📉 Macro-News round-up
MarketNews
🏭 This morning, Germany showed lower than expected factory orders. April factory orders fell by 0.2%, in April against an expected growth of 0.6%. Continuing the contraction seen in March, when it fell by 0.8%.
🌍 The divergence between the US and European economies in monetary policy seems to be closing. US data is starting to show some weakness in a row. Yesterday we had the ADP nonfarm payrolls data, which was somewhat disappointing for the labour market. In the case of Europe, PMI economic activity indicators seem to have improved with the exception of France.
💹 In addition to this, the inflation rate within Europe seems to have picked up in the last month. We witnessed higher than expected inflation in both Europe and Germany. And although the US has not presented significant problems in its latest inflation data, the scenario in Europe looks very much like the inflationary stagnation in the US. This could lead to both monetary policies finally synchronising.
⏱️ In a few hours we will have the European Central Bank’s rate cut decision. In previous reports we have highlighted the high German bond yields as a special indicator that could show that rates will not be cut this time despite these expectations. On the other hand, last night the EURUSD was above 1.09, and although it has retreated in the last few hours, the strength it is showing would not be compatible with a rate cut on the euro. It is also fair to admit that the dollar has weakened and we have it at 104 support on DXY.
📊 Expectations: a rate cut of 25 basis points is expected to bring the interest rate in Europe to 3.75%. markets have gone from discounting three rate cuts in Europe to only two this year. on the other hand, optimism in possible rate cuts by the Federal Reserve is increasing given the poor macro data in the United States. Synchronisation.
📈 Markets: the SP500 manages to break above 5350 points, the challenge will be to stay above that level until the end of the week. Nasdaq 100 reaches 19000 points and pauses. European stock markets continue their bullish tone, recovering part of the territory lost in mid-May. The Dax 40 is above 18,700 points and seems to be back on course towards 19,000 points.
🏦 In the bond market, we can see how the US 2-year bond, for the first time in weeks, has lowered its yield above 4.75%, discounting this optimism for a rate cut. The German bond, whose yield had recently risen above 3%, cools down to 2.9% as it awaits the European Central Bank’s words.
🇮🇳 The Nifty50 of the Indian stock market slowly recovers from the almost 9% fall after the elections, where the ruling party lost its absolute majority, and will need to negotiate a coalition.
🇨🇦 The USDCAD rose sharply yesterday, following the announcement of a 25 basis point rate cut by the Central Bank of Canada. However, after the passing of the hours it has stabilised again and is at similar levels as before the announcement, currently trading at 1.3685.
Geopolitics:
🇬🇧 In the UK, the British Trump is back on the scene. Nigel Farage announced that he will stand in the British elections on 4 July. This poses a threat to the Conservative Party. In fact, in the previous elections, he preferred not to stand so as not to detract votes from the current government. Farage is a divergent proposal in the face of the monopoly of the two parties in the UK. If anything was clear after the election debate between Labour and the Conservatives, it was the lukewarm differences on both economic and foreign policies. Farage, on the other hand, is an eccentric flip-flopper. In his own words, ‘I’m back. Lets make Britain great again!’
🇷🇺 Russia: In a televised speech yesterday Putin warned that Russia could provide long-range weapons to third countries to attack Western targets in response to NATO allowing Ukraine to attack Russia. Putin said the West was wrong to assume that Russia would never use nuclear weapons, and that its nuclear doctrine should not be taken lightly. He warned that allowing attacks inside Russia would escalate tensions.
