Weekly outlook: Fed leads trio of central bank reports amid slew of inflation data

The key events for UK wealth managers for the week starting 17 June

Monday 17 June

-Scottish Investment Trust interim results

Tuesday 18 June

– Ashtead final results

– German and European ZEW monthly economic confidence indicator

– European monthly inflation figures

– US housing permits and housing starts data

Wednesday 19 June

– Berkeley Group Holdings results

– Aim-listed robotics business Blue Prism reports

– Whitbread trading update

– UK core inflation rate

– Federal Reserve interest rate decision

Citing data from the CME Fedwatch service, AJ Bell’s Russ Mould notes markets are only putting a 20% chance on a rate cut from the current 2.5% level at the next meeting. But analysts are forecasting a 98% chance of at least one cut by December, an 87% chance or two or more and a 50% chance of three or more, he adds.

Mould says: “In theory lower rates will lower returns on cash, drag bond yields down and drive money into equities. But it doesn’t always work like this – Fed cuts did not stop stock market collapses in 2000-03 and 2007-09 because the economy and corporate earnings tanked at the same time.”

Thursday 20 June

– UK retail sales

– Bank of England MPC meeting

– Bank of Japan interest rate decision

Neither central bank is expected to change course on monetary policy and raise rates but Mould says economists will nevertheless listen closely to any comments from governors Haruhiko Kuroda and Mark Carney to get a steer on their respective markets.

“Amid the uncertainty of Brexit and the Tory leadership campaign, there are mixed signs from our economy where good unemployment and wage inflation numbers have been somewhat undone by poor manufacturing figures and a perception that UK Plc is holding back on investment for the time being,” notes Interactive Investor head of markets Richard Hunter.

The BoE has not added to its £445bn quantitative easing scheme for some time, Mould notes, though the BoJ is running its QE policy “flat out” at ¥80trn a year.

“The Bank of Japan has to think about the possible effects upon the Japanese economy of a planned increase in consumption tax to 10% from 8% this autumn and the Bank of England is still wrestling with the possible implications of Brexit, above and beyond wider global trade and growth worries.”

Friday 21 June

– US existing homes sales

– EU Manufacturing and Services PMI data

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