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The Fed’s Favorite Underlying Inflation Gauge Is Cooling
(Bloomberg) — The Federal Reserve’s top-tier inflation gauge is poised to show some modest relief from persistent price pressures, underscoring central banks’ prudence about the timing of interest rate cuts.
Bloomberg’s Most Read
Economists expect the price index for personal consumption expenditures minus food and energy – forecast for Friday – to rise 0.2% in April. That would represent the smallest advance so far this year for the measure, which provides a better picture of underlying inflation.
The overall PCE price index likely rose 0.3% for a third month, according to the median projection in a Bloomberg survey. The increases this year contrast with relatively stable readings in the final three months of 2023, underscoring the Fed’s uneven progress in its fight against inflation.
Fed Chairman Jerome Powell and his colleagues have emphasized the need for more evidence that inflation is on a sustained path toward the 2% target before cutting the benchmark interest rate, which is at its highest level in two years. decades since July.
The PCE price measure is expected to rise 2.7% on an annual basis, while the main metric is expected to be 2.8% – both matching the previous month’s levels.
Earlier this month, authorities rallied around the desire to keep interest rates higher for longer and “many” questioned whether the policy was restrictive enough to reduce inflation to its target, according to the minutes. from your last meeting.
Read more: Minutes show officials rallying around higher rates for longer
The latest inflation figures will be accompanied by personal spending and income figures. Although demand grew at a solid pace in the first quarter, the data will inform spending on services, after flat retail sales in April were previously reported.
What Bloomberg Economics Says:
“The report will likely provide some encouraging signs that the disinflation process has not completely stalled. With income growth slowing in a cooling labor market, consumers are gradually giving in, which should provide a continued disinflationary boost for the rest of the year. However, with price recovery pressures still brewing, inflation is likely to moderate only very gradually this year.”
—Anna Wong, Stuart Paul, Eliza Winger, and Estelle Ou, economists. For full analysis, click here
Other data for the week includes revised first-quarter gross domestic product on Thursday. Economists predict that growth has likely slowed from the government’s initial estimate. The Fed will publish its Beige Book summary of economic conditions across the country on Wednesday.
The story continues
Among the U.S. central bankers who spoke during the holiday-shortened week were John Williams, Lisa Cook, Neel Kashkari and Lorie Logan.
Looking north, Canada will release gross domestic product data for the first quarter. Declining monthly momentum in March and weak domestic demand would likely keep a June rate cut in play for the central bank.
Elsewhere, a likely recovery in inflation in the eurozone, Chinese industrial data and PMI numbers, as well as price reports from Brazil will be among the highlights.
Click here to find out what happened last week and below is the summary of what’s to come in the global economy.
Asia
China’s manufacturing sector will be in the spotlight next week. Monday’s industrial data will show whether profits recovered in April, after a sharp pullback in March dragged the pace of earnings in the first three months to 4.3%.
Persistent deflation in producer prices and weak domestic demand could keep profitability under pressure. China receives its official manufacturing PMI data on Friday, with a focus on whether the indicator remains above the 50 threshold that separates contraction from expansion for a third month in May.
Also on Friday, Japan’s industrial production growth is expected to slow while retail sales advance in April.
Consumer inflation in Tokyo could increase slightly in May, foreshadowing gains for national numbers.
Meanwhile, China called on South Korea to maintain stable supply chains as the countries began their first tripartite summit with Japan since 2019.
Consumer price growth in Australia is forecast to slow to 3.3%, still hot enough to keep the Reserve Bank of Australia on hold.
Vietnam also releases CPI data along with industrial production, retail sales and trade during the week.
At the central bank, Kazakhstan sets its reference policy rate on Friday.
Europe, Middle East, Africa
In the euro zone, inflation probably accelerated in May to 2.5%, according to economists’ forecasts. An underlying indicator is forecast to have stopped weakening for the first time since July, holding at 2.7%.
In line with broader euro zone data, national releases beginning with Germany’s on Wednesday are expected to have gone in the wrong direction in three of the region’s four biggest economies. Only Italy records slower price growth.
Such results impede progress towards the ECB’s 2% target, but consistent signals from officials for a quarter-point rate cut on June 6 make it unlikely that a month of data will derail them. Still, some policymakers argue against any rush for greater flexibility.
“The probability is increasing that in 13 days we will see the first rate cut,” Bundesbank President Joachim Nagel, a political hawk, said in an interview on Friday. “If there is a rate cut in June, we will have to wait, and I believe we will have to wait maybe until September.”
Other reports in the euro zone include Germany’s Ifo business confidence index on Monday, the ECB’s inflation expectations survey on Tuesday and economic confidence on Thursday.
ECB officials scheduled to speak next week include chief economist Philip Lane and the Dutch, French and Italian governors. A pre-decision blackout period begins on Thursday.
The Bank of England has already gone silent, canceling all speeches and public statements by policymakers during the campaign ahead of the UK general election on 4 July.
Among other European central banks, a financial stability report from Sweden’s Riksbank on Wednesday and a speech in Seoul by Swiss National Bank President Thomas Jordan will be among the highlights.
Several monetary decisions are scheduled across the region:
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Israel’s central bank is expected to hold its key rate steady at 4.5% on Monday, largely to keep war-related inflationary pressures in check and provide support for the shekel. Governor Amir Yaron is afraid of easing monetary policy and further increasing the difference between borrowing costs in Israel and the US.
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Ghana’s monetary authority is expected to maintain its key rate at 29% on Monday to beat persistent inflation and support its struggling currency.
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On Wednesday, Mozambique’s policymakers are poised to reduce borrowing costs, with consumer price growth expected to remain in the single digits for the rest of the year.
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And on Thursday – a day after elections in which the ruling African National Congress risks losing its majority – South African monetary authorities are expected to maintain their base rate at 8.25%, with the inflation has yet to return to the 4.5% midpoint of its target range.
Latin America
Brazil will release the mid-month reading of its benchmark consumer price index next week, along with the May reading of its broader measure of inflation.
The combination of Brazil’s tight labor market and weaker currency will likely limit the scope for further disinflation relative to current levels, with inflation already approaching consensus year-end forecasts.
The IPCA-15 price index fell below 4% last month after jumping more than 5% in September – just two months after reaching 3.19%, below the central bank’s target for 2023.
Also in Brazil, the central bank publishes its weekly survey of economists on Monday, whose inflation expectations and interest rate forecasts are rising again, along with national unemployment, total outstanding loans and budget balances.
Chile publishes six separate indicators for April, highlighting unemployment, retail sales, industrial production and copper production.
Mexico’s light calendar will be dominated by the central bank’s publication of its quarterly inflation report, followed by a press conference hosted by Governor Victoria Rodriguez.
Banxico earlier this month set its inflation forecasts through the third quarter of 2025, while Wednesday’s report will reveal the bank’s revised GDP forecasts.
On Thursday, Mexico’s labor market data for April will be released. The initial consensus predicts that the unemployment rate will rise from the historic low of 2.28% recorded in March.
–With assistance from Robert Jameson, Piotr Skolimowski, Monique Vanek and Laura Dhillon Kane.
(Updates with Israel released in the EMEA section)
Bloomberg Businessweek Most Read
©2024 Bloomberg LP
The spotlight next week will shift somewhat to the Federal Reserve’s second-quarter earnings season and monetary policy. Market watchers will be treated to results from several major names, including Dow 30 components Goldman Sachs (GS), UnitedHealth (UNH), Johnson & Johnson (JNJ) and American Express (AXP), along with streaming giant Netflix (NFLX).
The Fed will still attract some attention as investors will be eager to hear from a packed lineup of central bank speakers just before the policy meeting lockout period.
In terms of the economic calendar, after fifteen days of labor market and inflation indicators, activity data will gain momentum in the form of the latest retail sales and industrial production reports.
Earnings Highlight: Monday, July 15 – Goldman Sachs (GS) and BlackRock (Black). See the full earnings calendar.
Earnings Highlight: Tuesday, July 16 – UnitedHealth (UNH), Bank of America (BAC), Progressive (PGR), Morgan Stanley (IN), PNC Financial (PNC) and JB Hunt Transport (JBHT). See the full earnings calendar.
Earnings Highlight: Wednesday, July 17 – Johnson & Johnson (JNJ), US Bancorp (USB), Morgan Children (KMI), United Airlines (UAL) and Ally Financial (ALLY). See the full earnings calendar.
Earnings Highlight: Thursday, July 18 – Netflix (NFLX), Abbott Laboratories (ABT), Black stone (BX), Domino’s pizza (ZDP) and Taiwan Semiconductor Manufacturing (TSM). See the full earnings calendar.
Earnings Highlight: Friday, July 19 – American Express (AXP), Halliburton (THANKS) and Travelers (VRT (return to recoverable value)) See the full earnings calendar.
IPO Observation: Hospital and healthcare clinic operator Ardent Health Partners (TARDT), insurance service provider Twfg (TWFG) and the biotechnology company Lirum Therapeutics (LRTX) are expected to price their IPOs and begin trading next week. The analyst quiet period ends at Rectitude (RECT) to free up analysts to publish ratings.
Police cars outside the residence of Thomas Matthew Crooks, the suspected shooter at a Trump rally on Saturday, investigate the area in Pennsylvania. Following the incident, one rally attendee was killed, two rally attendees are in critical condition and Donald Trump suffered a non-fatal gunshot wound. The shooter is dead after being shot dead by the United States Secret Service. (Photo by Kyle Mazza/Anadolu via Getty Images)
Investors will initially favor traditional safe-haven assets and may lean toward trades more closely tied to former President Donald Trump’s chances of winning the White House after he survived an assassination attempt, according to market watchers.
“There will undoubtedly be some protectionist or safe-haven flows into Asia early this morning,” said Nick Twidale, chief market analyst at ATFX Global Markets. “I suspect gold could test all-time highs, we’ll see the yen being bought and the dollar, and flows into Treasuries as well.”
Early market commentary suggested Trump’s shooting at a rally in Pennsylvania on Saturday could also prompt traders to increase his likelihood of success in the November election. His support for looser fiscal policy and higher tariffs is generally seen as likely to benefit the dollar and weaken Treasuries.
An indicator of market sentiment heading into the weekend: Bitcoin surged above $60,000, likely reflecting Trump’s pro-crypto stance.
Other assets positively linked to the so-called Trump trade include stocks of energy companies, private prisons, credit card companies and health insurers.
Traders will also be closely watching market measures of expected volatility on Monday, such as those in the tariff-sensitive Chinese yuan and Mexican peso, which have begun to price in the U.S. vote.
Trump said he was shot in the right ear after a shooting at his rally. His campaign said in a statement that he was “fine” after the incident, which prompted him to rush off the stage.
“Currencies will be the first major market on Monday in Asia to react to the weekend’s shots. There’s potential for extra volatility, and getting a clear reading could be especially difficult because liquidity will be hurt by Japan’s national holiday,” said Garfield Reynolds, Asia team leader for Bloomberg Markets Live.
Strategists had already expected a volatile run-up to the election, particularly as Democrats are still agonizing over President Joe Biden’s candidacy after his poor performance in last month’s debate raised questions about his age. Investors were also grappling with the possibility that the election could end in a drawn-out dispute or political violence.
But there is little precedent for events like those in Pennsylvania. When President Ronald Reagan was shot four decades ago, the stock market plunged before closing early. The next day, March 31, 1981, the S&P 500 rose more than 1% and benchmark 10-year Treasury yields fell 9 basis points to 13.13%, according to data compiled by Bloomberg.
Bond investors should pay particular attention as the attack is likely to boost Trump’s election chances and ultimately lead to concerns about the fiscal outlook, according to Marko Papic, chief strategist at California-based BCA Research Inc.
“The bond market must at some point become aware of President Trump’s greater chances of winning the White House than any of his rivals,” Papic wrote. “And I continue to believe that as his chances increase, so too must the likelihood of a bond market revolt.”
Kyle Rodda, senior financial markets analyst at Capital.com, said he was seeing client flows into Bitcoin and gold following the shooting.
“This news marks a turning point in American policy norms,” he said. “For markets, it means safe-haven trades, but more tilted toward non-traditional safe-havens.”
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Jio Financial share price: Should you buy this Reliance group stock on Monday ahead of Q1 FY2024 results?
Q1 2024 Results: Jio Financial Share Price will be in focus on Monday as the Reliance Group company has a fixed board meeting on July 15, 2024 to consider and approve the company’s unaudited standalone and consolidated financial results. Trust Group company informed about the Q1 2024 Results date on Wednesday last week via an exchange filing. According to stock market experts, Jio Financial Services Limited is poised to deliver impressive Q1 results for FY25 on solid operating income. They have forecast a healthy QoQ PAT for the company in Q1 FY25.
Jio Financial Services News
Speaking on the Jio Financial Services Q1 2024 results, Manish Chowdhury, Head of Research, StoxBox, said, “We believe Jio Financial Services is poised to deliver impressive results in Q1FY25 aided by its operating income, which is likely to show robust growth driven by strong investment income, which in turn should lead to healthy PAT growth on a sequential basis. Jio Financial Services continues to make strategic moves such as launching digital products and expanding its ecosystem, with a clear focus on future growth. The company has announced plans to introduce products for lending against stocks and mutual funds, leveraging Jio’s large user base, which could be a significant growth driver in the coming quarters.”
“Furthermore, with the NBFC receiving RBI approval to become a primary investment company, Jio Financial Services is well-positioned to unlock value from its investments. Overall, we expect the company to report robust numbers in the upcoming quarter,” the StoxBox expert added.
Jio Financial Stock Target Price
Speaking about the technical outlook of Jio Financial share price, Ganesh Dongre, Senior Manager, Technical Research at Anand Rathi, said, “Jio Financial Services share price is poised to make a fresh high at the ₹260 apiece level. If the stock breaks above this mark, the Reliance Group stock could make a fresh high by touching the ₹290-₹295 zone. Hence, those with Jio Finance stock in their portfolio are advised to stick to the script by keeping a stop loss at ₹205. If the stock breaks above ₹260 decisively, then one can upgrade the stop loss at ₹240 for the near-term target of ₹295.”
On the advice to new buyers regarding Jio Financial stock, Ganesh Dongre said, “New buyers are advised to wait for the breakout. Once the stock breaks above ₹260, one can buy this Reliance Group stock at the short term target of ₹295, keeping a stop loss of ₹240 apiece.”
Disclaimer: The views and recommendations made above are those of individual analysts or brokerage firms, and not of Mint. Investors are advised to consult with certified experts before making any investment decisions.
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