Rate angst creeps back; yuan, yen weaken anew
A look at the day ahead in U.S. and global markets from Mike Dolan
In a year supposedly filled with central bank interest rate cuts around the world, the prospect of another G10 policy tightening amid fresh strains of stubborn inflation is just a bit jarring.
With U.S. markets anxiously awaiting Friday's update on the Federal Reserve's favored PCE inflation gauge, Australia's dollar AUD= jumped 0.5% overnight after inflation there unexpectedly accelerated to a six-month high of 4% in May with core price up for a fourth month.
The surprise unnerved money markets and saw futures shift the chances of another Reserve Bank tightening this year to 60% from next to zero prior to the report. Deutsche Bank's economists, for example, quickly shifted their call to see an RBA hike to 4.6% as soon as its next meeting in August.
An Aussie outlier perhaps? Along with Japan, another rate rise would make Australia only the second G10 central bank to lift borrowing costs this year - with the Euro zone, Switzerland, Sweden and Canada all having headed the other direction.
But Canada too had a sobering inflation update on Tuesday.
Consumer price growth there took an unexpected turn and picked up pace to 2.9% in May - stalling what had been pretty consistent disinflation process since start of the year and forcing markets to cut back hopes of another Bank of Canada rate cut next month to below 50%.
With a mixed bag of U.S. economic updates this week, the overseas price picture may feed greater caution ahead of PCE release.
Well-known Fed hawk Michelle Bowman said holding U.S. policy rates steady "for some time" should be enough to bring inflation under control but the Fed governor also repeated her willingness to raise borrowing costs again if needed.
Although Bowman's view probably doesn't represent consensus Fed thinking, it's still an uncomfortable contrast with the near two rate cuts still priced into the futures curve.
And Treasury yields US10YT=RR have started to nudge higher again in another week of heavy debt sales. Treasury has scheduled $183 billion in coupon debt to be auctioned this week, split between the two-year notes and five- and seven-year notes to be sold on Wednesday and Thursday.
So far, the paper has sold with ease. Some $69 billion of 2-year notes were snapped up on Tuesday at a high yield of 4.706% - about 5 basis points below where they were trading at the close of bidding.
Briefly befre the auction, the 2-to-10 year yield curve hit minus 52bps - its most inverted of the year.
And, Aussie aside, the picture has generally boosted the dollar .DXY - not least against Asia's ailing currency giants the yuan CNH= and the yen JPY=.
China's offshore yuan weakened to a fresh seven-month and has now lost almost 3% since the start of the year. Dollar/yen, meantime, nudged further into what traders consider intervention territory as it topped 160 for the first time since the Bank of Japan last stepped in April.
Back on Wall Street, the S&P500 .SPX and Nasdaq .IXIC recovered ground on Tuesday - helped by a near 7% bounceback in AI heavyweight Nvidia NVDA.O following its slightly puzzling peak-to-trough swoon of near 20% from record highs over the past week as the midyear point in 2024 nears.
Stock futures were higher before Wednesday's bell.
Transport giant FedEx FDX.N rallied 15% in out-of-hours trading overnight as it forecast 2025 profit above analysts' estimates and said it expected planned cost reductions to deliver margin gains.
Banking stocks were steady, with the big U.S. lenders expected to show ample capital to weather any renewed turmoil as the Fed releases annual health checks later on Wednesday.
The central bank will publish the results of its bank "stress tests", which assess how much cash lenders would need to withstand a severe economic downturn and how much they can return to investors via dividends and share buybacks.
Key developments that should provide more direction to U.S. markets later on Wednesday:
* US May new home sales
* Federal Reserve releases latest U.S. bank stress tests
* European Central Bank chief economist Philip Lane speaks
* French President Emmanuel Macron meets with Hungarian Prime Minister Viktor Orban at the Elysee Palace in Paris
* US Treasury sells $70 billion of 5-year notes, 2-year FRNs
* US corporate earnings: Micron Technology, Paychex, General Mills
Aussie dollar jumps after strong inflation print https://reut.rs/3zcpogc
Canada's inflation rises in May, clouds July rate cut chances https://reut.rs/49Y9pjw
US 'Case Shiller' house price index and mortgage rates https://reut.rs/3xESQuQ
"Better off" now versus then? https://reut.rs/4biNd3w
UK FDI, the pound and a change of government https://tmsnrt.rs/4bgBySB
By Mike Dolan; Editing by Bernadette Baummike.dolan@thomsonreuters.com
Mga Kaugnay na Asset
Pinakabagong Balita
Disclaimer: Ang mga kabilang sa XM Group ay nagbibigay lang ng serbisyo sa pagpapatupad at pag-access sa aming Online Trading Facility, kung saan pinapahintulutan nito ang pagtingin at/o paggamit sa nilalaman na makikita sa website o sa pamamagitan nito, at walang layuning palitan o palawigin ito, at hindi din ito papalitan o papalawigin. Ang naturang pag-access at paggamit ay palaging alinsunod sa: (i) Mga Tuntunin at Kundisyon; (ii) Mga Babala sa Risk; at (iii) Kabuuang Disclaimer. Kaya naman ang naturang nilalaman ay ituturing na pangkalahatang impormasyon lamang. Mangyaring isaalang-alang na ang mga nilalaman ng aming Online Trading Facility ay hindi paglikom, o alok, para magsagawa ng anumang transaksyon sa mga pinansyal na market. Ang pag-trade sa alinmang pinansyal na market ay nagtataglay ng mataas na lebel ng risk sa iyong kapital.
Lahat ng materyales na nakalathala sa aming Online Trading Facility ay nakalaan para sa layuning edukasyonal/pang-impormasyon lamang at hindi naglalaman – at hindi dapat ituring bilang naglalaman – ng payo at rekomendasyon na pangpinansyal, tungkol sa buwis sa pag-i-invest, o pang-trade, o tala ng aming presyo sa pag-trade, o alok para sa, o paglikom ng, transaksyon sa alinmang pinansyal na instrument o hindi ginustong pinansyal na promosyon.
Sa anumang nilalaman na galing sa ikatlong partido, pati na ang mga nilalaman na inihanda ng XM, ang mga naturang opinyon, balita, pananaliksik, pag-analisa, presyo, ibang impormasyon o link sa ibang mga site na makikita sa website na ito ay ibibigay tulad ng nandoon, bilang pangkalahatang komentaryo sa market at hindi ito nagtataglay ng payo sa pag-i-invest. Kung ang alinmang nilalaman nito ay itinuring bilang pananaliksik sa pag-i-invest, kailangan mong isaalang-alang at tanggapin na hindi ito inilaan at inihanda alinsunod sa mga legal na pangangailangan na idinisenyo para maisulong ang pagsasarili ng pananaliksik sa pag-i-invest, at dahil dito ituturing ito na komunikasyon sa marketing sa ilalim ng mga kaugnay na batas at regulasyon. Mangyaring siguruhin na nabasa at naintindihan mo ang aming Notipikasyon sa Hindi Independyenteng Pananaliksik sa Pag-i-invest at Babala sa Risk na may kinalaman sa impormasyong nakalagay sa itaas, na maa-access dito.
