With 253k new nonfarm payrolls, with gains across all sectors (Construction +15k, Manufacturing +11k, Services +197k, Leisure +31k, Healthcare +77k), hourly earnings (AHE) soaring to +0.48% mom (+4.4% y/y), and the unemployment rate falling to a record low since the first moon landing in 1969 (3.4%), the employment data is undoubtedly strong, making the Fed's job harder once again.

In addition to the employed population, the growth of hourly wages is also a part that Powell has made clear that he will pay special attention to. The data shows that the slowdown in the job market is not enough to cool inflation. The CPI data will be released on Wednesday. If the data results show similar resilience, the June FOMC will become a key meeting to challenge the Fed's inflation assumptions. Although the possibility of another 25 basis point rate hike is extremely low, the market is not prepared to face another rate hike.

At regional banks, weekly data showed that the Fed's lending window remained stable, and even deposits at small and large banks increased by $6.4 billion and $14.8 billion, respectively, last week. In addition, although survey data showed that there are still concerns about the supply of credit, bank lending data actually still grew modestly in April.

Strong economic data results and a rebound in regional bank stocks (PacWest +82%, all regional bank stocks rose) caused the US Treasury yield curve to rise by 7 to 13 basis points across the board, and the market's pricing for the June FOMC returned to a flat rate from a slight possibility of a rate cut, and the possibility of a rate cut in July became 50/50. This week is an important week in terms of inflation data, with data such as CPI, PPI and University of Michigan inflation expectations to be released. We believe that the data results are more likely to be higher than expected, and market expectations for a rate cut in the second half of the year may gradually fade in the short term.



Stocks were up across the board, with 91% of stocks in the black, a short squeeze in oil futures (8% from lows), continued strong earnings performance in tech giants, expectations of a pause in Fed rate hikes, and the lack of contagion in the banking crisis gave the market an excuse to rally sharply on Friday. In addition, while there has been much discussion about the imbalance in the performance of the "SPX 5" and "SPX 495", a closer look at the fundamental data shows that large-cap stocks have performed better in terms of sales growth, earnings and net profit margins compared to the overall index, providing at least some rationality for their valuation premium.

Looking ahead to this week, we expect markets to continue to have elevated risk sentiment at least through the early part of the week, before CPI and other inflation data outcomes determine the next big move in interest rates. We believe that equity and FX volatility will continue to decline in the near term, although interest rate volatility will remain elevated unless inflation data turns out to be significantly lower than expected, making the current interest rate trajectory expected to be cut in the second half of the year reasonable.

Finally, in terms of cryptocurrencies, prices have not changed much in the past few weeks, with BTC and ETH stagnating in the $28-30k and $1.8-2k ranges respectively. However, outside of the major currencies, some small coin activities have seen a slight rebound, among which the activity of Ordinals (BRC-20) and the latest memecoin (PEPE) have led to a significant increase in gas fee income on both Bitcoin and Ethereum chains.

In terms of volatility, as the currency price cannot break through and the contract volume expiring before the end of the month is low, the overall implied volatility and term structure remain sluggish; however, the open interest of call options still significantly exceeds that of put options , as traders are either seeking upside exposure or trading covered calls while holding cash. We expect price action this week to be significantly influenced by CPI, particularly if U.S. Treasury yields break out if inflation data beats expectations.