A late rally saw U.S. Equity Markets finished yesterday’s session with modest losses following the rout of the previous three trading sessions. Although the Dow closed lower by 0.50%, the NASDAQ 100 finished with a small 0.21% gain. All the action was in Bond Markets where the 10-Year closed at multi-year highs with a yield of 3.50%. The U.S. Bureau of Labour Statistics’ Producer Price Index (“PPI”) growth for May was better than anticipated, as it reported its second decline in two months. During the period, PPI numbers rose 10.8% on a year-over-year basis compared with the forecast of 10.9% growth and the month prior’s downwardly revised increase of 10.9%. On a month-over-month basis, the figure jumped 0.5% versus the projected 0.6% rise and April’s gain of 0.2%. So, while the figures were not far off from all-time highs – which were set two months ago – this could signal manufacturing costs may be easing. If this is the case, it could alleviate some concerns among Money Managers. However, the continued increase in manufacturing overhead still supports the Federal Reserve’s decision to tighten monetary policy, as a rising PPI indicates growing consumer costs… even if the rate of growth was lower than projected. Within the S&P 500, nine of the 11 sectors finished lower. European Markets closed lower. Italian economist Francesco Giavazzi, an adviser to Prime Minister Mario Draghi, questioned the plan behind raising interest rates, saying economic demand is not the issue. European Central Bank Governing Council member Peter Kazimir said the regional economy is likely to experience several quarters of weak growth due to high inflation. Germany’s final Consumer Price Index (“CPI”) growth for May was in line with the preliminary reading, as rising energy prices remained the primary driver. The Centre for European Economic Research’s Euro-Zone Economic Confidence Survey for June showed investor pessimism eased as they feel the situation can’t grow worse. The rout in the European Bond Markets has led to the ECB calling an Emergency Meeting to discuss this potential catastrophic event as the ECB hold trillions of Bonds that are carrying massive capital losses. The Bund closed at 1.77% last night which is 2.5% higher that where we were in December. It will be interesting to hear what detailed points they have to offer given how trapped the ECB is at this time. In Asia, Taiwan and U.S. Security Officials were said to be planning meetings later this month to discuss security cooperation and joint military drills. The People’s Bank of China encouraged the nation’s banks to increase loans for water-based infrastructure projects by roughly $119 billion. The Bank of Japan increased its purchase of five- to 10-year sovereign debt from $3.7 billion to $6 billion to stem the recent rise in bond yields. Chinese state-run media outlet China Securities Journal said the government in Beijing is preparing to support the economy with new targeted stimulus measures. Elsewhere, Oil fell 2% on news that India substantially increased its purchases of Russian oil, while Gold closed a further 0.75% lower on continued Dollar strength.
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