Central bank developments, particularly the FOMC statement, kept the spotlight on most traders most days of the week.
Downbeat data from China also grabbed some attention, raising expectations for more stimulus policies, keeping risky assets like commodities and stocks supported.
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Notable economic news and updates:
🟢 Extensive arguments about market risk
People’s Bank of China Cut the 7-day reverse repo rate from 2.0% to 1.9% and cut the internal reference price by 200 pips
I’m Chineseindustrial product It slowed from 5.6% yoy in April to 3.5% yoy in May while retail It rose 12.7% year-on-year in May, lower than expected 13.6% and April growth of 18.4%, supporting stimulus hopes.
The preliminary US consumer confidence reading for June rose to 63.9 vs. 59.2 in May – University of Michigan
Extensive arguments for deflecting market risk
The Federal Open Market Committee kept the federal funds rate range at 5% to 5.25%. by a unanimous vote, but more tightening (possibly two more increases) is needed; No member indicated a cut in 2023
The European Central Bank raised interest rates by 0.25% as expected and confirmed that reinvestment of bond purchases through the asset purchase program will expire next month, with Lagarde hinting at another increase in July.
API Private Oil Inventory In the US, it rose by 1.024 million barrels for the week of June 9, instead of declining as expected Crude oil stocks in environmental impact assessment It jumped by 7.9 million barrels instead of declining by 510 thousand barrels as expected in the same period.
US Initial Jobless Claims: 262K (275K expected; 262K prior); Continuing claims rose to 1.775 million
New Zealand is now technically in a recession With GDP printing -0.1% qoq in the first quarter of 2023 after declining by 0.7% in the fourth quarter of 2022
Weekly global market summary
Dollar, Gold, S&P 500, Bitcoin, Oil, US 10-Year Yield Overlay Planned by TV
Stocks started the week on a positive note, as traders seemed to anticipate expectations of a failed US CPI for May and the FOMC’s decision to stop tightening.
Gold and crude oil struggled to participate in these early risk rally, although the latter was still plagued by demand outlook concerns and doubts that voluntary cuts in Saudi Arabia would pay off. The precious metal faltered due to the rally in bond yields that led to the central bank’s decisions last week.
Even gold bond yields were able to draw support from upbeat UK jobs data and indications of strong wage growth, bolstering expectations of a Bank of England rate hike next week.
Commodities managed to regain ground when the People’s Bank of China surprised the markets with its decision to cut the 7-day reverse repo rate from 2.0% to 1.9% and lower the internal reference rate by 200 basis points.
Downbeat Chinese industrial production and retail sales data released later in the week also boosted expectations of more stimulus for the world’s second-largest economy, keeping risk-on sentiment in check. Strong numbers from Oracle and Nvidia also helped maintain the AI-powered technology rally from the previous week.
However, Crude Oil regained some of its gains in the middle of the week when both the API and EIA printed inventory gains, reminding investors of the woes in global demand.
Even US stocks and the dollar fluctuated when the Federal Open Market Committee dropped strong hints about resuming the tightening cycle on Wednesday during the US session. However, Fed Chairman Powell downplayed the certainty of the dot chart forecasts suggesting two more price increases below the line, allowing stocks to regain direction.
The preliminary data for jobless claims came in on Thursday, and once again caused a sharp drop in US bond yields and the dollar as the number came in at 262K – its highest level since October 2021. Fundamental components still reflect weaknesses in the consumer economy.
Meanwhile, Adobe’s strong earnings numbers and improved EPS outlook over the upbeat outlook of its AI-generating program allowed equities to shrug off bleak US economic data ahead of the so-called “magic triple day” for US stocks.
On Friday, the Bank of Japan released its latest monetary policy statement, keeping policy ultra-loose as widely expected. It was not a major event for broad market sentiment (it arguably provided some support for risk-takers), and after the quiet Asia and London sessions, risk sentiment moved convincingly in favor of risk-takers during the US session. The moves were particularly in oil and cryptocurrency prices, as well as bond yields.
A potential catalyst was a better-than-expected preliminary US consumer confidence reading from the University of Michigan, adding to growing speculation that a soft landing is the likely scenario ahead. It is also possible that there may even be some people taking steps who see a non-zero chance of the US avoiding a recession all together.