were under pressure early from the OECD’s forecast that global 2020 GDP will
contract -6.0%, and by an even larger -7.6% if there is a second pandemic wave.
from the top U.S. infectious disease expert, Anthony Fauci, weighed on the
overall market when he called the coronavirus his “worst nightmare”
and warned that the pandemic is far from over. The coronavirus pandemic
continues to dampen the U.S. and global economies. Confirmed cases of the virus
have risen above 7.344 million globally, with deaths exceeding 414,000.
prices whipsawed after the post-FOMC announcement Wednesday afternoon. The FOMC
said the economy faces “considerable risks” over the medium term. All
FOMC members said they expect the fed funds rate to remain near zero through
the end of 2021, and all but two members expect the fund’s rate to stay there
through 2022. The Fed said it will purchase about $80 billion a month of Treasuries
and $40 billion of mortgage-backed securities “to support the flow of
credit to households and businesses.”
Fed’s new economic projections were bearish for stocks. The Fed projects that
U.S. 2020 GDP will contract by a range of -7.6% to -5.5% versus a Dec estimate
for expansion of +2.0%/2.2%. The Fed estimates the U.S. 2020 core PCE at
+0.9%/1.1%, down from a Dec projection of +1.9%/2.0%.
global inflation pressures are dovish for the world’s central banks and are
supportive for stocks. The U.S. May core CPI eased to a 9-year low of +1.2%
y/y, weaker than expectations of +1.3% and down from April’s +1.4%. Also, China
May CPI rose +2.4% y/y, weaker than expectations of +2.7% y/y, and the slowest
pace of increase in 14 months. Also, Japan May PPI fell -2.7% y/y, weaker than
expectations of -2.4% y/y and the steepest pace of decline in 3-1/2 years.
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