I hope you enjoyed your weekend. Friday’s reports revealed another surprisingly strong round of CPI gains in May, again led by used car prices and airfare, leaving a steep climb in the y/y metrics that go well beyond the lift initially expected from “base effects.” We also saw an initial claim decline of -9k alongside a steep drop in continuing claims (-258k) that was welcomed and broke the pattern for disappointments with the continuing claims figures.
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Key Market Trends
Tip: This can be used as a guide to the short-term direction for key markets. A client of mine would call me almost daily to ask about the direction the markets were going. Here is a quick cheat sheet Knowing the market trend will help you understand what’s happening in the short-term.
|S&P 500||4247.45||0.19%||8.26||4248.38||4232.25||Strong Bull|
|Crude oil (WTI).||71.229||0.62%||0.442||71.673||70.64||Bull|
|US Dollar Index||90.469||−0.04%||−0.040||90.601||90.433||Neutral|
The Week Ahead What is the Agenda for Tapering?
TIP – This is a 1-minute brief bullet-point summary. This tool gives investors and financial professionals a quick and simple list on what to look out for, and the main talking points of the week.
- Bonds rally as Fed tapering concerns ease, ECB maintains status quo
- FOMC to start taper talks with a tolerant stance
- BoJ may extend the covid aid program, if policy is not changed.
- Taiwan and Indonesia see rates remaining unchanged at 1.125%, and 3.50%
- Australia: RBA minutes, Governor Lowe speech, employment data; NZ GDP
- U.S. Data includes retail sales data, production data, PMIs (and housing starts), and housing start data
- CPI highlights Canada’s slate along with housing start-ups and existing home sales
- Eurozone CPI, production, current account; German HICP, PPI due
- UK Retail Sales, BoE Lending Data, Money Supply and UK CPI are awaited
- SNB to maintain policy as long as inflation is below target
The dollar remains firm In comparison to other currencies, the DXY narrow-weighted trade index measures a trading range that is typically small in the early weeks. This range is within a whisker’s distance of a month highs. The 10-year U.S. Treasury rate is also trading just a few basis point above the three-month lows of last week, under 1.430%.
There has been a steady drop in the USD, but equities are at new highs. The 1 day chart above shows the USD compared to the S&P 500. The trend is expected to continue. It’s just consolidating now.
Recap: The benchmark yield Last week, the CPI dropped by 15 basis points despite the fact that it was higher than expected in May at 5.0% y/y. This is a record high for 13 years. The price movement was basically a capitulation from laggard bears of bonds in the face the dominant Fed view that inflation is transitory due to y/y statistics base effects and reopening supply bottlenecks.
This background intensifies The FOMC’s announcement on Wednesday is the main focus for markets this week. This background intensifies the focus on this week’s FOMC announcement which will be held on Wednesday. We expect Powell to emphasize that there won’t be any policy changes imminently. For some time to come, a wait and see attitude should be adopted since the criteria for “substantial further progress” Data has been too noisy and cluttered for officials to see clearly.
BEAR Alert We are concerned that Covid Delta could cause another shutdown. This variant has caused major problems in India, and is now spreading rapidly. We learned this weekend that China has shut down areas again in an attempt to contain the virus. The Pfizer vaccine is effective against it.
You can find out more about this by clicking here. “Red” We think that areas controlled by Democrats like California and NY, which are Democrat-controlled, could be affected. I live near Florida and have seen the effects of hurricanes. “back to business” For several months. Every person I talked to was against a shut down. Media will probably hype up the fear, and we’ll see a dip in markets. The variant has not yet been tested to determine if it will pose a serious risk.
The FOMC is the main focus of attention in the US, although a busy data schedule will also be of interest. Markets will also be watching the BoJ, where they are alert to an expansion of Covid’s aid program.
Bank of Taiwan, Bank of Indonesia, and SNB are also expected to be on hold. Chinese activity should slow the robust recovery. The ECB’s steady stance, and commitment to continue its efforts in Europe has made it impossible for the ECB to be a factor. “significantly higher” While data from PEPPs is mostly retroactive, it won’t have an impact on policy.
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