ALL EYES ON FED

The upcoming week is filled with another round of Fed speak and a plethora of economic releases, with many traders focusing on consumer data points.

On Tuesday, the Conference Board’s Consumer Confidence reading is expected to soften from 121.7 to 119.3. The Friday release of personal income and spending will show dramatic drops as the stimulus impact wanes.

Traders will pay close attention to EU leaders summit meeting on Monday, which will include strategy over reaching the EU’s 2030 target of reducing greenhouse emissions, Brexit, and Russia.

Here are the key market moving factors for the week:

The US

• As the US recovery accelerates, concerns are growing that worker shortage problems could derail the swift labor market recovery that has been mostly priced in. Delays in getting infrastructure spending done is also starting to weigh on the outlook.
• President Joseph Biden will likely have to abandon bipartisan negotiations, but if he waits too long, the cyclical rotation trade could see a little more of an unwind.
• Fed speak will come from Brainard, Mester, Bostic, George, and Quarles. Investors will be fixated on each members’ timeline for considering a tapering of asset purchases.

EUROPE

• European Council leaders will hold a summit in Brussels on Monday and Tuesday. In this special session, the leaders will discuss how to achieve the EU’s 2030 target of cutting greenhouse emissions. Other topics include the COVID pandemic, the U.K., and Russia.
• On Tuesday, the focus will be German data. The German economy is expected to contract in Q1, with a consensus of -1.7% (QoQ) and -3.0% (YoY).
• On Wednesday, France releases manufacturing confidence and consumer confidence.
• ECB Governing Council member Francois Villeroy de Galhau speaks at the French National Assembly finance committee. ECB Vice President Luis de Guindos speaks at a virtual conference on the topic of financial integration.
• EU agriculture ministers hold a two-day meeting in Brussels to discuss a reform of farm subsidies in the EU, agri-food techniques, and organic farming.
• On Thursday, Germany releases GfK consumer confidence which should modestly improve from -8.8 to -5.2.
• ECB Executive board member Isabel Schnabel speaks at the Forum New Economy about a new mandate for central banks. The Institute of International Finance live-streams its IIF European Summit, titled “The Role of Financial Services in a Sustainable, Innovative and Resilient Europe.”

The UK

• The UK has been on a steady path to recovery, with the economy reopening. However, the next reopening phase set for Jun. 21 could be endangered by a new COVID strain, with hotspots at London’s Heathrow airport and several other locations.
• This new strain has more than doubled in the UK in just one week.
• On Tuesday, the UK releases public sector net borrowing (ex-banking groups), which should increase slightly from GBP 28 billion to GBP 32 billion.
• BOE policymaker Silvana Tenreyro presents a lecture at the Latin America Center in Oxford, titled “Economic Challenges from the Pandemic”.
• On Wednesday, BOE policymaker Gertjan Vlieghe gives a speech at the University of Bath, on the topic “What government bond yields can tell us about future growth and inflation.”
• On Friday, U.K. Chancellor Rishi Sunak hosts a virtual meeting of G-7 finance ministers and central bank governors ahead of the in-person gathering in June.

JAPAN

• Japan adds more provinces to its COVID-19 states of emergency, a theme we are now seeing recurring all over Asia. The elephant in the room is the Olympics with a final decision on go, or no go expected later in June. A strong short-term negative for Japan markets if cancelled.

AUSTRALIA & NZ

• No significant data from Australia. New Zealand sees the RBNZ announce its latest rate decision on Wednesday. No change is expected but as usual, it will be the wording of the statement that matters.
• Markets will be looking for hints of potential QE tapering given the strength of the NZ recovery. That could send NZD sharply higher.

CHINA

• China releases Industrial Profits on Wednesday but it is unlikely to be market moving unless it diverges massively to the downside.
• The week is a slow one data wise meaning that Mainland markets are likely to move in sync with US markets, unless some unexpected local headline risk is introduced. That is likely to be in the shape of more technology clampdowns/fines, or more noise about “speculation” in the commodity space.
• China’s “national team” continues to appear on the bid the moment equity markets start looking soft. A sudden drop in equity markets could occur if they suddenly make themselves scarce.

Market Overview:

Gold

• Big bets continue to pile into gold as Treasury yields have been mostly anchored. A laundry list of items have turned bullish for gold: central bank buying remains healthy, ETF selling has ended, Chinese demand has picked up, Wall Street has resumed betting against the dollar, growing inflation hedges, and portfolio diversification.

Oil

• Crude prices are respecting a relatively tight trading range that has been in place since February. Bullish momentum from an optimistic crude demand outlook for the second half year has been exhausted and now prices are drifting lower on expectations Iranian crude output is about to steadily increase once sanctions are lifted.

Below are the major market moving events for the week:

All times listed are EDT

Monday

Germany, Switzerland and Canada: markets all closed for holidays.

Tuesday

2:00: Germany – GDP: expected to remain flat at -1.7%.

4:00: Germany – Ifo Business Climate: seen to rise to 98.1 from 96.8.

10:00: US – CB Consumer Confidence: forecast to dip to 119.0 from 121.7.

10:00: US – New Home Sales: to slip to 975K from 1,021K.

22:00: New Zealand – RBNZ Interest Rate Decision: anticipated to remain at 0.25%.

Wednesday

10:30: US – Crude Oil Inventories: previously came in at 1.321M Bbls.

Thursday

8:30: US – Core Durable Goods Orders: predicted to plummet to 0.7% from 2.3%.

8:30: US – GDP: expected to edge up to 6.5% from 6.4% QoQ.

8:30: US – Initial Jobless Claims: predicted to dip again this coming week, to 425K from 444K.

10:00: US – Pending Home Sales: seen to decline to 1.1% from 1.9%.

Friday

8:30: US – PCE Price Index: referred to by some as the Fed’s preferred inflation indicator, expected to drop to 0.2% from 0.5%.

Based on the above factors and the events lined up for the week, the analyst at RvR Ventures suggests you to Trade responsibly; invest only as much as you can lose. All the profits and losses due to the above data are your own personal responsibility. Kindly practice money management & risk mitigation while trading.

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