Macro-News round-up
Market News
🇫🇷 France Elections: Le Pen’s National Rally finished with a smaller margin of victory than polls indicated, and opponents are strategizing to prevent an absolute majority in the second round on July 7th. The euro edged up against the US dollar after the first round of France’s parliamentary elections.
📈 Related Market: EURUSD rallied to around 1.0750, optimistic ahead of the French first round election result. However, intraday charts show difficulties at the 200-period average, which coincide with the current price zone and could be resistance.
🇬🇧 UK Elections: Opinion surveys in Britain continue to indicate that the governing Conservatives, after 14 years in the government, will suffer a catastrophic defeat in the three days leading up to the general election in the UK. Even though most surveys indicate that the opposition Labour Party would easily win Thursday’s UK election, Prime Minister Rishi Sunak is adamant that the Conservatives may still win.
📉 Related Market: Labour’s victory seems to be highly discounted in the UK. The party has no significant changes from the previous government, so the impact on markets will be low. The pound could benefit from this, with EURGBP falling towards areas such as 0.8375.
🇺🇸 US elections: Journalist Bill O’Reilly claims that Joe Biden has made up his mind not to run for reelection. According to O’Reilly, the White House is unsure about the best time or method for making the formal announcement. According to Senator Ted Cruz, Michelle Obama will be selected as the Democratic nominee in lieu of Joe Biden. According to reports, Kamala Harris is upset that she isn’t being considered to succeed Joe Biden.
💱 Synchronised monetary policy: With the exception of the BoJ, most major central banks are in line to cut interest rates. Although the Fed may cut rates later than expected, the market continues to discount that such cuts will occur.
📉 Related Market: This could prevent the corrective movements we are experiencing. In the US, because of the increasingly obvious lack of strength to keep pushing the SP500 & Nasdaq 100 markets higher. In Europe, because of the corrections of the last weeks in the face of political turbulence affecting the Cac 40 & Dax 40. Looser monetary policy could keep the stock market cycle up once again.
📊 Macroeconomic Data:
📉 Industry in Europe continues to weaken: The eurozone manufacturing PMI fell to 45.8 in June from 47.3, below the 50 no-change mark for the second year and preliminary estimates. The output index, a proxy for GDP, sank to a 6-month low of 46.1, just ahead of forecasts, indicating declining factory production. New orders dropped sharply to 44.4 from 47.3 despite factories cutting prices, extending the record 25-month stretch of falling demand. Only Italy saw manufacturing growth while other major eurozone economies like Germany weakened further. However, a supportive global backdrop of recovery in the US, UK and India manufacturing may cushion the bloc’s downturn. In a few hours we will know the German inflation rate.
📈 Factory activity expanded across Asia in June. China’s Caixin manufacturing PMI rose to a 3-year high of 51.8. South Korea saw faster manufacturing growth in June on surging new orders, signaling strength in supply chains for batteries and chips. Vietnam, Taiwan and India also saw manufacturing expansion, but Japan’s pace slowed as firms faced higher costs from a weaker yen.
📅 The most important data of the week will be released on Friday, when the US will release the NFP non-farm payrolls and unemployment rate. A weak labour market is the key to the Fed’s rate cut.
🌍 Geopolitics:
🔺 Multiple US media outlets reported the US military raised alert levels at several bases in Europe to Charlie, the second-highest level. At this level, intelligence indicates some form of terrorist action or targeting against personnel or facilities is likely. The highest level Delta applies when a terrorist attack has occurred or is imminent. European nations have been on heightened alert since gunmen killed nearly 150 outside Moscow in an IS-claimed attack in March. France has also increased its state of alert ahead of the Paris Olympics while Germany hosts an international football tournament.
☢️ Russian President Putin said Russia should resume production of intermediate and shorter range nuclear-capable missiles and then consider deployment locations. This effectively kills all that remains of the landmark 1987 INF Treaty between the US and Soviet Union, the first to eliminate a whole category of nuclear weapons. Russia then imposed a moratorium on previously-banned missiles, but Putin said the US has resumed such missile production.
