Industrial production in the euro zone; Bunzl update
Europe is set for a positive opening on Monday, with expectations that the Fed will maintain its conciliatory message later this week. In Asia, most major stock indexes were higher, as were the dollar and oil, but gold prices fell further and Treasury yields stagnated.
European stocks are expected to extend gains on Monday, with the Stoxx Europe 600 likely to push further into record territory, as investors anticipate an accommodating Fed meeting this week.
“There is probably a chance to have a little more of a ‘let’s see-what-they-have-to-say’ approach, said Jim Baird, chief investment officer of Plante Moran Financial Advisors. question is whether policymakers will give details of their thinking on a possible cut to the Fed’s bond buying program, offering investors “more of a look behind the curtain,” he said. -he declares.
Several Fed officials have said the Fed should start thinking about when it would be appropriate to discuss easing buying. Investors also analyzed the details surrounding inflation.
“The question now is whether this is the start of a 1970s-style price spiral, in which case it would be very bad for the markets,” said Eric Diton, chairman of The Wealth Alliance, which oversees over $ 1.2 billion in assets. . The market appears to believe that the inflation spikes will be transient, as commodity shortages during the pandemic will prove to be temporary, according to Diton.
Stocks to watch: Royal Dutch Shell is reportedly reviewing its holdings in the largest oil field in the United States, according to information released on Sunday. The potential sale could include all of Shell’s 260,000 acres in the Permian Basin, mostly in Texas, as the company refocuses on existing production elsewhere and shifts to low-carbon companies, Reuters reported, citing anonymous people close to the case. Such a sale could fetch up to $ 10 billion, CNBC said, also based on an unidentified insider with knowledge of the talks. The sale was not to be imminent.
The dollar continued to strengthen against other major currencies on Monday, albeit in lower trading volumes in Asia, with markets in China and Hong Kong closed for the holidays. DailyFX.com said that for the coming week investors will likely focus on US retail sales and the FOMC meeting.
Capital Economics said the dollar is expected to strengthen against most currencies over the next 12 to 18 months as Treasury yields continue to rise.
“To a large extent, this view is based on our forecast of a relatively uneven global economic recovery in which the US economy is outperforming thanks to its significantly larger stimulus measures,” said Jonathan Petersen, economist at Capital Economics. . A fall in commodity prices is also expected to push the dollar higher, he said.
Beyond 2022, the dollar could reverse its gains as yield spreads shift in favor of the rest of the world as other economies catch up with the United States, he said. The dollar is “moderately overvalued”, justifying a gradual depreciation in the medium term.
JPMorgan economist Michael Feroli told clients the Federal Reserve is likely to hike rates sooner than expected, due to reduced risks from the coronavirus pandemic and rising inflation expectations . “We are advancing our take-off expectations at the end of 2023.”
Mr. Feroli also expects “superficial” discussions on reducing asset purchases. “If we are correct in saying that they are talking about reduction, then our best guess is that we learn about this discussion in the remarks prepared by the president at the start of the press conference,” he said, adding “we we would also expect Powell to quickly follow this by observing that the economy is still a long way from meeting the “substantial further progress” targets.
The Russian central bank could raise interest rates an additional 75 to 100 basis points later this year, pushing the ruble higher, Unicredit said. The central bank on Friday raised its key rate by 50 basis points to 5.50% and said rising inflationary risks could lead to rare further hikes in upcoming meetings.
The prospect of another rate hike, combined with rising oil prices, is expected to push the ruble further this year, Unicredit analyst Artem Arkhipov said. However, inflation is expected to slow next year, prompting the bank to become more “dovish” and cut the real inflation-adjusted policy rate to around 100-150 basis points, he said. “This could lead to moderate pressure on the RUB if other central banks become more hawkish in 2022.”
Treasury yields traded in line with Friday’s close of 1.462%, with inflation remaining at the center of the debate.
Bank of America is concerned that temporary inflation may last long enough to have lasting effects. “These ‘temporary’ pressures are likely to persist for many months and could become anchored in the psychology of inflation.” The bank said that while there are reasons to dismiss much of current inflation as temporary, “it will remain important to monitor whether transient inflation turns into higher persistent inflation.”
A slowdown in new issuance of euro-denominated bonds could increase corporate bond spreads, Mizuho said. The supply of euro corporate bonds was very low on Thursday due to the European Central Bank’s policy decision and “it will be important to see now whether, thanks to the appeasement of the ECB, the flow of deals will resume in the coming days “.
Otherwise, “the summer lull could come sooner rather than later, which would fuel even greater momentum for tightening credit spreads,” the bank’s analysts said.
Oil futures continued to climb in Asia, after posting a third week gain to end Friday at a more than two-year high.
The market “cannot ignore the clear bullish signal” from the IEA report, in which the energy agency called for more oil to be produced by OPEC + “to meet the recovery in oil demand 2022, “said Louise Dickson, oil markets analyst at Rystad Energy.
“OPEC + ‘s supply conservatism has supported oil prices since last year and this is why prices have now reached such highs,” she said in a daily note. . “There is certainly room for OPEC + to increase production from the second half of this year and until that happens there is a definite advantage for oil prices.”
Baker Hughes data on Friday suggests U.S. production may soon increase, as the number of active U.S. oil rigs increased from six to 365 this week.
Gold extended Friday’s decline as the strength of the dollar helped send prices to their lowest level in more than a week.
The outlook that the Fed might be less accommodating at this week’s FOMC meeting has also soured the mood in Asia. Recent labor gains and the scorching inflation figure increase the risk that the Fed will be less accommodating, although expectations remain that it will stick to its ‘inflation is transitory’ scenario. high, OANDA said.
The precious metal is expected to trade between $ 1,870 and $ 1,900 as the FOMC move nears, OANDA said.
Copper prices have remained stable amid lingering uncertainty over the outcome of the presidential election in Peru, the world’s second-largest base metal producer.
Results won’t be finalized until a contested voting process is completed, but Pedro Castillo’s lead over Keiko Fujimori raises fears the left-wing candidate will raise taxes on mining companies and compromise capital spending forecast needed to increase supply in the longer term. term, said TD Securities.
Recently, the three-month LME copper contract was little changed at $ 10,005.50 per metric tonne.
MAJOR TITLES OF THE DAY
G-7 leaders rally for Biden call to challenge China
CARBIS BAY, England-Leaders of the Group of Seven Wealthy Democracies called on China to respect human rights but stopped before an outright condemnation of Beijing, as President Biden sought to build momentum for a international coalition to counter Chinese influence in the world.
A 25-page joint statement released Sunday by leaders of the G-7 countries covering issues ranging from pandemic recovery to the global economy, taxation, trade and girls’ education asked China “To respect human rights and fundamental freedoms, especially relationship with Xinjiang and these rights, freedoms and high degree of autonomy for Hong Kong.” The same section of the statement said the G-7 would continue to consult on how to challenge China’s behavior in the global economy.
Markets leave little room for the Fed to misjudge inflation
Investors trust the Fed. Over the past three months, consumer prices, excluding volatile food and energy, have risen by 2%, which equates to an incredibly high annual rate of 8.2%. Rather than panicking and throwing the bonds away, investors crammed into Treasuries and slashed 10-year yields to their late February level. Confidence in the central bank is absolute.
To be fair, the Fed is probably right: This surge in inflation is probably transient. The reopening of the economy has triggered an increase in pent-up demand, while supply bottlenecks restrict production and distribution. With the return to normal, inflation should subside.
Europe continues to help businesses avoid wave of Covid-19 insolvencies
Rousselle Industrie SA, a manufacturer of machinery for paint manufacturers in northern France, nearly collapsed in 2020 after the pandemic disrupted the supply and operations of its customers.
The 10-person company saved the equivalent of $ 360,000 in loans under a government program that guaranteed debt and deferred interest payments for 12 months.
Regulators tell banks it’s time to stop using Libor
Regulators are stepping up efforts to end Libor trading by the end of the year.
(MORE FOLLOWING) Dow Jones Newswires
June 14, 2021 00:17 ET (04:17 GMT)
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