[Daily Outlook] Goldman Sachs expects emerging market assets to outperform the rest of the world after the dollar hits.
British Prime Minister could face a vote of confidence launched by his party's opposition within days:
Rebel lawmakers in the Conservative Party, the ruling party to which the prime minister belongs, could launch a vote of confidence against him as soon as this week, according to a key ally of British Prime Minister Boris Johnson. The man said the Conservative MP seeking Johnson's removal could be close to securing the 54 votes needed to call for a vote; he insisted, however, that the prime minister is confident he will win any vote. One MP who has been mobilizing against Johnson said they believe the rebels already have the necessary support votes to initiate a vote. According to Conservative Party rules, only Graham Brady, chairman of the 1922 Committee, a group of backbenchers, knows how many MPs have formally called on the prime minister to step down. Once the minimum threshold is reached, Brady's first step is to notify the prime minister. A spokesman for the prime minister would not comment. Johnson has insisted he has no intention of resigning; however, calls for his departure have been building since the release last month of the report of an internal inquiry into illegal parties held in Downing Street during the outbreak.
U.S. nonfarm payrolls add more than expected in May, unemployment rate unchanged at 3.6%.
U.S. nonfarm payrolls added more jobs than expected in May, indicating that businesses remain confident about demand and the economic outlook. Data released Friday by the U.S. Department of Labor showed that nonfarm payrolls rose by 390,000 in May, compared with a revised 436,000 in April. The unemployment rate was unchanged at 3.6 percent and the labor force participation rate edged up. The median forecast of economists surveyed by Bloomberg was for an increase of 318,000, with the unemployment rate falling to 3.5 percent. The report suggests that employers were successful in filling open positions during the month. While Fed policymakers are expected to continue to raise interest rates, rising labor force participation may also help curb wage growth that has added to inflationary pressures. average hourly earnings rose 0.3 percent in May from a year earlier and 5.2 percent from a year earlier, down from a 5.5 percent increase in April. To curb inflation, which has reached multi-decade highs, the Fed has adopted a more aggressive stance on monetary policy and has hinted that it will continue to raise rates by 50 basis points in June and July.
Biden called for confidence in the U.S. economy, but inflation is a scandal.
Following a better-than-expected jobs report, President Joe Biden praised the state of the U.S. economy; but he also acknowledged that it may be overshadowed by the record inflation that is afflicting Americans. "I know that even with today's good news, many Americans are still anxious, and I understand that feeling," Biden said Friday in Rehoboth Beach, Delaware. He added: "There's no denying that high prices, especially for gasoline and food, are a real problem for people. But the American people have every reason to believe that we will meet these challenges head on." Data released Friday by the U.S. Department of Labor showed that nonfarm payrolls rose by 390,000 in May, compared with a revised 436,000 gain in April. The unemployment rate was unchanged at 3.6 percent and the labor force participation rate edged up. The report suggests that the economy is moving ahead while the Federal Reserve is rapidly raising interest rates to curb sizzling inflation. The median estimate of economists surveyed by Bloomberg was for 318,000 jobs to be added in May. The report suggests that the labor market, while still tight, may be shifting from the surge that followed the unsealing of the epidemic to more modest growth.
Bloomberg survey: ECB expected to raise rates slightly from July, with expectations of a 50 basis point increase at a time or falling short:.
According to the results of a Bloomberg survey of economists, the European Central Bank is expected to make multiple small rate hikes, and hawkish policymakers' efforts to push for a single 50-basis-point hike are threatened to fail. According to the survey, the ECB is expected to raise the deposit rate (currently at -0.5%) by 25 basis points in July and 25 basis points in September. While this is in line with ECB President Lagarde's pledge to end negative interest rates in the third quarter, the increase will be less than officials such as Austrian Central Bank President Robert Holzmann expect. Calls for stronger action are gaining momentum as the ECB exits stimulus measures, as eurozone inflation hit another record high in May at 8.1%, more than four times the ECB's target.
Goldman Sachs expects emerging market assets to outperform the rest of the world after the dollar hits.
Goldman Sachs believes emerging economies' stocks, bonds and currencies will benefit from the potential topping of the U.S. dollar. Goldman Sachs strategists Caesar Maasry and Jolene Zhong point out that a key dollar indicator has fallen nearly 3% since its mid-May high, signaling a rebound in developing markets. Developing markets typically outperform the rest of the world in the months following a cyclical top in the dollar. "Dollar weakness cycles tend to favor emerging market assets," they wrote in a report to clients on Thursday, noting the attractiveness of the MSCI China Index as well as emerging markets in Southeast Asia.
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