Global equities traded softly amid continued weakness in crude oil prices. Asian bourses eked out gains, led by technology shares
MSCI decided to include China A-shares in its Emerging Markets Index
As expected, the Mexican Central Bank raised the overnight rate by 25bps to 7.00% at its June meeting
The May release of US core PCE, the Fed’s preferred gauge of inflation, will be closely scrutinised
> The Fed’s preferred measure of inflation, the core PCE deflator, is expected to soften for a fourth consecutive month to 1.4% yoy in May, from 1.5% yoy in April, moving further below the Fed’s inflation target of 2%. If confirmed, this will be the lowest annual inflation rate since the end of 2015.
> Pending home sales, a measure of contracts that have been signed and are awaiting closing, are anticipated to advance 0.6% mom in May after a 1.4% drop in April. This would fit in nicely with other upbeat May housing market data, which showed a rebound in both existing and new home sales categories.
> The S&P CoreLogic Case-Shiller 20-City Composite Home Price NSA Index, which tracks home prices in 20 major cities, has remained within 5.0%-6.0% for the last two years. The April reading is not expected to deliver any significant deviation from trend, after printing 5.9% yoy in March and February. The US housing market remains supported by low interest rates and historically elevated levels of affordability.
> After the upbeat second estimate of US Q1 GDP, the final release is expected to remain unchanged at 1.2% qoq annualised, up from 0.7% in the first estimate and following from Q4’s rate of 2.1%. The boost to the second estimate came from a better than expected gain in personal consumption, which is now anticipated to remain unrevised. Focus will also be on whether there are further revisions to investment in non-residential structures and economy-wide corporate profits.
>The headline Conference Board Consumer Confidence Index is expected to print 116.0 in June (117.9 previously), marking the third consecutive month of decline from a decade high in March. The pullback in sentiment comes amid diminishing expectations around US President Donald Trump’s economic reform agenda.
> In Europe, the German Ifo Business Climate Index for Juneis expected to edge slightly lower from the previous month’s print (-0.1 pt to 114.5), although this is from the highest level since the index began in 1991. Recent elevated Ifo readings bode well for Germany’s Q2 GDP print.
> The final release of UK Q1 GDP is seen confirming the previous estimate of 0.2% qoq (+2.0% yoy). Of greater interest will be the services sector output data for April and the print for the Q1 savings ratio (which saw a dramatic decline in the second half of 2016).
> Following the downward surprise in May eurozone CPI inflation prints, the headline estimate for June is expected to decline further, by 0.1 ppts to 1.3% yoy, the lowest print since December 2016. Recent oil price weakness and euro strength have weighed on price pressures in the region. More positively for the European Central Bank, core inflation is seen edging up slightly (to +1.0% yoy), although remaining range-bound.