Aborted Mutiny 

The aborted mutiny in Russia underscores weaknesses in the Putin regime and illustrates that there are probably a range of ways this conflict could end sooner than we had thought before. Oil initially rose a touch but didn’t gap up as it was all over by the time it had started, and then headed lower as growth fears seemed to take hold as Europe opened in risk-off mode. Stocks are weaker this morning, with the main bourses in Europe down around half a percent in early trade having fallen last week to the tune of 2%. Wall Street closed lower on Friday to break a good run. The S&P 500 and Nasdaq both declined 1.4%, ending five and eight consecutive weeks of gains respectively.   

Inflation Story 

Away from Ukraine and Russia, this week is all about inflation – central banks are struggling to tame it and might need to accept it is higher for longer. Whether mandates explicitly change or not, they are not throwing the kitchen sink at getting core inflation down from 4% to 2%. The first major inflation gauge arrives in the shape of BoJ core CPI numbers on Tuesday, which is followed later by Canada’s CPI estimates. Japan’s core CPI is seen up 3.1% from 3.0%, whilst Canada’s is expected at +0.5% month-on-month, slowing from +0.7%. US durable goods orders numbers for May will be a major focus after these unexpectedly rebounded in April, indicating the US may not be as close to recession as some fear.  

RBA to Pause? 

Over to Australia for the latest CPI update on Wednesday. The reading will be important for steering market expectations for the Reserve Bank of Australia’s next move. Minutes for June 6th meeting showed the rate hike was a finely balanced decision and the RBA is still considering a pause. Also on Wednesday we hear from Bank of England governor Bailey, Fed chair Powell and BoJ governor Ueda at the central bank gathering in Sintra, Portugal.  

Eurozone Inflation 

More inflation on Thursday as we move to Germany’s preliminary CPI report. German producer price inflation declined to just 1%, its lowest since January 2021. Will Europe see consumer inflation normalise this year? Spain’s flash CPI numbers are also due up before the ECB’s latest economic bulletin. Later in the session we get the final Q1 GDP reading for the US. The Commerce Department is expected to confirm the US economy grew by 1.3% in the first quarter after revising its estimate up 0.2 percentage points. US weekly unemployment claims figures are also important after rising above 260,000 for the last three weeks.  

US PCE 

More Japanese inflation data arrives on Friday with the closely watched Tokyo core CPI reading for June. Core-core inflation, which strips out fresh food and fuel costs, rose to 3.9% in May, the highest since 1982. Will sticky core inflation force the Bank of Japan to do anything? Chinese manufacturing and non-manufacturing PMIs are due, with signs of contraction in the world’s second-largest economy worrying investors. Finally, the big release of the week is the US core PCE inflation index, which four weeks ago edged higher to 4.7% from 4.6%. Markets know the Fed thinks it will need to hike again – but softer inflation might change the calculation.