Market Update

Global equity markets saw gains this week as a result of decreasing inflation expectations. This development raises hopes that central bank policymakers may reconsider their plans for aggressive interest rate hikes.
The PMI data released this week fell significantly below expectations, reinforcing our recent observations about the slowing global economy. For instance, the US Manufacturing PMI for June registered at 52.4. While it's reassuring that the reading remains above the critical 50-mark (which separates expansion from contraction), it marked a substantial drop from May's figure of 57.0 and fell well below economists' forecasts of 56.0.
A similar trend was observed in Germany's manufacturing-oriented economy, with the manufacturing PMI dropping from 54.8 to 52.0, significantly below the expected 54.0. Notably, the accompanying statement indicated that prices for both goods and services increased at a slower pace in June compared to May. This suggests that we may be approaching the peak of inflation.
Furthermore, today's (June 24, 2022) revised University of Michigan reading on long-term inflation (defined as 5-10 years) came in at 3.1%, down from the earlier reading on June 10, 2022, which reported 3.3%. This is a positive development as it indicates that concerns about unanchored inflation expectations may have been exaggerated.
We could speculate that the initial reading of 3.3% may have influenced the decision of Fed policymakers to increase US interest rates by 0.75%, rather than the previously indicated 0.5%. Consequently, this lower reading may expedite the conclusion of the Fed's aggressive monetary tightening.
Looking ahead to the coming week, the US will see the release of durable goods orders, consumer confidence data, and ISM figures. In other regions, we anticipate Eurozone CPI inflation, Chinese PMI data, and Japanese retail sales, industrial production, and CPI inflation reports.