Market news

Investing.com – The report on Thursday showed that retail sales in the US in May rose for the third month in a row, boosting optimism about the US economy and supporting the US central bank’s intention to increase the number of interest rate increases this year.

According to the report of the US Department of Commerce, in comparison with the previous month, the volume of retail sales in the US in May rose by 0.8%, which was significantly higher than the forecasted growth rate of 0.4%.

The growth in retail sales for April was revised upwards to 0.4% compared to the initial growth of 0.3%.

The increase in retail sales indicates economic growth, and a decline in economic decline.

The base retail sales index (excluding car sales) increased by 0.9% in May against the projected growth of 0.5%. In April, the base retail sales index increased by 0.4%.

The basic index of retail sales corresponds to the component of consumer spending in the calculation of gross domestic product. Consumer spending accounts for 70% of US economic growth.

(Reuters) – The European Central Bank on Thursday announced that it will curtail the asset purchase program from the end of December 2018, and rates will remain at current levels at least until the fall of 2019.

The ECB said that by the end of September 2018, asset purchases will continue at a volume of 30 billion euros per month, and from the end of September to the end of December 2018, its monthly volume will be 15 billion euros, after which the program will be completed.

Following the meeting, the regulator left the overnight deposit rate at minus 0.40 percent per annum. The main refinancing rate, which determines the cost of lending in the economy, remained at the level of 0.0 percent, the rate of emergency lending for banks was 0.25 percent.

The Governing Council of the ECB expects that key rates will remain at current levels at least until the end of summer 2019 and in any case as long as the inflation dynamics will continue to meet the current expectations of its steady adjustment.

According to the ECB, the decisions taken at the meeting will allow further movement of inflation to levels below, but close to 2 percent in the medium term.

(Francesco Kanepa, Balash Koranyi, translation and text of Marina Bobrova, editor Anton Kolodyazhny)

Investing.com – The overwhelming majority of experts believe that the Federal Reserve System (FRS) will raise the interest rate on federal funds (federal funds rate) following a two-day meeting, which ends on Wednesday.

The market estimates the chances of raising the rate at the June meeting to 1.75-2% per annum from the current 1.5-1.75% in more than 90%, according to the CME Group.

All  37 economists, who participated in the survey conducted by the agency Bloomberg, are waiting for  rates increasing.

At the same time, the share of respondents expecting at least three more increases in 2018, slightly decreased compared to March. The median estimate of economists now implies two more increases this year, which coincides with the Fed’s own forecasts, also published in March.

“GDP growth rates in the second quarter may be 4%, but before that there was a very weak first quarter,” says chief economist Loomis Sayles & Co. Brian Horrigan. According to him, fears over trade disputes, steadily sluggish inflation, strengthening the dollar and tensions in emerging markets can also deter the Fed from a more aggressive reaction.

In addition, after the meeting, representatives of the US central bank will publish new quarterly macroeconomic forecasts and an updated forecast for the further interest rate trajectory. Then Chairman of the Federal Reserve Service Jerome Powell will start his second press conference after taking office in February.

Many experts expect that the Central Bank’s management will improve forecasts of consumer price growth, as well as the economy as a whole, and may increase the forecast of the number of rate increases in 2018 to four (including March and June) against the backdrop of accelerating inflation and an active rise in the labor market. Point charts of forecasts (dot plots), published by the Fed in March, indicated that the Fed proposes to raise the rate three times in 2018.

The Fed in late 2015 raised the base interest rate for the first time in almost 10 years, in 2016 the rate was raised once (by 25 basis points), in 2017 – three times by the same amount. In March 2018, the rate was raised again.

Bloomberg.com — Oil declined below $66 a barrel as an industry report showing U.S. stockpiles expanded raised concern among investors who’re already worried OPEC may soon end output cuts.

Futures in New York dropped as much as 1.3 percent after the American Petroleum Institute was said to report nationwide crude inventories rose last week. That compares with forecasts for a slide in supplies ahead of government data Wednesday. Meanwhile, Russia, which has already started increasing output, is said to propose that OPEC and its allies be allowed to return production to October 2016 levels within three months.

Bloomberg.com — Mario Draghi is holding what might be the most awkward European Central Bank policy meeting in his tenure.

The two-day Governing Council session in Riga — a critical discussion that could result in a decision to end the ECB’s bond-buying program — will have a notable absentee. Latvian Governor Ilmars Rimsevics, who as host would normally sit alongside President Draghi at Thursday’s news conference, is instead fighting corruption allegations and is barred by national authorities from the building. The ECB is challenging restrictions on him in court.

The governor’s absence isn’t the only reason for unease. Scandals over dodgy clients in the former Soviet Union have plagued Latvian banks and the ECB shut the country’s No. 3 lender in February after the U.S. accused it of breaking North Korea sanctions.

“It’s no doubt an awkward situation,” Fredrik Erixon, director of the European Centre for International Political Economy, said by email. “The only thing we know is that the saga reflects badly on everyone and erodes the credibility of central banks in Europe.”

The ECB holds one meeting a year away from its Frankfurt base, and Latvia was planned long ago. The external gatherings often prove colorful. Four years ago in Naples, Italy, security amid anti-globalization protests was so strict that policy makers could barely hear each other speak over the roar of helicopters. In Cyprus the following year, a journalist seized the floor to harangue the ECB president in Greek. Several months later in Malta, the event took place in a hotel complex that also housed a lavish gambling hall.

Legal Battle

This meeting comes after a rocky few months for the Baltic nation of 2 million people. Rimsevics, 53, was detained in February on suspicion he’d solicited bribes from a local lender, just days after the U.S.’s money-laundering accusations emerged against the now-defunct ABLV Bank AS. He was released on bail, denying wrongdoing. Regulators are dismantling the nation’s non-resident banking business.

While Latvia represents just 0.2 percent of the euro-area economy, it’s become a focal point for questions about financial oversight and central-bank independence.

The ECB has sued the country over limits on Rimsevics performing his duties and a travel ban that’s kept him away from Governing Council meetings. His deputy, Zoja Razmusa, who’s been attending as an observer, will probably appear alongside Draghi at Thursday’s 3:30 p.m. news conference in Riga.

There’s still a chance Rimsevics, who joined the Governing Council when Latvia adopted the euro in 2014 and is its longest-serving national bank chief, could make an appearance. While investigators will pursue formal charges within “a few weeks,” the European Court of Justice could rule at any time to reinstate him or soften the restrictions he faces.

One ECB Governing Council member, who asked not to be identified discussing his colleague, said Rimsevics — not the first official to face controversy — would be welcomed with “open arms” should he be cleared for future meetings. Latvia’s political establishment is decidedly more hostile. The president, government and parliament all say he should resign.

Bloomberg.com — Stocks in Asia meandered and the yen weakened as investors await the details of a “comprehensive” and historic document signed by U.S. President Donald Trump and North Korean dictator Kim Jong Un.

With prospects for continued dialog between the two leaders diminishing geopolitical risks, the safe-haven yen offered the biggest reaction in an otherwise muted response by investors to the summit. Equities from Tokyo to Sydney swung between gains and losses. U.S. Treasury yields steadied. S&P 500 Index and FTSE 100 futures barely budged. The pound extended a decline as Theresa May’s landmark Brexit legislation goes to Parliament. Oil recovered as cracks in a pipeline threatened Nigerian exports.

Trump hailed the document signed with Kim as “very important,” while the North Korean leader added that e “world would see a major change” following the unprecedented event. He said he would “absolutely” invite Kim to the White House. Trump is expected to deliver a press briefing later in the day Tuesday.

Traders will soon switch focus to the Federal Reserve, which is expected to raise interest rates Wednesday, while European Central Bank officials later in the week are poised to hold formal talks on ending its bond-buying program. The Bank of Japan meets Friday, with no change to policy expected.

“Despite the historic event, the markets haven’t moved much because they’ve already discounted the risk of military conflict,” Goohoon Kwon, co-head of Korea research and senior Asia economist at Goldman Sachs Group Inc. told Bloomberg Television before the document signing. What’s more important going forward is the “follow through, execution, implementation” of any agreements, he said.

Meanwhile, Trump’s top economic adviser, Larry Kudlow, was “doing well” on Monday night after suffering a heart attack, a White House spokeswoman said.

Investing.com – The US dollar has fallen in price during the morning trades on Monday, and the Japanese yen has strengthened; President of the United States Donald Trump left the G7 summit, and then wrote on Twitter that he recalled the signature under a joint communique. Investors closely follow the upcoming meeting of the leaders of the United States and the DPRK and the decisions of the largest central banks on the issue of monetary policy.

The dollar index, which reflects the strength of the dollar against a basket of six major currencies, dropped 0.06% to 93.49.

The G7 summit in Québec came to an end with the early departure of Trump, and agreement with the other leaders was not achieved. Later he wrote on Twitter that he refused to sign a joint communique and criticized Prime Minister of Canada Justin Trudeau.

Now Trump arrived to Singapore, where on Tuesday he must meet with North Korean leader Kim Jong-un.

The pair USD / JPY added 0.18% to 109.75. However, the market reaction can be considered moderate, as a number of traders expected that at the G7 summit an agreement on trade would be reached.

In addition, this week, central banks in the US, the euro zone and Japan will conduct their policy reviews. It is expected that the Fed this week will raise interest rates; investors are closely monitoring whether there will be a third and fourth round of policy tightening in 2018.

Meanwhile, in Australia, trades took place on a thin market due to holidays, and the pair AUD / USD added 0.07% to 0.7605.

The pair USD / CNY fell by 0.01%, reaching the level of 6,4058. The People’s Bank of China set the benchmark rate for the RMB against the dollar at 6.4064 against 6.4003 a day earlier.

Bloomberg.com — China’s massive trade surplus with the world shrank in May. Unfortunately for the ongoing tensions with President Donald Trump, the surplus with the U.S didn’t.

The trade gap with the U.S. swelled to $24.6 billion, making up almost all of the total surplus of $24.9 billion. Overall, exports rose 12.6 percent in May from a year earlier while imports surged 26 percent, partly due to higher oil and other commodity prices. Shipments to the U.S. were up 11.6 percent, the most since February. […]

Bloomderg.com — Japan’s economy has moved past a rough stretch that ended a two-year run of growth, with forecasts pointing to renewed expansion as global demand regains traction.

Gross domestic product shrank 0.6 percent on an annualized basis in the first quarter, according to revised data released on Friday, as a weaker reading of private consumption offset a stronger one for capital investment. That missed the median forecast of economists. […]

Private consumption remains soft — and an obstacle to the Bank of Japan’s goal of generating 2 percent inflation. It fell 0.1 percent during the first quarter, the revised data showed on Friday, but that was the result of an upward revision to the fourth-quarter figure to growth of 0.3 percent.

Export growth, capital investment and the tightest labor market in decades have yet to turn into the kind of robust wage gains and consumer spending that could fuel 2 percent inflation. […]

Capital investment has been on the rise for more than a year, but at a slow pace. The first-quarter result was revised higher to an increase of 0.3 percent, up from a preliminary reading of -0.1 percent.

While economic growth is poised to resume, it is expected to be slower than the 1.7 percent achieved in 2017. And the reliance on external demand will leave Japan vulnerable at a time of escalating trade battles. […]