Prior Week Summary
Dovish Federal Reserve sentiment and confirmation of an extended Trump-Xi meeting at the G-20 summit led U.S. equity markets higher on the week and sent the S&P 500 to new all-time highs. The FOMC voted to leave the Federal Funds target range untouched but opened the door to downward policy adjustments in the coming months. Notably, the FOMC removed the word “patient” from the statement released on Wednesday and instead said, “the Committee will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2 percent objective.” As of this writing, the Fed Funds futures market is pricing in a rate cut at the July FOMC meeting as a virtual certainty. Elsewhere, Mario Draghi, President of the European Central Bank, offered similar sentiment noting, “additional stimulus will be required,” if Eurozone economic conditions fail to improve.
President Trump announced on Tuesday that he will hold an “extended meeting” with Chinese President Xi Jinping at the G-20 summit later this month. The announcement energized market participants as there has been little in the way of progress since trade talks broke down in early May. Commerce Secretary Wilbur Ross downplayed hopes of a major breakthrough saying, “I think the most that will come out of the G-20 might be an agreement to actively resume talks.”
The Look Forward
Market participants will be looking forward to the G-20 summit in Osaka, Japan at the end of the week, specifically the Trump-Xi “extended meeting.” Updated figures on new home sales, durable goods orders, first-quarter GDP, and consumer spending dot the economic calendar.
Market Implied Policy Path (Overnight Indexed Swap Rates)
Fixed Income Snapshot
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