By Murray Gunn | Global Rates & Money Flows editor
I have spent much of my career among professional traders. By nature, traders are a betting crowd; if they can’t bet on the markets, they’ll bet on something else.
A monthly highlight on trading floors was always the ‘NFP Sweepstake,’ where everyone would pay some money to guess what the U.S. Non-Farm Payroll (NFP) number would be. The winner, who would take the whole pot, was the guess that came closest to the actual number. A good strategy, therefore, would be to try and be either the highest or lowest number because, sometimes, NFPs do surprise.
That was the case last month when NFPs came in showing that 272,000 jobs were added in May compared with a consensus forecast of 185,000. Momentum in the U.S. labor market is waning, though. From January 2021 to December 2022 the average NFP number was 490,000 jobs added each month. From January 2023, the monthly average has halved to 241,000. The unemployment rate has increased from 3.4% in April 2023 to 4.1% now and jobless claims are rising.
The chart above shows annualized percentage change in those in the U.S. engaged in full-time employment. Full-time employment has been shrinking on an annualized basis since February this year, and you can see that every one of the eight recessions (the shaded areas on the chart) since 1970 has been accompanied by a negative reading. On three occasions, this metric has dipped into negative territory without a recession occurring.
I’m no expert bookie, but it seems to me that those odds tilt towards favoring a recession. What do you think?
The U.S. jobs market remains the most important economic variable on the planet given the importance of the U.S. consumer to economic activity. Regardless of where in the world you live or invest, staying ahead of the trends in the U.S. stock market and economy is worth your while. Elliott Wave International has a free must-read issue on U.S stocks that I suggest you check out, on www.elliottwave.com.
Over past year ECB decision triggered moves of ↑ 1.5% & ↓ 0.3%
Index trading 3% away from YTD high at 5142.3
Technical levels = 5010 & 4880
Watch out for fresh trading opportunities in the week ahead due to key data, corporate earnings, and the European Central Bank (ECB) meeting:
Monday, 15th July
CN50: China GDP, retail sales, industrial production
EU50: Eurozone industrial production
US500: US Empire State Manufacturing, Fed Chair Jerome Powell speech
US30: Goldman Sachs earnings
Tuesday, 16th July
GER40: Germany ZEW survey expectations
EU50: Eurozone ZEW survey expectations
JP225: Japan tertiary industry index
US500: US retail sales, Morgan Stanley, Bank of America earnings
Wednesday, 17th July
EU50: Eurozone CPI
SG20: Singapore trade
UK100: UK CPI
US500: US industrial production, Fed Beige book
NETH25: ASML earnings
Thursday, 18th July
AU200: Australia unemployment
EU50: ECB rate decision
UK100: UK jobless claims, unemployment
US500: US initial jobless claims, Fed speech
NAS100: Netflix earnings
TWN: TSMC earnings
Friday, 19th July
JP225: Japan CPI
US500: New York Fed President Williams, Atlanta Fed President Bostic speech
Our spotlight shines on FXTM’s EU50 which has been trapped within a weekly range since mid-February 2024. Still, the index has gained 10% year-to-date and is 3% away from its 2024 high at 5142.3.
Note: FXTM’s EU50 tracks the underlying Euro Stoxx 50 index – which represents the performance of the 50 largest blue-chip companies operating within eurozone nations.
With all the above discussed, here are 3 forces that may rock the EU50 in the week ahead:
1) Key EU data
Economic releases from Europe may impact bets around when the ECB cuts rates again in 2024.
Keep an eye on the latest Eurozone industrial production, the final print of June’s inflation reading along with the ZEW survey expectations from Germany – the largest economy in Europe. While the incoming data is unlikely to impact what decision the ECB makes this month, it could expectations for September and beyond.
Should overall European data support the argument for lower rates, this could push the EU50 higher.
A positive set of economic reports or an unexpected upward revision to the CPI print could pull the EU50 lower.
Golden nugget: Over the past year, the Germany ZEW survey has triggered upside moves as much as 0.5% or declines of 0.5% in a 6-hour window post-release.
2) ECB rate decision
Markets widely expect the ECB to leave interest rates unchanged on Thursday 18th July.
In June, the central bank cut interest rates for the first time since 2019 but adopted a cautious stance on future moves. Much focus will be on Lagarde’s press conference for additional clues on future policy moves, especially after the recent political drama in Europe.
Traders are currently pricing in an 82% probability of a 25-basis point ECB cut by September with a move fully priced in by October.
The EU50 could receive a boost if the ECB signals that a September rate cut is on the cards.
If the ECB sounds more hawkish than expected or offers little insight on future moves, the EU50 may dip.
Golden nugget: Over the past year, the ECB rate decision has triggered upside moves as much as 1.5% or declines of 0.3% in a 6-hour window post-release.
3) Technical forces
Prices remain trapped within a wide range on the daily charts with the first layer of support at 4880 and resistance at 5010. The candlesticks are trading marginally below the 50 and 100-day SMA as of writing with the MACD below zero.
A solid breakout above 5010, may open a path towards 5115 and 5142. Should bulls push beyond the 2024 high, this could trigger a move toward the next psychological point at 5150.
Sustained weakness below 5010, could see bears challenge 4880 and 4835.
At the end of Wednesday, the Dow Jones Index (US30) rose by 1.09%, and the S&P 500 Index (US500) gained 1.02%. The NASDAQ Technology Index (US100) closed yesterday 1.18% positive. The S&P 500 and Nasdaq 100 indices hit new all-time highs, while the Dow Jones Industrials Index hit a 7-week high. The strength in chip maker stocks led tech stocks and the broader market higher Wednesday after Taiwan Semiconductor Manufacturing Co (TSMC), the sole supplier of cutting-edge chips to Nvidia and Apple, reported better-than-expected second-quarter sales. In addition, Apple shares rose to a record high on news that the company intends to ship 10% more new iPhones this year.
Today, the US will release its inflation report for June. Economists expect consumer inflation to rise 0.1% month-over-month and fall slightly to 3.1% from 3.3% year-over-year. The core rate, which excludes food and energy prices, is expected to be unchanged at 3.4% year-on-year. Economists note that if the June CPI report meets expectations, the Fed will likely start a rate cut cycle in December. This could give the US dollar temporary confidence. At the same time, economists note that any downward deviation of the index (especially the core index) by more than 0.2% will sharply increase the probability of the first rate cut in September, especially given the recent weak economic data. A further slowdown in inflation could convince more market participants to bet on two Fed rate cuts by December. Such a situation would pressure the US dollar but send a green signal for precious metals and stock indices.
Equity markets in Europe were mostly down on Wednesday. Germany’s DAX (DE40) rose by 0.94%, France’s CAC 40 (FR40) closed higher by 0.86%, Spain’s IBEX 35 (ES35) climbed 1.59%, and the UK’s FTSE 100 (UK100) closed positive 0.66%.
Germany’s annualized inflation rate for June 2024 eased to 2.2%, down from 2.4% in the previous month, in line with preliminary estimates. Commodity prices slowed (0.8% vs. 1% in May), while energy costs declined faster (-2.1% vs. -1.1%). Looking at the consumer price index harmonized across EU countries, the annual rate fell to 2.5% from 2.8%, and the monthly rate was 0.2%, unchanged from May.
The UK economy grew by 0.4% month-on-month in May 2024 after stagnating in April. Construction grew at the fastest pace in almost a year. UK industrial production rose by 0.2% month-on-month in May 2024, recovering from a 0.9% fall in the previous month and matching market expectations. Manufacturing output rebounded (0.4% vs. -1.4% in April).
WTI crude oil prices rose to 82.7 dollars per barrel on Thursday, rising for the second consecutive session thanks to a larger-than-expected decline in US crude inventories. According to the EIA, the US crude oil inventories fell by 3.444 million barrels in the week ended July 5, a larger-than-expected decline of 3.0 million barrels. Gasoline inventories also fell more than expected. In addition, OPEC reaffirmed its forecast for strong growth in global oil demand in 2024. The EIA forecasts global oil demand to reach 104.7 million bpd by 2025, slightly higher than the projected supply of 104.6 million bpd, indicating a future deficit.
Asian markets were predominantly down yesterday. Japan’s Nikkei 225 (JP225) was up 0.61%, China’s FTSE China A50 (CHA50) was down 0.51%, Hong Kong’s Hang Seng (HK50) was down 0.29% for the day, and Australia’s ASX 200 (AU200) was negative 0.16%.
The Australian dollar exchange rate surpassed $0.675, hitting its highest level in six months amid growing expectations that the Reserve Bank of Australia (RBA) may raise interest rate again if inflation picks up. Markets still see a 20% chance of further RBA policy tightening in August while ruling out the possibility of a rate cut this year.
S&P 500 (US500) 5,633.91 +56.93 (+1.02%)
Dow Jones (US30) 39,721.36 +429.39 (+1.09%)
DAX (DE40) 18,407.22 +171.03 (+0.94%)
FTSE 100 (UK100) 8,193.51 +53.70 (+0.66%)
USD Index 105.01 -0.12 (-0.11%)
Important events today:
– UK GDP (m/m) at 09:00 (GMT+3);
– UK Industrial Production (m/m) at 09:00 (GMT+3);
– UK Manufacturing Production (m/m) at 09:00 (GMT+3);
– UK Trade Balance (m/m) at 09:00 (GMT+3);
– US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.
As financeprofessors, we find this at least as important. The Supreme Court’s 6-3 ruling in SEC v. Jarkesy could make it more challenging for the Securities and Exchange Commission – the U.S. agency that regulates securities markets – to fight fraud. And any time the SEC loses power, as it just did, market trust and transparency may be at risk.
What matters for investors, including anyone with a 401(k) plan, is how the SEC chooses to handle cases moving forward.
In 2013, the SEC accused the fund manager – George Jarkesy – of committing securities fraud, alleging that he overestimated fund values and made other false claims. The SEC charged Jarkesy and fined him US$300,000 in a proceeding in an in-house SEC court overseen by an administrative law judge.
Jarkesy then sued the SEC, claiming he hadn’t been granted a fair trial.
The case found its way before the Supreme Court, which ruled in Jarkesy’s favor. The ruling determined that the SEC proceedings used to identify fraud and impose fines didn’t meet the criteria for a fair trial. Moving forward, such cases will need to be tried in federal court.
It’s an important precedent for the defense of people accused of misdeeds by government agencies. And the SEC isn’t the only agency to use such internal administrative proceedings. More than two dozen other agencies, including the Department of Labor and the Environmental Protection Agency, will be affected by the court’s ruling.
However, a ruling that the SEC now must turn to judiciary trials or proceedings instead of internal administrative proceedings will move all securities-fraud cases involving fines to the federal courts, potentially raising the cost of prosecution. That, in turn, could result in fewer enforcement efforts, given limited agency resources.
What’s more, losing the implicit home-court advantage the SEC previously had with its internal proceedings could further slow and complicate enforcement efforts. The result could be that when people commit securities fraud, the SEC won’t have the resources to ensure they’re caught and punished.
To understand what will likely change, it’s important to understand the former status quo.
In the most recent fiscal year, 2023, the SEC filed 784 enforcement actions, ordering nearly $5 billion in fines and distributing nearly $1 billion to harmed investors. That was a 3% increase in enforcement actions over 2022. And the past two years of SEC fines have been the largeston record.
But now, the SEC cannot fine defendants through administrative courts and must seek civil penalties through federal courts.
One potential outcome could be a smaller regulatory burden for investment professionals who may have been concerned with how their actions would be viewed by the SEC – including, but not necessarily limited to, fraudsters. This is because the SEC may bring forward fewer fines or cases with fines due to the additional resources necessary for judiciary proceedings.
If that happens, fraudsters might be emboldened – since the expected cost of committing securities fraud would be lower than it was before the ruling – and investors would have to depend less on regulators protecting them and more on limiting risks themselves.
This could pose a problem for less sophisticated investors. Lots of people don’t know how to define securities fraud; even fewer can figure out whether a fund manager may have committed it. That risk, in turn, could limit the way investors participate in markets.
But if that simply means Americans buy more shares of S&P 500 exchange-traded funds and invest less in hedge funds, it shouldn’t be a problem for anyone’s bottom line. And more sophisticated investors should be well-equipped to evaluate risks on their own.
Enforcement will remain key to maintaining transparency in markets, but the method of enforcement – be it in a federal court or elsewhere – may not matter very much. The important thing is that people who commit financial crimes continue to face consequences.
At Tuesday’s close, the Dow Jones (US30) Index was down 0.13%, while the S&P 500 (US500) Index added 0.07%. The NASDAQ Technology Index (US100) closed positive 0.14%. Stock indices showed mixed performance on Tuesday, with the S&P 500 (US500) and NASDAQ (US100) hitting new all-time highs. Strengthening bank and chip stocks led to a higher overall market.
Fed Chairman Powell said Tuesday that good data would bolster confidence that inflation is moving toward the Fed’s 2% target and recent data point to “modest further progress” in prices. He added that the labor market is strong but not overheated, and easing too quickly and too much could hurt inflation progress. Markets estimate the odds of a 25 bps rate cut at 5% at the next FOMC meeting on July 30–31 and 71% at the next meeting on September 17–18.
Markets await the US CPI report for June, due out on Thursday, to see if price pressures continue to ease. The consensus is that the June CPI fell to 3.1% y/y from 3.3% y/y in May, while the core CPI was unchanged from May at 3.4% y/y. Falling inflationary pressures may put pressure on the US dollar.
Equity markets in Europe were mostly down on Tuesday. Germany’s DAX (DE40) was down 0.02%, France’s CAC 40 (FR40) fell by 0.63%, Spain’s IBEX 35 (ES35) lost 0.01%, and the UK’s FTSE 100 (UK100) closed negative 0.13%. European equity markets opened higher on Wednesday amid easing political concerns in France. France faces a hung parliament after no party won an outright majority in Sunday’s election, although the left-wing New Popular Front won the most seats.
Norway’s annual consumer inflation rate slowed to 2.6% in June 2024, down from 3% the previous month and below market estimates of 2.9%. This is the lowest since December 2020, mainly due to lower inflation for food and non-alcoholic beverages (4.9% vs. 5.4%), recreation and culture (4% vs. 7.6%) and healthcare (4.6% vs. 4.8%).
WTI crude oil prices hovered around $81.5 a barrel on Wednesday, trying to break a three-day decline as traders reacted to a larger-than-expected drop in US crude inventories. According to API data, the US crude oil inventories fell by 1.923 million barrels in the week ended July 5, significantly higher than market expectations for a 0.25 million barrel decline. In addition, oil prices are supported by the growing likelihood of an interest rate cut by the Federal Reserve. This move is seen as a potential boost to economic activity and demand.
Asian markets were predominantly up yesterday. Japan’s Nikkei 225 (JP225) rose by 1.96%, China’s FTSE China A50 (CHA50) climbed 0.99%, Hong Kong’s Hang Seng (HK50) was little changed for the day, and Australia’s ASX 200 (AU200) was positive 0.86%. Stock indices in Asia continued to rise at Wednesday’s open as soft consumer inflation data in China bolstered the case for easing monetary policy in the country.
China’s annual inflation rate fell to 0.2% in June 2024 from 0.3% in the previous two months, falling short of market estimates of 0.4%. It was the fifth straight month of rising consumer inflation but the lowest since March amid a fragile economic recovery. Food prices fell for the 12th month (-2.1% vs. -2.0%) despite a sharp price rise during the Dragon Boat Festival. The offshore yuan weakened to 7.29 per dollar.
The Reserve Bank of New Zealand (RBNZ) kept the official cash rate (OCR) at 5.5% at the July 2024 policy meeting, extending the rate pause for the eighth consecutive time and confirming market expectations. Policymakers noted that restrictive monetary policy has eased pressure on manufacturing capacity and lowered consumer price inflation. Core inflation fell to a nearly three-year low of 4% in the first quarter of 2024 but was still above the target range of 1-3%. The Committee continues to expect core inflation to return to the target range in the second half of the year. The degree of restraint will be gradually adjusted in line with the expected decline in inflationary pressures.
S&P 500 (US500) 5,576.98 +4.13 (0.074%)
Dow Jones (US30) 39,291.97 −52.82 (0.13%)
DAX (DE40) 18,236.19 −235.86 (1.28%)
FTSE 100 (UK100) 8,139.81 −53.68 (0.66%)
USD Index 105.12 +0.12 (+0.11%)
Important events today:
– Japan Producer Price Index (m/m) at 02:50 (GMT+3);
– China Consumer Price Index (m/m) at 04:30 (GMT+3);
– China Producer Price Index (m/m) at 04:30 (GMT+3);
– New Zealand RBNZ Interest Rate Decision at 05:00 (GMT+3);
– New Zealand RBNZ Rate Statement at 05:00 (GMT+3);
This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.
On Monday, the Dow Jones (US30) decreased by 0.08%, while the S&P 500 (US500) added 0.10%. The NASDAQ Technology Index (US100) closed positive 0.28%. Strengthening chip stocks on Monday led technology stocks higher and boosted the overall market.
Markets are awaiting Fed Chairman Powell’s semi-annual monetary policy report before the Senate Banking Committee on Tuesday and before the House Financial Services Committee on Wednesday. Markets are also cautiously awaiting key US inflation data on Thursday (CPI) and Friday (PPI). On Monday, data showed that expectations for 1-year US consumer inflation fell for the second straight month to 3% in June from 3.2% in May. Last week’s data also pointed to rising unemployment, a contraction in service-sector activity, and weak private-sector employment. The probability of a Fed rate cut in September is about 76%.
Nike (NKE) stock price fell more than 3% and topped the Dow Jones Industrials’ list of losers after Jim Cramer said the company’s latest conference call was a “desperation call” and he “can’t find anything good for the company.” Shares of Gilead Sciences (GILD) closed higher by more than 1% after Raymond James upgraded the stock to “outperform” from “market perform” with a $93 price target.
Equity markets in Europe were mostly down on Monday. Germany’s DAX (DE40) was down 0.02%, France’s CAC 40 (FR40) fell by 0.63%, Spain’s IBEX 35 (ES35) was down 0.01%, and the UK’s FTSE 100 (UK100) closed negative 0.13%.
German exports for May fell by 3.6% m/m, weaker than expectations of 2.8% m/m and the biggest decline in 5 months. Imports fell by -6.6% mom in May, weaker than expectations of 1.0% m/m and the strongest in 17 months. ECB Governing Council spokesman Muller said yesterday that wage and service price growth in the Eurozone remains strong and “for this reason, the ECB cannot rush to cut interest rates.”
The Euro Stoxx 50 Index rose to a 3-week high on Monday after Sunday’s French election was unexpectedly won by a far-left party, leaving a divided parliament and without a clear majority. This result limits the options for any party, leading to expectations that President Macron will form a new coalition between centrists and center-leftists.
Trade tensions between China and the EU are escalating, with Beijing planning to hold anti-dumping hearings next week over brandy purchased from the EU. The move follows the imposition of additional tariffs on Chinese electric cars from the EU.
WTI crude oil prices fell to $82 a barrel on Tuesday, extending losses from the previous session, amid easing fears of supply disruptions. Tropical Storm Beryl, which first hit Texas as a Category 1 hurricane, has been downgraded due to reduced wind speeds and now looks set to dissipate without impacting US domestic oil markets. In addition, concerns about supply risks due to wildfires in Canada have diminished as they have not largely spread to Suncor’s infrastructure. Meanwhile, investors are watching geopolitical developments in the Middle East amid prospects of a ceasefire agreement between Israel and Hamas, which reduces concerns about the escalation of the conflict and possible disruptions to oil supplies.
Asian markets were mostly down last week. Japan’s Nikkei 225 (JP225) decreased by 0.32%, China’s FTSE China A50 (CHA50) fell by 0.50%, Hong Kong’s Hang Seng (HK50) lost 1.55%, and Australia’s ASX 200 (AU200) was negative 0.76%.
The Reserve Bank of New Zealand (RBNZ) will hold a monetary policy meeting as early as tomorrow. The Central Bank is expected to leave the official monetary rate at 5.5% for the eighth consecutive time. At the last meeting in May, the Bank said that restrictive policy should be maintained to ensure that inflation returns to target levels. In addition, the possibility of raising interest rates was discussed at that meeting. As the RBNZ has little reason to move to a less hawkish stance, a repeat of the May message could help boost the Kiwi.
The offshore yuan slid to 7.29 per dollar after the People’s Bank of China (PBoC) weakened its benchmark rate. The Central Bank set the average rate at 7.1310 per dollar, reversing the strengthening trend over the past three sessions. The yuan has faced pressure since the beginning of 2023 due to domestic issues, including a sluggish real estate sector, weak consumer spending, and declining yields, which have caused capital outflows. However, despite these challenges, there is potential for the offshore yuan to strengthen. On Monday, China’s Central Bank announced temporary liquidity operations, which helped ease pressure by improving liquidity management and stabilizing short-term interest rates.
S&P 500 (US500) 5,572.85 +5.66 (+0.10%)
Dow Jones (US30) 39,344.79 −31.08 (−0.08%)
DAX (DE40) 18,472.05 −3.40 (−0.02%)
FTSE 100 (UK100) 8,193.49 −10.44 (−0.13%)
USD Index 105.01 +0.14 (+0.13%)
Important events today:
– Australia NAB Business Confidence (m/m) at 04:30 (GMT+3);
This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.
On Friday, the Dow Jones (US30) Index gained 0.17% (for the week +0.73%), while the S&P 500 (US500) Index gained 0.54% (for the week +1.43%). The NASDAQ Technology Index (US100) closed positive 0.90% (for the week +2.58%). Stock indices rose moderately on Friday, with the S&P 500 (US500) and Nasdaq 100 (US100) setting new record highs. Stocks found support on Friday after the June US payrolls report bolstered the Fed’s outlook for interest rate cuts this year.
US non-farm payroll employment for June rose by 206,000, exceeding expectations of 190,000. However, May’s non-farm employment data was revised downward to 218,000 from the previously announced 272,000. In addition, the June unemployment rate unexpectedly rose by 0.1 to a 2–1.5 year high of 4.1%, indicating a weaker labor market than expected with no change at 4.0%. Average hourly earnings for June declined to 3.0% y/y from 4.1% y/y in May, which matched expectations and was the slowest growth rate in 3 years.
President Joe Biden has faced growing skepticism within his own party about his potential 2024 re-election campaign. Rep. Mike Quigley of Illinois and Rep. Angie Craig of Minnesota have publicly urged Biden to reconsider his intention to run for president again. Quigley and Craig’s calls for Biden to resign were a notable development given their status as members of his party. The growing voices of dissenters within the Democratic Party indicate a search for alternative strategies or candidates that could strengthen their chances in the upcoming electoral contest.
The price of Bitcoin (BTCUSD) fell more than 3% to a 4-month low on Friday. Concerns over the possible sale of Bitcoin by lenders and governments have put pressure on digital assets. Administrators of the bankrupt Mt Gox exchange are returning $8 billion of Bitcoin to creditors, and uncertainty over how much of that will eventually be sold is weighing on the overall market. According to Arkham Intelligence, a wallet linked to Mt Gox moved $2.7 billion worth of tokens on Friday. There were also signs that German authorities are preparing to sell some of the 50,000 bitcoins seized earlier from online criminals, putting pressure on Bitcoin.
Equity markets in Europe were mostly down on Friday. The German DAX (DE40) rose by 0.14% (week ended +1.31%), the French CAC 40 (FR40) closed down 0.26% (week ended +0.03%), the Spanish IBEX 35 (ES35) fell by 0.39% (week ended -0.57%), the British FTSE 100 (UK100) closed negative 0.45% (week ended +0.49%).
In France, opinion polls showed that no party is likely to win a clear majority in the parliamentary elections. The left-wing Alliance is projected to win up to 198 seats, Macron’s centrists are likely to win up to 169 seats, and Marine Le Pen’s far-right National Rally will come in third with up to 143 seats. The election results have raised fears of further political uncertainty and market volatility as France’s legislature will be in a vacuum, and the prospect of a left-wing government will raise fiscal risks.
The UK Labor Party returned to government for the first time since 2010 and promised to launch its plan to fix the economy. In particular, there are several difficult short-term decisions to be made on public sector pay, fuel duty, and health funding. Solving them will cost £10 billion, according to official estimates and think tank calculations. Another £20 billion or more will be needed for a long-term fix to public services, according to the International Monetary Fund. The question is how the new Chancellor of the Exchequer will be able to do this when the debt ratio is close to 100%, growth rates are anemic, and the tax burden is the highest in decades.
WTI crude oil prices fell below $83 a barrel on Monday, extending the previous session’s losses as traders continue to assess last week’s mixed US jobs data. The latest data has raised concerns that the US economy, the world’s largest oil consumer, could slow down and affect oil demand. In addition, the growing likelihood of a ceasefire in Gaza has dampened estimates of strong summer fuel demand.
Asian markets were mostly up last week. Japan’s Nikkei 225 (JP225) gained by 2.69%, China’s FTSE China A50 (CHA50) fell by 0.68%, Hong Kong’s Hang Seng (HK50) gained 1.23%, and Australia’s ASX 200 (AU200) was positive 0.71%.
The Australian dollar rose as high as $0.675, hitting new six-month highs amid expectations that the Reserve Bank of Australia (RBA) may fall behind the global rate-cutting cycle or even raise interest rates again on the back of strong inflation data for May. Markets currently rate the probability of the RBA raising rates at its next meeting in August as slightly less than even, while the likelihood of a rate cut this year has been ruled out.
This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.
The Dow Jones (US30) Index added 0.41% at Monday’s close, while the S&P 500 (US500) Index gained 0.62%. The NASDAQ Technology Index (US100) closed positive 0.84% on Tuesday. Stock indices ended Tuesday’s trading with moderate gains. Stocks found support on Tuesday thanks to lower bond yields after Fed Chairman Powell said prices show signs of resuming a disinflationary trend.
Tuesday’s US economic news was hawkish for Fed policy and bearish for stocks after JOLTS job openings for May unexpectedly rose by 221,000 to 8.140 million, indicating a strengthening labor market versus expectations of a decline to 7.946 million.
Tesla (TSLA) stock price rose more than 10% to a 5-month high and led gains in the S&P 500 and Nasdaq 100 after the company reported second-quarter vehicle shipments of 443,956 units, beating the consensus forecast of 436,000 units. Bank of America (BAC) shares closed higher by more than 2% after Seaport Global Securities upgraded the stock to “buy” from “neutral” with a $48 price target. PayPal Holdings (PYPL) closed with an increase of more than 2% after Susquehanna upgraded the stock to positive from neutral with a $71 price target. Shares of Nike (NKE) closed down more than 1% after RBC Capital Markets lowered its price target on the stock to $75 from $100.
Equity markets in Europe mostly fell yesterday. Germany’s DAX (DE40) fell by 0.69%, France’s CAC 40 (FR40) closed down 0.30%, Spain’s IBEX 35 (ES35) lost 1.30%, and the UK’s FTSE 100 (UK100) closed negative 0.56%. European stocks fell on Tuesday amid hawkish comments from ECB President Lagarde, who said on Monday night that the ECB does not yet have sufficient evidence that inflation threats have passed, reinforcing expectations that the ECB will delay further interest rate cuts. European stocks also declined as political uncertainty in France remains high ahead of the second round of parliamentary elections this Sunday.
The Eurozone Consumer Price Index for June declined to 2.5% y/y from 2.6% y/y in May, which was in line with expectations. However, core CPI for June rose 2.9% y/y, unchanged from May and exceeding expectations of a decline to 2.8% y/y. ECB Governing Council spokesman Simkus said yesterday that core inflation is the “most important” indicator that will force the ECB to act and that the ECB will not rush to lower borrowing costs. Policymakers are looking at September and the months ahead for further potential interest rate cuts. Swaps estimate the odds of a 25 bps ECB rate cut at 7% for the July 18 meeting and 65% for the September 12 meeting.
WTI crude oil prices retreated from a 2-month high on Tuesday and declined after Russian crude exports rose to a 2-month high. Oil initially moved higher on Tuesday due to rising tensions in the Middle East, with Israel close to a full-scale war with Hezbollah in Lebanon and Houthi rebels in Yemen stepping up attacks on commercial ships in the region. According to API data, the US crude inventories fell sharply by 9.163 million barrels in the week ended June 28, the largest weekly decline since early August 2023 and well above market expectations for a 0.15 million barrel drop.
Natural gas prices fell for the sixth straight session on Tuesday, hitting a seven-week low. They remain under pressure as US storage inventories are +20.6% above the 5-year seasonal average, indicating ample supplies. However, the forecast for hot summer temperatures in the US is a favorable factor for natural gas prices in the coming weeks.
Asian markets were mostly up yesterday. Japan’s Nikkei 225 (JP225) rose by 1.12%, China’s FTSE China A50 (CHA50) gained 0.78%, Hong Kong’s Hang Seng (HK50) added 0.29%, and Australia’s ASX 200 (AU200) was negative 0.42%.
In New Zealand, the latest economic data fell short of expectations. Tuesday’s business survey showed a significant drop in confidence in the second quarter due to high interest rates weighing heavily on demand. Markets are betting that the Reserve Bank of New Zealand (RBNZ) will cut rates as early as October.
The Caixin China Services PMI fell to 51.2 in June 2024 from May’s 10-month high of 54.0, below the forecast of 53.4. This is the 18th consecutive month of growth in service sector activity.
S&P 500 (US500) 5,509.01 +33.92 (+0.62%)
Dow Jones (US30) 39,331.85 +162.33 (+0.41%)
DAX (DE40) 18,164.06 −126.60 (−0.69%)
FTSE 100 (UK100) 8,121.20 −45.56 (−0.56%)
USD Index 105.69 −0.21 (−0.20%)
Important events today:
– Japan Services PMI (m/m) at 03:30 (GMT+3);
– Australia Retail Sales (m/m) at 04:30 (GMT+3);
– China Caixin Services PMI (m/m) at 04:45 (GMT+3);
– German Services PMI (m/m) at 10:55 (GMT+3);
– Eurozone Services PMI (m/m) at 11:00 (GMT+3);
– UK Services PMI (m/m) at 11:30 (GMT+3);
– Eurozone Producer Price Index (m/m) at 12:00 (GMT+3);
– US ADP Nonfarm Employment Change (m/m) at 15:15 (GMT+3);
– US Initial Jobless Claims (m/m) at 15:30 (GMT+3);
– US Trade Balance (m/m) at 15:30 (GMT+3);
– US ISM Services PMI (m/m) at 17:00 (GMT+3);
– Eurozone ECB President Lagarde Speaks at 17:15 (GMT+3);
This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.
Unexpected results could trigger volatility on GBP & UK100
Bloomberg FX model: 77% GBPUSD – (1.2569- 1.2800)
UK100 under pressure with W1 support at 8100
Millions of voters in Britain will be heading to the polls tomorrow!
And the outcome may shape the UK’s outlook over the next few years.
Here, we’ll break down what exactly is going on and how it could impact your trading.
What is happening?
On Thursday 4th July, Britons will elect the 650 MPs who sit in the House of Parliament.
The political party that wins at least 50% of seats will form the new government, and its leader the Prime Minister.
Polling stations open at 7am until 10pm UK time.
The lowdown…
On May 22, 2024, UK Prime Minister surprised the public by announcing elections will be held on July 4th despite having until January 2025.
Who are the major players?
Rishi Sunak: Conservative leader
Keir Starmer: Labour leader
Ed Davey: Liberal Democrats
Nigel Farage: Reform UK
John Swinney: SNP party
Carla Denyer: Green party
According to opinion polls, the opposition Labour Party leads the Conservatives by around 20 points and is on course for a historic landslide victory.
What does this mean?
It could mean Labour returns in power for the first time since 2010 when led by Gordon Brown.
What could go wrong?
Polls have been wrong before with elections full of surprises.
Despite what the polls are showing, the current government (Conservatives) stays in power.
Or a hung parliament situation where no party has a majority of seats – leading to coaling governments after the election. The last time this happened was in 2017.
How will this impact UK markets
Broadly speaking, the market-friendly outcome appears to be a Labour victory.
This is based on markets expecting little change in fiscal policy in the near future. In addition, an incoming Labour-led government would seek to adopt closer ties with the EU – possibly boosting confidence in the UK economic outlook in the medium to longer term.
How about the Pound & FXTM’s UK100?
In the short term, a Labour win could boost the British Pound but hit the UK100.
A shock result that sees the current government stay in power may weaken the Pound, supporting the UK100 as a result.
Note: Over 80% of the revenues from FTSE100 companies come from outside of the UK.
So essentially, when the pound appreciates, it results in lower revenues for those companies that acquire sales from overseas – dragging the UK100 lower as a result. The same is true vice versa
Technical outlook
GBPUSD
Prices remain in a wide range on the weekly charts with support at 1.2600 and resistance at 1.2800.
A breakdown below 1.2600 could see a decline towards 1.2500
Should 1.2600 prove to be reliable support, prices may retest 1.2800
According to Bloomberg’s FX forecast model, there’s a 77%% chance that GBPUSD trades within the 1.256- 1.2800 range over the next one-week period.
UK100
FXTM’s UK100 is under pressure on the weekly charts with bears eyeing the 8100 level.
A solid break below 8100 could signal a decline toward 8020 and 7900.
Should 8100 prove to be reliable support, prices may rebound toward 8250.
It’s a widely accepted notion among economists that cultural differences can pose a significant barrier to trade. The larger the cultural gap between two countries – judging by differences in language, customs, values and business norms – the more challenging and costly trade relations become. This is a recurringthemein research.
Our research uncovered a distinctive pattern: Unlike many other nations, cultural differences rarely influence the scale of China’s trade activities.
Bridging cultural gaps: Strategies and successes
Countries have various tools to minimize the effects of cultural differences on their trade. Cultural exchange programs, bilateral trade agreements and international trade shows have shown remarkable success in fostering mutual understanding, easing trade negotiations and overcoming cultural barriers.
However, these options are available to all countries. What makes China unique?
By aligning itself with the economic development needs of its trading partners, China has been able to minimize the negative effects of cultural differences on its trade. It’s a strategy that has proved to be remarkably effective.
A closer examination of China’s trade ventures in Africa, the Middle East and Latin America — all regions with significant cultural differences from China — paints a vivid picture of this observation.
Despite its cultural differences with nations on the African continent, each with its own unique traditions, languages and customs, China has built a multibillion-dollar trade network in the region that spans industries from mining to telecom. China’s engagement in Africa is facilitated by a combination of local infrastructure investment, affordable technology provision and favorable loan terms. These partnerships are more about creating symbiotic relationships and less about efficiency. This facilitates market access and helps China to overcome cultural barriers.
In the Middle East, too, China has made significant inroads by aligning itself with the region’s development goals, such as those outlined in Saudi Arabia’s Vision 2030 and the United Arab Emirates’ Centennial 2071. China’s Belt and Road Initiative complements these long-term development plans, offering the capital investment and construction expertise needed to bring ambitious infrastructure projects to life.
China’s presence in Latin America has also grown substantially over the past decade. Despite the geographical and cultural distance, China has become one of the top trade partners for countries such as Brazil, Chile and Peru. This relationship is built on reciprocity: Latin American countries supply raw materials and agricultural products in exchange for Chinese investment in the infrastructure and manufacturing sectors.
Again, this is a strategy that hinges on pragmatic economic interactions focused on mutual benefits and development goals.
The need for strategic adaptability
Some might argue that trading with China is an obvious choice due to its size and influence. The economic incentives include access to China’s population of over 1.4 billion and its significant role in global value chains, especially in electronics, textiles and machinery. As China’s influence in global markets grows, U.S. companies also face competitive pressures to maintain their market positions.
However, China’s trade practices, frequently entangled with governmental intervention, potentially undermine market efficiency — an established economic objective — in numerous ways.
In international trade, market efficiency refers to the extent to which prices in the global market reflect all available information, allowing resources to be allocated optimally across countries.
China has been known to require foreign companies to transfer technology to local firms as a condition for market access. This practice may distort market efficiency by forcing companies to share proprietary technology rather than compete on a level playing field.
Intellectual property theft and insufficient protection of intellectual property rights in China have also been major concerns for Western companies. The lack of robust intellectual property enforcement can lead to inefficiencies, as it discourages innovation and investment by foreign firms who fear their inventions and technologies may be copied without adequate legal recourse.
Western companies also face various market-access barriers in China, such as joint venture requirements, limits on foreign ownership and regulatory hurdles. These barriers can prevent the efficient allocation of resources and limit competition and innovation, resulting in a less efficient market overall.
Despite these concerns, Western firms continue to do business with China.
China’s adeptness in transcending cultural barriers, combined with Western firms’ continued engagement, pose a significant challenge for Western economies, notably the United States’. The challenge is heightened as the U.S. maintains a focus on traditional efficiency approaches in forging trade relationships across diverse regions such as Africa, Latin America and the Middle East.
Since traditional market efficiency approaches might not always suffice, Western economies may need to reconsider their strategies.
Article by 
