Macro Briefing: 15 July 2022

* China GDP growth slows to weak 0.4% annual increase in Q2
* China reports highest daily Covid cases in 7 weeks as lockdowns spread
* Italy in political crisis as prime minister urged to rethink resignation
* Joe Manchin, key Democrat vote in US Senate, rejects climate, tax measures
* US jobless claims rise to highest level in nearly 8 months
* Despite expectations of more Fed rate hikes, US 10yr yield holds below 3%:

Fed funds futures pricing in roughly 50-50 probability of a 100-basis-point rate hike for the July 27 FOMC meeting. “I support another 75-basis point increase” at the next FOMC meeting, says Federal Reserve Governor Christopher Waller. “However, my base case for July depends on incoming data. We have important data releases on retail sales and housing coming in before the July meeting. If that data comes in materially stronger than expected, it would make me lean towards a larger hike at the July meeting to the extent it shows demand is not slowing down fast enough to get inflation down.”

European Central Bank set to start hiking interest rates. “Next week’s European Central Bank meeting will finally mark the very first rate lift-off since 2011,” advises ING. “The decision has been so well prepared that just delivering the expected could be a disappointment.” Although policy tightening looks set to begin, “The macro situation is clear: the economic outlook is worsening by the day and the number of downside risks are increasing by the week.”

Biden reportedly will leave Middle East with no public announcement on increasing oil supply, according to sources via Bloomberg. “The fundamental point is: what could the Saudis really do?” observes Alex Booth, head of research at oil consultancy Kpler Ltd. “They need extra oil at home right now, and a unilateral increase would go down very badly with the rest of OPEC+. Biden simply needs to be seen trying to do something on gas prices, even though they’re beyond his control.”