Weekly Outlook: Federal Reserve interest rate decision

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10 June 2024

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Christian Mayes

Monday 10 June

Japanese Q1 GDP growth

Tuesday 11 June

Full-year results from Oxford Instruments and FirstGroup
UK unemployment and job vacancies
UK wage growth
In Europe, quarterly results from Colruyt
In the USA, quarterly results from Oracle and GameStop

Wednesday 12 June

Full-year results from Molten Ventures
First-half results from Safestore
Trading statement from WH Smith
UK manufacturing, construction and industrial output
Chinese consumer price inflation
US consumer price inflation
US oil inventories
In the US, quarterly results from Broadcom
Federal Reserve interest rate decision

On Wednesday, the Federal Open Market Committee (FOMC) will announce its interest rate decision for June. The fourth meeting of the year is expected to once again end with the Fed Funds rate staying at 5.5%.

AJ Bell investment director Russ Mould, head of financial analysis Danni Hewson, and investment analyst Dan Coatsworth said: “The wait for the first, elusive reduction in headline borrowing costs continues, especially as financial markets began 2024 expecting six rate cuts from the Fed, down to 4% by the end of the year, with the first of those coming in March.

“Those expectations have been scaled right back, and markets now see two cuts in 2024, down to 5%, with the first one coming in at the sixth FOMC meeting of the year in September.

“However, even here conviction levels are not especially high. The US two-year Treasury yield has a fair track record of moving some six-to-nine months ahead of the Fed and it stands at 4.79%, a level which implies three, one-quarter point cuts in the next 24 months.”

Thursday 13 June

Full-year results from Fuller Smith & Turner and GB Group
First-half results from Virgin Money UK
UK RICS house price index
German wholesale price inflation
US producer price inflation
US weekly initial unemployment claims
In the US, quarterly results from Adobe, Kroger, Jabil and Signet Jewelers
Crest Nicholson first-half results

Housebuilder Crest Nicolson will report their first-half results on Thursday, just 10 days after Martyn Clark took on the role of CEO, replacing Peter Truscott.

The results also come a week before the next Monetary Policy Committee meeting on 20 June, with housing a sector that is particularly sensitive to interest rates.

“Shares in the quoted housebuilders have – generally – been strong performers in the past year, despite the UK economy’s turgid performance. This may, in many cases, be down to hopes for interest rate cuts or policy initiatives from whichever political party forms the government after July’s general election,” said the AJ Bell trio.

“Only Barratt Developments and Crest Nicholson have lagged the FTSE All-Share over the past year – the former thanks to its all-stock bid for Redrow, the latter owing to ongoing operational problems.

“This makes the timing of the first-half results from Crest Nicholson particularly interesting and the FTSE 250 index member’s figures for the six-month period to the end of April will be released on Thursday 13 June, just ten days after Martyn Clark’s arrival as chief executive officer. He replaces Peter Truscott, who has been the boss since 2019 and during his time in charge reshaped Crest Nicholson’s strategy and oversaw an efficiency drive that was a response to both poor operational and financial performance and also how higher interest rates (and mortgage costs) have hit demand.

“Crest Nicholson’s shares are down a fraction over the past year, and they trade at barely half of their pre-pandemic high. The company’s shares actually peaked in 2017, well before the pandemic and well before the end of Help-to-Buy, higher input cost inflation and higher mortgage costs.

“That reflects the string of operational miscues at the builder, whose operating margins have long come in below those of its peer group, to rather create the impression that it has been unable to get out of its own way, despite the best efforts of Mr Truscott and his colleagues.”