Gerald Fitzgerald’s Market Review June 17th

LAST WEEK IN 30 SECONDS...

Despite the ongoing standoff between the US and China on trade, markets continued their recovery last week. Positive US industrial production data coupled with markets continuing to believe the US Federal Reserve will cut interest rates in the short term helped propel markets higher. The NASDAQ finished the week 0.7% higher whilst a stronger dollar contributed to global equities in euro terms finishing the week 1.2% higher. Government bonds yields continue to languish at supressed levels with an estimated $12 trillion of bonds now trending at negative yields.

THIS WEEK IN 30 SECONDS...

Central banks dominate discussions this week as the US Federal Reserve delivers its monetary policy decisions for June on Wednesday. Whilst no change is expected, guidance will be sought as to the Federal Reserve’s outlook for interest rate changes over the coming months with markets currently pricing in interest rate cuts. Elsewhere, the race for the Conservative leadership gathers momentum with many viewing the process as a mere formality with Boris Johnson hotly tipped to take over from Theresa May. From a data perspective Eurozone consumer confidence figures are due for release on Thursday with Eurozone and US PMI Manufacturing data due for release on Friday.

ECB’S DEFLATED EXPECTATIONS

The European Central Bank (ECB) has long targeted elevating inflation to just under 2% levels. Recent inflation expectations, however, have undermined the ECB’s efforts with the key inflation metric falling to a 5 year low. Mario Draghi’s soon to be named successor has a clear challenge ahead to reverse this trend.