One week after the Fed and ECB, central banks return to the market in force today with no less than five monetary policy decisions from major institutions. The Bank of Brazil (BCB) fired the first shot, leaving its benchmark rate unchanged at 13.75%, as expected by the market. Brazil's political powers were hoping for more easing, but this will not happen, as the BCB still fears inflation. We also have decisions by the Swiss National Bank, the Norges Bank, the Turkish Central Bank and the Bank of England. What these central banks have in common is that they are confronted with complex inflation issues, to a greater or lesser extent.

The BOE was the most closely scrutinized, following Tuesday's publication of higher-than-expected inflation in the UK in May. It decided to go with a surprise half-point rise to 5%, the highest level since 2008.

As for the most spectacular intervention, it's certainly the Turkish Central Bank, which decided to raise rates by 6.5 bps in one go! New governor Hafize Gaye Erkan, which increased the benchmark rate from 8.5% to 15%, chose to return to a policy dictated by the economy and not by the powers that be. The new strategy remains unclear at a time when annual inflation is flirting with 40%.

This climate of uncertainty about the success of the fight against inflation is having an impact on equity markets. Profit-taking has been taking place for the past three days in Europe and for the past two days in the United States, Monday having been a bank holiday. Yesterday, Jerome Powell maintained his firm stance as he presented his semi-annual monetary policy review to lawmakers in Washington. The Fed boss reiterated that the central bank still has "a long way to go" to bring inflation back within its self-imposed limit of 2%. He added that "almost all" members of the committee expected further rate hikes by the end of 2023. Equity markets therefore continued to tense up, because until recently they believed in the end of the monetary tightening cycle. The bond market is more cautious, and seems to have rallied in part to Powell's rhetoric over the past few weeks.

Yesterday, all indices continued to lose ground, with the Nasdaq 100 losing 1.3% more than the others. However, the index of large US technology companies has gained almost 36% since the start of the year.

The world of crypto-currencies experienced a new bout of fever. Bitcoin returned to the USD 30,000 level after gaining 20% over the week. This speculative movement is underpinned by the filing of several spot ETF applications by financial institutions, products which regulators have so far rebuffed. Industry heavyweight BlackRock is among the applicants, further bolstering the rise in cryptoassets.

US equity futures were slightly lower this morning ahead of the second day of Federal Reserve Chair Jerome Powell’s testimony. Weekly jobless claims were published at 8:30 am and were roughly in line with expectations at 264,000.

 

Today's economic highlights:

I think everyone has understood that today is Central Bank Day. Switzerland, the UK, Turkey and then Japan. In addition, weekly US jobless claims and existing home sales are scheduled, and so is Jerome Powell for a parliamentary hearing on the second day. The full agenda is here. 

The dollar is still flat against the euro at EUR 0.9103 and is up 0.1% against the pound to GBP 0.7844. The ounce of gold is trading at USD 1926. Oil is stable, with North Sea Brent at USD 75.63 a barrel and US light crude WTI at USD 71.09. The yield on 10-year US debt stands at 3.79%. Bitcoin is trading at around USD 30,000.

 

In corporate news:

  • Spirit Aerosystems, which produces critical structures for Boeing aircraft, decided on Thursday to suspend production at its plant in Wichita, Kansas, after employees rejected a wage proposal from management and announced a strike starting June 24. Spirit shares were down 8.9% in premarket trading, while Boeing shares were down 1.3%.
  • General Electric - The US group's aerospace division announced on Thursday that it had signed a memorandum of understanding with Hindustan Aeronautics Limited (HAL) to produce fighter jet engines for the Indian Air Force.
  • Micron Technology announced on Thursday its intention to invest up to $825 million (€749.4 million) in a new chip assembly and test facility in Gujarat, India, its first plant in the country.
  • Accenture - The IT consulting company announced on Thursday that it expected sales for the current quarter to fall short of Wall Street expectations, due to economic uncertainties that could limit IT budgets. The share price was down 2% in pre-market trading.
  • NRG Energy - Activist investor Elliott Investment Management is stepping up the pressure on the US energy group and seeking to oust its CEO Mauricio Gutierrez, the Wall Street Journal reported on Wednesday, citing sources close to the matter.

 

Analyst recommendations:

  • Agree Realty: Mizuho Securities upgrades to buy from neutral. PT up 7.4% to $70.
  • Andersons: Roth MKM initiated coverage with a recommendation of buy. PT up 22% from last price to $55.
  • Antofagasta: Morgan Stanley maintains an in-line weighting with a price target raised from 1340 to 1490 GBp.
  • Archer-Daniels-Midland: Roth MKM initiated coverage with a recommendation of buy. PT set to $92.
  • Burberry: Morgan Stanley maintains an in-line weighting with a price target reduced from GBp 2500 to GBp 2400.
  • Bunge: Roth MKM initiated coverage with a recommendation of buy. PT set to $138.
  • Caterpillar: D.A. Davidson & Co initiated coverage with a recommendation of neutral. PT set to $263.
  • Expedia: B Riley Securities initiated coverage with a recommendation of buy. PT set to $160.
  • Mercury Systems: Baird downgrades to neutral from outperform. PT up 5% to $40.
  • Shell: HSBC remains Buy with price target raised from GBp 2710 to GBp 2760.
  • Toro: D.A. Davidson & Co initiated coverage with a recommendation of buy. PT set to $117.
  • Tripadvisor: B Riley Securities initiated coverage with a recommendation of buy. PT set to $25.