Geopolitics largely dominated the tape on Friday, as Israel’s attack on Iran took all the headlines and the fallout thereafter. As such, US indices saw heavy selling pressure before closing around lows of Friday’s session, while the Dollar gained to the detriment of all G10 FX peers, ex-CAD & NOK which were supported by rising oil prices. Antipodeans were the G10 laggards given the risk-off sentiment. As expected, given the Middle East escalation, WTI and Brent soared to highs of USD 77.62/bbl and 78.50, respectively, albeit they currently sit off these levels. Treasuries were initially bid after Israel’s attack overnight, but as the session progressed, they fell foul to the inflationary picture amid the surging oil prices. Elsewhere, sectors are lower across the board, aside from Energy, which is buoyed in wake of the aforementioned news. Said geopolitics was the only thing of note to end the week with attention on any updates over the weekend ahead of the FOMC on Wednesday. Do note, the Preliminary University of Michigan Consumer Survey for June was strong across the board as all three readings (sentiment, conditions, expectations) topped expectations and above the upper end of the forecast range. Within it, 1 Year inflation expectations also tumbled to 5.1% from 6.6%, and 5 Year ticked lower to 4.1% from 4.2%. While there has been a deluge of geopolitical updates, overnight/through the day, briefly recapping – Israel attacked Iran’s nuclear facilities overnight, and continued throughout the day, killing senior military figures and nuclear scientists. Israel informed the US before the strikes, but the US maintain they were not involved and Iran says they were. In response, US President Trump has urged Iran to make a deal on its nuclear programme, warning of “even more brutal” Israeli attacks, and there is more to come from them, a lot more. More recently, Iran began its response to Israel the IDF said less than 100 missiles were fired from Iran in the barrages, and most were intercepted. Following the initial Iran response, Supreme Leader Khamenei said Israel will not remain unscathed and Tehran will not go for half measures in its response. Further still, an Iranian Senior official said that nowhere in Israel will be safe and its revenge will be painful. As such, all attention over the weekend will be on any responses and further escalations. Post-Iran’s attack, Israel said it would respond to the Iranian bombing by targeting civilian areas, according to Channel 12 quoting Israeli officials. The Prelim University of Michigan for June topped expectations across the board, with all three (conditions, expectations, sentiment) all printing outside the top end of the forecast range. Sentiment and Conditions rose to 60.5 (exp. 53.5, prev. 52.2) and 63.7 (exp. 59.4, prev. 58.9), respectively, while Expectations jumped into expansionary territory printing 58.4 (exp. 49.0, prev. 58.9). Looking at inflation expectations, 1yr plunged lower to 5.1% from 6.6%, while the longer-term 5yr ticked down to 4.1% from 4.2%. Within the release, Surveys of Consumers Director Joanne Hsu notes that “consumers appear to have settled somewhat from the shock of the extremely high tariffs announced in April and the policy volatility seen in the weeks that followed. However, consumers still perceive wide-ranging downside risks to the economy.” In addition, she adds consumers’ views of business conditions, personal finances, buying conditions for big-ticket items, labour markets, and stock markets all remain well below six months ago in December 2024. In May, PPI was largely cooler than expected, but not without upward revisions to the April figures. Core M/M rose by 0.1%, below the expected 0.3% (prev. -0.4%, rev. -0.2%), core Y/Y rose by 3.0%, shy of the expected 3.1% (prev. 3.1%, rev. 3.2%), and headline M/M rose by 0.1% (exp. 0.2%, prev. -0.5%, rev. -0.2%). Meanwhile, headline Y/Y matched expectations of 2.6% with the prior revised to 2.5% from 2.4%. The report adds to the soft inflationary theme seen in CPI earlier in the week, but similar to the April PPI report, upward revisions continued. Nonetheless, Fed pricing took another slight dovish turn, with money markets views of two Fed 25bps rate cuts solidifying. The PPI components that feed into PCE varied M/M. Acceleration was seen in Physician care, 0.2% (prev. 0.1%), and the rate of decline slowed, particularly in portfolio management and airline passenger services; portfolio management -1.0% (prev. -7.1%), airline passenger services -1.1% (prev. -1.8%). Hospital outpatient care fell M/M by 0.3% (prev. 0.6%), inpatient care was flat (prev. 0.4%), nursing home care was 0.2% (prev. 0.4%), and home health, hospice care was 0.0% (prev. 0.2%). Post PPI, Pantheon Macroeconomics suggest CPI and PPI imply the core PCE deflator rose by 0.12% in May, and “look for hefty increases in the core PCE deflator of 0.4% in June and 0.3% in July, followed by a run of increases averaging 0.25% over the remainder of the year”. GS note based on the details in the PPI and CPI reports, they estimate that the core PCE price index rose 0.14% in May (vs. 0.18% prior to PPI), corresponding to a Y/Y rate of +2.58%. Additionally, GS expect headline PCE price index increased 0.10% in May, or increased 2.26% Y/Y. Elsewhere, Oil surged 7.26% while Gold also closed higher by 2%.
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For anyone following my Platinum Service it made 172 points on Friday and is now ahead by 2811 points for June, having closed May with a gain of 3606 points, after closing April with a gain of 7685 points after closing March with a gain of 2254 points while closing February with a gain of 4180 points. January ended with a gain of 2768 points while 1997 points were gained in December. October ended with a gain of 2179 points, after closing September with a gain of 4402 points, following a loss of 301 points in August. July gained 1908 points while June saw a gain of 2074 points. The Platinum Service made a record 9619 points in October 2022. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 2300 points. I have a YouTube Channel which contains recent interviews I have given This can be viewed by clicking HERE Please subscribe to this for new interview notification
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