The Weekly Update

A mixed week across markets saw yields across the UST curve spike; with the 10-year benchmark stabilising within 3% range, at 3.06%. The dollar held onto its weekly gain, and Brent peeked above $80pb intraday on Thursday; closing the week at $78.51pb, 1.8% higher. Meanwhile, equity markets endured a choppy week; the S&P Index eventually closed 0.54% lower.

Mixed Fed rhetoric grabbed market attention, with the likes of Atlanta’s Bostic, once again highlighting his concerns over possible yield curve inversion. The probability of a fourth rate hike this year (or three more) also shot up last week, however, remains below a 35% chance. The next hike is priced in for the central bank meeting next month, with the third (and currently final) rate rise expected in September.

Elsewhere, China’s activity and investment readings softened in April and the renminbi fell against the stronger dollar. Trade negotiations continued, China offered to “substantially” reduce the bilateral trade gap with the US by “significantly” increasing its imports of American goods and services, and discussed dropping the anti-dumping investigations into US sorghum imports. US Treasury Secretary Munich noted that the two sides are to put “the trade war on hold”, while a framework is being executed. Staying with trade, newswires suggested a NAFTA agreement is still some way away.

Markets will continue to watch for further Sino-US trade negotiations this week, and the Fed minutes release will also garner attention. Also of note will be the Brexit negotiations in Brussels, Italy’s political developments, the South Korean president’s Washington trip, and Putin’s talks with world leaders including Modi, today, which will be watched closely as Russia pushes to firm ties in the wake of US protectionism and sanctions.

Aside from a number of Fed speakers today, there is little in the way of key economic data; UK house prices, Japan trade and the Chicago Fed National Activity Index are due to be released. With another data light Tuesday, market focus will shift to the political spectrum, where S. Korea’s Moon and Trump meet in Washington and another round of Brexit talks take place. Sino-US trade negotiations will also be watched closely on Wednesday as the public comment on proposed tariffs ends.

Global PMI’s will revive market activity on Wednesday; UK CPI, US home sales and the Fed minutes will also be monitored. Thursday kicks-off with Japanese PM Abe’s trip to Russia and Merkel’s official trip to China. In terms of data we will see release of US home sales, UK retail sales and Germany GDP. Energy Ministers from Russia and Saudi Arabia are also due to meet on Thursday to discuss the Iran nuclear deal. German IFO, UK GDP and US durable goods, and Michigan consumer sentiment will be revealed on Friday, and markets will be paying special attention to Fed Chair Powell’s speech. What could also be interesting is the St. Petersburg Forum, where Putin, Macron, Abe and the IMF’s Lagarde participate in a panel.

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