Summary of institutions' views on financial markets on June 1

On June 1, institutions summarized the outlook for the stock market, commodities, foreign exchange and central bank policy:



1. Barclays looks forward to the Bank of Canada interest rate decision: it is expected to raise interest rates by 50 basis points and said it will continue to raise interest rates
The Bank of Canada is expected to raise rates by 50 basis points to 1.50%. The announcement is expected to make clear the need for continued interest rate hikes with the economy running in excess of demand and inflation persistently well above target. A surprise 75 basis point rate hike is unlikely as officials at the bank do not explicitly support the idea of a larger rate hike, while renewed global growth concerns have reduced the urgency for a tougher stance from core central banks. The bank is expected to maintain the pace of 50 basis points of rate hikes in July. While the bar for a hawkish surprise rate hike to lift the CAD is high, we maintain a constructive medium-term view on the CAD and continue to expect a gradual decline in the US and Canada

2. CITIC Securities: Chinese stocks are expected to continue to outperform the U.S. stock market
CITIC Securities pointed out that the domestic epidemic situation has begun to improve, and the vigorous promotion of stable growth policies and the normalization of Internet supervision will accelerate the recovery of market confidence. Due to the deviation of policies and fundamental trends and superimposed valuation advantages, we judge that Chinese stocks are expected to continue to outperform the US stock market. It is recommended to pay attention to stable growth, the main line of post-epidemic recovery, the Internet of Hong Kong stocks and high dividend targets

3. Citi: Bearish sentiment on US stocks has peaked ① Citi analysts Scott Chronert and Drew Pettit released a report on Tuesday that the bearish sentiment on US stocks has peaked. As a result, investors' attention will now turn to individual company earnings results and forecasts. Citi analysts, whose views are based on positioning data, say some investors have shifted portfolios to prepare for an eventual recession. They also said that much of the sell-off on fears of rate hikes and a recession has been completed;
② According to the view of the report, investors will focus on individual stocks rather than macro factors, and refocus on the fundamentals of individual companies. Chronert and Pettit argue that volatility in the stock market will move more along single-stock paths. Expect to see more of this as the second-quarter earnings season approaches. Investors will also be looking at individual companies' earnings and forecasts for 2023. They pointed out: There may be risks to the company's future earnings, and we must recognize that future earnings data, especially in 2023, may not reduce the risk as much as the valuation.

4. DNB Markets analyst: Oil prices rise as EU bans imports of Russian oil
Oil prices rose after EU leaders agreed to back a ban on Russian oil imports. Brent crude oil rose as much as 1.7% to $119.59 a barrel; WTI crude oil rose as much as 3.2% to $118.76 a barrel. And the ban could halt at least 3.5 million barrels a day of oil purchases and could cause serious disruption to Russia’s energy flows. It will be a major challenge for Russia to find other buyers for such a large oil stockpile

5. Morgan Stanley: Economic growth risks remain unabated, and U.S. stocks have limited room for this round of rebound
① Morgan Stanley strategist Michael Wilson said that as risks to economic growth remain significant, there is limited room for a rebound in the U.S. stock market. Wilson said last week's firm move was ultimately just another bear market rally. The key fundamentals we are focusing on now are the economic slowdown and we believe earnings valuations are too high;
② Morgan Stanley expects the S&P 500 to rebound up to 4,250 to 4,300 points in this round, 3.4% higher than Friday's closing level. The Nasdaq and small-cap stocks can have relatively large percentage gains, as is often the case in such situations. Wilson remains one of the most high-profile bears on Wall Street and also accurately predicted the latest wave of selling. He expects the S&P 500 to trade around 3,400 by the end of the second-quarter earnings season in mid-August, 18% below its recent close;
③ Wilson wrote that the main reason for thinking that this rally is not just an oversold rally is that the Fed may consider sitting on hold in September, but inflation is still too high for the Fed to be satisfied, so no matter how investors hope for a turn, Not enough to change the downtrend of the stock market

6. Standard Chartered Bank: Bank of Mexico is expected to raise interest rates by 75 basis points in June

7. Barclays: The European Central Bank is expected to raise interest rates by 175 basis points next year, which will be the bank's most aggressive tightening cycle since 2000

8. Citi: Recession risk hangs over global economy, Brent crude fair value near $70
Ed Morse, global head of commodities research at Citigroup, said demand for oil and refined products is falling as the economy faces recession risk. While Brent crude futures are currently trading around $120 a barrel, their fair value is in the $70/barrel range. Analysts continue to adjust demand forecasts for signs of an economic slowdown;
Citi's head of commodities, Ed Morse, cited the prospect of a global recession and a lack of demand growth as reasons to be bearish on crude. This is a big difference if the refining system is under pressure. The world is at risk of recession and demand growth for diesel will not be strong. Citi lowered its oil demand forecast to 2.2 million bpd from 3.6 million bpd at the start of the year

9. Commerzbank analyst Daniel Briesemann: Gold is facing resistance from a stronger dollar and a significant rise in bond yields

10. David Meger, head of metals trading at High Ridge Futures: The market is expecting that Biden may push the Fed to do more to combat inflationary pressures, and as a result we see the dollar is fairly stable and the gold market is slightly stressed

11. Goldman Sachs: EUR/USD to jump 1.10 in coming months
Goldman Sachs FX strategists said they intend to maintain their medium-term optimism on EUR/USD, expecting EUR/USD to jump 1.10 in the coming months
The analysts also said that the ECB's imminent exit from negative rates would have a materially positive impact on fixed income flows, as the incentive to hold euro zone bonds improved, supporting the euro for some time.

12. Moody's Senior Economist Kamil Kovar: Euro zone inflation soars in May, the possibility of the ECB raising interest rates increases
Euro zone goods and services inflation continues to exceed the ECB's target. The preliminary annual rate of CPI in the euro zone in May was recorded at 8.1%, a new record high. Energy prices climbed again to push inflation higher, while food prices also rose strongly. Given the underlying trend, inflation in the euro zone will peak by the end of the summer. Overall, the euro zone's May CPI data added to the certainty that the ECB will raise interest rates in July, which, if in line with expectations, would be the bank's first rate hike in more than a decade.

13. United Overseas Bank: Singapore's industrial production outlook remains solid
UOB economist Barnabas Gan believes that global trade recovery and the gradual reopening of borders in Asia have boosted the overall growth momentum of Singapore's manufacturing industry. The transportation engineering cluster played a large lead, growing 17.2% year-on-year in April 2022, helped by higher aircraft parts production and maintenance demand from commercial airlines. Strong demand in the semiconductor sector has also underpinned industries such as electronics and precision engineering. We expect manufacturing to grow by an average of 4.0% for the full year of 2022. This shows that despite a high base for growth in 2021, global trade activity is expected to remain active in the year ahead

14. Bert Colijn, Senior Eurozone Economist at ING Bank: EU Oil Sanctions Will Delay Eurozone Inflation Decline Core inflation in the euro zone has picked up, with headline inflation hitting a record high of 8.1% in May. Oil prices continued to rise in May, while EU sanctions on Russian seaborne oil announced on Monday intensified expectations that oil prices will remain high, which will delay the decline in headline inflation in the euro zone, especially as food and core inflation are also on the rise.

15. Oxford Economics: Eurozone inflation is about to peak, but upside risks remain
Eurozone inflation should peak in the next two to three months, but EU ban on Russian oil has brought Further price pressure, which could keep inflation at higher levels for longer. Euro zone inflation is expected to gradually decline in the second half of the year, with a more pronounced decline next year, when energy prices are expected to fall from current levels. Headline and core inflation are expected to fall below 2% in 2023, said Fabiani, assistant economist at Oxford Economics.

16. Rabobank: Russian oil embargo could push euro zone into recession
A ban on Russian shipping oil, combined with already high inflation and massive supply chain pressures, will push the euro zone into recession. Rabobank expects the euro zone economy to enter a recession in late 2022 or early 2023. Affected by the tail-raising factor, the euro area economy is expected to grow by 2.2% in 2022 and shrink by 0.1% in 2023. The ban will not lead to lasting energy shortages, but it will take time to displace Russian oil imports and prices will almost certainly move higher. Rabobank adds that euro zone growth forecasts are affected by uncertainty