| ON DECK FOR FRIDAY, JUNE 28 |
KEY POINTS:
- Global markets await US inflation, month- and quarter-end
- America should be gravely embarrassed over last night’s debate
- Eurozone headline inflation is landing on the screws so far…
- ...but core inflation continues to flash warning signs
- Tokyo core CPI bounces back, but it’s just one month
- US core PCE is likely to be soft, but more evidence will be needed
- Canada awaits Q2 GDP updates
- Canadian markets to close early ahead of Canada Day
- BanRep expected to cut
Month- and calendar quarter-end, an early close in Canada, and possible last-minute effects into the weekend’s French election will combine with elevated global data risk to end the week, month and quarter with a potential bang. Markets showed no reaction to overnight developments out of Europe, Japan, and including the truly pathetic US debate. There may be volatility around N.A. data this morning.
Eurozone Inflation On Consensus, Core Still Flashing Warning Signs
European inflation readings offered no surprises this morning. France (0.1% m/m), Spain (0.3% m/m) and Italy (0.2% m/m) all landed on the screws. That said, there remain signs that core inflation is still running too hot. Chart 1 shows Spanish core CPI in m/m terms and because it’s seasonally unadjusted we compared this June to like months in history to show that it was among the hottest months of June for underlying inflationary pressure on record. ECB measures of inflation expectations ebbed a touch with the 1-year down a tick to 2.8% and the 3-year also down a tick to 2.3% (chart 2). German CPI arrives on Monday and the Eurozone tally will be released on Tuesday.
Tokyo Core Inflation Bounces Back
Tokyo core CPI bounced back in June with a 0.3% m/m SA rise (chart 3). The reading has shaken off the distorted -0.6% m/m SA drop two months prior when there were changes to school fees. Still, it’s one month of evidence that core inflation has increased when before the distorted reading the trend had been decidedly lower for about a year prior. The yen couldn’t have cared less.
America Should be Ashamed
I want my 90 minutes back!! I spent the whole 90 minutes of last evening’s Presidential debate feeling flushed, red faced, and appalled for America. These two are the best the country can come up with??! Trump didn’t win. Biden lost. That’s not just semantics. Nothing’s changed with Trump as he remains his usual lying, despicable self and would occupy an office lacking any global respect while driving deep divisions at home. Biden had a better grasp of the content, but his mental acuity and energy are clearly not suited to another term in office that would only bring further deterioration and uncertainty over who is running the administration. Absent a quick and successful effort to replace Biden amid uncertainty that anyone would poll any better against Trump it seems that we’re stuck with this man and his severely misguided policies for another four years amid much higher stakes to the US and world economies and US democracy this time. Watch for the aftermath of polling results through the weekend into early next week as the next step. A CNN poll shows 67% of viewers thought Trump won; maybe debates don’t matter.
Soft US Core PCE Inflation Needs More Evidence
The US updates core PCE inflation for May. Will it be a 0, 1 or 2 as the first decimal point to the m/m core reading? I went with zero, consensus is 0.1, some are at 0.2. The reason I went a little lower is that a) core PCE often undershoots core CPI that itself was only 0.16% m/m in June, and b) core PCE puts a higher weight on cool core services prices and a lower weight on hot shelter prices than CPI does which could combine to drive a rather weak number. Frankly, any of those estimates would indicate a softening of inflationary pressures at the margin but would be insufficient on its own to motivate a dovish pivot by the FOMC.
Tracking Canada’s Economy in Q2
Canada updates GDP figures (8:30amET). We’ll get a better understanding of Q2 GDP growth from the April figures that were initially guided by Statcan to be up by 0.3% m/m and the preliminary estimate for May.
BanRep Expected to Cut
Colombia’s central bank gets the final word when it is expected to cut 50bps (2pmET).
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