Fed's first-quarter loss-making agency looks ahead to non-farm payrolls, turning dovish

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Institutions look ahead to next Friday's non-farm payrolls data: The US non-farm payrolls report released next Friday is expected to show that although the US labor market is still tight, employment growth may begin to shift from sharp growth to moderate growth. According to a Bloomberg survey, U.S. nonfarm payrolls may have increased by about 325,000 in May. Although the increase is still strong, it is expected to be the smallest increase in more than a year; the unemployment rate is expected to fall to 3.5%, and the monthly average hourly wage rate is expected to be 0.4%. Friday's data is not expected to have much of an impact on the Fed as it prepares to keep raising interest rates while job growth continues to cool to help moderate wage gains and inflation.

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The Federal Reserve's latest financial statement reported that in the first quarter of 2022, the Fed's holdings of U.S. Treasury securities and mortgage-backed securities brought unrealized losses (paper losses) of $330 billion due to rising interest rates. The Fed's portfolio could see further large losses as market interest rates continue to rise, the report said.

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Minutes of the Fed's May meeting noted that the economy remains strong and households are doing well, making it more difficult for them to stop spending and ease price pressures. And supply chain bottlenecks "remain serious", companies are still struggling to recruit, and their ability to meet demand is still limited, which is why prices continue to rise. Uncertain when the situation will ease, officials have begun to take a broad stance on the likely effect of a sharp rise in interest rates. If the Fed wants to slow down the pace of tightening in the second half of the year, it will leave some leeway for future monetary policy tightening.

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The American political magazine "Jacobin" published an article on May 26 saying that the 40 billion aid bill signed by Biden will bring a huge "windfall" to American arms dealers. The article said: "Biden signed a $40 billion aid bill, but its biggest beneficiaries are not ordinary Ukrainians, but American arms dealers - they will receive at least $17 billion in additional revenue." The author He said his "conservative estimate" was based on the bill and accompanying documents drafted by the White House and the House Appropriations Committee, "which redistributes wealth from public coffers to the pockets of arms contractors."

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In the most recent CPI data, inflation in Canada rose to 6.8%, the highest level since 1990. With the unemployment rate falling to a low of 5.2%, the Bank of Canada is expected to consider further monetary policy tightening next week, raising its benchmark interest rate to 1.5% from 1%. Considering that the Fed may raise interest rates by 50 basis points in June, the Bank of Canada will match it, and this week will raise interest rates by a minimum of 50 basis points, or even a more aggressive 75 basis points, to bring interest rates back to a more neutral level.

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If imports of natural gas from Russia are stopped in June this year, Italy's average annual GDP is expected to drop by nearly 2% in 2022 and 2023, according to a report by the Italian Industrialists' Confederation (Confindustria). Stopping gas imports from Russia could have a very serious impact on the already weak Italian economy, the report said. Severe gas shortages in industry and services, as well as further increases in energy costs, will have a negative impact. Last year, Russia was Italy's largest natural gas supplier, supplying 29 billion cubic meters of natural gas, or 40 percent of Italy's total natural gas imports. The Italian government has been looking for alternative energy suppliers in the wake of the Russian-Ukrainian conflict, with the country's ministers travelling to Africa and the Middle East to secure new energy supply contracts.

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U.S. crude futures rose $0.98, or 0.9%, to settle at $115.07 a barrel; Brent crude futures rose $2.03, or 1.7%, to settle at $119.43 a barrel. Fuel inventories continue to show signs of tightness as the U.S. enters the peak summer driving season. Meanwhile, European countries negotiated a complete ban on Russian crude imports, pushing prices higher, while drivers face soaring costs as gasoline inventories are at their seasonally lowest levels since 2014 as the holiday rush looms. New York gasoline futures settled above $4 a gallon for the first time since March 16. Strong global demand for the fuel has underpinned prices, with gasoline and heating oil futures both outpacing crude oil futures this year.

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European Central Bank President Christine Lagarde said that the European Central Bank will raise interest rates at the monetary policy meeting held in July this year, and basically announced that the "era of negative interest rates" will end in September. Lagarde's roadmap has won the support of many officials. On May 25, local time, ECB Deputy President de Guindos said the timetable was "very sensible", while ECB Chief Economist Len described it as "clear" and "strong policy".