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Rise and shine everyone
In a surprise turn of events yesterday, the Fed decided to raise their forecast for interest rates by 0.5% to 5.6% by the end of the year. While we didn’t get a hike yesterday, this leave the door open for two further hikes by the Fed.
They also revised their Inflation estimates upwards with core inflation from 3.6% to 3.9%, GDP growth estimates from 0.4% to 1% and Unemployment Rate from 4.5% to 4.1%. The Fed clearly sees the economy remaining resilient enough for them to hike further to conquer sticky core inflation.
The market responded negatively to the statement but Chair Powell didn’t come out very hawkish in his press conference and the market closed higher.
US Equity Futures are now trading lower with rates, the US Dollar and Oil trading marginally higher. Gold and Bitcoin are trading lower. The Yield Curve inverted further to -0.91%.
The big news for today is the ECB’s rate decision at 8:15am ET. There’s not much surprise there as the ECB is set to hike 25 bps and continue hiking in upcoming meetings. We also have US Retail Sales numbers at 8:30am.
Kroger reports before market open and Adobe reports after market close.
Asia and Australia
Asia equities ended mixed Thursday as China economic data and rate cuts, blended together with a 'hawkish pause' by the Fed.
Hang Seng led China markets higher as consumer and property stocks outperformed on hope of fresh stimulus, mainland markets led by cyclicals as overseas net fund inflow surged to highest since February.
In Thursday's MLF operation, PBOC cut the 1-year rate 10 bp to 2.65%, matching expectations, while rolling over CNY237B vs CNY200B in maturing loans.
China activity data confirms softening momentum. Industrial production rose 3.5% y/y in May, in line with expectations, following 5.6% in the previous month.
Australia employment rebounds strongly, jobless rate unexpectedly declines. Headline employment rose 75.9K m/m in May, above consensus 17.5K, rebounding from 4.3K decline in the previous month.
Europe, Middle East, Africa
European equity markets mixed.
UK Long-dated Gilts remain under pressure, with 10-year down for third session, leaving yield close to 4.5%.
Despite benign inflation dynamics, Pantheon Macroeconomics suggest there is risk of deeper Eurozone downturn.
The BoE will hold an external-led review into its economic forecasts after facing criticism for failing to anticipate the rise and persistence of inflation.
The Americas
Bond traders raise continue to bet Fed will steer US economy into recession
CAVA Group (NYSE) prices 14.44 mln share IPO at $22.00 per share, above the revised expected range of $19.00-20.00
Alphabet introduces new AI shopping feature
The second largest homebuilder, Lennar, reported last night. They delivered a huge beat. Lennars Q2 EPS $2.94 vs $2.32 FactSet Consensus; revenuess $8 bln vs $7.21 bln FactSet Consensus. Announced deliveries of 17,074 above its guidance; sharply raises FY23 deliveries guidance. Up 2.8% in the pre-market. With housing market inventory remaining tight, orders are starting to pick up.
Calendars
(news taken from Reuters, FT, Bloomberg; Calendar from Benzinga Pro)
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