Central bank commentary at the ECB forum doesn't move the markets

TL;DR: US shares were flat yesterday and Asian shares are mixed this morning as the markets shift their attention to July base rate expectations. The dollar is slightly lower this year.

📰 What’s moving markets?

• US shares were mostly flat yesterday with tech stocks keeping the Nasdaq 100 in the green (+0.12%) while the S&P 500 recorded minor losses (-0.04%).

• Apple closed at a record high yesterday and has made gains in excess of 51% year-to-date. US Banks stocks are also performing well under recent recession-simulating stress tests.

• Sweden’s Riksbank (Central Bank) is expected to hike rates by 25bp today, with some chance of a 50bp surprise given the weakness of the Krona on real estate concerns and aggressive hawkish policy elsewhere.

• The Fed’s Jerome Powell spoke yesterday at the ECB forum saying the Fed would likely raise rates further and did not rule out a hike for July (markets are pricing an 80% chance of a 0.25% hike). Powell also commented that does not see inflation falling to the 2% target set y the Fed until 2025.

• At the same conference, the ECB chair set expectations for their 9th consecutive hike for July and marketing and pricing two more hikes for the ECB this year.

• European inflation flash prints for June in Spain and Germany are released today, with Spain expected to weaken due to base effects and strength expected in Germany.

• The Dollar Index is down 0.35% for the first half of this year after reaching record highs last year.

📊 Chart of the day

With markets expecting only one or two more Fed rate hikes this year, investors are already shifting their expectations to what might happen after the hiking cycle ends. More specifically, once rates start to fall. History is not very helpful on this account, with some cutting cycles determinedly bullish (1984, 1989, 1995, 2020) and others scarily bearish (2001, 2007).

S&P 500 performance after the Fed’s first rate cut

📅 Coming up this week

Monday 26th June

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Tuesday 27th June

• Japan BoJ Core CPI (YoY) expected: 3.4%, last; 3.0%, actual: 3.1%

• Canada Core CPI (YoY) expected: 3.9%, last: 4.1%, actual: 3.7%

• US Housing Price Index (YoY) expected: 3.1%, last: 3.6%, actual: 3.1%

• Australia Headline CPI (YoY) expected: 6.1%, last: 6.8%, actual: 5.6%

Wednesday 28th June

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Thursday 29th June

• Euro Zone Consumer Confidence expected: -16.1, last: -17.4

• Germany Headline CPI (YoY) expected: 6.3%, last: 6.1%

• US GDP (QoQ) expected: 1.4%, last: 1.3%

• Japan Unemployment Rate expected: 2.6%, last: 2.6%

Friday 30th June

• UK GDP (QoQ) expected: 0.1%, last: 0.1%

• Euro Zone Core CPI (YoY) expected: 5.5%, last: 5.3%

• Euro Zone Headline CPI (YoY) expected 5.7%, last 6.1%

• Canada GDP (MoM) expected: 0.2%, last: 0.0%

📈 The markets at a glance