US bonds yields are trading near three-months lows as investors expect the Federal reserve to maintain the dovish stance at the FOMC meeting this week, while global shares are holding to the record highs. The Federal Reserve meeting is the main event for the markets this week, while some data releases will also be in focus. The US will publish retail sales and PPI data on Tuesday and China will release industrial production and retail sales figures on Wednesday. In the UK, this Monday Boris Johnson is expected to announce a delay to the full economic reopening due next week.
The S&P 500 rose to a record high and capped its third week of gains amid growing optimism that surging inflation will not last for long and central banks will maintain its accommodative policies. The benchmark was up 0.4% last week after a 0.2% gain on Friday. While US consumer prices climbed a 5% annual pace in May for the first time since 2008, more than half of the price increases came from transitory factors. The focus this week will be on the Fed’s statement at the conclusion of a two-day policy meeting on Wednesday. Despite the inflation concerns and sluggish labour market, the Fed is not expected to begin discussing scaling back its asset purchase program before its annual conference in Jackson Hole in late August. Dow is trading around 34,479.60, which is 0.04% up, Nasdaq is up 0.35% at 10,069.42. 10-year US Treasuries are trading at 1.465% having fallen to a three-month low of 1.428% on Friday. Dollar is largely unchanged today with DXY at 90.483 after posting a gain of 0.5% last week.
European stocks extended a record high last week with inflation concerns easing after the European Central Bank last Thursday renewed its pledge to maintain stimulus measures even as it upgraded forecasts for growth and inflation. The Stoxx 600 Europe Index is 15% up this year and is expected to gain more. This morning European markets opened to the upside with FTSE 100 up 0.65%, DAX up 0.78%, CAC is up 0.83%. EURUSD is lower at 1.2104 after touching a one-month low of 1.2093. The British pound is trading at the lower end of the trading range at $1.4113 ahead of the British Prime Minister Boris Johnson announcement on Monday on whether the planned lifting of coronavirus restrictions can go ahead as scheduled on the 21st of June. He is largely expected to delay the reopening by two to four weeks due to rapidly spreading Delta variant of Covid-19, which was first identified in India.
Activity has been limited on Monday in Asia with the largest markets – China, Hong Kong and Australia – closed for a holiday. Japan’s Nikkei rose 0.35%, while MSCI’s broadest index of Asia-Pacific shares outside of Japan was down 0.1%. Cautious sentiment is the key factor ahead of the FOMC meeting this week in Asian markets. The data from China on Wednesday will also be closely watched.
Oil prices are holding near multi-year highs on an improved outlook for worldwide fuel demand. Brent crude futures are up 0.5% at $73.07, the highest level since May 2019. US Crude futures are trading 0.5% higher at $71.32 per barrel, the highest since October 2018. Bitcoin is holding on to gains at $39,267, after Elon Musk comments on possible resumption of Tesla transactions in bitcoin.