Financial news - bond yields, Cathie Wood's losses, Nvidia and GameStop growth, global debt

• Rising bond yields continued to unnerve equity investors on Wednesday, with benchmark U.S. Treasuries rising above 4.5% in Tokyo hours and their Japanese counterparts reaching levels not seen since 2011. At the heart of the move are fears that persistent inflation will keep interest rates high for a long time or even drive them higher further in the short term, with particular focus on the US Federal Reserve.

• An unexpected improvement in US consumer confidence meant the Fed could cut rates in September, helping lift Treasury yields, which in turn lifted the dollar, especially against the rate-sensitive yen. That adds to inflation concerns at the Bank of Japan as the yen at its lowest level in 34 years forces policymakers to take a more aggressive stance. Market participants reacted by betting on additional rate hikes in Japan and the start of quantitative tightening.

• Strong US macro data and rising prices for raw materials provoked a return of inflation fears and led to a strong drawdown in bond prices, and also stopped the growth of stocks.

• Only semiconductor and AI-related demand remains solid. This allowed the Nasdaq-100 to update its all-time high.

• Global debt reached $315 trillion in the first quarter of 2024. And this is already almost three times more than the expected global GDP in 2024 of $110 trillion. This is a staggering amount and the world has not seen such a level of debt since the Napoleonic Wars. If the global debt were divided among all the people on the planet, each of us would owe about $39,000, notes CNBC.

• Cathie Wood's flagship Ark Invest ETF suffered huge losses. The fund's decline has reached 93%, and of the top 10 assets, only Tesla shows growth.

• Toyota, Mazda and Subaru are investing in new generation internal combustion engines instead of electric cars. To achieve this goal they created an alliance.

• European wheat futures hit a one-year high. They rose to 269 euros/t (+7.75 euros/t to the price of the previous trading day).

• The municipal bond market is seeing its biggest boom in bond sales since at least 2013 - Bloomberg.
US states and local governments are issuing new bonds despite high interest rates.

• Bullish investors invest in stock and bond funds - NYT. US fund flows have turned positive after two years of decline.
U.S. mutual and exchange-traded funds have attracted $172 billion in net inflows this year, a marked shift after they collectively lost assets over the past two years.

• Wall Street's favorite recession indicator is experiencing its own decline - NYT. Treasury yields have been inverted for the longest time in history. Now one of Wall Street's favorite recession indicators looks broken.
The anomaly known as an inverted yield curve, where short-term Treasury yields exceed long-term government debt yields, has long been seen as a near-certain signal that an economic downturn is approaching. In each of the previous eight U.S. recessions, this occurred before the economy began to decline.
Is now an exception or a new rule? – We will most likely find out in 2025.

• NVDA shares rose 7% yesterday. Musk's xAI said it raised $6 billion in the company's latest venture round on Sunday. Musk's xAI partners with Oracle to access data centers. And Oracle is increasing its investment in chips. It is expected that most of the money will go towards purchasing Nvidia chips.
“We believe the AI ​​investment cycle remains early... with new inference infrastructure similar to the scale of all data centers around the world becoming available as adoption becomes widespread,” Macquarie analyst.

• GameStop (GME) shares rose 25% on Tuesday. After the video game retailer said it raised nearly $1 billion in its latest stock offering.

• Apple (AAPL) shares tried to rise on news from China, but ended the day at zero. iPhone sales in China jumped more than 50% in April as retail partners slashed prices, data showed.

• DraftKings (DKNG) shares fell 10%. The Illinois Senate has passed a bill that would impose a new tax hike on sports betting. The tax hike would make Illinois the second most expensive state for online sports gambling companies to operate, only behind New York. Analysts warn other states could soon follow Illinois' lead. Shares of FanDuel owner Flutter Entertainment (FLUT, FLTR.L) also fell on the news, falling about 7%.

• US consumer confidence rose unexpectedly in May, ending three straight months of declines. The reason is a stable labor market. The latest reading from the Conference Board was 102, up from 97.5 in April and higher than expected by 96 economists surveyed by Bloomberg.

• Neel Kashkari: Rate increases are still possible. 

• Robinhood (HOOD) announced a $1 billion buyback. Shares are up 4%.
The reaction is overestimated - the buyback is extended over 2-3 years and affects 5-6% of the company’s capitalization. However, investors can hope that this is just the beginning.

• AAL shares fall 6%. The airline has downgraded its forecasts for the year. This dragged shares of both UAL and DAL down 2%.

Today
- Reports from Agilent Technologies, Bank of Montreal, Dick's Sporting Goods, HP Inc., Nutanix, Okta, Pure Storage and Salesforce.
- The Fed publishes a “beige book”. The report compiles scattered information on current economic conditions from the Fed's 12 regional banks.
- The two-day TD Cowen Technology, Media & Telecom conference will be held with the participation of AMD, Seagate Technology (STX) and Clear Channel Outdoor (CCO).
- Etsy will participate in the Evercore ISI Nothing But Net Internet Investor Summit.
- Federal Reserve Bank of New York President John Williams will participate in a roundtable with local leaders to hear about business conditions and municipal and public services.