Indian inflation later will show further declines. Markets are reasonably upbeat ahead of the likely Fed pause decision later this week. 

Freepik

Global macro and markets

• Global markets: US Stocks continued to push higher on Friday, seemingly finding comfort in the prospect of a pause from the Fed later this week, though markets are split over whether this will be the last hike this cycle, or whether there will be one more. The S&P 500 is now at levels it has not seen since last September. The NASDAQ is up 26.68% YTD – not bad for an economy that seems poised to slip into recession later this year…. Chinese stocks also made gains on Friday. Both the Hang Seng index and CSI 300 rose between 0.4-0.5%. US Treasury yields also pushed higher. Yields on the 2Y Treasury rose 8.1bp to 4.596%, while those on 10Y Treasury bonds rose just 2.1bp to 3.739%. EURUSD is pretty steady at 1.0749, though the AUD has pushed back up to 0.6745. Sterling is also stronger, rising to 1.2579 though the JPY is a little softer at 139.35. Asian FX is a bit mixed, with gains from the THB, and IDR, but further weakness from the CNY, which is now 7.13 following a month and a half of losses.
• G-7 macro: It is a quiet start to the week, though this won’t last. US CPI for May is out tomorrow, and we should see decent falls in the headline rate and some smaller declines in core inflation ahead of the FOMC decision, which comes out at 02:00 SGT on 15 June.
• China: Aggregate Finance data are released at some point this week, along with the usual monthly data dump on economic activity and MLF rates, which are out on 15 June – and there is some growing market speculation of a small rate cut. Regarding the activity data, we will be watching the retail sales figure, in particular, to see how the main engine of the recovery is doing. We expect it to slow from April as the post-re-opening spending bounce is not sustainable at current levels.
• India: CPI data for May will show inflation falling further into the Reserve Bank of India’s (RBI’s) target range. We expect inflation to drop from 4.7% to 4.3%YoY (consensus 4.37%). Keep an eye out for the core inflation figures, which will be key for determining when the RBI may feel it can start thinking about winding back some of its tightening. For the moment, on-hold seems the more likely response. But the RBI won’t ignore a chance to give growth a chance if offered and may signal a more neutral stance at the next meeting on 10 August.

What to look out for:

• Japan PPI inflation and machine tool orders (12 June)

• India CPI inflation (12 June)

• Australia Westpac consumer confidence and NAB business confidence (13 June)

• US CPI inflation and NFIB small business optimism (13 June)

• South Korea unemployment (14 June)

• India Wholesale prices (14 June)

• Philippines OF remittances (14 June)

• US PPI inflation and MBA mortgage applications (14 June)

• FOMC policy meeting (15 June)

• New Zealand GDP (15 June)

• Japan core machine orders (15 June)

• Australia unemployment (15 June)

• China industrial production and retail sales (15 June)

• Indonesia trade (15 June)

• India trade (15 June)

• Taiwan policy meeting (15 June)

• ECB policy meeting (15 June)

• US retail sales and initial jobless claims (15June)

• Singapore NODX (16 June)

• BoJ policy meeting (16 June)

• US University of Michigan sentiment (16 June)

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