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Is the U.S. going to default? The U.S 1yr Sovereign credit default swap just hit a record high. This is the cost of insuring U.S Treasury bonds against the risk of default. Worth noting that the U.S. now has a higher default risk than China.

🗺️ The US has drafted a proposal for G7 countries that calls for a complete ban on exports to Russia (with a few exemptions like agricultural and medical products).

• The draft will be in focus at next month’s Hiroshima meeting where leaders will discuss increasing economic punishment for Putin’s regime.

• The EU and Japan have already pushed back on the proposal, saying “it is simply not doable”.

• The current sector-by-sector restrictions are already the largest sanctions and export control actions ever imposed on a major economy.

🌎 Back home, President Joe Biden announced his bid for a second term in the White House this morning.

• According to a recent NBC News poll, 70% of Americans—including over half of Democrats—don’t think he should seek re-election.

• As for his likely opponent, Donald Trump: 60% of Americans—including a third of Republicans—don’t believe he should run either.

📉 Zooming into the economy, Texas manufacturing activity slowed in April to its lowest level since July.

• The Dallas Fed’s manufacturing gauge dropped well below expectations for its 12th straight monthly contraction.

• New orders rose modestly but remain in contraction as employment ticked down and future expectations softened, suggesting a pessimistic outlook for firms in the region.

📱 Apple has won an appeal court case against Epic Games over its App Store rules.

• The court ruled that the former did not violate antitrust law—as the latter claimed in its suit—by banning competing app marketplaces on the iPhone.

• This means the fees it charges and the control it has over its App Store are likely to remain unchanged for Apple.

😱 Wall Street’s “fear gauge” (VIX) has been unusually complacent in 2023, spending most of the year under its long-term average of ~20.

• JPMorgan’s Marko Kolanovic warns that a low VIX may not accurately reflect the risks facing stocks.

• While some attribute the low levels to less-restrictive monetary policy and better-than-expected growth data, others point to the surge in 0DTE (zero days to expiry) options as the reason behind the index’s drop.

• Either way, the reliability of the VIX is in question.

⏲️ Speaking of, Wall Street got a new tool yesterday with the launch of CBOE’s 1-Day Volatility Index (VIX1D).

• As its name implies, the index tracks the expected volatility of SPX-based options that expire in 24 hours.

• While the tool was created to shed light on investor sentiment over ultra-short time frames, most pros are unsure what to make of it.

• Meanwhile, a recent study revealed retail investors have been losing an average of $358,000 per day (since May 2022) trading 0DTE options.

⛽ The benchmark average weekly retail diesel price has declined in 21 of the past 26 weeks.

• The latest price of $4.077 a gallon is nearly 30% lower than last summer’s peak of $5.81.

• It’s also the lowest since February 2022.

• Driving the decline is a general slowdown in economic activity and waning ocean freight traffic.

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📊 Here are some of yesterday’s highlights:

• First Republic: $1.23 EPS (vs. $0.85 expected), $1.21 billion in sales (vs. $1.15B expected).

  • Despite a $30 billion in time deposit from 11 larger banks, deposits fell more than 40% in the quarter to $104.5 billion.

• Coca-Cola: $0.68 EPS vs. ($0.64 expected), $10.96 billion in sales (vs. $10.8B expected).

  • Demand for beverages remained strong in Q1 even as the company hiked prices to offset inflation.

  • Coke reiterated its 2023 forecast of 7-8% organic revenue growth and 4-5% EPS growth.

👀 What we’re watching today:

• Microsoft

• Alphabet

• Visa

• Pepsico

• McDonald’s

• Novartis

• Danaher

• United Parcel Services

• Texas Instruments

• Nextera Energy

• Verizon

• Raytheon

• General Electric

• Chubb

• Fiserv

• UBS

• Sherwin-Williams

• 3M

• Chipotle

• General Motors

• Halliburton

• Spotify

Full earnings here.

• UK refi: Over 1.4 million homeowners in the UK will be forced to refinance their mortgages at significantly higher rates this year.

• Disney cuts: Disney began its third round of layoffs this week with cuts coming to ESPN, its entertainment arm, and its experiences and product division.

• BoJ vs. YCC: If the Bank of Japan abandons yield curve control (YCC) measures, the yen could appreciate significantly.

• New app: As TikTok faces a ban, ByteDance has launched a new social media app in the US called Lemon8.

• Ousted: Fox and CNN fired high-profile media personalities Tucker Carlson and Don Lemon yesterday.

• Bluesky: Jack Dorsey’s invite-only, Twitter-alternative Bluesky has been downloaded 245,000 times.

• Project Kuiper: Amazon unveiled antennas for its satellite internet service which is expected to begin delivering broadband connections by the end of 2024.

• Streaming: Netflix will invest $2.5 billion in South Korean entertainment over the next 4 years.

• COIN vs. SEC: Coinbase sued yesterday to force the SEC to share its decision on whether existing securities rules can be extended to crypto.

• ARK: On the same day, Cathie Wood’s Ark Invest bought nearly $8.6 million worth of Coinbase shares.

• Shanghai boost: A record inflow of 572,000 ETH deposits for staking last week was driven by institutional staking platforms.

• Adoption: Visa is hiring experienced crypto devs to help drive mainstream adoption of blockchain and stablecoin tech.

• DAO bill: A new California bill would provide a legal framework to include decentralized autonomous organizations (DAOs) among acceptable business entities.

Check out GritCRYPTO for more.

• Leveraged loan: A group led by the Royal Bank of Canada has started a $2.75 billion loan sale to support Blackstone’s deal for an Emerson Electric unit.

• Stock photos: Shares of Getty Images jumped +30% yesterday after receiving a ~$4 billion acquisition proposal from Trillium Capital.

• Long shot: Bed Bath & Beyond says it can pull off a sale of its names and stores after declaring bankruptcy.

• Airlines: Italy and Lufthansa agreed to extend talks over the sale of ITA Airways until May 12.

• Potential record: Vista Equity is in talks with credit funds for $6 billion to refinance Finastra debt in what could be the largest private credit package on record.

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