The Federal Reserve and European Central Bank both hand down interest rate decisions this week. They’re each expected to raise interest rates by 25 basis points, the greater focus will be on signalling from policy makers on whether more hikes are likely – or if they plan an extended pause.
The outlier is the Bank of Japan, whose officials see little urgent need to address the side effects of its yield-curve control program at this point, though they expect to discuss the issue, according to people familiar with the matter.
In Australia, the big data drops are CPI on Wednesday and retail sales on Friday.
Shane Oliver, head of investment strategy and chief economist at AMP: “Inflation is likely to show a further fall in the June quarter with quarterly CPI inflation falling to 1 per cent qoq or 6.2 per cent yoy from 7 per cent yoy in the March quarter. This would be the slowest quarterly increase since the September quarter 2021.”
Tapas Strickland, head of market economics, markets at NAB: “While we pencil in trimmed mean inflation of 1.1 per cent q/q and 6.0 per cent y/y to be in line with the RBA’s May SoMP of 6.0 per cent y/y (consensus 1.1/6.0), we expect the details around services to be less favourable, flagging the risk of a slower return of inflation to target than in the May SoMP profile.”
Meanwhile on Wall Street, the bear market that engulfed the S&P 500 is a mere 260 points from being completely erased, fewer than 20 months after it began. Rather than foretelling trouble, chart patterns tracking everything from cross-asset momentum to transportation companies are painting a picture of burgeoning economic vigor.
Investors have pushed stocks up for the eighth time in 10 weeks. Should the optimism persist, last year’s bear market has a shot at being unwound faster than all but three of its predecessors since World War II.
“I’m shocked that the Fed has really pulled off the soft landing and everybody is caught underweight equity exposure,” said Dennis Davitt, co-manager of the MDP Low Volatility Fund. “As people have to get right sized on their portfolio, they’re going to have to come in and buy, and every day gets harder.”
US Treasuries have surged in recent weeks, sending yields on policy-sensitive two-year notes down nearly 30 basis points from this year’s peak of 5.12 per cent reached on July 6.
Now, with a quarter-point hike baked into the July 26 decision, the swaps market is pricing only a one-in-three chance of an increase later this year — down from more than 50 per cent odds earlier this month.
Local: NZ trade balance June
Overseas data: Euro zone Markit manufacturing PMI and manufacturing services June; US Chicago Fed Nat. Act. index June; US Markit manufacturing PMI and services PMI July
Owners slam ‘reckless’ Andrews’ rent cap plan: Australia’s largest real estate group warned a plan by Victorian Premier Daniel Andrews to introduce rental caps and freezes will be make the rental crisis worse.
Adapt or die’: crunch time for office towers as big tenants bail out: Various office towers across Sydney and Melbourne are set to have tens of thousands of office space vacant with many leases set to expire in the next 12 months.
Republicans’ first Millennial candidate wants an American revolution: While Florida governor Ron DeSantis is still seen as the Republicans’ second choice for presidential candidate, Vivek Ramaswamy is quickly gaining ground. He is worth almost $1 billion and acknowledges people think his policies are extreme.
ASX futures were up 29 points, 0.4 per cent, to 7300 points at 5.38am on Monday.
- AUD -0.7% to 67.29 US cents
- On Wall St: Dow flat S&P flat Nasdaq -0.2%
- In New York: BHP -0.2% Rio -0.2% Atlassian -0.7%
- Tesla -1.1% Apple -0.6% Amazon flat
- Bitcoin +0.2% to $US29,959
- Stoxx 50 +0.4% FTSE +0.2% DAX -0.2% CAC +0.6%
- Spot gold -0.4% to $US1,961.94 /oz
- Brent crude +1.4% to $US81.07 a barrel
- Iron ore $US113.20 a tonne
- 10-year yield: US 3.83% Australia 4.01% Germany 2.46%
Investors piled into tech stocks, while distancing themselves from the broader equity market, according to a weekly fund flow report from Bank of America.
Tech funds attracted $US1.8 billion in the week to July 19, pulling in money for the fourth consecutive week, and posting “strong inflows” over the past eight weeks, strategist Michael Hartnett said in a note on Thursday, citing EPFR Global data.
As buzz builds into the premieres of Barbie and Oppenheimer, some on Wall Street are doubting whether the films will be enough to power further gains in movie-theatre stocks as a strike by Hollywood writers and actors clouds the outlook for the industry.
JPMorgan downgraded its recommendation on Cinemark this week, saying the actors’ walkout limits visibility into the film supply. Analyst David Karnovsky noted that the strike has already halted production for several movies slated for the second half of next year.