Ineffective in May, speculation of a 75 bps FFR hike in July. May’s high inflation (1.0% MoM; 8.6% YoY), busting expectations of peak inflation in March (1.2% MoM; 8.5% YoY). Thus, investors believe the Fed will be more Hawkish in the coming 3Q22. This caused CME FedWatch to include the probability of a 75 bps FFR increase in their calculations. Nasdaq was down 3.5%, with the S&P 500 and Dow Jones down 2.9% and 2.7%, respectively. Wall Street’s pressure was also amid the ECB’s decision to end QE, and will raise interest rates by 25 bps, which also closes the negative interest rate trend of -0.5%.
Inflation at the producer level, along with the limited supply of raw materials, plus the energy crisis, will suppress the company margins. US May Final Demand PPI is projected to post an inflation of 0.8% MoM (Vs. Apr. 0.5% MoM) and 10.8% YoY (Vs. Apr. 11.0% YoY). This data is released ahead of the June FOMC Rate Decision meeting, which is projected to raise the FFR to 1.25%-1.50%. Over the weekend, the JCI fell 96 points to a level of 7,086, consistently moving in the red zone, in line with the wait and see attitude of investors. NHKSI Research projects that the JCI will rebound, within a range of 7,050-7,260.
Download full report HERE.