Stocks and Bonds rally, despite inflationary signals

Macroeconomic/ geopolitical developments

• US CPI data was higher than expectations, with the headline data posting at 5% year-on-year for May, at its fastest pace since August 2008, with the core rate at 3.8%, its highest for nearly three decades.
• But Bond markets and stock indices shrugged off this data, with moves to lower yields and higher share prices respectively.
• On Thursday the ECB did not signal when it aims to begin lessening the stimulus program in response to the COVID-19 pandemic.
• ECB President Lagarde also stated “Headline inflation is expected to remain below our aim over the projection horizon”.

Global financial market developments

• Global stock averages pushed higher last week with the S&P 500 and the DAX positing new record levels
• Big Tech continued to rebound.
• US 10yr (and global) yields moved lower, despite the high US CPI data.
• The US Dollar Index rebounded gain from above key support, though lost ground on Friday.
• EURUS and GBPUSD have reinforced =topping patters having been capped below key resistance.
• Gold pushed lower, increasing topping threat
• Oil has extended even higher.
• Copper was sideways, again highlighting a topping threat.
• Global stock averages pushed higher last week with the S&P 500 and the DAX positing new record levels
• Big Tech continued to rebound.
• US 10yr (and global) yields moved lower, despite the high US CPI data.
• The US Dollar Index rebounded gain from above key support, though lost ground on Friday.
• EURUS and GBPUSD have reinforced =topping patters having been capped below key resistance.
• Gold pushed lower, increasing topping threat
• Oil has extended even higher.
• Copper was sideways, again highlighting a topping threat.

Key this week

• Geopolitics:
  • Still looking for further easings of lockdown measures, particularly in Europe.
  • Monitoring COVID-19 cases, hospitalisations and deaths globally, alongside the spread of the Delta variant in the UK and Europe.
• Central Bank Watch:  We get the US Federal Open Market Committee (FOMC) interest rate decision and statement on Wednesday and the Bank of Japan (BoJ) interest rate decision, statement and press conference on Friday.
• Macroeconomic data: Data standouts this week are UK employment and Retail Sales, German and EU CPI, US PPI and Retail Sales.

Steve Miley (The Market Chartist)

Editor in chief

Steve Miley is the Market Chartist and has 32 years of financial market experience and as a seasoned expert now has many responsibilities. He is the founder, Director and Primary Analyst at The Mar... Continued