All eyes were on the US Federal reserve coming into this week. Before Wednesday’s announcement US manufacturing data missed expectations, rates remained benign and key commodity prices outside of oil continued to fade further from the recent spike highs. That had many predicting the Fed would take up their forecasts for growth, inflation and rates in the quarterly SEP projections, which it did. Chairman Powell did stress what he still saw as the transitory nature of much of the current inflation push and reiterated the Fed dot plot should not be construed as a forecast and taken with a large grain of salt. Regardless, the median FOMC projection pulled forward two rate hikes into 2023 inducing a hawkish surprise for global markets. Stocks came under pressure along with gold and the US dollar rallied. Growth stocks came back into favor relative the value and banks in particular. Rates initially popped but the long end of the US Treasury curve quickly turned lower as traders put on flatteners in response the belief that Fed officials would not let inflation run away from them. On Friday the S&P tested the 50-day moving average for the first time in roughly a month. St. Louis Fed’s Bullard underscored Wednesday’s FOMC signal when he emphasized the hawkish shift was necessary given recent data, while also noting he currently expected the first Fed rate hike in late 2022. For the week, the S&P lost 1.9%, the DJIA fell 3.5%, and the Nasdaq slipped 0.3%.
In corporate news this week, the European Union and the United States confirmed plans to extend tariff suspensions on aircraft for five years, putting a hold on the long-running dispute between Boeing and Airbus. Bank of America CEO Moynihan said his firm is seeing consumers credit/debit card spending up 20% v 2019 year to date, while JPMorgan CEO Dimon said his bank is prepared for higher rates and more inflation, as they also see card spending running up 20% versus 2019.
GM raised its planned spend on electric cars, saying it will boost EV and AV investments to $35B through 2025, up from its $27B prior investment, along with adding two more battery factories in the US. Ford raised its Q2 earnings guidance, citing improvement in its automotive business since April, driven by lower-than-anticipated costs and favorable market factors, despite the chip shortage running into next year. Another arrow was added to the quiver in the battle against COVID-19 as the Novavax vaccine was shown to be safe and effective in a US clinical trial. CureVac shares, however, plunged after reporting a disappointing 47% efficacy results for its COVID-19 vaccine candidate. Oracle shares dipped after coming up short on its Q1 earnings outlook, and the software giant said it planned to double cloud capex in 2022 in an effort to boost market share.
SUN 6/13 BTC/USD Tesla's Musk: Tesla only sold ~10% of holdings to confirm BTC could be liquidated easily without moving market. When there’s confirmation of reasonable (~50%) clean energy usage by miners with positive future trend, Tesla will resume allowing Bitcoin transactions." - tweet
MON 6/14 (AT) ECB's Holzmann (Austria): ECB is not in a dangerous zone but inflation concerns are rising NVAX COVID-19 vaccine demonstrates 90% overall efficacy and 100% protection against moderate and severe disease in PREVENT-19 Phase 3 trial; Intends to file for regulatory approvals in Q3 2021 BAC CEO Moynihan: seeing our consumers credit/debit card spending up 20% v 2019 YTD - CNBC (US) May NY Fed Survey of Consumer Expectations: Median year-ahead inflation expectations rise to 4.0% from 3.4% prior month (seventh consecutive monthly increase and a new series high) JPM CEO: JPMorgan is prepared for higher rates and more inflation; card spending running +20% v 2019 - MS conf comments (UK) PM Johnson: confirms pushes back full reopening of UK by four weeks to July 19th; we are concerned about the Delta COVID variant
TUES 6/15 (EU) EU and US resolve Boeing/Airbus 17-year trade tariffs dispute (as speculated) - press (EU) EU, US confirm to extend tariff suspension on aircrafts by 5 years *(US) JUN EMPIRE MANUFACTURING: 17.4 V 22.7E *(US) MAY PPI FINAL DEMAND M/M: 0.8% V 0.5%E; Y/Y: 6.6% V 6.2%E *(US) MAY ADVANCE RETAIL SALES M/M: -1.3% V -0.8%E; RETAIL SALES (EX-AUTO) M/M: -0.7% V 0.4%E *(US) JUN NAHB HOUSING MARKET INDEX: 81 V 83E (NZ) Fonterra Global Dairy Trade Auction Dairy Trade price index: -1.3% v -0.9% prior (US) Atlanta Fed GDPNow raises Q2 GDP forecast to 10.5% from 9.3% (US) TREASURY $24B 20-YEAR BOND REOPENING DRAWS 2.120%, BID-TO-COVER 2.40 v 2.42 PRIOR ORCL Reports Q4 $1.54 v $1.31e, Rev $11.2B v $11.1Be (US) FTC confirms big tech critic Lina Khan sworn in as the Chair of the agency
WED 6/16 *(CN) CHINA NATIONAL RESERVE ADMIN (SRB): WILL RELEASE RESERVES OF COPPER ALUMINIUM AND ZINC IN NEAR TERM *(UK) MAY CPI M/M: 0.6% V 0.3%E; Y/Y: 2.1% V 1.8%E (first time above the BOE target level since July 2019) *(US) MAY HOUSING STARTS: 1.572M V 1.630ME; BUILDING PERMITS: 1.68M V 1.730ME NUE Reports prelim Q2 $4.60-4.70 v $4.49e; Believes that these strong market conditions will continue in Q3 GM Confirms to boost EV and AV Investments to $35 Billion through 2025 up from $27B prior investment; raises H1 adj EBIT $8.5-9.5B (prior to be significantly better then prior outlook) *(US) DOE CRUDE: -7.4M V -3ME; GASOLINE: +2.0M V -1ME; DISTILLATE: -1.0M V 0ME (US) House Antitrust Chair Cicilline (D-RI): Antitrust legislation would ban Apple from pre-installing apps *(US) FOMC LEAVES TARGET RANGE UNCHANGED BETWEEN 0.00-0.25% (AS EXPECTED); IOER RAISED TO 0.15% V 0.10%E; MOVES UP TIMETABLE FOR POTENTIAL HIKES TO 2023; FOMC PROJECTIONS SHOW TWO HIKES BY END OF 2023 (US) Fed Chair Powell: Possibility inflation could turn out to be higher and more persistent than we expect; Bottleneck effects have been larger than anticipated - post rate decision press conference WLTW US antitrust regulators file suit to block Aon's $30B deal for Willis Towers Watson - press (US) SEC seeks further comment on VanEck's bitcoin ETF, postponing decision on whether to approve it - press LEN Reports Q2 $2.95 v $2.34e, Rev $6.43B v $6.16Be CVAC Provides update on Phase 2b/3 Trial of first-generation COVID-19 vaccine candidate, CVnCoV; Interim efficacy 47%, statistical success criteria not met at second interim analysis; study progressing to final analysis within the next few weeks
THURS 6/17 *(NO) NORWAY CENTRAL BANK (NORGES) LEAVES DEPOSIT RATES UNCHANGED AT 0.00%; AS EXPECTED; raises rate path outlook (NO) Norway Central Bank (Norges) Gov Olsen: could raise rates twice in 2021 - post rate decision press conference *(EU) EURO ZONE MAY FINAL CPI Y/Y: 2.0% V 2.0%E; CPI CORE Y/Y: 1.0% V 0.9%E F Raises Q2 adj EBIT 'significantly better' y/y and exceed expectations, citing improvement in automotive business since April is being driven by lower-than-anticipated costs and favorable market factors *(US) INITIAL JOBLESS CLAIMS: 412K V 360KE; CONTINUING CLAIMS: 3.52M V 3.43ME *(US) JUN PHILADELPHIA FED BUSINESS OUTLOOK: 30.7 V 31.0E DELL DISH and Dell Technologies to partner to build the nation's first Open RAN 5G Edge infrastructure ADBE Reports Q2 $3.03 v $2.81e, Rev $3.84B v $3.73Be
FRI 6/18 (JP) BOJ Gov Kuroda: Corporate financing likely to remain under stress; will take a while for pandemic to subside - post rate decision press conference (RU) Moscow city reports 9,056 new COVID cases (highest since pandemic began) (US) Fed’s Bullard (non-voter, hawk): acknowledges FOMC has been surprised to the upside over last 6 months; natural that Fed has tilted a little bit more hawkish here (US) New York Fed Nowcast: cuts Q2 forecast to 3.7% from 4.2%; cuts Q3 forecast to 4.4% from 5.3%