Rates Day: The Bloomberg Open, Europe Edition

Good morning. The Fed is seen pausing its rate hikes today. Ken Griffin says China may prop up global growth this year. And Swiss voters are preparing to decide on how to tax the 1%.

What’s Happening Now

The Fed will probably keep interest rates unchanged for the first time in 15 months when it meets today, though it’s seen retaining a tightening bias that would signal a possible resumption of hikes as soon as July. Investors unwound wagers on rate cuts later this year. Invesco’s Laurie Brignac says money-market funds are scooping up the Treasury’s growing bill issuance, in part as the tightening path nears its end.

Ken Griffin is increasing his focus on credit trading as he braces for a potential US recession. He’s more upbeat on China though, where he expects growth to surpass the government’s targets. As for the Fed, the Citadel chief sees one more hike this year and an extended pause after that.

The ECB will soon test the resilience of the banking sector by making lenders repay cheap pandemic-era loans—all in one go. While the €4 trillion or so of excess liquidity sloshing around the financial system should limit the overall impact, individual firms and countries could be strained. Smaller Italian lenders are the biggest concern, with Greek banks not far behind. Loans come due on June 28.

Spotlight

The UK housing market is being pushed to a breaking point amid surging mortgage costs. That’s setting up borrowers and homebuyers for a nerve-racking summer where interest rates keep rising, loans get more expensive and good deals become harder to find.

• The big concern is that the current downturn picks up steam as those pressures mount. Economists already see home values falling close to 10% peak to trough, and the market isn’t even halfway to that point.
• There’s a crucial moment approaching next week, when inflation figures and a BOE policy decision could combine to compound the damage to the market and set the scene for larger price declines.

What to Watch

Vladimir Putin acknowledged that Russian forces in Ukraine lack sufficient advanced weapons despite a tripling of arms output. The rare public admission of production shortcomings comes as Kyiv’s forces pressed a counteroffensive. Putin also said Russia has lost 54 tanks since Ukraine’s drive began last week, the first time the Kremlin has admitted a setback on such a scale.

The UK economy probably grew 0.2% month on month in April following a decline in March. Industrial production is seen slipping 0.1%. Euro-area IP probably gained 0.9% in April. Swedish inflation may have slowed to 9.5% in May, with the month-on-month gain falling to zero.

Donald Trump pleaded not guilty to charges of mishandling classified documents and obstructing justice. The federal indictment—a first for a former US president—includes charges carrying maximum sentences of 20 years. Trump later urged prosecutors to drop the charges and insisted on his innocence.

The crypto business model is at risk of falling apart, and Wall Street firms couldn’t be any happier, Andy Mukherjee writes. With the SEC planning to regulate digital coins as securities, there’s a good chance that blockchain leadership may finally pass to regulated banks. Wall Street can move in with tokenized versions of its traditional products—starting with the humble bank deposit.

By the Way

For Geneva’s millionaires, a regional vote on Sunday could have a lasting impact on their wallets. The city’s citizens will be balloted on whether to slap a “solidarity” levy on individuals with more than 3 million francs ($3.3 million) to their names for the next decade. Somewhere between 4,200 and 10,000 people, would be affected—roughly the top 1%.

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