M, BIGGEST DROP ON RECORD

World stocks were steady as investors waited for key US inflation data and assessed the latest in tariff news. Global equities have just had the biggest weekly outflow
of the year at $9.5 billion, according to strategists at BofA. Still, MSCI’s main world index is up over 5% this month. European stocks continued to benefit from weaker sentiment toward the US. Funds in the EU region attracted inflows of about $1 billion in
the week through May 28, while US equities suffered outflows of about $5.1 billion, according to BofA. Treasury Secretary Scott Bessent said that he was scheduled to have talks with a high-level Japanese delegation later today in Washington, although he said
talks with China were “a bit stalled”. Bessent said that a call between President Trump and Xi Jinping may be needed for the world’s two largest economies to reach a deal. The last time the two presidents spoke was in January. China plans to allocate 500 billion
yuan ($70 billion) of capital that could be leveraged up to fast track new infrastructure projects as authorities seek to cushion the economy from US tariffs. The mechanism is expected to be operational by the end of June.

EQUITIES:  MSCI Rebalance Today

US equity futures fluctuated ahead of key PCE data and quarter-end portfolio rebalancing. Stock futures then dropped after
President Trump accused China of violating the countries’ trade agreement. Stocks could be in for a volatile session due to MSCI index rebalancing and month-end flows, while the Fed’s preferred inflation gauge is the main focus early this morning. Historical
trends suggest a challenging period for stocks in the coming months. Over the past 70 years, the S&P 500 has often underperformed in early June of post-US presidential election years, as investors tend to take profits before the summer. Still, the S&P 500
has suffered losses in June just once in the past decade. Trump’s administration insisted it has multiple alternatives to push through his import tariffs. A stopgap plan being considered may impose tariffs as high as 15% for 150 days, the WSJ reported.

Futures ahead of the bell: E-Mini S&P -0.3%, Nasdaq -0.2%, Russell 2000 -0.5%, DJI -0.2%.

In pre-market trading, Gap (GAP) sinks 15% after the company predicted a tariff impact of up to $300 million and revealed weakness at Banana Republic and Athleta. Marvell
Technology (MRVL) slips 3% after the chipmaker posted quarterly results and provided an outlook. NetApp (NTAP) falls 5% after the data storage provider forecast 1Q profit that missed. PagerDuty Inc. (PD) declines 6.2% after the software company cut its full-year
revenue forecast. UiPath (PATH) rises 13% after the automation software company provided a 2Q revenue outlook that beat estimates. Ulta Beauty (ULTA) jumps 8% after the cosmetics retailer boosted its earnings per share forecast for the full year.  Zscaler
(ZS) gains 3% after the software company reported third-quarter results that beat expectations and raised its full-year forecast.

European gauges reversed early losses to trade broadly higher despite an unexpected dip in German retail sales. Spanish and Italian inflation eased to just below the
ECB’s 2% target, backing the case for rates to be lowered again next week. UK business confidence hit a nine-month high in May. European stocks trimmed gains after Trump accused China of violating an agreement with the US to ease tariffs. Defensive sectors
such as utilities and food and beverage outperformed, while technology as well as travel and leisure were the biggest laggards. Stoxx 600 +0.2%, DAX +0.4%, CAC -0.1%, FTSE 100 +0.4%. Utilities +0.8%, Food & Bev +0.6%. Technology -0.6%.

Shares in Asia declined, led by losses in Hong Kong after Trump’s tariff agenda received a temporary reprieve. The MSCI Asia Pacific Index fell 0.6%, paring its gain
for May to 4.7%. Alibaba and Tencent were among the biggest drags Friday, as US Treasury Secretary Scott Bessent’s comment on “stalled” trade talks with China weighed on the market. Chinese drugmaker stocks extend recent gains on hopes for treatments being
presented at the American Society of Clinical Oncology conference in Chicago. Taiwanese and Indonesia markets were closed for a holiday. Key events to watch next week include South Korea’s election and India’s rate decision. Thailand -1.3%, Nikkei 225 -1.2%,
Hang Seng Index -1.2%, Philippines -1.1%, Kospi -0.8%, Vietnam -0.7%, CSI 300 -0.5%, Sensex -0.2%. ASX 200 +0.3%

FIXED INCOME: 
 

Treasuries edge lower, pushing US 10-year yields up 1 bp to 4.435%. Session focus includes PCE price index, while month-end extension demand stands to support long-end
of the curve. US yields cheaper by up to 2.5bp across long-end of the curve, steepening 5s30s spread by around 3bp and 2s10s by 1.5bp. Federal Reserve Bank of Dallas President Lorie Logan signaled it may take a while before officials know how the economy will
respond to tariffs and other policy changes.

METALS: 

Spot gold fell over $20 to around $3,290/oz before recouping some losses on the Trump tweet. Gold is on track for a weekly loss as traders await key US economic data
for clues on how President Trump’s global trade war has impacted the economy. Bullion traded below $3,300 an ounce, extending this week’s decline to almost 2%.  Spot gold -0.4%, Silver -0.4%, Copper +0.3%.

ENERGY:   

Crude futures quickly erased earlier gains after Reuters reported that OPEC+ may discuss a larger-than-expected output hike and President Trump said China had violated
its trade agreement with the US. Russia is sending a delegation to Istanbul for a second round of talks with Ukraine amid disagreements over Kyiv’s insistence that Moscow outline its peace proposals before any meeting. Ukrainian Foreign Minister Sybiha says
Kyiv is open to discussing a ceasefire and peace agreement with Russia but is awaiting a memorandum from Moscow outlining its position. The next round of talks could pave the way for a meeting between Putin, Zelenskiy and Trump. WTI -1.1%, Brent -1.1%, US
Nat Gas -1.5%, RBOB -0.7%. 

CURRENCIES: 

In currency markets, the dollar moves higher ahead of the inflation data but remains on track for its longest streak of monthly losses in five years. The yen outperforms
after data showed prices in Tokyo jumped the most in two years, keeping the Bank of Japan on track for another rate hike in coming months. Consumer prices in Tokyo rose 3.6% in May from a year earlier, driven by surging food costs. The euro underperforms today
but is up a fifth straight month for the first time since 2017. Aussie$ declines after an unexpected decline in Australian retail sales last month added to speculation the Reserve Bank may cut rates. US$ Index +0.3%, GBPUSD -0.1%, EURUSD -0.3%, USDJPY -0.25%,
AUDUSD -0.35%, NZDUSD -0.2%, USDCHF +0.1%, USDCAD ~flat, USDSEK +0.2%, USDNOK +0.3%.

Bitcoin -0.2%, Ethereum -0.7%. 

Colors within the report:
Green is always the 200 period (day, week).
Red is always 21,
Blue = 50,
Brown =
100 *Stars have added importance 

• Upgrades
• BRP Inc. (DOO CN) Raised to Buy at Desjardins; PT C$78
• Raised to Buy at Stifel Canada; PT C$68
• California Resources (CRC) Raised to Overweight at Barclays; PT $60
• HCI Group (HCI) Raised to Buy at Compass Point; PT $205
• Nordson (NDSN) Raised to Outperform at Oppenheimer; PT $260
• Rockwell Automation (ROK) Raised to Overweight at Barclays; PT $350
• Tronox (TROX) Raised to Overweight at JPMorgan; PT $7
• Downgrades
• AGCO (AGCO) Cut to Neutral at Citi; PT $110
• Airbnb (ABNB) Cut to Sell at Truist Secs; PT $106
• Banco do Brasil (BBAS3 BZ) ADRs Cut to Neutral at Grupo Santander; PT $4.40
• CIBC (CM CN) Cut to Sector Perform at National Bank; PT C$98
• Civitas Resources (CIVI) Cut to Sector Perform at RBC; PT $40
• Park Hotels (PK) Cut to Hold at Truist Secs; PT $11
• PDD (PDD) ADRs Cut to Hold at China Galaxy; PT $112
• RBC (RY CN) Cut to Sector Perform at National Bank; PT C$177
• Zscaler (ZS) Cut to Neutral at Piper Sandler; PT $260
• Initiations
• AB InBev (ABI BB) ADRs Rated New Outperform at BNPP Exane; PT $72
• AMC Entertainment (AMC) Rated New Hold at Texas Capital; PT $3
• Amylyx Pharmaceuticals (AMLX) Rated New Buy at TD Cowen
• Atex Resources Inc (ATX CN) Rated New Buy at Stifel Canada; PT C$3.50
• Beta Bionics (BBNX) Rated New Neutral at Goldman; PT $16
• Rated New Outperform at Wolfe; PT $20
• Bio-Techne (TECH) Rated New Overweight at Wells Fargo; PT $59
• Carlsberg (CARLB DC) ADRs Rated New Neutral at BNPP Exane; PT $27
• Commercial Metals (CMC) Rated New Neutral at JPMorgan; PT $52
• Dexcom Inc (DXCM) Rated New Buy at Goldman; PT $104
• Heineken (HEIA NA) ADRs Rated New Outperform at BNPP Exane; PT $49
• Insulet (PODD) Rated New Buy at Goldman; PT $380
• L’Oreal (OR FP) ADRs Rated New Underperform at BNPP Exane; PT $68
• Meridian Mining UK Societas (MNO CN) Rated New Buy at Stifel Canada
• Nestle (NESN SW) ADRs Rated New Neutral at BNPP Exane; PT $111
• Pernod Ricard (RI FP) ADRs Rated New Neutral at BNPP Exane; PT $21.20
• SSE (SSE LN) ADRs Rated New Outperform at BNPP Exane; PT $31.70
• Xylem (XYL) Rated New Overweight at JPMorgan; PT $148

Data sources: Bloomberg, Reuters, CQG

David Wienke