Greetings,
We begin with the United States where some key Fed officials are talking about 2-3 interest rate hikes this year.

Source: Reuters

Short-term treasuries, Fed Funds futures declined in response to these comments. Fresh US economic data (discussed below) added to the rate hike fears.

Source: @barchart

Source: @barchart

The futures-implied probability of rate hikes in 2016 yesterday vs. today is shown below. The probability of a June hike rose from 4% to 15% between Monday and Tuesday.

Source: @SoberLook

This is a good segue into the Daily Shot Fed policy survey results (thanks everyone for participating - we had close to 1k responses). Here are the two questions. The results are a bit more dovish than the sell-side economists' forecasts and similar to the latest futures-based probabilities.

 

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The treasury curve flattened further in response to the Fed officials' comments. The market is pricing in tighter financial conditions as a result of a somewhat more aggressive tightening cycle.

Source: ‏@SoberLook

It was interesting to see that gold remains resilient in spite of the threats of early rate hikes. Some are suggesting that the Fed officials are jawboning in order to curb some of the speculative activity in risk assets. However, this could lead to a loss of credibility if the FOMC doesn't deliver another hike soon.

Source: @barchart

 

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One of the data points that had the latest Fed comments resonate with the markets was this month-over-month CPI pop. The equity markets retreated sharply in response.

Below are a few other US economic reports..

1. The US "sticky" CPI levels off at around 2.5% - which is a bit higher than the Fed's "target".

2. US rental costs continue to outpace wages.

Source: @SoberLook

4. US industrial production and capacity utilization exceeded forecasts, which also gives the FOMC hawks some ammunition.

5. The next chart shows 5-or-more-unit residential structures (apartments) currently under construction in the US.

6. The final US chart shows the Beveridge Curve (discussed here multiple times) broken out between long- and short-term unemployment. It's interesting that the dislocation only applies to those unemployed 27 weeks or longer (those who lack the skills/experience currently in demand).

Source: @WEF

1. We now switch to the UK where house prices are rising at 9% per year despite the Brexit uncertainty. This is driven by the upcoming tax increase on rental properties (designed to curb housing speculation).

Source: Office for National Statistics

Source: The Guardian

2. UK inflation rate unexpectedly fell as a result of cheaper air fares. The second chart below shows the breakdown of the CPI.

Source: @fastFT

3. Here is the latest rolling poll average on Brexit with the two groups now quite close. In fact, the latest TNS poll shows the Leave camp taking a lead (with 20% undecided).

Source: @FT

Is the record deflation Switzerland has been experiencing about to ease?

 

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The Swiss equity market is down some 10% this year and according to Bloomberg, traders are betting (in the options market) it will get worse.

Source: @acemaxx, @business

In the Eurozone, the trade surplus remains robust (and above expectations). This should add to the GDP growth.

Source: ‏@fastFT

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The next chart shows the evolution of consensus GDP forecasts for major Eurozone nations.

Source: ‏@MxSba

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Greek private sector savings continue to decline - in contrast to other euro area economies.

Source: @Fmirw 

Australian wage growth hit another record low (and came in below consensus). It's strange to see Australian wages growing slower than US wages (while Australian real estate continues to appreciate).

The Aussie dollar traded off in response to the wage data.

Source: CNBC

Japan posted a surprisingly strong Q1 GDP growth (1.7% annualized), avoiding what some thought could be another technical recession. It's strange to see Japan's Q1 growth significantly exceed that of the US. 

1. Switching to China, the nation's housing prices continue to climb. 

Source: Goldman Sachs

2. The Hong Kong - Shanghai exchange link shows a sharp increase in "southbound" activity (mainland buyers of Hong-Kong-listed shares).

Source:  ‏@fion_li, @business, @SamMamudi

3. Chinese capital outflows are ending up in US resi property markets.

Source: @melodyhahm

1. Turning to other emerging markets, India is expected to be a major energy consumer going forward.

Source: @business

2. The new government in Brazil has assembled an impressive new economic team, with Goldfajn heading up the central bank.

 

Source: Goldman Sachs

3. Nigeria, Africa's largest oil producer, has domestic flights disrupted by ... fuel shortages.

Source: Reuters

4. US gasoline exports to Mexico are on the rise.

Source:  ‏@JKempEnergy 

5. Argentina's headline inflation spike will dampen some of the post-election optimism.

Source: @IIF

In the energy markets, gasoline futures continue to rise. Note that this is not a seasonal effect. The chart shows the July-16 futures where the seasonality is already priced in.

Source: @barchart

US retail gasoline price is also rising - some of which is seasonality.

1. In other commodities, soybean meal futures rally continues. Note that soybean meal is used in pig food, a big business in China.

Source: @barchart

2. Another consequence of a strong dollar is a growing oversupply of cheese in the US, sending prices sharply lower.

Source: Quartz

3. Here are US milk futures over the past five years. With the dollar strength, US dairy is just not competitive internationally, sending exports lower. US dairy farmers are watching the Fed to see if the central bank's actions send the dollar even higher.

Source: @barchart

1. In US equities markets, Lending Club gets hit with a Justice Department subpoena. Will these events dampen the growth in peer-to-peer credit (or more precisely "asset managers to individuals" direct lending)?

Source: Google

2. MLP valuations are recovering as oil prices move higher.

Source: Ycharts.com

3. Similarly, energy shares continue to outperform.

Source: Ycharts.com

4. We continue to see more weakness in US retail shares.

Source: Ycharts.com

5. Gavekal Capital ‏says that investors are paying historically high multiples for corporate sales.

Source: @GaveKalCapital

6. The Merrill Lynch investor survey shows "fatigue with financial engineering". Investors want more focus on corporate balance sheets and less on dividends and stock buybacks. For now.

Source: @NickatFP

The same survey also shows investor perception of extremely weak CAPEX. Will companies respond?

Source: @NickatFP

1. In credit markets, the chart below shows CLOs picking up leveraged loans dumped by loan funds (in unprecedented capital outflows). This trend would suggest that loan funds may be an interesting investment (with CLOs continuing to support prices).

Source:  ‏@TRLPC 

2. US corporate bonds are in demand from abroad (as zero rates send institutions scrambling for yield).

Source:  ‏@business

3. Finally, Illinois CDS spreads are widening again as investors remain uneasy about the state's fiscal situation (especially risks related to Chicago).

Source: ‏@Schuldensuehner

Turning to Food for Thought, we have 5 items this morning:

1. E-commerce is approaching 8% of US total sales.

2. According to the WSJ, "the more education a woman has, the less she is likely to get paid versus her male peers". 

Source: @pdacosta

Here are the professions with the largest wage gaps.

Source: @pdacosta, h/t Jake

3. Biggest social media platforms used by teens.

Source: ‏@pewinternet

4. The map below shows property taxes in the US. For those of us in Westchester County, NY, most of the country looks quite reasonable.

Source:‏ @LauraFPuryear, @taxfoundation

5.  Finally, some midweek humor.

Source:‏  ‏@paul1kirby, @NewYorker