A leading indicator of German investor confidence was expected to continue its slide after news of both Germany and the Eurozone entering technical recession in the first quarter.

An economists’ poll predicted that the forward-looking economic sentiment reading from this month’s survey conducted by Germany’s ZEW economic institute will drop to -14.0 points from the -10.7 reading reported in May. The institute’s current conditions indicator is forecast to slip to -37.5 from -32.5.

“Financial markets’ sentiment continues in a gradual slide since the Silver Valley Bank collapse, although the banking sector turmoil proves to be more of a slow burner rather than an outright crisis,” Oxford Economics said in a note. “The decline in sentiment is being driven by the expectations component [a measure for the next six months], although with growth in the Eurozone visibly losing momentum, the current situation assessment is likely to decline. Equity prices have stabilised and are up year-to-date, but we think there’s a lack of any clear driver of a sustained rally in equities, and instead expect a small decline in the rest of 2023.”

(Continue Reading - LiveSquawk)

Market pricing has shifted massively over recent weeks, but we think the most likely outcome remains the Fed leaving policy rates unchanged on 14 June. There will be some dissent and a shock inflation reading could make it a very close decision. Either way, the Fed will leave the door open to further rate moves

Just over a month ago, Federal Reserve Chair Jerome Powell hinted that after 500bp of rate hikes over a 14 month period, interest rates may finally have entered restrictive territory and the Fed could pause at the June meeting to take some time to evaluate the effects.

Markets took this as a signal that we may already be at the peak with the fear that the combination of high borrowing costs and tighter lending conditions could prompt a recession with inflation falling swiftly back towards target. On 4 May, Fed funds futures contracts were pricing in 86bp of interest rate cuts by year end and the target range heading below 4% at the January 2024 FOMC meeting.

(Continue Reading - ING)

The euro zone has slipped into recession and Chinese data has disappointed, warning signs for world markets relieved that the March banking turmoil has not led to a full on credit-crunch and a U.S. debt ceiling crisis has been averted.

“We are heading for a downturn and it varies region to region,” said Benjamin Jones, director of macro research at Invesco. “There’s a lot of debate and my degree of confidence is quite low.”

(Continue Reading - Reuters)