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Morning Bid U.S.

A Reuters Open Interest newsletter

What matters in U.S. and global markets today

By Mike Dolan, Editor-at-Large, Finance & Markets

Oil prices remain elevated, inflation is climbing and bond markets are feeling the heat as the Iran war stalemate continues. Higher-than-forecast U.S. consumer price inflation of 3.8% in April underlined the simmering problem on Tuesday, with headline inflation now expected to top 4% this month - double the Fed’s target.

Even the “trimmed mean” cut of inflation, favored by incoming Fed Chair Kevin Warsh, showed its biggest monthly rise in more than two years.

I’ll get into that and more below.

But first, check out my latest column on the many factors placing bellwether government borrowing markets under strain.

And listen to the latest episode of the Morning Bid daily podcast. Subscribe to hear Reuters journalists discuss the biggest news in markets and finance seven days a week.

Data refreshes every time you open this email. For more U.S. market news, click here. Please send any feedback to morningbid@thomsonreuters.com.

Today's Market Minute

Saudi Arabia launched numerous, unpublicized strikes on Iran in retaliation for attacks carried out in the kingdom during the Middle East war, according to a Reuters exclusive.
U.S. President Donald Trump said he would urge China's Xi Jinping to "open up" to U.S. business on his way to a summit in Beijing on Wednesday, adding Nvidia's Jensen Huang to a group of CEOs travelling with him.
President Trump said on Tuesday that Americans’ financial struggles are not a factor in his decision-making as he seeks to negotiate an end to the Iran war, saying that preventing Tehran from acquiring a nuclear weapon is his top priority.
The U.S. rate outlook has turned decidedly hawkish since the Iran war started - but not everyone has thrown in the towel, explains ROI Markets Columnist Jamie McGeever.
The world natural gas market is weirdly chill, yet by the end of the year, what currently looks like ample breathing space may seem more like an air pocket, argues George Hay of Reuters Breakingviews.

Fed alert

The hot inflation prints have pushed Fed futures markets to wipe away any chance of a rate cut this year, and there’s now an 80% chance that the next move will be a hike as soon as next April.

That catapulted 30-year U.S. Treasury yields back above 5% in what was another ugly day for long-dated government bonds - not least in Britain, where political uncertainty around Prime Minister Keir Starmer’s future continues.

Meantime, President Trump arrives in Beijing today for a summit with his Chinese counterpart Xi Jinping. Trade, geopolitics and AI look set to dominate, with top U.S. tech bosses including Elon Musk and Nvidia’s Jensen Huang among the president's entourage.

Trump’s agenda is likely to be wide-ranging but a renewal of Chinese commitments to free up critical rare earth supplies will be one big issue. The Iran war is also likely to feature - though Trump said on Tuesday he does not think he will need China’s help to end the conflict.

Elsewhere, Asian shares rebounded on Wednesday after a weak start, with South Korea’s volatile, chipmaker-heavy KOSPI bouncing back from an early selloff to close up over 2%. European shares also rose in early trading, while Wall Street futures pointed higher before the bell.

Oil prices eased modestly on Wednesday, but both Brent and WTI crude remained above $100 per barrel and well above last week’s lows.

Earnings are back on the agenda stateside later today, with Cisco topping the bill. Additionally, April producer price data will provide another key read on inflation pressures. And a closely watched 30-year Treasury auction will test investor appetite after the latest bond market selloff.

With that, onto today's column.

G7 long bond stress intensifies

The relentless rise in long-term government borrowing costs shows no sign of abating, and the list of aggravators is growing by the day. If you've been in thrall to gravity-defying stock markets this year, look no further to see where stress is building in world markets.

Debt, oil, inflation and interest-rate risks are combining with domestic political and geopolitical uncertainty, and with ebbing official and private-sector demand for long bonds, to push borrowing costs in the Group of Seven (G7) advanced economies on aggregate to the highest in more than 20 years.

Graphics are produced by Reuters.