Five Things You Need to Know to Start Your Day: Americas

Good morning. US stock futures are muted after a strong close on Friday, while treasuries drop as traders pare bets for rate cuts this year. [View in browser]( [Bloomberg]( Good morning. US stock futures are muted after a strong close on Friday, while treasuries drop as traders pare bets for rate cuts this year. Oil retreats from a five month high as gold climbs to a new record. Want to receive this newsletter in Spanish? [Sign up to get the Five Things: Spanish Edition newsletter](. Eyes on earnings US stocks are poised to post modest moves after Friday saw a boost from surprisingly strong jobs data. European stocks are broadly higher, led by miners on the back of rebounding iron ore prices, while US futures are slightly lower. Investors are now looking ahead to the next key economic indicator — CPI— on Wednesday, which is expected to show further evidence of a gradual cooling in inflation, as well as the start of first quarter corporate earnings kicking off on Friday. Big names reporting include JPMorgan, Citigroup and Wells Fargo. Fading Fed cut bets All the encouraging economic data recently has tipped bets toward fewer Fed rate cuts this year. Markets [now favor just two reductions]( in interest rates, with swaps implying around 60 basis points of easing. That’s weighing on Treasuries with yields on 10-year debt within striking distance of[the key 4.5% level some watch]( to determine whether rates revisit last year’s highs. Comments from Federal Reserve Bank of Dallas President Lorie Logan added to the more hawkish picture, after she said it’s[too early to consider cutting rates]( at all. On Friday, the chance of a third cut was still above 50%. Oil retreats [Oil retreated from a five-month high]( after Israel said it would remove [some troops]( from southern Gaza, with the forces recuperating and preparing for future operations, including an offensive on Rafah. Iran is also [preparing a response]( to a suspected Israeli attack on its consulate in Syria. Escalating tensions in the Middle East and [supply shocks]( have driven crude’s recent rally, raising the prospect of the global benchmark reaching triple figures. Still, the broader outlook remains indicative of [rising prices](. Elsewhere in commodities markets, [gold reached a new record]( above $2,350 as geopolitical risks boosted its appeal and traders look for further indicators for the trajectory of rates. Yellen in China On the geopolitical front, [US Treasury Secretary Janet Yellen is wrapping up four days of meetings in China]( as part of efforts to improve economic ties between the two countries. Yellen’s repeatedly framed China’s strategy of boosting its manufacturing capacity as a widespread global concern and urged leaders to focus instead on revving up domestic demand. While Chinese Premier Li Qiang on Sunday [advised]( Yellen against turning “economic and trade issues into political” matters, meetings between the two sides have been cordial. Chipmaker loans Meanwhile, the US plans to [award Taiwan Semiconductor Manufacturing $6.6 billion in grants and as much as $5 billion in loans](to help the world’s top chipmaker build factories in Arizona. Under the preliminary agreement TSMC will construct a third factory in Phoenix, adding to two facilities in the state that are expected to begin production in 2025 and 2028. In total, the package will support more than $65 billion in investments at the three plants by TSMC, the go-to chipmaker for companies such as [Apple](and [Nvidia.]( The award is one of the largest announced under the 2022 Chips and Science Act, marking another milestone in President Biden’s push to boost the US semiconductor industry. What We’ve Been Reading This is what’s caught our eye over the past 24 hours. - Biden ally opposes halting[US weapons transfers](to Israel. - Liquidity is paramount, UK’s outgoing [debt office head]( warns. - UK stock funds have [lost £5 billion]( this year. - Alibaba [slashes cloud prices]( globally as AI demand quickens. - Yellen threatens [sanctions for China banks]( that aid Russia’s war. And finally, here’s what Joe is interested in this morning There's a ton of focus on US-China trade these days, with all kinds of anxiety about Chinese overcapacity, and EVS, and semiconductor, and widebody planes and all that. In fact, Treasury Secretary Janet Yellen is just wrapping up a trip to China, with the aim of [creating some kind of stability]( between the two nations despite the rising tension. All that being said, China is no longer the number 1 source of imports into the US. Mexico is. Here's the chart:  A lot of this is by policy design. President Trump initiated tariffs on Chinese goods, which the Biden administration has kept in place. What's more the re-written NAFTA (now the USMCA) rewards companies to move more of their supply chains to North America, which is to the benefit of Mexico. There have been a number of announcements -- [including a planned Tesla's Gigafactory]( -- of new manufacturing operations in the country. BYD may also [open a plant]( in Mexico. There are some obvious advantages for a company to open in Mexico. There is the favorable trade policy. It's very close to the US, obviously. Land and labor is cheaper. There are major disadvantages as well. The country is behind China when it comes to infrastructure, the experience of its domestic workforce, and the security situation is worse. [On the new Odd Lots podcast today](, Tracy Alloway and I speak with [Matt Silver](, a former freight broker who specializes in cross-border trade, whose new company is focused specifically on improving the logistics for companies looking to import from Mexico. We discuss a whole range of issues about why US-Mexico trade is booming, the types of companies setting up shop there, the improvements in Mexican infrastructure, the weaknesses in Mexican infrastructure, the security situation, and the exact mechanics of getting a load across the border (how it works) and so forth. It's not the main thing, but an advantage that Mexico has versus anywhere in Asia is simply timezones. If you're in Chicago, Texas, Detroit, or anywhere else in the US, your working hours are the same as the working hours of those running plants in Mexico. Digital communication has "flattened" many things so to speak. Slack, Zoom, etc. has made workplace collaboration easy for basically anyone around the globe. But it's difficult to overcome the tyranny of the human need to sleep at night. This same thing came up from another guest lately as well. Last week we did an episode with [NYU's Arpit Gupta]( about office real estate and remote work. Then we had a followup conversation in the Odd Lots discord about remote work, and how it's changing the nature of a company's employee base. Again, in theory, advanced collaboration technology presumably means that it's easier to integrate a global workforce, so that engineers in San Francisco can work "side by side" with someone from another country. But again, there's no getting over the existence of time zones. Arpit proposed a simple "test" of whether remote work would boost countries in the Western hemisphere. In addition to the pure volume of goods traded, keep an eye on flight patterns in the US, and whether the airlines add more "north to south" routes, relative to ones going to Asia. Find today's episode on [Apple](, [Spotify]( or elsewhere. Follow Bloomberg's Joe Weisenthal on X [@TheStalwart]( [Bloomberg Markets Wrap: The latest on what's moving global markets. Tap to read.]( Follow Us Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. Before it’s here, it’s on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can’t find anywhere else. [Learn more](. Want to sponsor this newsletter? [Get in touch here](. You received this message because you are subscribed to Bloomberg's Five Things to Start Your Day: Americas Edition newsletter. If a friend forwarded you this message, [sign up here]( to get it in your inbox. 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