Inflation in Japan is steady above target. Disappointing European PMI data :: InvestMacro

by just forex

On Thursday, US Central Bank Governor Jerome Powell told the House of Representatives that the Fed’s commitment to curb inflation for 40 years is “unconditional,” but that it risks rising unemployment. On Wednesday, Powell told the US Senate Banking Committee that the Fed is not trying to trigger a recession but it is “certainly possible” due to global events outside its control, notably the effects of the war in Ukraine and the COVID-19 pandemic. At the same time, Powell expects US economic growth to accelerate in the second half of the year.

On Thursday, another Fed official, Michelle Bowman, said she supports a 75 basis point rate hike in July, followed by a 50 basis point increase in the next few meetings. This statement coincides with opinion polls conducted by Reuters. Economists polled by Reuters this week expected the Federal Reserve to raise another 75 basis points next month, followed by a 0.5% increase in September.

New jobless claims fell last week from 231,000 to 229,000, while the headline PMI for manufacturing and services sector activity fell to 52.5 (from 57) and 51.6 (from 53.4) respectively.

With the stock market closed yesterday, the Dow Jones (US30) rose 0.64% and the S&P 500 (US500) rose 0.95%. The Nasdaq Technology Index (US100) jumped 1.62%.

Stock markets in Europe were trading lower yesterday. Germany’s DAX (DE30) is down 1.76%, France’s CAC 40 (FR40) is down 0.56%, Spain’s IBEX 35 (ES35) is down 0.48%, and Britain’s FTSE 100 (UK100) is down 0.97%.

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German and French PMI data showed that the Eurozone economy is beginning to show signs of slowing. In Germany, the manufacturing PMI fell from 54.8 to 52 while the services PMI fell from 55 to 52.4. In France, the manufacturing PMI fell from 58.3 to 54.4, and the services PMI fell from 54.6 to 51. A drop in the PMI below 50 is usually a sign of a recession in which the central bank raises interest rates. At the time, Fed spokesman Casimir said yesterday that some eurozone countries may face a short-term recession.

The Norges Bank surprised the markets by raising the interest rate by 50 basis points from 0.75% to 1.25%. Concerns about rising inflation in a tight labor market were the reasons for the scale of the increase. Inflation in Norway was 5.7% y/y in May versus 5.4% y/y in April. It is the highest level since December 1988.

Ukraine and Moldova officially received candidate status to join the European Union.

The Russian State Duma called for the bombing of the US Embassy in Kyiv over MLRS shipments to Ukraine. This statement was made by Deputy Chairman of the State Duma Committee on Defense, Yuri Shvetkin. He said the United States is “bringing World War III closer” by supplying it with HIMARS Multiple Launch Missile Systems. At the same time, Estonian Prime Minister Kaja Kallas said that in the event of a Russian invasion, Estonia would be wiped off the face of the earth due to NATO’s ineffective plan to defend the Baltic states. It called for at least 20,000 to 25,000 NATO soldiers to be sent to each of the Baltic states.

Natural gas futures fell more than 5% yesterday on the news of reserves. US domestic natural gas inventories increased by 74 billion cubic feet during the week. Meanwhile, total stored natural gas is 2.169 trillion cubic feet, 305 billion cubic feet less than last year, and 331 billion cubic feet below the five-year average.

The US Energy Information Administration said that the official weekly estimates of US oil stocks were due to be published on Thursday, but technical problems delayed those numbers until next week. Russia continues to find alternative buyers for its oil, with China and India among the largest buyers. China’s imports of crude oil from Russia increased by 55% in May from a year earlier, reaching a record level.

Yesterday Asian markets closed in the green. Japan’s Nikkei 225 (JP225) rose 0.08%, Hong Kong’s Hang Seng (HK50) rose 1.26%, and Australia’s S&P/ASX 200 (AU200) closed 0.31% higher.

The core CPI nationwide was 2.1% for the second month in a row and again exceeded the target level for the Bank of Japan. This data challenges the BoJ’s view that the recent rate increase is temporary and does not require the withdrawal of monetary stimulus. These sentiments provided a brief boost to the Japanese yen. But with wage growth slowing, many analysts expect the Bank of Japan to continue to pursue a soft monetary policy rather than fight inflation by raising interest rates.

Main market prices:

S&P 500 (F) (US500) 3,795.72 +35.83 (+0.95%)

Dow Jones (US 30) 30677.36 +194.23 (+0.64%)

DAX (DE40) 12,912.59 −231.69 (−1.76%)

FTSE 100 (UK100) 7,020.45 −68.77 (−0.97%)

US dollar index 104.35 +0.16 (+0.15%)

Important events for today:

  • – Japanese National Consumer Price Index at 02:30 (GMT +3);
  • – UK retail sales (month / month) at 09:00 (GMT + 3);
  • – German IFO business climate index for the eurozone (monthly) at 11:00 (GMT +3);
  • – EU leaders summit in the eurozone at 13:00 (GMT + 3);
  • – Reserve Bank of Australia Governor Lowe speaking at 14:30 (GMT +3);
  • – US New Home Sales (m/m) at 17:00 (GMT +3).

by just forex

This article reflects a personal opinion and should not be construed as investment advice and/or a continuing offer and/or solicitation to carry out financial transactions and/or guarantee and/or anticipation of future events.

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