InvestMacro

By JustMarkets

The Dow Jones Index (US30) decreased by 0.68% at the stock market’s close yesterday, while the S&P 500 Index (US500) added 0.08%. The NASDAQ Technology Index (US100) closed Wednesday positive by 0.39%.

The US Federal Reserve expectedly left rates unchanged yesterday at 5.25% but predicted further increases at the next meetings. The Fed now sees its peak rate at 5.6% in mid-2023, up from its previous forecast of 5.1% in March, which suggests two more hikes.

The main points from Jerome Powell’s speech at yesterday’s press conference:

• The FOMC is committed to getting inflation back to 2.0% to achieve price stability.
• The rate was raised to 5% from March 2022 through May 2023, which is a statistically unconventionally fast “move,” but given the data coming in, the FOMC has decided to move at a more moderate pace and consider raising the rate at future meetings.
• Given the lag in the effect of monetary policy, a rate hike in July 2023 depends on many variables, so the FOMC is closely watching labor market conditions, inflation data and financial sector conditions over a 3-month period.
• The FOMC does not see the effects of stress in the banking sector.
• The expected median rate at the end of 2023 is 5.6%,2024 is 4.6%, and 2025 is 3.4%.
• Asset reduction in Treasury securities will continue (QT-quantitative tightening).

BofA Global Research said it now expects two more quarter percentage point interest rate hikes from the US Federal Reserve this year, raising its final rate forecast to 5.5%-5.75%.

Amazon (AMZN) is considering using AMD’s artificial intelligence (AMD) chips in its cloud business.

Stock markets in Europe were mainly up Wednesday. Germany’s DAX (DE30) gained 0.49%, France’s CAC 40 (FR40) gained 0.52%, Spain’s IBEX 35 index (ES35) jumped by 1.20%, and Britain’s FTSE 100 (UK100) closed positive by 0.10% yesterday.

The European Central Bank (ECB) will almost certainly raise borrowing costs today and leave room for further increases as it continues to fight high inflation, even as the Eurozone economy weakens. More Eurozone countries are signaling a technical recession (2 consecutive declines in GDP per quarter). Eurozone’s inflation is still high for the ECB at 6.1%, more than three times its target of 2%, and core prices, which excludes food and energy, are only beginning to slow. Economists expect another 0.25% increase in July before the ECB pauses in fall 2023.

Asian markets traded higher yesterday. Japan’s Nikkei 225 (JP225) gained 1.47% on the day, China’s FTSE China A50 (CHA50) was up by 0.14%, Hong Kong’s Hang Seng (HK50) ended the day down by 0.58%, and Australia’s S&P/ASX 200 (AU200) closed positive by 0.32%.

The Japanese yen fell to an 8-month low against the dollar amid hawkish statements from the US Federal Reserve. The Japanese government is once again talking about currency intervention. Japan’s Chief Cabinet Secretary pointed out that excessive fluctuations in the currency are undesirable, with a senior currency official saying that the government would take action if necessary. Last year the weakening of the yen to 146 yen per dollar triggered the first intervention.

New Zealand’s gross domestic product (GDP) fell by 0.1% in the first quarter of 2023. This is the second consecutive quarterly decline in GDP, indicating that New Zealand has entered a technical recession. The contraction was caused by a decline in manufacturing, which fell by 3.5%, and transportation, port, and warehouse services, which fell by 2.2%. The Reserve Bank of New Zealand (RBNZ) raised its benchmark rate to a 14-year high at its May meeting, and it was probably the last increase this year.

S&P 500 (F) (US500) 4,372.59 +3.58 (+0.082%)

Dow Jones (US30)33,979.33 −232.79 (−0.68%)

DAX (DE40) 16,310.79 +80.11 (+0.49%)

FTSE 100 (UK100) 7,602.74 +7.96 (+0.10%)

USD Index 103.02 -0.32 (-0.31%)

• – New Zealand GDP (q/q) at 01:45 (GMT+3);
• – Australia Unemployment Rate (m/m) at 04:30 (GMT+3);
• – China Industrial Production (m/m) at 05:00 (GMT+3);
• – China Unemployment Rate (m/m) at 05:00 (GMT+3);
• – China Retail Sales (m/m) at 05:00 (GMT+3);
• – Switzerland Producer Price Index (m/m) at 09:30 (GMT+3);
• – Eurozone Trade Balance (m/m) at 12:00 (GMT+3);
• – Eurozone ECB Interest Rate Decision at 15:15 (GMT+3);
• – Eurozone ECB Interest Monetary Policy Statement at 15:15 (GMT+3);
• – US Retail Sales (m/m) at 15:30 (GMT+3);
• – US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
• – US Empire State Manufacturing Index (m/m) at 15:30 (GMT+3);
• – Eurozone ECB Press Conference at 15:45 (GMT+3);
• – US Industrial Production (m/m) at 16:15 (GMT+3);
• – US Natural Gas Storage (w/w) at 17:30 (GMT+3).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

By JustMarkets

As the stock market closed yesterday, the Dow Jones Index (US30) increased by 0.43%, and the S&P 500 Index (US500) was up by 0.69%. The NASDAQ Technology Index (US100) closed Tuesday positive by 0.83%.

The US consumer prices fell from 5.5% to 5.3% year-over-year. Core inflation fell sharply from 4.9% to 4%. This was the eleventh consecutive month of decline in overall inflation and the lowest level since early 2021, but it is still double the Fed’s stated target of 2%. The US inflation data raised the odds of the Fed pausing to raise rates today from 81% to 93%. The US factory inflation (PPI) data will be released today.

Since investor expectations today are mostly for a rate pause scenario, more attention will be paid to policy recommendations and fresh economic forecasts to determine what happens next. The Fed’s more data-driven stance and policy flexibility language could be seen as less hawkish. On the other hand, if the interest rate forecast is revised upward along with inflation estimates, this could lead to a longer-term interest rate outlook and revive hawkish fears.

Stock markets in Europe mostly rose Tuesday. Germany’s DAX (DE30) was up by 0.83%, France’s CAC 40 (FR40) added 0.56%, Spain’s IBEX 35 index (ES35) lost 0.05%, and the British FTSE 100 (UK100) closed on the plus side by 0.32% yesterday.

Germany’s inflation rate fell from 7.2% to 6.1% year-on-year. Inflation in Europe’s largest economy continues to decline but remains three times higher than the ECB’s target level. Food prices are still the biggest driver of inflation.

Bank of England governor Andrew Bailey said yesterday that inflation in the country would continue to decline, but it will take longer. Strong labor market data yesterday bolstered investor confidence that the Bank of England will hold at least two more 0.25% rate hikes.

Asian markets traded higher yesterday. Japan’s Nikkei 225 (JP225) gained 1.80% on the day, China’s FTSE China A50 (CHA50) gained 0.38%, Hong Kong’s Hang Seng (HK50) gained 0.60%, while Australian S&P/ASX 200 (AU200) closed positive by 0.23%. Most Asian stock indices rose Wednesday as weak US inflation data bolstered expectations that the Federal Reserve will suspend its interest-rate hike cycle.

Japan’s Nikkei (JP225) hit new 33-year highs. Sentiment for Japanese stocks was largely supported by expectations that the Bank of Japan will maintain its ultra-soft policy this Friday.

The People’s Bank of China (PBOC) cut the 7-day reverse repo rate to 1.9%, which was previously at 2%. The Chinese government is taking additional stimulus measures to support the slowing global economic recovery. The move raised fears about how deep the economic cracks in China were after three years of blockage due to Covid-19.

S&P 500 (F) (US500) 4,369.01 +30.08 (+0.69%)

Dow Jones (US30)34,212.12 +145.79 (+0.43%)

DAX (DE40) 16,230.68 +132.81 (+0.83%)

FTSE 100 (UK100) 7,594.78 +24.09 (+0.32%)

USD Index 103.28 -0.37 (-0.36%)

• – UK GDP (q/q) at 09:00 (GMT+3);
• – UK Industrial Production (m/m) at 09:00 (GMT+3);
• – UK Trade Balance (m/m) at 09:00 (GMT+3);
• – US Producer Price Index (m/m) at 15:30 (GMT+3);
• – US Crude Oil Inventories (w/w) at 17:30 (GMT+3);
• – US Fed Interest Rate Decision at 21:00 (GMT+3);
• – US FOMC Economic Projections at 21:00 (GMT+3);
• – US FOMC Monetary Policy Statement at 21:00 (GMT+3);
• – US FOMC Press Conference at 21:30 (GMT+3).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

By George Prior

The latest US inflation report suggests that the Federal Reserve will pause interest rate hikes tomorrow (Wednesday), but investors need to “stay grounded” as more rate rises are likely this year.

This is the warning from Nigel Green, the CEO and founder of deVere Group, one of the world’s largest independent financial advisory, asset management and fintech organizations, as the Bureau of Labour Statistics releases the US CPI data today showing that inflation rose at a 4% annual rate in May, which is the lowest in 2 years.

He says: “Tuesday’s report shows again that the prices rises, which have been hitting consumers, businesses and financial assets for two years, are decelerating.  The 12-month increase was the smallest since March 2021.

“It’s a feel-good headline figure that will cheer investors as it will add further pressure on the Fed to pause its interest rate hike agenda.

“The US central bank is now 15 months and 10 consecutive rate increases into its battle to cool red-hot inflation, but markets will be expecting that the latest CPI report will now be enough to convince officials to hit the pause button.”

The deVere CEO expects that other sectors which have “been outperformed so far in 2023” by mega-cap tech stocks are likely to get a boost should the Fed, as is anticipated, pause rate hikes this week following the CPI data.

“This will firmly signal that progress is being made in the battle to cool inflation and this will buoy investors across the board, finally providing a boost to sectors which have been unloved so far this year.”

As such, investors should be speaking to an advisor about the “possibility of an opportunity-packed new rally if the Fed, as is expected, pauses rate hikes this week.”

However, Nigel Green also issues a warning: “Investors need to stay grounded as despite a possible pause, more rate rises are likely this year, which would be a negative shock to stock markets.

“Inflation is certainly coming down so far, but it is very, very gradual. It remains sticky and a long way from the 2% target, largely due to a tight labor market.

“Therefore, investors need to brace for at least another interest rate hike this year, even if the Fed skips this one.”

Diversification remains investors’ best tool for long-term financial success. As a strategy it has been proven to reduce risk, smooth-out volatility, exploit differing market conditions, maximise long-term returns and protect against unforeseen external events.

“The likely market relief rally that is expected if the Fed pauses could provide important opportunities for investors, but they shouldn’t get overconfident that this is the end of the most aggressive monetary policy since the 1980s.

“The Fed isn’t done yet,” notes the deVere Group CEO.

About:

deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients.  It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.

By JustMarkets

At the close of the stock market yesterday the Dow Jones Index (US30) increased by 0.56%, and the S&P 500 Index (US500) added 0.93%. Technology Index NASDAQ (US100) closed Monday positive 1.51%. Investors were confidently buying stocks yesterday ahead of important inflation data today. One of the main reasons for the buying is Goldman Sachs raised its year-end forecast for the S&P 500 to 4500 points from 4000 points. Analysts believe that if incoming data for June and July show that US inflation will decline, there is a high probability that the Fed will finish raising rates this cycle.

The US inflation data for May will be released today. Inflationary pressures are expected to fall, which will increase the likelihood of a pause at tomorrow’s US Fed meeting.

The US federal government’s budget deficit for the first eight months of the fiscal year reached $1.16 trillion, up 191% from a year ago. Growth in interest expense has been the main driver of spending growth so far in the fiscal year. However, that spending declined in May because of lower interest payments on inflation-protected Treasury securities.

Shares of Advanced Micro Devices Inc (AMD) jumped by 8% ahead of a presentation today. The chipmaker is likely to unveil updates to its data center and AI technology.

Stock markets in Europe were mostly up Monday. Germany’s DAX (DE30) gained 0.93%, France’s CAC 40 (FR40) added 0.52%, Spain’s IBEX 35 (ES35) jumped by 0.37%, and the British FTSE 100 (UK100) closed up by 0.11% yesterday.

Jonathan Haskell of the Bank of England’s Monetary Policy Committee said yesterday that the central bank might have to raise interest rates more than once from their current levels in order to get inflation under control. Britain’s economy looks set to avoid recession this year, but deep-rooted problems such as weak business investment will persist, the trade body the Confederation of British Industry said Monday.

The ECB has to balance raising borrowing costs to reduce demand and curb inflation without causing a deep economic downturn. Revised data last week showed that Eurozone GDP unexpectedly contracted by -0.1%, marking the second quarter of contraction and meeting the technical definition of a recession. Investors have new concerns that the region will not handle the aftermath of the war with Russia as well as anticipated, casting doubt on the more optimistic outlook for 2023

Crude oil prices fell by 4% on Monday. It was all due to comments from Iran’s supreme leader on a possible nuclear deal with the United States, which would open Iran’s access to the world market of oil products.

Asian markets traded higher yesterday. Japan’s Nikkei 225 (JP225) increased by 0.52% for the day, China’s FTSE China A50 (CHA50) added 0.45%, Hong Kong’s Hang Seng (HK50) was up by 0.07% for the day, and Australia’s S&P/ASX 200 (AU200) was not trading yesterday.

Most Asian stocks rose Tuesday, following strong gains on Wall Street, as markets bet that the Federal Reserve will suspend its rate hike cycle this week, while an interest rate cut in China also boosted sentiment in the region.

Chinese airliner C919 made its first commercial flight. China plans to build the airliner from its own components, in order to be less dependent on parts from the US and Europe. But in a broader context, import substitution efforts are not yet sufficient. It is estimated that 40% of C919 parts, including the engine, are imported from French Safran and US General Electric.

S&P 500 (F) (US500) 4,338.93 +40.07 (+0.93%)

Dow Jones (US30)34,066.33 +189.55 (+0.56%)

DAX (DE40) 16,097.87 +148.03 (+0.93%)

FTSE 100 (UK100) 7,570.69 +8.33 (+0.11%)

USD Index 103.62 +0.06 (+0.06%)

• – Australia NAB Business Confidence at 04:30 (GMT+3);
• – UK Average Earnings Index (m/m) at 09:00 (GMT+3);
• – UK Claimant Count Change (m/m) at 09:00 (GMT+3);
• – UK Unemployment Rate (m/m) at 09:00 (GMT+3);
• – German Consumer Price Index (m/m) at 09:00 (GMT+3);
• – Eurozone German ZEW Economic Sentiment (m/m) at 12:00 (GMT+3);
• – Eurozone ZEW Economic Sentiment (m/m) at 12:00 (GMT+3);
• – US Consumer Price Index (m/m) at 15:30 (GMT+3);
• – UK BOE Gov Bailey Speaks at 17:00 (GMT+3).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

By JustMarkets

At the stock market close on Friday the Dow Jones Index (US30) gained 0.13% (+0.31% for the week) and the S&P 500 (US500) added 0.11% (+0.37% for the week). The Technology Index NASDAQ (US100) on Friday closed positive by 0.16% (+0.16% for the week). The rally in US stocks shows signs of investor confidence that the US economy is holding up despite higher interest rates. Recession risks are declining. Some investors have begun to dive into economically sensitive market areas, including mid-cap and small-cap companies, energy and industrial stocks, not just “mega-companies.” Stronger-than-expected job growth and solid consumer spending were among the indicators that bolstered investors’ economic outlook. This week, investors will keep an eye on US inflation data as well as the US Federal Reserve’s monetary policy meeting.

Equity markets in Europe were mostly down on Friday. German DAX (DE30) shed by 0.25% (-0.81% for the week), French CAC 40 (FR40) decreased by 0.12% on Friday (-1.12% for the week), Spanish IBEX 35 (ES35) lost 0.34% (-0.49% for the week), British FTSE 100 (UK100) close negative by 0.49% (-0.59% for the week).

The ECB will hold its meeting on June 15, the day after the Federal Reserve. There is little doubt that Europe’s central bank will raise key rates by a quarter point. The interest rate will reach 4%. The swap market is confident that the ECB’s decision will not be finalized and expects at least one more quarter-point hike at the end of the third quarter.

Thomas Jordan, President of the Swiss National Bank, hints at further rate hikes to combat inflation. Switzerland’s annual inflation rate fell to 2.2% in May, but that is not enough for the SNB as the bank wants to see inflation in the 0-2% range. Analysts and the market expect the SNB to raise interest rates at its June 22 meeting.

The US Treasury yields are gradually rising as the US government continues to sell huge amounts of government bonds. Gold and silver are inversely correlated to government bond yields. And with the US Federal Reserve at the end of its tightening cycle, precious metals have more fundamental catalysts for growth in the medium term.

Oil prices fell in Asian trading on Monday, with the price of WTI dropping back below $70 a barrel after Iran’s leader said the country is open to a deal with the West on its nuclear program, albeit with some reservations. Iran is ready to make a deal only if Iran’s nuclear infrastructure is kept intact. The comments came just days after both Tehran and Washington denied reports of a possible deal. If the deal is completed, it would sharply increase oil supply in the market, sending oil prices plummeting in the face of weak demand.

Asian markets traded higher last week. Japan’s Nikkei 225 (JP225) was up by 1.26% for the week, China’s FTSE China A50 (CHA50) added 0.45%, Hong Kong’s Hang Seng (HK50) increased by 0.47% for the week, and Australia’s S&P/ASX 200 (AU200) was negative 0.32% for the week.

The Bank of Japan (BOJ) is expected to maintain an ultra-soft monetary policy this week and is forecasting a moderate recovery as strong corporate and household spending softens the blow from slowing demand overseas. The central bank may also signal that inflation is exceeding its forecasts, making it more likely to raise its price forecasts when it revises its estimates quarterly.

The Chinese yuan fell to a six-month low against the dollar as major state-owned Chinese banks began cutting interest rates on yuan-denominated deposits. The move foreshadows a broader cut in the central bank’s main lending rate later this month as it struggles to support economic growth.

S&P 500 (F) (US500) 4,298.86 +4.93 (+0.11%)

Dow Jones (US30)33,876.78 +43.17 (+0.13%)

DAX (DE40) 15,949.84 −40.12 (−0.25%)

FTSE 100 (UK100) 7,562.36 −37.38 (−0.49%)

USD Index 103.55 +0.21 (+0.20%)

• – Japan Producer Price Index (m/m) at 02:50 (GMT+3).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.