Growing US and European markets and falling China amid inflation, company news

• The Fed's revised outlook (smaller rate cuts this year, slightly higher unemployment, higher long-term interest rate) cooled equity, currency and fixed income markets late in the US session on Wednesday. But it was not enough to refute the idea of ​​a US soft landing, and the impact on the market was clear: record highs for the S&P 500, Nasdaq and global stocks, as well as lower US bond yields, the dollar and cross-asset volatility.

- Inflation in the US unexpectedly turned out to be zero in May. +0.1% was expected. This led to a slowdown from 3.4% y/y to 3.3% y/y - the minimum level since April 2021.
- Excluding food and energy prices, inflation increased by 0.2% compared to April and by 3.4% compared to May 2023 - also 0.1% less than expected.
- The main reason for the cooling of inflation is the decline in world oil prices. Just one tenth caused great joy among investors in the stock and bond markets. Overreaction to news is a characteristic feature of financial markets.
- Inflation in Germany rose as expected from 2.2% to 2.4% y/y
- UK GDP grew as expected in April by 0.6% y/y

• Threat of deflation in China. Wednesday's data showed that disinflationary pressures in China and even outright deflation persist, increasing pressure on Beijing for tough fiscal or monetary stimulus. Or both. The cumulative effect on Chinese assets has been noticeable recently: stocks and the yuan have fallen, prompting state-owned banks to sell dollars to shore up the currency and reviving doubts about China as an investment destination. Chinese stocks have lost 5% over the past three weeks, double the loss of the MSCI Asia ex-Japan index and significantly underperform Japan's Nikkei, which was little changed, and U.S. and global stocks, which have risen to new peaks.

• The Fed, as expected, left the discount rate unchanged at 5.25-5.5%. And he raised the average forecast for his rate at the end of 2024 from 4.6% to 5.1%.
I just brought it up to the level of market expectations. Against the backdrop of rising expectations for core PCE inflation from 2.6% to 2.8%. Powell said the Fed is prepared to cut rates if inflation falls quickly.

• Bloomberg: China's appetite for foreign wheat and corn is plummeting. This is likely to put pressure on global grain markets.
In general, China has recently reduced its purchases of various raw materials on the world market.

• The EU will introduce tariffs on Chinese electric cars of up to 38% from July 4th. The Chinese Chamber of Commerce in the EU expressed its "shock, deep disappointment and deep dissatisfaction with this protectionist measure" and condemned the anti-subsidy investigation as a "witch hunt." She added that tariffs would be a "major market barrier." According to Politico, the tariffs raise the immediate prospect of a full-scale trade war between the EU and China after Beijing launched an investigation into European alcohol producers and threatened retribution against EU farmers and aircraft companies.
Chinese Tesla cars will receive an individual import duty rate.

• Shares of electric vehicle division Evergrande (China) fell after the order to return subsidies - WSJ. Chinese authorities have ordered Evergrande Auto to return government subsidies due to failure to fulfill contractual obligations. The company warned that it could face the seizure of some assets.

• Umicore lowered forecast due to slowing demand for electric vehicles - WSJ. Umicore now expects earnings from its battery business to be around breakeven in 2024, with volumes the same or slightly lower than last year.
The group's profit forecasts were also downgraded.

• World oil markets will become surplus by the end of the decade - IEA. Global oil markets are expected to face significant surpluses by the end of this decade, with spare capacity reaching levels seen only in the early stages of the pandemic, as demand growth slows and supply increases, the International Energy Agency says.

• Apple (AAPL)'s market capitalization increased by $215 billion. The stock topped the S&P 500 for the first time in many years. Apple again became the most valuable company in the world, displacing Microsoft from first place.

• Mastercard (MA) is launching its biometric retail payments system in Europe, using Poland as a test bed - ZeroHedge.

• The heads of US corporations Microsoft and BlackRock will take part in negotiations on infrastructure development during the Group of Seven (G7) summit in southern Italy on Thursday - Reuters. This was reported by two sources familiar with the matter. It is expected that the session will be devoted to the development of Africa - one of the key topics of the G7 leaders' summit. Is there a coming war between the West and China for African raw materials and people?

• Elon Musk made Twitter likes private. Now users can only see a list of their likes and who liked their posts.

• FedEx (FDX) is laying off 1,700 to 2,000 workers in Europe to save $175 million a year. But layoffs will begin only in 2027.

• SPCE will do a reverse split of 1 for 20. The stock has fallen too far. Unpleasant for shareholders. Shares are down less than 10% in premarket trading.

• Broadcom (AVGO) shares rise 15% after the report. The company will conduct a 10-for-1 stock split on July 12. The company has beaten forecasts and is benefiting from AI.

• The US stock market rose after data on slowing inflation. But mostly only in AI and growth stocks. And also in small capitalization, depending on the dynamics of interest rates.

• Value stocks were weak.

• In the morning, despite the reduction in rates, non-ferrous and precious metals become cheaper.

Today
- Tesla (TSLA) will hold its highly anticipated annual meeting. Shareholders will vote on twelve proposals, including approval of Elon Musk's $56 billion compensation package in 2018.
- Mondelez International (MDLZ), Costco (COST) and Restaurant Brands International (QSR) will hold conversations at the Evercore ISI Consumer & Retail conference.
- The May report on the US Producer Price Index will be published.
- Federal Reserve Bank of New York President John Williams will moderate a discussion at the Economic Club of New York.
- Fed Representative Williams will interview Treasury Secretary Yellen.