US Credit Mkt Week Ahead: Headline Risk Cont To Eclipse Data

     CHICAGO (MNI) - Headline risk likely to continue to eclipse limited data

and a few Fed speakers in the week ahead. Trade wars and geopolitical risks will

continue to rattle markets.

     Traders can plan and position around known data and Fed speaker event risk,

but you never know when someone is going to slap multi-billion dollar tariffs on

your favorite free market for free people as has been the case between China,

the EU and the U.S. the past few weeks.

     In an exclusive, MNI reported Thursday that "Chinese trade officials have

quietly approached their U.S. counterparts seeking ways to minimize punitive

tariffs on Chinese exports and avoid a full-blown trade war." 

     The exclusive notes it's not a trade war yet. "Trade war starts when the

tariffs are actually implemented," Liu Hong, a director with China Association

of International Trade, a think tank of the Ministry of Commerce, told MNI.

     That may be so, but markets will react to it anyway, while a solution to

the spat may take months.

     Bank of America economists posited the U.S. "thinks it can outlast China

because it can impose tariffs on more products than China can...But China has

many non-tariff options for retaliation."

     BoA economists estimate a "trade war could be a major drag on US growth,

lowering the level of GDP by roughly 1.2% at its nadir".

     "Higher import prices should pass-through to inflation, leading to a

temporary acceleration in core inflation. The Fed is likely to remain on its

current policy path in the near term, but could stop the hiking cycle short and

potentially cut rates if the economy were to tilt toward a recession," BoA

cautioned.

     Aside from the trade spat with China, Dow Jones reported Friday that U.S.

Energy Secretary Rick Perry will be meeting in Washington Tuesday with Russian

oil minister Alexander Novak.

     On limited top-tier data in the week ahead Friday's Personal Income and

Spending likely to hold market's attention the most.

     Morgan Stanley economists estimate the "0.3% month-over-month gain in

average hourly earnings alongside a robust 223,000 increase in payrolls suggest

a solid gain of 0.4% in nominal income."

     Regarding spending, MS said "after a better-than-expected retail sales

print for May, we look for a 0.5% gain. Incorporating this month's CPI and PPI

inputs, our forecast for May core PCE inflation is 0.21%M, raising the year/year

rate to 1.9% from 1.8% (1.94% vs. 1.80%). Headline PCE inflation should also

rise 0.21%, raising the year/year rate to 2.2% from 2.0%."

     RBC economists said they "do not expect any significant surprises. Income

should rise about 0.4%, as evidenced by the increase in aggregate wages.

Meanwhile, strong retail sales point to an even firmer spending number of around

0.5%. This means the savings rate is poised to tick lower."

     Tying in implications for monetary policy, Lloyds Bank economists said they

"forecast strong consumer spending growth for May and the expected further rise

in the Fed's preferred inflation measure, the consumer expenditure deflator, may

reinforce expectations that two further interest rate hikes are likely in the US

in the second half of the year."

     On second-tier data Nomura economists estimate Monday's new home sales

should show a "0.5% m-o-m increase in new home sales to 665k saar in May, from

662k in April." Nomura warns "rising mortgage costs remain a concern."

     While the "prospect of rising rates" may spur some consumers to invest

before rates go higher, Nomura posited, "recent rate increases have made it more

difficult for first-time home buyers to enter the market."

     On Tuesday's Conference Board consumer confidence data, Nomura expects

"index to increase to 130.0 in June, from 128.0 in May" as labor market

continues to gain momentum.

     Durable Goods Wednesday, Morgan Stanley forecasts "some softening in

durable goods orders ex transportation in May with a 0.1% decline. For headline

orders, industry tracking suggests further easing in orders for new aircraft,

and we look for overall durable goods orders to fall 0.4%."

     Fielding questions at separate events Tuesday, Atlanta Federal Reserve Bank

President Raphael Bostic will participate in an armchair chat in Alabama while

Dallas Federal Reserve Bank President Rob Kaplan will participate in a moderated

Q&A session at the "Greater Houston Partnership State of Talent" in Houston,

Texas.

     Boston Federal Reserve Bank President Eric Rosengren will give the 2018

Annual O. John Olcay Lecture on Ethics and Economics at the Peterson Institute

for International economics in Boston Wednesday.

     Rounding out the week, St. Louis Federal Reserve Bank President James

Bullard will participate in a moderated conversation on the U.S. Economy and

Monetary Policy at the Ascension Health Management Annual Conference in St.

Louis on Thursday.

     Treasury auctions kick off Tuesday with $34B 2Y notes, $16.000B 2Y FRN late

Wednesday morning followed $36B 5Y notes in t he afternoon, $30B 7Y note auction

on Thursday rounds off Treasury supply.

Calendar of next week's market events (prior, estimate): 

- Jun 25 May new home sales (662k, 665k) 1000ET

- Jun 25 May bldg permits revision (1.301m, --) 1000ET

- Jun 25 Jun Dallas Fed manufacturing index (26.8, --) 1030ET

- Jun 26 Jun Philadelphia Fed Nonmfg Index (45.3, --) 0830ET

- Jun 26 23-Jun Redbook retail sales m/m (0.0%, --) 0855ET

- Jun 26 Apr Case-Shiller Home Price Index (0.5, --) 0900ET

- Jun 26 Jun Richmond Fed Mfg Index (16, --) 1000ET

- Jun 26 Jun Conference Board confidence (128.0, 128.8) 1000ET

- Jun 26 Jun Dallas Fed services index (18.5, --) 1030ET

- Jun 26 US TSY TO SELL $34.000 BLN 2Y NOTES, SETTLE JUL 02 1300ET

- Jun 26 Atl Fed Pres Bostic, armchair chat, Birmingham Civil Rights Inst, Al,

Q&A 1300ET

- Jun 26 Dal Fed Pres Kaplan moderated Q&A "Grtr Houston Prtnrshp State Talent"

Tx, 1345ET

- Jun 27 22-Jun MBA Mortgage Applications (5.1%, --) 0700ET

- Jun 27 May durable goods new orders (-1.6%, -0.5%) 0830ET

- Jun 27 May durable new orders ex transport (0.9%, 0.4%) 0830ET

- Jun 27 May advance goods trade gap (-$68.2b, --) 0830ET

- Jun 27 May advance wholesale inventories 0830ET

- Jun 27 May advance retail inventories 0830ET

- Jun 27 May NAR pending home sales index (106.4, --) 1000ET

- Jun 27 22-Jun crude oil stocks ex. SPR w/w (-5.914m bbl, --) 1030ET

- Jun 27 US TSY TO SELL $16.000 BLN 1Y-10M FRN, SETTLE JUN 29 1130ET

- Jun 27 Bos Fed Pres Rosengren, Ann O. John Olcay Ethics/Economics Lecture,

Peterson Inst Int'l Economics, Boston 1215ET

- Jun 27 US TSY TO SELL $36.000 BLN 5Y NOTES, SETTLE JUL 02 1300ET

- Jun 28 23-Jun jobless claims (218k, 220k) 0830ET

- Jun 28 Q1 GDP (3rd) (2.2%, 2.2%) 0830ET

- Jun 28 Q1 GDP Price Index (1.9%, 1.9%) 0830ET

- Jun 28 24-Jun Bloomberg comfort index (56.5, --) 0945ET 

- Jun 28 22-Jun natural gas stocks w/w 1030ET

- Jun 28 StL Fed Pres Bullard moderated Q&A, U.S. Eco/MonPol, Ascension Hlth

Mngmnt 1045ET

- Jun 28 Jun Kansas City Fed Mfg Index (29, --) 1100ET

- Jun 28 28 US TSY TO SELL $30.000 BLN 7Y NOTES, SETTLE JUL 02 1300ET

- Jun 28 May farm prices (-2.2%, --) 1500ET

- Jun 28 27-Jun Fed weekly securities holdings 1630ET 

- Jun 29 May personal income (0.3%, 0.4%) 0830ET

- Jun 29 May current dollar PCE (0.6%, 0.4%) 0830ET

- Jun 29 May total PCE price index (0.2%, 0.2%) 0830ET

- Jun 29 May core PCE price index (0.2%, --) 0830ET

- Jun 29 Jun ISM-Milwaukee Mfg Index (67.9, --) 0900ET

- Jun 29 Jun MNI Chicago PMI (62.7, 60.1) 0945ET

- Jun 29 Jun Michigan sentiment index (f) (99.3, 99.3) 1000ET

- Jun 29 Q2  St. Louis Fed Real GDP Nowcast ( %, --) 1100ET

- Jun 29 Q2  NY Fed GDP Nowcast ( %, --) 1115ET

- Jun 29 16/17 grain stocks 1200ET

--MNI Chicago Bureau; tel: +1 312-431-0089; email: bill.sokolis@marketnews.com

--MNI Washington Bureau; tel: +1 202-371-2121; email: kevin.kastner@marketnews.com

[TOPICS: MTABLE,M$U$$$,M$$FI$,MN$FI$,MN$FX$]