June 15 – A look at the day ahead from Danilo Masoni.
Pre-Fed price action would suggest markets aren’t anticipating any big trauma from policy normalisation at the world’s leading central bank. And that’s helping keep the bulls in play.
Equities in Europe look set to nudge up and stay around yesterday’s fresh historic peaks as the recovery-induced trade displays its full potential, and Wall Street too is poised for a positive start after yet another record close.
Volatility gauges on both sides of the Atlantic have dipped to new pre-pandemic lows and bond yields across developed counties are moving around the mid point of the last three months’ trading range, illustrating the fairly relaxed mood.
The two-day Federal Reserve meeting kicks off today and although it is not expected to announce any plan to pare its bond purchases it may offer hints the discussion has began, amid some concerns about growing inflationary pressures.
JP Morgan said the upcoming tapering process was unlikely to hurt its bullish view on equities for the second half of 2021. It expects the Fed to start tapering early next year.
Back to today’s agenda, investors will keep an eye on a number of ECB speakers but that comes after abundant reassurances – the latest from president Lagarde yesterday – that it’s too early to even talk about withdrawing support.
And in Asia Pacific, similar soundings came from Australia, where its central bank members said in the June meeting’s minutes that it was too early to end the bank’s bond buying programme.
Meantime in Japan a former Bank of Japan policymaker said the bank must eventually consider ways to unload its huge holdings of exchange-traded funds after tapering bond and ETF purchases. But the timing will be years away.
On the corporate front, the U.S. and Europe are expected to announce a truce in their 17-year-old dispute over aircraft subsidies on Tuesday. That could help planemakers Boeing and Airbus and also bring relief to other industries.
Good news also on the COVID-19 front. A new analysis has shown that vaccines made by Pfizer and AstraZeneca offer protection of more than 90% against hospitalisation from the Delta coronavirus variant.
Finally, bitcoin steadied after climbing above the $40,000 mark following remarks from Elon Musk who said Tesla may resume allowing Bitcoin transactions.
Key developments that should provide more direction to markets on Tuesday:
* German final CPI/HICP
* UK payrolled employees surge by 197,000 in May
* ECB speakers: board member Philip Lane 1100 GMT; board member Fabio Panetta 1300 GMT; chief supervisor Andrea Enria 1000 GMT
* BoE: Governor Andrew Bailey speech at TheCityUK conference
* U.S. retail sales May/industrial output
* U.S. TIC data showing overseas buying of Treasuries
* Auctions: U.S. 6-month bills, U.S. 20-year; UK 7-year gilt, 30-year gilt; German 2-year
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