Senior Relationship Manager
Good Morning,
All eyes will be on the European Central Bank today where a rate hike would still be a surprise but it is expected that it will shut down QE and advise on rising rates. The Press conference at 14:30 can easily be more important than announcement at 13:45.
Our economist Christopher Dembik states:
The eurozone CPI topped 8 % year-over-year in May – the highest on record - and the eurozone HICP, which is highly watched by the ECB, reached a new high of 3.8 % in May (with core goods at 4.2 % and services at 3.5 %). This is uncomfortably high. In these conditions, Lagarde has little choice but to deliver an hawkish message this week – meaning higher rates and a stronger euro. The next data to look at closely will be the first estimate of the June eurozone HICP on July 1. ECB hawks might be vocal in favor of a fast tightening pace afterwards. While pressure is undeniably building in favor of a 50 basis point move in July, we doubt the ECB will start its hiking cycle with such a big step.
Hi US yields and the lack of good news weighed on equities yesterday, US indexes gave up app 1% as 10 year yields held above 3%.
The Dax fell below the 14400 over night and is trading at 14365 at the moment, German 10 Year Yields are 1.36% and the Italian at 3.50.
The USD Index is fairly calm and remains at 102.50 but while EURUSD and GBPUSD can rise to 1.0720 and 1.2525, USDJPY rose to near 134 and traded as high as 134.55. The Turkish Lira continues to fall and is currently at 17.20 lira per USD.
Gold and Silver are little changed again at 1855 and 22.10, Bitcoin holds at 30300.
Chinese Exports massively exceeded expectations at 16.9% vs an expected 8%.
Credit Suisse was one of the most interesting shares yesterday , initially falling app 6% on a likely Q2 loss, after “inside paradeplatz” reported State Street is looking to take over the company, it rose to close 3.8% higher.
Intel announced a hiring freeze in the PC Chip division according to a memo as part of a series of cost-cutting measures
The SEC announced it will change regulation to regulate the handling of retail order flow, affecting the current setup of retail brokers like Robin hood and E*Trade.
Overall we seem to be in a holding pattern ahead of key releases, the ECB today, US CPI tomorrow and the US Rate decision next week Wednesday.
Consider Options for speculative bets to limit your risk.
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As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
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