France Composite PMI output Index at 47.3 (May: 51.2). 28-month low, expected 51.0, consumers finally getting the script ? the ECB doves will see this as a welcoming sign..>>> service sector that had been the engine of growth in the spring, is now back into contraction/decline, as higher rates add to consumer headwinds.., German manuf PMI weaker too, services held a little bit better
BoE hikes 50bps (slightly more than 30 priced), and makes a few dovish comments (self defeating for inflation expectations tbh)...>>> GBP weakens a little >>> and this morning : UK consumer morale touches 17-month high despite inflation pain - GfK, and that's 'the' problem right there. Many economist calling this move 'catastrophic error of overtightening'.. (the mistake was made 1-2y ago, for being blind and doing too much QE, when inflation was clearly not going to be temporary..now everyone pays for the mistake of the CB - not just UK btw, but more accute there because of Brexit and change in labour market..)
SNB hikes 25bps, as expected >>> another hike coming in Sep coming, inflation outlook was hawkish!
Turkish CB (after 10 straight rate cuts..)...hikes from 8.5% to 15% (..market was expecting nearer to 20%..) >>> not enough, USDTRY goes another 5% higher to 24.50 area
Powell : Fed may raise capital requirements for big banks by 20%, KRE was already struggling on higher rates, then most banks were off a little on this >> more hikes coming ''it'll be appropriate to raise rates again this year, perhaps twice''
Beijing on Friday upgraded its warning for hot weather to "red" - the highest in a colour-coded alert system - saying most parts of the Chinese capital could roast in temperatures of up to 40 degrees Celsius (104 Fahrenheit)
U.S. President Joe Biden and Narendra Modi hailed a new era in their countries' relationship after the White House rolled out the red carpet for the Indian prime minister on Thursday, touting deals on defense and commerce aimed at countering China's global influence
Japan core inflation (so excluding fresh food and energy costs) came in higher than expected at 4.3% YoY, this is a 42-year high
Former member of BoE MPC, Prof Blanchflower: "Supply shocks are not fixed by interest rates. You have to ask: how come inflation is 8.7% in the UK, but tumbling everywhere else? One answer is Brexit. The other reason is that the credibility of UK policy makers is trashed." - bravo - well said
Markets :
Higher Terminal rates, high(er) for longer, slowly putting pressure back on stocks, commods (copper, crude down) and AUD >>> in a few months, IMHO, many CB's will 'have' to acknowledge that they had been (currently) looking too much in the rear view mirror... but timing is Very hard
VIX super low similar levels seen in previous decade before a nasty reaction (timing is Very hard to tell in short-term though too)
German 2s10s yield curve inverts most since 1992, markets pricing ECB Peak below 4% for the First Time since Monday
USDCNH grinding higher still, 7.22 latest, the likes of EURJPY looks way way overdone on topside
Fed's Powell reinforces likelihood of more rate hikes because of persistently high inflation (yahoo.com) and Powell Says Wall Street Faces Higher Capital Requirements (yahoo.com) .. force bank to buy all your UST's that will have to be issued ?...
Fund any kind of growth with more debt >>> hard to see how this story ends well (not too dissimilar on other countries mind..)
"We are creating a strong and futuristic partnership," Indian Prime Minister Modi said about US tech companies' decision to invest in his country
Brexit was never going to make the UK better off, says former Chancellor Lord Hammond - LBC too late !
Banks summoned on mortgages after interest rate shock - BBC News so government is going to tell banks how to behave ?..not good
Almost inevitable..
have a great friday and weekend
team PVM
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