US Credit Mkt Wk Ahd: Headline Watching, Fed Blackout Begins

     CHICAGO (MNI) - The week ahead should primarily be back watching headline

covering geopolitical concerns out Europe (Italy still in focus, but so is

Portugal, Spain and Turkey), trade-war negotiations and tit-for-tat tariffs

between U.S. and it's long standing allies.

     Core and peripheral bonds moves continue to have an untoward effect on U.S.

markets, burgeoning U.S. dollar strength on pause, though U.S. dollar/Yen has

risen apace with the rebound in Treasury yields off early last week's lows.

     Though voter support for Italian "League" has grown since Friday,

challenges remain for the newly formed populist government (while an imminent

exit from the EU has been denied).

     The Wall Street Journal reported Saturday that G-7 members have expressed

their "'unanimous concern and disappointment' with U.S. tariffs" at a meeting in

Whistler, British Columbia Saturday after "U.S. decision last week to impose

tariffs on steel and aluminum imported from the European Union, Canada and

Mexico."

     U.S./North Korea summit talks and political machinations to de-nuclearize

are also not far from the front burner as are any mention of special counsel

Robert Mueller's investigation into Russian voter meddling and/or obstruction on

the part of U.S. president Trump.

     Meanwhile, U.S. data releases are rather prosaic while policy related

comments from Federal Reserve speakers will be absent as their media blackout

period began Saturday, June 2 and runs through June 14, the day after the next

FOMC announcement.

     Speaking out just prior to the blackout period, San Francisco Fed President

John Williams relayed a hawkish message in a Reuters interview late Friday.

     "The Fed is about three rate hikes away from reaching a 'neutral' level,

where interest rates are neither adding to or taking away from economic growth,"

Williams told Reuters. "After that, the Fed does not necessarily need to pause

on rate hikes, but could drive rates still higher if the economy remains strong

and inflation is at or above the Fed's 2 percent target."

     On the week ahead data, Deutsche Bank economists posited none "should deter

the Fed from hiking at their upcoming meeting, which the markets have almost

completely priced in."

     "The domestic picture should remain the focal point for the Fed and data in

recent weeks point to an economy with a tightening labor market, in which steady

income gains continue to support above-trend GDP growth and a continuation of

'gradual' interest rate increases," DB said.

     After last Friday's "better-than-expected average hourly earnings print"

pushed "the year-on-year change up about 15bps to 2.71%, Tuesday's JOLTS report

and Wednesday's productivity (+0.7% forecast vs. +0.3% previously) and unit

labor costs (+2.7% vs. +2.1%) data may garner some additional interest. However,

both will be a bit stale as the JOLTS report is for April and the other two are

revisions for Q1, reflecting last week's preliminary GDP release," DB concluded.

     RBS NatWest economists said the "only key report scheduled to be released

is the non-manufacturing ISM survey on Tuesday. We look for about a one point

gain in the headline composite index to 58.0, which would put it slightly below

its year-to-date average (58.8) but still suggest that the economy is growing at

a healthy clip."

     On macro themes, Barclays economists said "Economic indicators strike a

reassuring note, supporting the view that Q1 weakness was just a soft patch and

global growth is set to pick up again in Q2." Meanwhile, "Any trade war

escalation, however, would threaten this outlook and could lead to higher

inflation and lower growth, in particular in countries imposing restrictions."

     Monthly Fed reinvestment caps consistent with the FOMC Sept. 20 decision

and June 2017 addendum:

MONTHLY CAPS ON SOMA SECURITIES REDUCTIONS

US TREASURIES.../AGENCY MBS/MONTH CAP 

- Oct-Dec 2017.. $6 billion./$4 billion 

- Jan-Mar 2018.. $12 billion/$8 billion 

- Apr-Jun 2018 $18 billion../$12 billion 

- Jul-Sep 2018 $24 billion../$16 billion 

- From Oct 2018** $30 billion $20 billion

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

- Jun 04 May ISM-NY current conditions (64.3, --) 0945ET

- Jun 04 Apr factory new orders (1.6%, --) 1000ET

- Jun 04 Apr factory orders ex transport (0.3%, -0.5%) 1000ET

- Jun 04 May ETI (108.08, --) 1000ET

- Jun 05 02-Jun Redbook retail sales m/m (0.1%, --) 0855ET

- Jun 05 May Markit Services Index (final) (55.7, --) 0945ET

- Jun 05 May ISM Non-manufacturing Index (56.8, 57.7) 1000ET

- Jun 05 Jun IBD/TIPP Optimism Index (53.6, --) 1000ET

- Jun 05 Apr JOLTS job openings level (6.55M, --) 1000ET

- Jun 05 Apr JOLTS quits rate (2.3%, --) 1000ET

- Jun 06 01-Jun MBA Mortgage Applications (-2.9%, --) 0700ET

- Jun 06 Q1 non-farm productivity (f) (0.7%, 0.6%) 0830ET

- Jun 06 Q1 unit labor costs (f) (2.7%, 2.7%) 0830ET

- Jun 06 Apr trade balance (-$49b, -$49b) 0830ET

- Jun 06 01-Jun crude oil stocks ex. SPR w/w (-3.62m bbl, --) 1030ET

- Jun 06 May Kansas City Fed LMCI (0.75, --) 1100ET

- Jun 06 May Treasury STRIPS Holdings 1500ET

- Jun 07 02-Jun jobless claims (221k, 221k) 0830ET

- Jun 07 03-Jun Bloomberg comfort index (  , --) 0945ET

- Jun 07 Q1 Service Revenue (-1.1%, --) 1000ET

- Jun 07 01-Jun natural gas stocks w/w (96 Bcf, --) 1030ET

- Jun 07 Q1 domestic non-financial debt 1200ET

- Jun 07 Apr consumer credit ($11.6b, $15b) 1500ET

- Jun 07 May Treasury Allotments (final) 1500ET

- Jun 07 06-Jun Fed weekly securities holdings 1630ET

- Jun 08 Apr wholesale inventories (0.4%, 0.1%) 1000ET

- Jun 08 Apr wholesale sales (0.4%, --) 1000ET

- Jun 08 Q2 St. Louis Fed Real GDP Nowcast (  %, --) 1100ET

- Jun 08 Q2 NY Fed GDP Nowcast ( %, --) 1115ET

--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$]