Market Update | June 12, 2018

Macro View

Daily Insights

  • A denuclearized North Korea. President Trump’s historical meeting with North Korean leader Kim Jong-Un in Singapore concluded with the signing of a document that states North Korea will work toward complete denuclearization. It also stated a commitment to lasting and stable peace on the Korean peninsula. In return, President Trump vowed the U.S. would end joint military exercises with South Korea. Overall, there is still a long way to go, but clearly these are major steps in the right direction, and given how tense feelings were late last year–a quick and welcome change.
  • Consumer inflation ticks higher ahead of Fed meeting.The year-over-year rate of growth in the consumer price index (CPI), at 2.8%, bested consensus expectations for a 2.7% as energy costs continued to rise. Meanwhile, the core reading, which strips out the more volatile food and energy components, held steady month over month at +2.1% as medical care services and auto prices rose, while growth in transportation costs moderated. Though the CPI is an important gauge for monitoring pricing pressures in the economy, the Federal Reserve’s (Fed) preferred measure, the core personal consumption expenditures index, has not yet breached the 2% level, and today’s CPI reading likely won’t spur the central bank to consider ramping up its pace of rate hikes at this point. However, the data indicate that inflation pressures continue to mount, and we (and the Fed) will continue to monitor it closely.
  • Watching paint dry. The S&P 500 Index traded in a range of only 0.36% yesterday, the lowest since last Monday’s 0.31% range. These are the two smallest intraday ranges all year. Of course, this was ahead of the Trump/Kim Summit, the Fed meeting that starts today, and the European Central Bank (ECB) meeting on Thursday–so a wait-and-see approach made some sense.
  • Fixed income markets also watching paint dry. Like equity markets, fixed income markets were in a neutral positioning mindset heading into a busy week of central bank meetings and important economic data releases, not to mention the U.S.-North Korea summit. Position shifts across rates, breakeven inflation, and rate hike expectations were all little changed and remained relatively neutral. Markets will look to the Fed for clues about future rate hikes and conviction around inflation, while ECB watchers will be looking for information about the potential timing of an end to their asset purchase program.
  • Investment-grade corporates have seen headwinds year to date, but those may fade as interest rate rises become more gradual than they were earlier in the year. A combination of high interest rate sensitivity and weakening supply/demand dynamics have weighed on investment-grade corporates this year. In this week’s Bond Market Perspectives, we dive into what’s behind the weakness and why we think it may be largely behind us.

Monitoring the Week Ahead

Click Here for our detailed Weekly Economic Calendar



  • Fed: FOMC Rate Decision
  • PPI (May)
  • UK: CPI & PPI (May)
  • Eurozone: Industrial Production (Apr)
  • China: Retail Sales (May)
  • China: Industrial Production (May)


  • Weekly Jobless Claims (Jun 9)
  • Retail Sales (May)
  • Germany: CPI (May)
  • France: CPI (May)
  • UK: Retail Sales (May)
  • ECB: Main Refinance Rate
  • BOJ: Policy Balance Rate




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