SOCCER PUNCH

My Monday post argued that the recent rise in US employment data was largely due to preparations for World Cup events in 11 US cities. Goldman Sachs documents how previous similar events impacted the economy.

Payroll employment rose 80k above trend in host cities during the 1994 US World Cup and 40k on average during past Summer Olympics in the event months, before largely reverting to trend in the following months.

Job gains during the events were concentrated in leisure and hospitality, retail trade, and transportation, while professional and business services hiring tended to accelerate in the months preceding the event to support logistics and operations.

Consistent with this pattern, business services employment in the 11 host metropolitan areas rose about 20k in each of March and April [2026], while it was little changed in the rest of the US. While city-level data are not yet available for May, some of the strength in May payroll growth might also have reflected hiring ahead of the World Cup.

To estimate the impact of the 2026 World Cup on payrolls, we scale up the trajectory of job gains observed around the 1994 tournament by roughly 30% to reflect the larger number of matches and attendees. Accounting for some hiring that has likely already occurred through May, we estimate a boost to monthly payroll growth of 40k in June and 10k in July, followed by a 15k drag in August as temporary positions wind down, with further gradual reversals throughout the rest of the year.

Economic activity should receive a modest boost from the tournament. Spending on food and beverages by foreign tourists, domestic tourists, and locals will boost retail sales, which does not distinguish between spending by residents and foreigners. In the GDP statistics, all spending by domestic fans will boost consumer spending, and spending by foreign fans will boost exports of tourist services.

Drawing on estimates from the US State Department, FIFA, and Tourism Economics, and assuming that roughly two-thirds of World Cup-associated arrivals represent net additive inflows—with the remaining one-third displacing other tourism due to capacity constraints and elevated prices in host cities—we estimate that foreign arrivals will run ½-1mn above trend in June and July.

The “Little Excursion”

China’s Inflation Split Widens as AI, War Stir Up Factory Prices

The consumer-price index climbed 1.2% from a year earlier, rising at the same pace as in the previous month and missing the median estimate of 1.3% in a Bloomberg survey of economists. A 16% plunge in pork prices had a 0.3 percentage-point drag on the CPI, according to data published by the National Bureau of Statistics on Wednesday.

Producer inflation accelerated to 3.9% compared with a year ago, matching forecasts and up from 2.8% in April. The core CPI, which strips out volatile food and energy prices, surprised by undershooting expectations and increasing 1.1%, slower than its 1.2% gain in April. (…)

But many consumer-facing firms are struggling to pass on higher raw material costs to buyers, which is hurting their profit margins. Years of weak demand and excessive supply have contributed to bruising competition among Chinese industrial firms that’s keeping a lid on consumer prices. (…)

Within the CPI, the cost of fuel for vehicles soared 21% in May from a year ago, accelerating from the 17% gain in April. Acting as an offset, prices of food, alcohol and tobacco dropped, extending their decline slightly to 0.9%.

Pork prices have been falling for almost two years now, as the pig farming industry struggles to clear overcapacity.

Other consumer items — ranging from clothes and housing to education, entertainment and health services — showed inflation flatlining or decelerating. The category of “miscellaneous goods and services,” which includes gold jewelry, also saw price increases slow after surging since late 2025, suggesting a fading boost from the bullion rally.

“Food and property prices are helping suppress headline inflation for now,” said Lynn Song, chief economist for Greater China at ING Bank NV. “But rising prices more broadly suggest we’re moving from deflation into a low inflation environment.” (…)

As a result of more expensive components, prices for communication equipment under the CPI — including smartphones — climbed 7%, accelerating from 4% in April. Home appliances prices also picked up.

“The acceleration of electrification, the deep integration of artificial intelligence across various sectors, and the growing demand for computing power have driven up prices in industries such as nonferrous metals, electrical machinery, and computers,” NBS statistician Dong Lijuan said in a statement accompanying the figures. (…)

China’s footprint in global trade suggests higher charges ahead for global buyers.

Already, the oil shock and the AI boom have pushed China’s export prices out of a three-year streak of declines. Overall export prices rose 5% in April from a year ago, their biggest gain since April 2023. (…)

• China’s reflation trend continues to solidify 

  Inflation has been at or over 1% for the past 4 months, and in positive territory for 8 straight months, suggesting the reflation trend is solidifying.

Falling food and rental prices are balancing out higher inflation elsewhere

Rising raw material costs are likely to feed through to other prices moving forward

• Japan’s Producer Prices Jump Again on Elevated Energy Costs

The measure of input prices for Japanese firms rose 0.9% from a month earlier, and April’s increase was revised higher, the Bank of Japan reported Wednesday. On an annual basis, prices climbed the most in three years — above most estimates in a Bloomberg survey of economists and also following an upward revision to the prior month.

“Higher import prices upstream are already feeding through to domestic producer prices,” said Masayuki Sato, an economist at NLI Research Institute. “I think the pace of increase in producer prices is likely to accelerate going forward.”

Sato said Wednesday’s data strengthen the case for the BOJ to move ahead with rate hikes sooner rather than later, while emphasizing the need to assess the impact of each adjustment.

The report underscores continued pressure on corporate margins arising from higher costs for raw materials and energy as the Middle East conflict shows no signs of abating. (…)

The rising producer price index reflects a growing willingness from suppliers to pass on rising operating costs to their corporate customers, an indication that inflationary expectations are taking root.

The gain in goods prices was led by higher commodity costs, including petroleum and coal products, electric power and gas as well as chemicals. (…)

Data earlier Wednesday showed that Japan’s small firms increasingly expect the impact of the Iran war to affect future wage talks, underscoring how companies may have trouble sustaining pay gains as the war drives up input costs and squeezes profit margins.

Xinjiang Chief Touts Trade, Diplomacy as Hormuz Disruption Bites

China is pitching its far-western Xinjiang region as a commercial gateway to Central Asia and Europe, courting neighbors at a moment when overland trade routes are drawing renewed attention due to shipping disruptions in the Strait of Hormuz. (..)

“Xinjiang has entered the best period of development in its history,” Chen said, adding that the region “is opening ever wider to the outside world.”

Chen spoke at the start of a conference on regional cooperation in Altay, a city near the borders of Russia, Kazakhstan and Mongolia. Mongolian Deputy Prime Minister Nyamtaishir Nomtoibayar was among the attendees.

While overland routes carry only a fraction of China’s trade, which moves overwhelmingly by sea, the near-closure of the Strait of Hormuz during the US-Israeli war against Iran has sharpened Beijing’s interest in corridors beyond unstable waters. (…)

Chen called for the development of “efficient and convenient major transport corridors,” citing the planned China-Kyrgyzstan-Uzbekistan railway, the China-Mongolia-Russia Economic Corridor, and expanded China-Europe freight services. (…)

Prospects for Job Seekers Seen Worsening, NY Fed Survey Says

Americans’ view of the labor market grew somewhat more pessimistic in May, with the perceived prospects for job seekers hitting their lowest point this year, according to a Federal Reserve Bank of New York survey released Monday. (…)

The report followed an unexpectedly strong employment report for May with job gains beating expectations. (…)

The perceived probability of losing one’s job in the next 12 months rose in May by half a percentage point to 15.1%. Meanwhile, the perceived ability to find a job fell by 2.3 percentage points to 43.7%, the lowest reading since December.

Despite that, the expected quit rate — or the probability of leaving one’s job voluntarily in the next year, usually a sign of confidence in the labor market — rose in May to the highest since February of 2023. The increase was broad-based across age, education and income groups, the report said. (…)

The share of households who said their financial situation was worse than last year reached its highest level since January of 2023. More consumers also expected a deterioration in their finances in the year ahead.

Perceived probabilities of missing a minimum debt payment in the next three months also rose in May, driven by consumers with a high school degree at most and annual income below $100,000.

CNBC has more details:

The share of those seeing their current situation as “much worse” than a year ago leaped to 13.3%, up about 2.7 percentage points from April and the highest since July 2022. The total of those seeing either a much or somewhat worse situation from a year ago stood at 43.7%, which the New York Fed said was the highest since January 2023.

Those expecting their situations to be either much or somewhat worse totaled 36%, while those seeing things improving totaled just 22.9%. The net between those seeing better versus worse conditions hit its lowest since October 2022, the New York Fed said in the release.

And I also have more:

• The median one-year ahead expected earnings growth is +2.7%, roughly stable since April 2025 but well below inflation expectations at +3.5%.
• The mean probability of finding a job in the next three months if job lost today is 43.7%, down from 50.7% one year ago and from 46.0% in April.
• Yet, household spending growth expectations stands at 5.0%, also roughly stable.
• The duration of unemployment keeps grinding higher … median weeks unemployed rose to 11.6 in May, well above pre-pandemic levels.

U.S. Employment Trends Index Ticked Down in May

A reading of the U.S. labor market from The Conference Board fell slightly in May, highlighting potential downside risks to the labor market, a gauge of employment showed.

The Employment Trends Index, or ETI, fell to 107.01 in May, from an upwardly revised 107.88 in April.

May’s payroll employment report was strong, but ETI, a forward-looking measure for payrolls, ticked down slightly, with five of eight components contributing negatively to the index, said Jannik Schulz, economic research associate at The Conference Board. (…)

The primary drag on the ETI in May was the share of small firms reporting that jobs are “not able to be filled right now,” which dropped to its lowest level since May 2020. In addition, while job openings increased sharply to above 7.6 million in April, the jump was driven by an idiosyncratic movement in the professional and business service industry, which isn’t expected to continue, The Conference Board said. (…)

Goldman Sachs’ Slack Tracker:

Evercore’s Krishna Guha:

The case for disinflation without rate hikes rests on two claims.

First, sequentially in turn the three inflation waves will crest then roll over without contaminating inflation expectations and the underlying inflation process.

Second, in parallel, incoming data will establish a downshift in underlying inflation, assisted by high productivity and moderate wages. If this happens, core inflation will fall back to close to 2 per cent next year.

How likely is this?

Assuming inflation expectations remaining anchored (repeat: watch the 2y2y breakeven), we think the base case is each inflation wave rolls in, peaks and rolls over naturally, and the downshift in underlying inflation comes through.

For disinflation to advance though all this needs to come good. With multiple shocks interacting after years of above-target inflation, risks are overwhelmingly to the upside.

The AI capex cost wave is distinctly problematic because of its timeline, size and the fact that it is demand-driven, even though it too is mostly a price-level shock.

We think the modal case is still sequential progress wave by wave, plus underlying cooling that adds up to progress on 6 month type horizons by late 26, and this allows the Fed to avoid a hike.

I am not a fan of this type of chart but this one is eerie.

Oil market defies predictions of summer supply crunch Crude prices stay below $100 a barrel as China’s import cuts help eke out global stockpiles

(…) The reprieve has been driven largely by China, which traders believe cut its oil imports in May by roughly 5mn barrels a day, the equivalent of almost half the global supply deficit caused by the closure of the strait, as its refineries either scaled back their production or turned to domestic stockpiles in the face of spiralling prices.

But analysts say the market’s apparent stability rests on an unprecedented drawdown of inventories and emergency reserves that cannot continue indefinitely, and market resilience will be tested as demand peaks in the summer months.

(…) stockpiles are being depleted not only in the US, which publishes weekly data showing the declines, but also “quite heavily” across Europe, which publishes far less information. (…)

Amrita Sen, founder of consultancy Energy Aspects, said the key region to watch is now the US, which has been shipping record amounts of fuel and crude to Europe and Asia, while draining its own reserves to a two-decade low.

“The tightness is actually in the US because it has overexported,” said Sen. “If the US has to pull back, and they do not export as much, that is when you start to see the rest of the world panic.” 

American oil executives have sounded warnings in recent weeks that the status quo is unsustainable.     

“We’re approaching unheard-of inventory levels. I mean, really, really low levels. You can debate whether that’s going to hit those really low levels in two weeks or three weeks. But once you get to that point, you’ll see prices shoot up,” said Neil Chapman, a senior vice-president at ExxonMobil, at a conference organised by research firm Bernstein. 

Meanwhile, seasonal demand for fuel will accelerate in the coming weeks. While Chinese refineries have pulled back, in the rest of the world, refineries typically step up their production by around 4.5mn barrels a day as summer demand peaks, said Sen. 

Traders also cautioned that the current stability in the market hangs on China’s continued absence. If the world’s second-largest economy starts bidding for oil again, and the strait remains closed, available supply could tighten rapidly. 

“How long does the strait remain closed now?” asked Lasserre. “If it is another two weeks, maybe we will escape the worst, which is a recession at the global level. If it is another three months, I doubt we can escape.”

Bank Indonesia Surprises With Rate Hike to Stem Rupiah Bleeding

Indonesia’s central bank raised interest rates in an off-schedule decision on Tuesday, pulling an emergency lever as mounting external and domestic pressures weighed on the country’s currency.

Policymakers in Southeast Asia’s largest economy raised the benchmark rate by 25 basis points to 5.50% and announced measures to support the rupiah, including incentives aimed at encouraging foreign investment.

They also raised the overnight deposit facility rate and lending facility rate by 25 basis points each, to 4.50% and 6.25%, respectively.

The moves are intended to stabilize the Indonesian currency amid heightened volatility stemming from the conflict in the Middle East and to ensure that inflation remains within target, Ramdan Denny Prakoso of Bank Indonesia’s communication department said in a statement. (…)

The ramped-up currency defense echoes measures by India’s central bank, which has deployed a range of non-monetary tools to aid the rupee amid broader pressure on regional currencies. (…)

“If the currency reverses today’s gains, we wouldn’t be surprised if Bank Indonesia delivers further, and more aggressive, policy tightening to try to reassure investors.”

BofA Warns It’s Time to ‘Take Profits’ as Red Flags Multiply

(…) There are “too many red flags,” strategists led by Savita Subramanian wrote in a note dated June 5. “Take profits,” they advise.

Some 70% of those bear-market signals have recently been triggered, in line with the average observed during prior market peaks, the strategists said. The benchmark S&P 500 Index was “statistically expensive on 17 of 20 metrics, and trades rich versus its tech bubble metrics on eight,” Subramanian said.

Measures include consumer confidence data, growth expectations, M&A scores, and credit stress as well as tightening conditions indicators, like the Federal Reserve’s Senior Loan Officer Opinion Survey, known as the SLOOS. The latter, released in May, showed consumer demand continued to soften. Additionally, stocks with high price-to-earnings ratios were leading those with low multiples by a wide margin, a “sign of excessive speculation,” according to the strategists. (…)

She added that strong performance for the S&P 500 has “masked internal drama,” with the difference between returns for the top and bottom-performing 10ths of index stocks over the last three months jumping to a post-Covid era high. She cited figures from 1986 through May. (…)

Some tech-stock fundamentals are healthy, like leverage, valuation and capital intensity. However, most have worsened since a BofA analysis in November. Notably, “cash flow conversion has flat-lined, investment grade and equity supply has increased, buybacks as a percent of market cap have slowed and capex as a percent of operating cash flow for hyperscalers is forecast to reach nearly 100% by year-end, up from 40% in 2023,” Subramanian said. (…)

“We see opportunity in S&P 500 stocks, but not the overall cap-weighted index,” Subramanian said. Her year-end S&P 500 year-end target is 7,100; the index closed 0.3% higher at roughly 7,406 on Monday.

• The S&P 500 gained +16% over April and May 2026, a 2-month return that has only been matched 4 times since World War II, according to Deutsche Bank. In 3 of those 4 instances, this gain followed a recession, after 2020, the Global Financial Crisis, and the first oil shock in 1975. The only non-recession precedent was January and February 1987, a few months before Black Monday, when the index crashed -20% in a single day. What makes this time different is that there was no recession to justify this speed, the Federal Reserve is now more likely to hike than cut rates, and geopolitical risk remains historically elevated. Investor complacency is unlike almost anything seen before. (@GlobalMktObserv)

CMG Private Wealth Group’s Steve Blumenthal  publishes Trade Signals, a weekly monitoring of many technical indicators. Here’s the latest (June 5) summary for US equities:

Ed Yardeni’s 200-dma gap chart suggests short-term vulnerability. 58.5% of S&P 500 companies are trading above their 200-dma vs a LT average of 61.5%. Only 39.2% of S&P 500 companies are outperforming YoY and 42,2% of S&P 500 stocks are down year-to-date.

This next chart sums it all, for now:

Wait, there is also the “on the one hand and on the other hand” view, this time courtesy of Andrew Tyler, JPMorgan Chase’s head of global market intelligence:

Tyler said the strength of the economy and corporate earnings will continue to support the bull market in stocks, saying “we do feel comfortable buying the dip.”

But he said it “makes sense to leg into a position over the course of this week and next” because of some factors that are exposing the market to the risk of an “imminent pullback.” He cited bond market volatility, position unwinding, a potential pullback from the AI trade and elevated equity issuance among them.

He said he’d grow bearish on stocks if coming inflation data pushes bond yields higher and negative earnings reports rekindle the tech-stock selloff. But there’s also the potential for a bullish shift if there’s an advance toward ending the US-Iran war that would ease worries about inflation.

“These variables would aid a bullish reaction, but we want to reiterate our underlying investment hypothesis that strength of the underlying fundamentals, micro and macro, point to stocks needing to be owned,” Tyler wrote.

“Stocks may take a couple weeks to find their footing,” he wrote in a note to clients.

• SpaceX IPO Is Well Oversubscribed With $10 Billion Orders

SpaceX’s initial public offering is well oversubscribed with multiple institutional investors placing orders for about $10 billion or more of shares, according to people familiar with the matter, as demand builds for a potentially record-setting debut. (…)

SpaceX’s IPO is set to price June 11 and trade the following day. The company is offering 555.6 million shares at a fixed price of $135 each, which would raise about $75 billion, and value it at about $1.8 trillion. (…)

The company is allocating as much as 30% of the offering to retail, Bloomberg News has reported.

On Tuesday, Morgan Stanley is hosting about 300 institutional investors at the bank’s New York headquarters for meetings with SpaceX management including President Gwynne Shotwell and Chief Financial Officer Bret Johnsen. (…)

The company formally known as Space Exploration Technologies Corp. will trade on Nasdaq and Nasdaq Texas under the symbol SPCX.

Padding orders before the meeting…

AI CORNER

Axios C-Suite: Confessions of an AI lab rat

I’ve spent the past year using AI obsessively, inputting copious amounts of personal and business data, turning myself into a CEO lab rat. (…)

Starting a year ago, we’ve aggressively tested AI (mainly OpenAI’s Codex and Anthropic’s Claude Code) across every layer of every department at Axios.

• We provided access and instruction to every employee. Most of my leadership team operates with chief-of-staff agents, and we’re knee-deep in agent-to-agent prep.
• On a personal level, I use ChatGPT or Claude for one to two hours daily, usually in the early mornings, and control an AI personal operating system via my phone. That’s connected to an always-on computer that runs several agents, including one that scans daily for CEO-related data and trends.

Here are my blunt takeaways for how AI impacts CEO-level work after all this experimenting:

1. It’s exceeding expectations at the individual level. (…) AI is smarter than 95% of the people I know on 95% of topics. Even for someone using it obsessively with real discipline, I’m still discovering it’s way better than I thought possible. Its ability to think creatively and research deeply is extraordinary. But only if you know how to use it. The point isn’t to outsource your thinking to the machine — it’s to expand your own. Used right, AI doesn’t think for you. It makes you think bigger.
2. It takes work. You can’t wing it or outsource it, even at the CEO level. You need to work at it daily — so AI learns you and you learn AI. This is when the magic happens. You have to feed it copious information and tell it what works and what sucks. This feedback loop creates a new form of super-institutional knowledge made up of the accumulated context and memory you build into it over time.
3. You need to go beyond chat. The life-changing work happens in projects or with agents. You need to feed in files of information and direct it with specific skills on how you want it to write, think, fact-check and cite actionable research and intel. This is where your company is headed. Only by doing it yourself will you discover new ways to apply it internally. And you can’t delegate this. Your team copies what you do, not what you mandate. Adoption rises and falls based on whether the CEO is hands-on, especially at smaller orgs.
4. The last mile sucks. As good as it is, AI hits internal walls when it comes to security, connecting to other systems and deciding what data it can access. This is a massive issue right now, which is slowing any internal gain. In most cases, it’s simply not ready for scaled deployment. This problem is getting WORSE, because …
5. Agent-to-agent work is a mess. If AI transforms our business — and I think it will — agents need to work flawlessly with other agents. This is the unfolding frontier. My exec team has chief-of-staff agents, but we hit constant walls in determining what they can know, share and act on once they collaborate. Just think about all the permissions you need to nail down so this doesn’t backfire. The AI companies know this and presumably will solve it. Until then, efficiency gains are overhyped. Our job as CEO is to live in that uncomfortable middle: don’t believe the demos, don’t dismiss the trajectory.
6. A new class of superworker is born. Here’s the best news: We’re spotting rank-and-file workers daily whose brains are wired for AI. It’s been easier than expected to train them to be AI enablers on their team or companywide. If you don’t have an AI enablement team now, build one ASAP and create a mechanism to spot and elevate these AI-wired brains. These people are NOT technologists by training.
7. You’ll discover new business lines. A year ago, I thought the big win would be cost savings and productivity. Automate ruthlessly, cut expenses, expand margins. That’s real — we’ve done it. But over the last three months, my view shifted. The bigger opportunity isn’t efficiency. It’s new business lines that were economically impossible before AI. We have at least three new revenue-generating projects underway that simply weren’t possible without AI. And here’s what separates the durable ones: They sit where raw AI output still needs a human-trusted layer with judgment the machine can’t supply alone. Many jobs will change, but I now believe we’ll hire more people over time than I’d have guessed a year ago.

The bottom line: I’ve never been more personally productive, more enthusiastic and more curious about hands-on experimentation.

• By the end of this month, I’ll have personal agents helping with my day-to-day work, researching a book, building out a new business line and helping solve a medical mystery for a family member.
• And don’t forget: I went in as dumb and blind to how tech works as anyone reading this!

FYI: