🌐 Macro-News round-up
#MarketNews
🌍 Europe: ECB’s Kazaks seems to insist that rate cuts go ahead. “The June meeting is quite likely to be the start of ECB rate cuts”.
🇬🇧 UK: Bank of England Deputy Governor Ben Broadbent signaled: “it’s possible the bank rate could be cut in the summer.” Broadbent acknowledged the UK economy “has suffered large shocks” and there is “unclear persistence of second-round inflation effects.” Governor Andrew Bailey also said the economy is “moving in the right direction” for rate cuts. However, Broadbent cautioned views differ on the MPC about how much evidence is needed for a cut. MPC members are also “wary about cutting rates” given recent experience. Overall, the central bank appears to be laying the groundwork for rate reductions in coming months, if inflation moderates as projected. But timing views differ among MPC members.
💷 Nevertheless, the pound seems to be relatively strong against the dollar. GBPUSD is currently trading above 1.27, but is showing a long-term downtrend that has lasted since 2021, and at these levels, there could well be further downward momentum in the pair.
🏢 The City still rules: According to an Ernst & Young poll, the UK’s percentage of new projects hit its highest point in ten years. The results indicate that despite worries about the UK’s competitiveness sparked by Brexit and subpar performance by London’s equities markets, investors still see the country as a trustworthy place to conduct business.
🇺🇸 US: Fed members continue to make comments, but markets seem to continue to ignore them. Fed’s Barr: The Fed will need to allow tight policy to have further time to continue to do its work. Q1 inflation was disappointing, it did not provide the confidence needed to ease monetary policy. Fed’s Bostic: The Fed is open to all possibilities on the path of the economy. Our new steady state on interest rates is likely to be higher than what people have been used to for the past decade.
🇨🇳 China: The HSI index has risen more than the Nasdaq and S&P 500 so far this year. If it can trade cleanly above 20,000 points, it will certainly bode well for the Hong Kong Stock Exchange. I remind you that on Friday China announced new easing measures for the real estate sector, in addition to a new bond issuance program aimed at financing stimulus programs.
⚙️ Commodities:
🔺 Copper hits record highs. The sharp rise in copper could signal an increase in industrial activity in China, which is the world’s largest buyer of copper, and therefore, this industrial metal is a good indicator of economic activity. However, concerns are also growing that this rise could fuel new waves of inflation.
📈 Market: Markets are back on a bullish tone. Both European and U.S. equities are pushing to new all-time highs. Particularly interesting is the NASDAQ100 index, which starts the week above all-time highs, standing above 18,500 points, possibly with new targets around 50% of the upper range that could take it to 20,000 points. However, US bond yields are rising again, with the 2-year bond trading above 4.8%. The market is discounting the September rate cut with more pessimism, even suggesting a rate cut in January.
🌐 Geopolitics:
🇮🇷 Iran’s President Ebrahim Raisi lost his life in a helicopter crash in the country’s mountainous region. The event occurs during a period of instability in the area brought on by Israel’s conflict with Hamas, which is supported by Iran, in Gaza.
🇮🇱 Israel war: Benny Gantz, a member of Israel’s war cabinet, threatened to resign if Prime Minister Benjamin Netanyahu does not agree to a post-war Gaza plan by June 8. Israeli troops and tanks pushed deeper into parts of the congested northern Gaza Strip district of Jabalia on May 18, killing and wounding dozens of Palestinians according to medics and residents. The latest incursions have exposed cracks in Netanyahu’s government as defense minister Yoav Gallant demanded clarity on post-war plans.
📢 The prosecutor of the International Criminal Court seeks arrest warrants for Israeli Prime Minister Netanyahu, Defense Minister Gallant and three Hamas leaders for war crimes and crimes against humanity.
🌍 According to a Forbes article, The EPA (Environmental Protection Agency) released a new regulation requiring that by 2032, two-thirds of new vehicle sales must be electric vehicles (EVs) or plug-in hybrids, with at least 56% being EVs. This amounts to regulatory tyranny that was never voted on by Congress and overrides consumer preferences. Most Americans still prefer gas-powered vehicles, according to polls. The EPA ignores national security risks from increased reliance on China, which dominates battery materials supply chains and could threaten them.
Macroeconomic Calendar of the week:
Monday
Japan: Industrial activity index.
UK: BoE member Speaks.
US: Fed FOMC member Speaks.
Tuesday:
Germany: PPI
US: Treasury secretary speaks. Yellen.
Europe: ECB Lagarde Speaks, Eurogroup meeting.
Canada: CPI
US: Fed Waller speaks.
UK: BoE Gov Bailey Speaks.
Wednesday:
UK: Core CPI, CPI & PPI.
Europe: ECB Meeting & Lagarde speaks.
US: Existing Home Sales, FOMC minutes.
NZ: Retail Sales.
Corporate: Nvidia Earning Results.
Thursday:
France: PMI services and manufacturing.
Germany: PMI services and manufacturing.
Euro Zone: PMI services and manufacturing.
UK: PMI services and manufacturing, BoE member speaks.
US: Initial jobless claims. New home sales, Bolstic Fed Speaks, Fed Balance Sheet.
Friday:
UK: Core Retail sales.
Germany: GDP Q1.
Europe: ECB Schnabel Speaks.
US: Fed Waller speaks, Atlanta Fed GDPNow.
