The week ahead: the US vs Сhina, inflation, ECB and infrastructure plan

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Except for inflation and a potential nuclear deal between Iran and the United States, negotiations on an infrastructure package have been the main topic of recent weeks. Despite the stubbornness of the Republicans, Joe Biden has not yet abandoned a plan to secure disbursement of up to $ 1.7 trillion. In return, the President proposed abandoning plans to raise corporate tax rates to 28% and instead set a minimum rate of 15%.


Let’s see if this will help in negotiations, in the meantime, we are concerned about another question: is there upside potential for the shares of companies that, in theory, will benefit from the proposed infrastructure development plan? There is a feeling that the principle will work again: “Buy on hearsay, sell on facts”. The US Secretary of Transportation says Democrats and Republicans should have a clear view of the infrastructure plan when they return from vacation on June 7.

Meanwhile, PMI data released last week indicated further economic recovery, although inflationary risks continue to rise. It remains to wait for the data from the US and China, which will be released this week, and we will get a full picture of what is happening. In particular, we will understand how close central banks are to changes in monetary policy.

By the way, this week there will be a meeting of the ECB, where the future of the interest rate will be decided. Even though the latest data indicate a strong recovery, the risks of new foci of coronavirus have not disappeared anywhere. For this reason, we do not expect any changes, at least for now.

Another important topic is relations between the United States and China, or rather their deterioration. At the end of last week, Biden expanded the blacklist on the ban on investments in PRC companies associated with the Chinese armed forces to 59. Among them is one of the world’s largest telecommunications companies Huawei Technologies Co., Ltd, a microelectronics company Semiconductor Manufacturing International Corporation (SMIC), aircraft manufacturer Aviation Industry Corporation of China (AVIC), telecommunications companies China Mobile Communications Group Co., Ltd., China Telecommunications Corporation, China United Network Communications Group Co., Ltd., China Railway Construction Corporation (CRCC ) others.



The week kicks off with the release of data on industrial orders in Germany, house prices in the UK, and China’s trade balance. In addition, the eurozone will present the Sentix investor confidence indicator for June, and the US will report on changes in consumer lending for April.



On Tuesday, data on industrial production for April in Germany, foreign trade balance for April in France and the United States, an index of business sentiment from the ZEW institute for June in Germany and the Eurozone will be released. Additionally, we will get data on GDP and employment for the 1st quarter in the Eurozone, as well as data on the level of open vacancies and labor turnover for April in the United States.



On Wednesday, South Korea’s GDP for Q1, equipment orders for May in Japan, inventories in wholesale warehouses for April in the United States, as well as oil reserves will be published. Besides that, the consumer price index and producer price index for May in China will be released, and the Bank of Canada will announce the decision on the interest rate.



On Thursday, we will know industrial production data in Japan, the number of people employed in the non-agricultural sector for the 2nd quarter, the number of initial claims for unemployment benefits in the US, as well as the volume of industrial production in April in France. Another major development will be the ECB’s decision on interest rates in the euro area in line with the consumer price index for May.



The week will end with retail sales data, the volume of investment in fixed assets, and industrial production for May in China. In the UK GDP, industrial production, manufacturing output, the balance of visible trade, and construction volume for April will be published. In the US, the consumer sentiment index for June will be released, as well as the Baker Hughes report on the number of active oil rigs.


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