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Epic Investment Partners Views: The Week Ahead

Markets will have to wait for the latter part of this week for key data prints including the US GDP and PCE core (Thursday), and the PCE deflator prints (Friday). We have a fair amount of central bank chatter to digest ahead of that. Today we have the ECB’s Schnabel, Villeroy de Galhau (and again on Friday), and the Fed’s Daly. On Tuesday we’ll hear from the Fed’s Cook and Bowman and the ECB’s Stournaras. The BoE releases its financial stability report on Thursday, and then on Friday the Fed’s Barkin delivers a keynote speech. 

The US Conf. Board consumer confidence prints on Tuesday will garner market attention given the recent weakness in consumer data. US home sales are due on Wednesday. Thursday’s data includes China’s industrial profits, eurozone confidence and US durable goods, initial jobless claims, GDP and core PCE prints. On Friday we have UK GDP, US PCE, spending and income, and the Uni. of Michigan consumer sentiment readings.  

Last week we had further mixed US data, by way of weaker-than-expected retail sales in May, coupled with previous downward revisions. Housing starts and building permits also disappointed, falling in May, against expectations for a marginal rise. Sentiment improved at the end of the week, as the S&P Global PMI prints for May surprised to the upside. The stronger PMIs, coupled with broadly hawkish Fed speak underpinned the dollar (DXY Index +0.23%), while US Treasuries pared earlier gains; the 10-year benchmark rose 4bps to 4.26%. Meanwhile, the S&P Index rose 0.61%, and Brent crude rose to $85.24pb, 3.17% higher on the week.  

Elsewhere, the People’s Bank of China (PBoC) plans to gradually incorporate secondary market transactions of government bonds into its monetary policy toolkit, as announced by Governor Pan Gongsheng. This move reflects the increasing scale and depth of China’s bond market, enabling the central bank to manage liquidity through buying and selling government bonds. Pan emphasised that this approach is not quantitative easing, but rather a tool for liquidity management and base money injection. China kept its benchmark lending rates unchanged, with the one-year loan prime rate (LPR) at 3.45% and the five-year LPR at 3.95%. This decision comes amid signs of economic weakness, including falling new home prices and lower-than-expected bank lending, highlighting the challenges in balancing monetary easing with concerns over interest rate margins and currency stability, 

Closer to home, the BoE held pat on rates despite earlier inflation reaching target. The BoE’s primary concern, mirroring its US counterpart, is persistent service inflation, which only marginally decreased to 5.7% from 5.9% in April. The central bank attributed part of these increases to regulated prices and volatile components, rather than underlying inflationary pressures.  The BoE raised its Q2 2024 GDP growth forecast to 0.5%, indicating economic recovery. However, concerns persist about potential inflation risks from wage growth and energy prices. Markets now estimate a 66% chance of a rate cut in August, up from 30% before the BoE’s announcement, suggesting the central bank might begin easing in August barring unexpected developments in June’s inflation data.  Over in Europe, markets whipsawed through the week amid the political turmoil in France. The ECB warned that eurozone countries face significant fiscal challenges due to ageing populations, increased defence spending, and climate change. Countries will need to reduce budget deficits by an average 5% of GDP, requiring EUR 720bn in savings or revenue. The ECB urged immediate action, especially from high-debt nations, to meet the EU’s 60% debt-to-GDP target by 2070. This comes as seven countries, including France, were reprimanded for breaching EU fiscal rules. While the required adjustments are substantial, the ECB notes they’re not unprecedented, emphasising that delaying action will only increase future costs.

Epic Investment Partner’s Key risks & Disclaimers:

EPIC Global Equity Fund (the “Fund”) is a sub-fund of EPIC Funds p.l.c. (the “Company”), which is an open-ended umbrella fund authorised in Ireland as a UCITS fund and regulated by the Central Bank of Ireland. This marketing material has been approved in the UK by EPIC Markets (UK) LLP, trading as EPIC Investment Partners, which is a limited liability partnership incorporated and registered in England and Wales under partnership OC306260 with its registered office at Audrey House, 16-20 Ely Place, London EC1N 6SN. EPIC Markets (UK) LLP is regulated by the Financial Conduct Authority. Distribution of this material and the offer of the Fund are specifically restricted in certain jurisdictions. In particular, but without limitation, neither this material nor shares in the Fund are available to US persons.

This document is for general information purposes only and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. It is not a personal recommendation and it should not be regarded as a solicitation or an offer to buy or sell any shares in the Fund. This document represents the views of EPIC Investment Partners at the time of writing. It should not be construed as investment advice. Any person interested in investing in the Fund should conduct their own investigation and analysis of the Fund and should consult their own professional tax, accounting or other advisers as to the risks involved in making such an investment. Full details of the Fund’s investment objectives, investment policy and risks are set out in the Fund’s Prospectus and Supplement which, together with the Key Information Document (“KID”), are available on request and free of charge from Maples Fund Services (Ireland) Limited, 32 Molesworth Street, Dublin 2, Ireland and, in the UK, from EPIC Markets (UK) LLP, Audrey House, 16-20 Ely Place, London EC1N 6SN. Any offering of the Fund is only made on the terms of the current Prospectus, Supplement and KID. A subscription in the Fund can only be made after the provision of the KIID and should be made solely upon the information contained in the Prospectus, Supplement and KID.

An investment in the Fund is not suitable for an investor who cannot sustain a loss on their investment. There is no guarantee of the Fund’s future performance and past performance is not a reliable indicator of future performance. The value of your investment and the income derived from it can go down as well as up, and you may not get back the money you invested. The risks associated with making an investment in the Fund are described in the Prospectus and Supplement but investors should note, in particular, the following: 1) Foreign currency denominated investments are subject to fluctuations in exchange rates that could have a positive or an adverse effect on an investor’s returns. There is also a risk that currency hedging transactions for one share class may in extreme cases adversely affect the net asset value of the other share classes within the same sub-fund since there is no legal segregation between share classes; 2) The Fund is subject to the risk of the insolvency of its counterparties; and 3) Emerging market securities are subject to greater social, political, regulatory, and currency risks than developed market securities. This may impact the liquidity and value of such securities and, consequently, the value of the Fund.

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This information has been accurately reproduced, as received from EPIC Investment Partners. No information has been omitted which would render the reproduced information inaccurate or misleading. This information is being distributed by MeDirect Bank (Malta) plc to its customers. The information contained in this document is for general information purposes only and is not intended to provide legal or other professional advice nor does it commit MeDirect Bank (Malta) plc to any obligation whatsoever. The information available in this document is not intended to be a suggestion, recommendation or solicitation to buy, hold or sell, any securities and is not guaranteed as to accuracy or completeness.

The financial instruments discussed in the document may not be suitable for all investors and investors must make their own informed decisions and seek their own advice regarding the appropriateness of investing in financial instruments or implementing strategies discussed herein.

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