US EARLY MORNING: Index futures are inching upwards; Biden pledges to boost affordability, productivity, fix supply chains, reduce the deficit and reform the tax code

US equity futures are trading flattish (NQ +0.4%, YM 0.0%, ES 0.0%, RTY 0.0%) after the long-weekend. Overnight, Asia-Pac stocks were mixed at month-end amid a data deluge, including Chinese PMIs (which we recap on below), while the start in Europe has been cautious as EU leaders agree on a plan to ban Russian seaborn oil imports (pipeline exports will not be banned at this stage), which could add an inflationary impulse ahead. Today, Eurozone CPI data will be eyed ahead of next week’s ECB meeting, where officials have been pivoting to a more hawkish stance recently. More domestically in the US, many desks are now beginning to talk about an inflection point where the bearishness seen in recent weeks -- characterised by downside in risk assets as growth projections are cut amid warnings of recession, lowering earnings estimates and price targets -- may be at a turning point. Indeed, JPMorgan tells its clients that the Growth-Policy trade off could become less problematic in the second half of the year. “Relative to what are now commonplace downbeat growth projections, the scope for downside surprise is perhaps diminishing, especially if China support ramps up,” the bank writes, “at the same time, our call of the Fed reaching peak hawkishness relative to what is priced into the futures already, is starting to see traction, with bond yields that are lower, as well as lower Fed futures, and CPI rates are projected to be peaking.” In terms of the implications for US equities, the bank says it has been less comfortable with the US than other markets like the UK, given the heavy Growth tilt in US indices; JPM told its clients that it was maintaining its call for overweighting Value over Growth. “The US still trades less attractively than International stocks, but we do think that in the second half of the year, US equities will be able to move up in absolute terms, and sees the “regional convergence” trade continuing. Ahead German unemployment and Eurozone CPI for May are the highlights ahead of next week’s ECB confab; the North American day sees the release of monthly GDP data out of Canada, house price data out of the US, the Chicago PMI and US consumer confidence. Full Day Ahead calendar can be accessed here.

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31 May 2022 - 09:27- EquitiesData- Source: Newsquawk

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