Daily Market Commentary 27th May 2022

The UK announced a bail-out/fiscal stimulus package designed to assist low income people suffering the record high inflation/cost-of-living, caused by the profligate fiscal spending? The Tory Government is adding further fuel to the inflation (9%CPI) bonfire, while apportioning the blame to greedy large energy companies and the Russian sanctions (that the Government imposed). The Government is the problem here, as they propose to fix their ‘created energy crises’ with fiscal bail-outs, for those who are worst effected, at the margins. The energy crises was triggered by pursuing costly green energy policies, which resulted in lack of reliability and soaring costs, only to be exasperated by imposing sanctions on Europe’s major energy producer. The looming food crises will unfold in exactly the same way.

The stimulus was enough to boost markets in Europe, with the GBP trading up to 1.2600, while the EUR pushed above 1.0700. US equity markets continued to rally, despite some poor economic data. US GDP estimates contracted 1.5%, from 6.9% gains in the previous quarter, while the Kansas City Fed Manufacturing Index also slumped lower. US Pending Home Sales contracted 9.1%, following a slew of bad news in this important leading sector. Economic data is deteriorating rapidly and markets are reflecting that, which questions the validity of the latest bounce in equities?

The NZ Dollar held above 0.6450, following the hawkish MPS, while the AUD drifted below 0.7100. Australian Retail Sales are released today, which could reflect rising inflation and cost-of-living pressures. The Japanese markets will watch inflation, with the release of their own CPI, while NZ watches an important consumer confidence number. Attention in the US will focus on the PCE number, to be released tonight, which is the number the Fed gauges inflationary pressures by.