Still a long way to go for central banks?

• Global market indices
• Currencies
• Cryptocurrencies
• Fixed Income
• Commodity sector news
• Key data to move markets this week
• Global macro updates

US Stock Indices 

Nasdaq 100 +4.29% MTD and +35.89% YTD 
Dow Jones Industrial Average +3.48% MTD and +2.74% YTD 
NYSE +5.17% MTD and +3.11% YTD 
S&P 500 +5.00% MTD and +14.30% YTD 

The Nasdaq 100 and the S&P 500 Index experienced a three-day losing streak this week, the longest since early May as a more hawkish tone emerged from various Fed policymakers. Tech stocks were hit particularly hard as higher rates reduce the appeal of companies that promise long-term growth.

Mega caps: This week was a poor week for some mega caps with Alphabet, Amazon, Apple, and Microsoft all down while Meta Platforms was relatively flat. Only Nvidia, and Tesla are slightly up this week.

On Wednesday the US Federal Trade Commission (FTC) sued Amazon in federal court in Seattle, alleging that the company has "knowingly duped millions of consumers into unknowingly enrolling in Amazon Prime." In a statement, Amazon called the FTC's claims "false on the facts and the law." The FTC accused Amazon of using "manipulative, coercive or deceptive user-interface designs known as 'dark patterns' to trick consumers into enrolling in automatically renewing Prime subscriptions.” Amazon said, "The truth is that customers love Prime, and by design we make it clear and simple for customers to both sign up for or cancel their Prime membership." The lawsuit said that under substantial pressure from the FTC, Amazon changed its cancellation process in April but that "violations are ongoing" and that it still "requires five clicks on desktop and six on mobile for consumers to cancel from Amazon.com."

Energy stocks had a mixed week as questions remain on how rising rates will impact global energy demand and if China will implement further stimulus by either more rate cuts or other policy measures. Apa Corp (US), ConocoPhillips, Chevron, Marathon Petroleum, Phillips 66, Occidental Petroleum, and Energy Fuels were all down. However, Shell remains up this week following on from its decision to raise the dividend per share.

Materials and Mining stocks were mixed again this week as a weakening USD helped some metals such as Zinc and Copper. Albemarle Corporation, Mosaic, and Newmont Mining are largely flat, CF Industries Holdings, Yara International and Nucor Corporation are up, while Freeport-McMoran, DuPont de Nemours Inc. and Sibanye Stillwater are down.

Yara International reported that Lars Røsæg, currently Deputy CEO and EVP Corporate Development, will leave Yara to take up a new position as investment partner in the Norwegian firm Salvesen & Thams.

European Stock Indices 

Stoxx 600 +1,16% MTD and +7.56% YTD 
DAX +2.29% MTD and +15.08% YTD 
CAC 40 +2.29% MTD and +12.16% YTD 
IBEX 35 +4.27% MTD and +14.62% YTD 
FTSE MIB +5.98% MTD and +15.46% YTD
FTSE 100 +1.52% MTD and +1.44% YTD 

Other Global Stock Indices 

MSCI World Index +5.04% MTD and +12.16% YTD
Hang Seng +5.40% MTD and -2.85% YTD

Currencies

The USD weakened this week as investors seemed to have pushed the Fed’s hawkish stance aside. The GBP is +5.55% YTD against the USD with Sterling rising to its highest level against the dollar since April 2022 . The EUR is +2.64% YTD against the USD on the expectation that the ECB will continue to raise rates in July and reach a terminal rate of 4% in December.

Cryptocurrencies

Bitcoin +10.44% MTD and +80.53% YTD
Ethereum +0.55% MTD and +56.55% YTD

Bitcoin continues to rally as it rose above $30,000 on Wednesday for the first time since April, boosted by the world’s biggest asset manager, BlackRock, announcing plans to create a bitcoin exchange-traded fund (ETF).

Fixed Income

US 10-year yield to 3.72%.
German 10-year yield to 2.43%.
UK 10-year yield to 4.40%.

Bond yields ticked higher this week as key central banks continue to express the need to maintain tight monetary policy, with shorter dated bond yields rising the most since March in Europe. The closely watched gap between Italian and German 10-year yields has also risen this week to 163 bps. Last week it hit its tightest level since 1 April, below 150 bps. This may raise concerns for the ECB and the EU as negotiations and clashes over changing fiscal rules in the Stability and Growth Pact are still taking place.

Commodities

Gold futures to $1,944.80 an ounce.
Silver futures to $22.91 per ounce.
West Texas Intermediate crude to $72.53 a barrel.
Brent crude to $77.00 a barrel.

Gold is down almost 7% since early May due to rising yields as the Fed looks to continue to increase rates at least twice with rates likely to stay higher for longer and technical selling pressures.

Oil had a difficult week amid demand fears after the Fed Chair Powell suggested further interest rate hikes and lower than expected Chinese interest rate cuts.

Note: As of 5 pm EDT 21 June 2023

Key data to move markets this week

EUROPE 

Thursday: Eurozone Consumer Confidence and a speech by Bundesbank President Joachim Nagel.
Friday: German HCOB Composite, Manufacturing, and Services PMIs, Eurozone HCOB Composite, Manufacturing, and Services PMIs, and a speech by ECB Executive Board member Fabio Panetta.
Saturday: A speech by ECB Executive Board member Isabel Schnabel.
Monday: German IFO Business Climate, Current Assessment and Expectations surveys.
Wednesday: German Gfk Consumer Confidence.
Thursday: EU leaders summit, ECB Economic Bulletin, Eurozone Business Climate and Consumer Confidence surveys, and German Harmonized Index of Consumer Prices.

UK

Thursday: Bank of England Interest Rate Decision, Bank of England Monetary Policy Summary, Bank of England minutes, and GfK Consumer Confidence.
Friday: Retail Sales, S&P Global/CIPS Composite, Manufacturing, and Services PMIs.
Wednesday: A speech by BoE Chief Economist Huw Pill and BoE Quarterly Bulletin.
Thursday: A speech by BoE MPC member Silvana Tenreyro.

US

Thursday: Speeches by Fed Board of Governor’s members Christopher Waller and Michelle Bowman, Fed Chair Jerome Powell’s testimony to the Senate Banking Committee, a speech by Cleveland Fed President Loretta Mester, a speech by Richmond Fed President Thomas Barkin, Chicago Fed National Activity Index, Initial jobless claims, and Continuing jobless claims.
Friday: Speeches by St. Louis Fed President James Bullard, Atlanta Fed President Raphael Bostic, and Cleveland Fed President Loretta Mester, S&P Global Composite, Manufacturing, and Services PMIs.
Sunday: A speech by New York Fed President John Williams.
Tuesday: Durable Goods Orders, Nondefense Capital Goods Orders, Housing Price Index, S&P/Case-Shiller Home Price Indices, Consumer Confidence, and New Home Sales.
Wednesday: Bank Stress Test Info.
Thursday: GDP, Initial jobless claims, Continuing jobless claims, Core Personal Consumption Expenditures, Personal Consumption Expenditures Prices, Pending Home Sales.

Global Macro Updates

The Fed isn’t done. In a hearing before the House Financial Services Committee, Chair Jerome Powell said he would not characterise the Fed's decision last week to hold interest rates steady as a "pause," and noted that a majority of policymakers see two more quarter-point rate increases as likely by the end of the year as “inflation pressures continue to run high, and the process of getting inflation back down to 2 per cent has a long way to go.” He said that skipping a rate rise in June was prudent given that the “full effects of monetary restraint” take time to be realised. He also noted that the tightening in credit standards following the collapse of SVB and others could still cause problems for the economy. He differentiated between the level of rate raises and the speed of those rises. “Earlier in the process, speed was very important. It is not very important now,” he said. This focus on level over speed was supported by Atlanta Fed President Raphael Bostic stating that "if we simply press on with additional rate hikes, we could needlessly drain too much momentum from the economy."

The BoE’s inflation bumble. In a 7-2 vote, the Bank of England raised rates by 50 basis points today to 5%. It said that although inflation is expected to fall significantly this year due to falling energy prices, the second round effects on domestic wages and prices are likely to take longer to unwind. The Bank noted in its  statement that gilt yields have risen materially, particularly at shorter maturities, now suggesting a path for Bank Rate that averages around 5.5%, that mortgage rates have also risen notably and that the sterling effective exchange rate has appreciated further. It also noted that the unemployment rate has been flat at 3.8% and that despite the vacancies-to-unemployment ratio falling, it remains significantly elevated. The BoE retained its previous guidance on future policy, which stated that if there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required. The 50 bps rate rise took many analysts by surprise due to concerns over rising mortgage rates and the “ticking time bomb” this becomes as fixed rate deals come to an end and the impact this may have on consumer spending. The MPC justified the rise saying, “There has been significant upside news in recent data that indicates more persistence in the inflation process.” Although the UK economy has proven to be more resilient than expected at the beginning of this year, with the BoE forecasting growth of 0.25% this year, the danger is that the BoE may unintentionally create a recession due to the lagged effect of rate rises.

Europe’s wage pressures mean higher rates for longer. Bundesbank President Joachim Nagel told a conference on Wednesday that "price growth could come down quickly in the coming months and that may raise pressure on the ECB to stop tightening but lower headline inflation could mask underlying pressures, so it won't necessarily mean that the job is done.” Bank of France Governor Francois Villeroy de Galhau emphasised the duration of high rates over further hikes, which would be "limited," in any case. "What matters is how long we remain at the terminal rate rather than its level," Villeroy told French newspaper Les Echos on Wednesday. Markets have fully priced in a July rate hike and have also priced in another move in September or even October, putting the rate peak at 4%. ECB board member Isabel Schnabel, a noted hawk, warned that price growth could remain stubborn due to a tight labour market, with the vacancy to unemployment ratio at a historical high, helping to enforce a wage-inflation spiral.

Bitcoin’s popularity contest. As noted by Bloomberg news, BlackRock Inc.’s surprise filing for a US spot Bitcoin exchange-traded fund last week, despite it having Coinbase, now being sued by the SEC, as its crypto custody partner, has led to other financial service companies’ applications. On Tuesday, Invesco Ltd. renewed its application for the physically-backed Invesco Galaxy Bitcoin ETF within hours of WisdomTree’s filing with the Securities and Exchange Commission for the WisdomTree Bitcoin Trust. This seems to indicate that there may be a slight fading of reputational risk associated with conducting crypto business despite the still existing regulatory uncertainties caused by the SEC lawsuits. 

Also on Tuesday, new crypto exchange EDX Markets, backed by Charles Schwab, Fidelity Digital Assets and Citadel Securities, announced that it has been live for several weeks trading bitcoin and ether.

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