Macro Roundup (Jun 24)

SHANGHAI, Jun 24 (SMM) —This is a roundup of global macroeconomic news last night and what is expected today.

The dollar ended higher on Wednesday as two Federal Reserve officials said that a period of high inflation in the United States could last longer than anticipated, a day after Fed Chair Jerome Powell played down rising price pressures.

Atlanta Fed President Raphael Bostic said with growth surging to an estimated 7% this year and inflation well above the Fed’s 2% target, he now expects interest rates will need to rise in late 2022.

Both Bostic and Fed Governor Michelle Bowman on Wednesday said that while they largely agree recent price increases will prove temporary, they also feel it may take longer than anticipated for them to fade.

But Powell on Tuesday said that prices are rising due to a “perfect storm” of rising demand for goods and services and bottlenecks in supplying them as the economy reopens from the pandemic and that those price pressures should ease on their own.

On Wall Street, stock futures opened flat in overnight trading after the market’s comeback rally hit a speedbump on Wednesday.

Futures on the Dow Jones Industrial Average added 44 points, or 0.13%. S&P 500 futures ticked 0.09% higher and Nasdaq 100 futures edged up 0.12%.

The S&P 500 snapped a two-day winning streak Wednesday, closing the regular session 0.1% lower. The Dow also shed 71.34 points, or 0.2%. Meanwhile, the Nasdaq Composite gained 0.1% to squeeze out another record closing high.

Eight out of 11 S&P 500 sectors closed in the red, led by utilities, which dropped 1.1%. However, energy names like Exxon Mobil, Occidental Petroleum and Devon Energy rose as oil prices continued to climb. Technology names like Tesla and Netflix also closed higher.

Oil prices rose on Wednesday, with Brent climbing above $76 a barrel to its highest since late 2018, after data showed US crude inventories declined as travel picks up.

US crude inventories fell by 7.6 million barrels last week to 459.1 million barrels, the US Energy Information Administration said, a much steeper drawdown than the 3.9 million barrels that analysts had expected in a Reuters poll.

Stockpiles at Cushing, Oklahoma, the delivery point for US crude futures, fell by 1.8 million barrels to the lowest since March 2020. Gasoline demand also edged higher last week.

Gold gained on Wednesday, lifted by soothing words from Federal Reserve Chair Jerome Powell who said inflation would not be the only determinant of interest rate decisions and the central bank would not rush into hiking interest rates.

Spot gold rose 0.3% to $1,782.96 per ounce by 1:42 p.m. EDT (1742 GMT). US gold futures settled up 0.3% at $1,783.40.

Powell’s words on Tuesday calmed investors who had worried about policy tightening following last week’s hawkish turn by the Fed.

Still, the precious metal has failed to reverse last week’s 6% drop as expectations of Fed policy tightening have taken hold in markets. Higher interest rates translate into a reduced opportunity cost of holding bullion, which pays no interest.

The pan-European Stoxx 600 provisionally ended the session down about 0.6%, with utilities stocks falling 1.4% to lead losses as most sectors and major bourses slipped into negative territory.

The first reading of June’s activity in the services and manufacturing sectors in the euro zone showed business growth accelerating at its quickest rate in 15 years, as pent-up demand is unleashed by the easing of lockdown measures across the single currency bloc.

Bitcoin is also in focus for investors given its volatile session on Tuesday, with the cryptocurrency at one point dipping below $30,000 and erasing its gains for 2021.

But bitcoin ultimately recouped its losses Tuesday and was trading back above $34,000 Wednesday afternoon, up 7%.