Market News.
📊 Data from Europe: Services PMIs released today by China, Spain, Italy, Germany, the UK and the EU are generally positive. France is the only country to show a services PMI below 50, which would indicate contraction. In the case of China and Germany, being above 50 they have come out somewhat weaker than expected. This trade we will know the US PMI.
🏛️ Political pressure continues to mount over the election facing the UK this Thursday. Yesterday, former Prime Minister Boris Johnson reappeared to support the Conservative Party’s campaign and its current candidate Rishi Sunak.
💷 Related Markets: Overall, sterling remains strong against currencies such as the euro and the dollar. However, the possibility of a UK interest rate cut says the Federal Reserve could lead to further declines in GBPUSD towards 1.20 from current levels.
🇫🇷 Marine Le Pen, leader of France’s far-right RN party, accused President Emmanuel Macron of carrying out “a kind of administrative coup d’état”. Le Pen justified her accusations on rumours of possible mass appointments in the administration by the outgoing government. The possible appointments include the director general of the police, the director general of the Gendarmerie and dozens of prefects. The far-right leader also accused Macron of “hindering the democratic process” with his voting slogans after the defeat in the European elections.
📉 The latest polls would establish that an absolute majority for RN is not possible, so it would have to govern with a coalition that would limit its policies.
📈 Related Market: Perhaps for these reasons above, the European stock markets seem to be recovering. the Cac 40 manages to recover the support of 7500 points, and seems to be heading towards the reference of 7750 points. The Dax 40, also advances positively during today’s session, trading above 18,300 points. The EURUSD has also recovered ground and trades above 1.0750. However, there are important resistances above that may challenge this recovery.
📉 European sovereign bonds continue to discount risks. French and German 2-year bond yields have risen slowly this week, back to levels close to 3.20% and 2.90% respectively.
🇺🇸 In US, According to a leaked pollster report that was published on Tuesday by the news site Puck, President Joe Biden’s favorability ratings fell following his debate performance last week in “the largest single-week drop” in almost three years. Democrats have urged Biden to stand out so that another candidate may challenge Trump, but Biden’s team has resisted these demands.
📈 Related Markets: The SP500 is approaching the 5600 barrier for the third time since the end of June. If it breaks through resistance, it would once again set all-time highs. The Nasdaq 100 is in a similar situation, breaking the 20,000 point barrier. However, non-technology indices, such as Dow Jones or Russell 2000, remain highly discounted.
📉 On the other hand, US bonds, like European bonds, seem to be increasing risk. The yield on the US 2-year bond reached 4.80% this week.
🌍 Geopolitics:
📞 Alexander Stubb, the president of Finland, said that Russia has become so dependent on China that a single phone call from Chinese President Xi Jinping could solve the crisis in Ukraine. Stubb argues that Russia’s dependence on China gives Beijing outsized power and influence over Moscow due to their strategic partnership. However, the same reasons would apply to the US and Europe, which advised Ukraine to reject peace negotiations and go to all-out war in May 2022.
🤝 Yesterday, Orban, president of Hungary, that holds the presidency of Council of the European Union, met with Zelenskiy in Kyiv in his first trip to Ukraine in over a decade, amid the ongoing Russian invasion. During the meeting, Orban urged Zelenskiy to consider declaring a ceasefire to help accelerate an end to the war with Russia. However, Zelenskiy’s foreign policy adviser later stated that the president reiterated Ukraine’s public stance on pursuing an end to the war through their proposed peace summit. Relations between Hungary and Ukraine have been strained since Russia’s invasion due to Budapest’s opposition to some EU support for Kyiv and disputes over Hungarian minority rights in Ukraine.
