Determined to fight against inflation, the US central bank will begin the process of deflating its balance sheet. Operators will also be sensitive to the PMI indices published in Europe and China, and to the American ISM.
The Fed’s “quantitative tightening” is launched | Photo credits: Federal Reserve / Public Domain Mark 1.0
Wednesday 1er June 2022 will mark. As of this day, the US Federal Reserve (Fed) will begin to reduce the size of its balance sheet.From 9,000 billion dollars, it will initially deflate by 47.5 billion per month, the Fed ceasing to reinvest the falls from its portfolio of government bonds and real estate securitizations (mortgage-backed securities, MBS) up to 30 billion and 17.5 billion respectively. After three months, the reduction will increase to 95 billion dollars per month (60 billion T-Bonds and 35 billion MBS). By reducing its balance sheet and raising its interest rates, the central bank hopes to curb inflation, which peaked at 8.3% over one year in April. This Wednesday, the Fed will be doubly maneuvering since it will publish, at 8 p.m. (Paris time), its Beige Book. This document will give a more complete view of the conditions of activity within the 12 districts of the Fed. The American agenda is not limited to these two meetings. Operators will also become aware of theISM manufacturing index for May (consensus: 54.5, compared to 55.4 in April), Department of Energy Weekly Petroleum Inventories and construction spending in april (consensus: +0.7% over one month).
Under 50 in China
On the Old Continent, investors will be sensitive to Final manufacturing PMI indices for May in the euro zone and the United Kingdom, which will be published in the morning. As a preliminary estimate, the statistics in the euro zone fell from 55.5 in April to 54.4 in May, below expectations and the lowest level since November 2020. In China, the manufacturing PMI index calculated by Caixin/Markit will be unveiled overnight. It should settle at 49, against 46 in April. The official index, published on Tuesday, stood at 49.6, below the 50 mark, which serves as the border between the contraction zone and the expansion phase of activity. Finally, the market will take a look at the registrations of new vehicles in May in France.
On the values front, Catana Group and Netgem will publish their first-half results.
PC