Investment Bank Outlook 08-06-2021
Citi
Markets are happy to adopt a cautious approach ahead of event risk later this week. USD trades marginally better against the majors while emerging Asian currencies held steady. Idiosyncratic developments remained prominent in the Latam region given recent elections in MXN and PEN. Overnight in Japan, revised government data showed that the economy shrank 3.9% in the first quarter, which represents an improvement from the initial estimate of a 5.1% contraction.
Broader price action suggests that markets may have a tendency towards directionless ahead of US CPI report on Thursday. Our economists expect another strong increase in core CPI of 0.6% MoM in May, with Fed likely to dismiss stronger inflation led by these components as transitory. CitiFX Quant flags in their latest report that USD positioning now lies only marginally net-short.
RBC Capital Markets
Overnight: US equities bounced back after London went home, shrugging off tax concerns, with the NASDAQ in particular closing at a five week high, boosted by the FDA approval of Biogen’s Alzheimers drug.Amazon recovered from the lows of the day, despite policy-maker intentions to ensure it is caught by the G7 agreement(taxing the more profitable AWS as a separate entity).
Our US equity team note the talk in their client base is that it will take a lot of time to play out through G20 and OECD negotiations with Congressional opposition. A buy-the-dip approach still reigns. Asian equities have been more mixed and in FX, USD has drifted higher overnight. Japan released its detailed capital flows data for April, showing Japanese investors started their new fiscal year selling large volumes of USD equities and non-sovereign bonds, buying USTs and other sovereign debt.
Day ahead: In the US, the April trade balance and the May NFIB small business optimism index are out. CA publishes trade data (see CAD).In Europe, we get the June ZEW survey.Other releases include CPI/PPI in China, Q1 GDP in SA, and Westpac consumer confidence in AU. For the latter, the latest Victorian outbreak and lockdown could prove an area of concern in the latest reading, with the sample period in early June (lockdown began on 27 May). The BoE’s Haldane and RBA’s Kent speak.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.