The US stocks have finally snapped a 3-week losing streak, with the S&P 500 bouncing off the bear markets, up 6.5% last week. The comeback was supported by a lowered inflation expectation, along with sharp falls in the global commodity prices, which strengthened the odds that central banks may scale back the aggressive rate hikes. Again, “bad news” is considered being “good news”. The broad equity markets will probably continue the corrective bouncing trajectory since all the economic data are pointing to a slowdown in global growth. Notably, the hardest-hit tech sector has outperformed the broad markets in the last few trading sessions, suggesting growth stocks may take the strongest tailwind of the market rebound.
Key Points
- The crude oil prices may face ongoing pressure as the G7 countries consider halting the plan to end public funding of fossil fuels due to an intensifying energy crisis in Europe, promoted by Germany. See the oil prices
- The US dollar index retreated from a 20-year high as the US bond yields slid. The dollar weakness may support a rebound in the other major currencies. However, weakening resource prices may continue to pressure the commodity currencies, such as AUD, CAD, and NZD. Check on the USD movements
- Australian equity markets may get respite from the sharp selloff from the last few weeks, but the mining and energy heavy index, the ASX 200, might underperform the global major markets due to the softened commodity demands of China. See the Australia 200 movements
- Cryptocurrencies may also benefit from the risk assets’ comeback, with Altcoin outperforming Bitcoin in the crypto markets last week. Watch the crypto markets
Key economic data and events (June 27 – July 1)
US Core PCE (May) – Thursday
US core Personal Consumption Expenditures (PCE) price index is one of the important economic data for the Fed to decide the monetary policy, which reflects changes in the goods and services purchased by consumers excluding food and energy. The index fell to 4.9% from 5.2% but still stayed elevated, far higher than the Fed’s target of 2%. Should the PCE data continue to decline, the odds of a less aggressive rate hike by the Fed will be strengthened, which will help the broad sentiment to recover from the recent Fed-led intensified recession fears.
The US durable goods orders and CB consumer confidence for May will be also released earlier this week. Consensus calls for a decline in both bellwether economic data.
Moreover, the US final read of the first-quarter GDP is due this Thursday, which printed at a contraction of 1.5% q/q the last time. It is expected the data may be revised to -1.4%. It is worth noting that a two-consecutive negative GDP defines an economic recession, making the second-quarter US growth crucial for investor sentiment.
BoJ CPI (May) – Tuesday
The bets for the Bank of Japan to intervene in the yen devaluation, especially after the SNB’s 50-bps rate hike a week ago. Japan's former Vice Finance Minister said Yen's weakness is detrimental to Japan's economy last week and sparked a sharp fall in USD/JPY. The upcoming CPI becomes a very sentiment economic data for the Japanese Yen, which may lead to a policy change of the BOJ, should the inflation hit above the target of 2%.
Australia retail sales (May) – Wednesday
The Australian retail sales are expected to grow 0.4% in May, down from 0.9% in April. The March data was at 1.8%. This will suggest that demands have been softened due to rising consumer prices, highlighting the country’s inflationary pressure is growing.
New Zealand business confidence, consumer confidence – Thursday, Friday
New Zealand business confidence index fell to -55.6 in May, the lowest since March 2020, which was the 11th consecutive negative reading. The ANZ consumer confidence for May also printed at a record low. Surging inflation and interest rates have been hurting the investment confidence, pressuring both the local equity markets and the Kiwi dollar. The country’s first-quarter GDP also contracted 0.2%, reflecting deteriorated economic conditions.
Canada GDP CPI (April) – Thursday
Canada's GDP growth is forecasted at 0.3% m/m in April, a slowdown from 0.7% in March. The first-quarter GDP growth was at 3.1%, which was also slowed from the fourth quarter of 6.6% due to a decline in exports. The country’s inflation surged to 7.7% in May, promoting a more aggressive rate hike of 75 bps by the BOC, which may further restrain its economic growth.
Europe Week Ahead
- EU flash CPI (June)
- Eurozone inflation
- AO World full-year results
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