InvestMacro

By JustMarkets 

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%)

• – 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);
• – US Fed Chair Powell Testifies at 17:00 (GMT+3);
• – US Crude Oil Reserves (w/w) at 17:30 (GMT+3);
• – US FOMC Member Bowman Speaks at 21:30 (GMT+3).

By JustMarkets

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.

By JustMarkets

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%)

• – Australia NAB Business Confidence (m/m) at 04:30 (GMT+3);
• – US Fed Chair Powell Testifies at 17:00 (GMT+3);
• – US FOMC Member Bowman Speaks at 20:30 (GMT+3).

By JustMarkets

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.

By JustMarkets 

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.

S&P 500 (US500) 5,567.19 +30.17 (+0.54%)

Dow Jones (US30) 39,375.87 +67.87 (+0.17%)

DAX (DE40) 18,475.45 +24.97 (+0.14%)

FTSE 100 (UK100) 8,203.93 −37.33 (−0.45%)

USD Index 104.88 −0.26 (−0.24%)

• – German Trade Balance (m/m) at 09:00 (GMT+3).

By JustMarkets

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.

By JustMarkets

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%)

• – 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);
• – US Natural Gas Storage (w/w) at 17:30 (GMT+3);
• – US Crude Oil Reserves (w/w) at 19:00 (GMT+3);
• – US FOMC Meeting Minutes at 21:00 (GMT+3).

By JustMarkets

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.

By ForexTime 

Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

By JustMarkets

At Monday’s close, the Dow Jones (US30) Index added 0.13%, while the S&P 500 (US500) Index gained 0.27%. The NASDAQ Technology Index (US100) closed positive 0.83%. Strengthening large-cap tech stocks boosted the broad market on Monday. However, concerns that the economy is losing momentum could limit the potential for further stock gains.

The ISM US Manufacturing Index for June unexpectedly fell by 0.2 to a four-month low of 48.5, weaker than expectations for a rise to 49.1. The ISM Goods and Services Price Sub-Index for June fell by 4.9 to a 6-month low of 52.1, weaker than expectations of 55.9.

Tesla (TSLA) shares rose more than 6% and led gains in the S&P 500 and Nasdaq 100 after Wells Fargo listed it as a tactical idea for the third quarter.

Equity markets in Europe were mostly up yesterday. Germany’s DAX (DE40) rose by 0.30%, France’s CAC 40 (FR40) closed higher by 1.09%, Spain’s IBEX 35 (ES35) Index added 1.04%, and the UK’s FTSE 100 (UK100) closed positive 0.03%. The S&P Eurozone Manufacturing PMI for June was revised upward by 0.2 to 45.8 from the previously reported 45.6. The German Consumer Price Index for June (EU harmonized) declined to 2.5% y/y from 2.8% y/y in May, which was in line with expectations. ECB President Lagarde said that the ECB does not yet have sufficient evidence that inflationary threats have passed, reinforcing expectations that the ECB will postpone further interest rate cuts. Today, the Eurozone will release Eurozone inflation data for June and unemployment data for May.

WTI crude oil futures rose to around $83.5 a barrel on Tuesday, hitting a two-month-high, driven by prospects for higher demand during the summer travel season. Prognoses from the American Automobile Association showed vacation travel up 5.2% year-over-year, with auto travel alone expected to rise 4.8% from a year ago. In addition, bets on a rate cut by the US Federal Reserve are providinxg support for oil prices after a recent slowdown in US inflation sparked optimism that a rate cut is imminent.

Asian markets traded mixed yesterday. Japan’s Nikkei 225 (JP225) was up 0.12%, China’s FTSE China A50 (CHA50) added 0.34%, Hong Kong’s Hang Seng (HK50) was not trading, and Australia’s ASX 200 (AU200) was negative 0.22%.

The offshore yuan depreciated to 7.30 per dollar, remaining at its lowest level in seven months, while weak guidance from the People’s Bank of China (PBoC) pressured investor sentiment. The Bank of China set the average rate at 7.1291 per dollar, the lowest since November 21, signaling a willingness to weaken the yuan further. The yuan’s depreciation is also supported by a stronger US dollar, driven by a sharp rise in US bond yields and speculation about Donald Trump’s possible return to the presidency.

The Japanese yen fell to 161.5 per dollar, sliding to new 38-year lows due to a sharp interest rate differential between Japan and the US. A lack of urgency from the Bank of Japan to normalize monetary policy is weighing on the currency. However, there is growing speculation that the BOJ may raise rates at its next meeting in late July. A weak yen raises the cost of imports, which adds to inflationary pressures and negatively affects household consumption. Meanwhile, Finance Minister Shun’ichi Suzuki reiterated on Tuesday that the government remains vigilant in monitoring exchange rate movements.

Minutes from the Reserve Bank of Australia’s (RBA) June meeting showed that policymakers emphasized the need to remain vigilant against upside risks to inflation, adding that a significant rise in prices could necessitate a significant rate hike. Nevertheless, the board sees an opportunity to bring inflation to the target level while maintaining stability in the economy and labor market. Markets are currently pricing in a one-in-three chance of a rate hike as early as August while ruling out the possibility of an RBA rate cut this year.

S&P 500 (US500) 5,475.09 +14.61 (+0.27%)

Dow Jones (US30) 39,169.52 +50.66 (+0.13%)

DAX (DE40) 18,290.66 +55.21 (+0.30%)

FTSE 100 (UK100) 8,166.76 +2.64 (+0.032%)

USD Index 105.82 −0.04 (−0.04%)

• – Australia RBA Meeting Minutes at 04:30 (GMT+3);
• – Eurozone Consumer Price Index (m/m) at 12:00 (GMT+3);
• – Eurozone Unemployment Rate (m/m) at 12:00 (GMT+3);
• – Canada Manufacturing PMI (m/m) at 16:30 (GMT+3);
• – Eurozone ECB President Lagarde Speaks at 16:30 (GMT+3);
• – US Fed Chair Powell Speaks at 16:30 (GMT+3);
• – US JOLTS Job Openings (m/m) at 17:00 (GMT+3).

By JustMarkets

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.

By Mark Galasiewski | Elliott Wave International

The U.S. government in early May sanctioned 300 Chinese entities for supplying machine tools and parts to Russia for its war against Ukraine, while in mid-May Russian president Vladimir Putin made a two-day visit to China. In turn I found myself thinking about how tensions between China and the United States could lead to open conflict, specifically over Taiwan.

The likelihood of conflict depends in part on the region’s social mood, as reflected in Asia’s stock market indexes. When social mood is negative, countries are more likely to behave aggressively.

Tensions in the region have been high. On May 23, China conducted a military drill that sent 111 warplanes plus several navy destroyers and frigates close to Taiwan and its outer islands. China said the drill meant to punish Taiwan for an offense committed by its new head of state, Lai Ching-te, who used his May 20 inauguration speech to suggest that Taiwan is not part of China.

Yet China appeared to end the provocative move after just two days, much like Iran quickly ended its reprisal drone attack on Israel in April. Both examples reflect the desire to limit the scope of new conflicts, consistent with the improving social mood and burgeoning rally in emerging markets.

As our “Bull versus Bear” chart shows, the mood in Taiwan remains positive amid the global tech boom: The Taiwan Index rose right through the military drill. In contrast, the mood in China remains severely negative, as reflected in the Shanghai Composite’s long-term pattern. That does raise the risk of Chinese aggression — or at the least increases the risk of accidents and miscalculations. As Singapore’s deputy prime minister Gan Kim Yong recently said at the Nikkei Forum in Tokyo, bad outcomes tend to follow during periods “when each side views the other as an adversary.”

Some geopolitical observers frame the Russia-Ukraine conflict as a proxy battle in a new cold war between the United States and its democratic allies, versus the China-dominated axis of autocratic states that includes Russia, North Korea and Iran.

Long-term charts offer perspective.

In 2020, the MSCI Asia-Pacific Ex-Japan Index ended a 26-year sideways pattern, while the MSCI World Ex-U.S. Index ended its own, similar 20-year-long sideways trend. This two-decade period is comparable to the 1929-1949 corrective period in the U.S. stock market. The Covid pandemic erupted toward the end of the triangless much like the 1948-1955 polio epidemic spread across the globe and killed half a million people a year at its peak.

The first proxy battle in the current cold war — Russia-Ukraine — erupted two years post-Covid during the correction in the index, much like the first proxy battle — the Korean War — in the earlier Cold War erupted in 1950 and lasted until 1953. The Russia-Ukraine war could follow that precedent by ending in a stalemate sooner than most observers imagine, even as the developing bull market in world ex-U.S. stocks contributes to years of relative peace. Then, once China becomes much stronger militarily, the next proxy battle in the cold war rivalry — perhaps over Taiwan — would be analogous to the Vietnam War when the U.S. dramatically escalated the fighting in 1965 and pulled out eight years later, as the communist government of North Vietnam in turn took over South Vietnam to reunite the country.

We’re watching the region’s stock market indexes closely.

If you’d like to learn more about Elliott wave price patterns, including the triangles mentioned above, EWI has made available the entire online version of the book Elliott Wave Principle: Key to Market Behavior.

By JustMarkets

On Wednesday, the US stock indices ended trading with an increase. The Dow Jones Index (US30) gained 0.09% on Thursday, and the S&P 500 Index (US500) added 0.09%. The NASDAQ Technology Index (US100) closed positive 0.30%. Stocks were supported amid weaker-than-expected US economic reports that lowered bond yields and reinforced speculation that the Federal Reserve may cut interest rates this year.

Markets are awaiting Friday’s release of PCE deflator data for May, the Fed’s preferred inflation gauge, to see if price pressures are easing. The year-over-year PCE Index is expected to fall to 2.6% from 2.7%. On a monthly basis, it is expected to rise 0.1%. The latest PCE Index data did not match expectations — US inflation unexpectedly halted in April. Overall, if the PCE Price Index report shows a further decline in inflationary pressures, it could further reinforce expectations of a Fed rate cut (70% as of today). This would likely hurt the US dollar. But suppose the inflation data does not show progress in reducing inflationary pressures. In that case, the likelihood of a rate cut in September would decrease, which would play into the hands of the US dollar and have a negative impact on risk assets and precious metals.

Boeing (BA) is up more than 2% after reporting that China’s safety regulator has cleared it to resume deliveries of wide-body airplanes to China.

Bitcoin stabilized above the $61,000 mark on Friday after falling to a near two-month low earlier this week amid renewed inflows into the US spot bitcoin ETFs. Data showed that inflows into the US spot bitcoin ETFs turned positive on June 25 and 26 after seven consecutive days of outflows. US fund assets also increased from $47 billion in early May to more than $52 billion as of June 26.

Equity markets in Europe were mostly down on Thursday. Germany’s DAX (DE40) rose by 0.30%, France’s CAC 40 (FR40) closed yesterday down 1.03%, Spain’s IBEX 35 (ES35) fell by 0.72%, and the UK’s FTSE 100 (UK100) closed negative 0.55%. The Eurozone Economic Confidence Index for June unexpectedly fell 0.2 to 95.9 versus expectations of a rise to 96.1. Eurozone M3 money supply for May rose 1.6% y/y, exceeding expectations of 1.5% y/y and the largest increase in 14 months. ECB Governing Council spokesman Kazimir said yesterday that he still sees significant upside risks to inflation, and the ECB can expect only one more interest rate cut this year. Swaps discount the odds of an ECB rate cut by 25 bps at 9% for the July 18 meeting and 67% for the September 12 meeting.

The UK economy grew 0.7% quarter-on-quarter in the first quarter of 2024, slightly above initial estimates of 0.6%. This is the strongest growth in two years, ending the recession that began last year. Services grew by 0.8%, up from 0.7% in the first estimate. The manufacturing sector grew by 0.6%, down from the 0.8% previously reported.

Sweden’s Central Bank left interest rates unchanged but changed its estimate for further rate cuts this year to “two or three” from two. Riksbank Governor Erik Thedeen said the inflation outlook had become more positive, especially for inflation expectations and wage growth, but two or three cuts were “an estimate, not a promise.” The Riksbank became one of the first major central banks to begin easing monetary policy this cycle in May when it cut rates by 25 basis points.

WTI crude oil prices rose above $82 a barrel on Friday as the escalating conflict in the Middle East overshadowed uncertainty on the demand side. Tensions between Israel and the Lebanese group Hezbollah have escalated after Hezbollah stepped up rocket fire and drone attacks on northern Israel in recent weeks, putting additional pressure on an Israeli government already mired in a war with Hamas. Major oil producer Iran may be drawn into the wider conflict, while Turkish President Erdogan expressed solidarity with Lebanon and called for regional support.

Asian markets were predominantly decreasing yesterday. Japan’s Nikkei 225 (JP225) was down 0.82%, China’s FTSE China A50 (CHA50) lost 0.32%, Hong Kong’s Hang Seng (HK50) was down 2.06%, and Australia’s ASX 200 (AU200) was negative 0.30%.

Japan’s Core Consumer Price Index in Tokyo in June 2024 rose by 2.1% year-on-year in June, beating market expectations and the Bank of Japan’s 2% target, strengthening the case for the central bank to continue policy normalization. Tokyo’s core inflation rate also accelerated for the second consecutive month after rising 1.6% in May. The Bank of Japan has been under sustained pressure to raise interest rates again as rising wages have boosted consumption. The Central Bank is also expected to defend its currency as the yen fell to a 38-year low, pushing up the cost of imports. Tokyo’s inflation data is widely seen as a leading indicator of nationwide price trends.

S&P 500 (US500) 5,482.87 +4.97 (+0.091%)

Dow Jones (US30) 39,164.06 +36.26 (+0.093%)

DAX (DE40) 18,210.55 +55.31 (+0.30%)

FTSE 100 (UK100) 8,179.68 −45.65 (−0.55%)

USD Index 106.05 +0.44 (+0.41%)

• – Japan Tokyo Core CPI (m/m) at 02:30 (GMT+3);
• – Japan Unemployment Rate (m/m) at 02:30 (GMT+3);
• – UK GDP (q/q) at 09:00 (GMT+3);
• – German Retail Sales (m/m) at 09:00 (GMT+3);
• – Switzerland KOF Economic Barometer (m/m) at 10:00 (GMT+3);
• – German Unemployment Rate (m/m) at 10:55 (GMT+3);
• – US PCE Price index (m/m) at 15:30 (GMT+3);
• – Canada GDP (m/m) at 15:30 (GMT+3);
• – US Chicago PMI (m/m) at 16:45 (GMT+3);
• – US Michigan Consumer Sentiment (m/m) at 17:00 (GMT+3).

By JustMarkets

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.