Macroeconomics & Market News.
🌍 The euro experienced volatility after the French election results, moving almost 0.5%. However, as the hours have passed, it has strengthened, and we have the EURUSD in clear ascent, close to 1.0830. The CAC 40, has risen more than 1.5% since its opening; however, in the last hours it is retreating and losing part of its strength without being able to consolidate above the 7700 points, which seems to be resistance.
📉 Friday’s US employment data was mixed. Non-farm payrolls NFP showed a strong labour market. However, the unemployment rate rebounded to 4.1% in the US. After a few hours, the market eventually adjusted. The final reading would be that the US economy is weakening, a rate cut is more possible now than ever, and the markets reflect this by celebrating.
📈 Related Markets: SP500 futures have broken new highs above 5600 points. The dollar index DXY has fallen below 105 points at this point, and the US bond offers a return below 4.75% for the first time since April.
🇩🇪 In European data, Germany’s trade balance improves to a trade surplus of 24.9 billion euros versus 19.9 billion expected.However, This might seem like positive news, were it not for the fact that, in reality, it is due to a slump in trade activity. Its exports have fallen, but its imports have fallen even more, with exports plummeting by -3.6% and imports by -6.6%, much worse than the previous period. The DAX 40 index failed to break above 18,600 points despite an improvement compared to last week.
💔 Investor sentiment in the eurozone broke an eight-month streak of improvements, declining more than expected in July according to the Sentix inde published by Reuters. Sentix described the results as a “bitter setback” and said the recent recovery in the European economy has come to an “abrupt end”. The Sentix poll was conducted between July 4-6 and surveyed 1,140 investors on their economic outlook.
📅 As important events of the week, the Fed’s Jerome Powell will address Congress on Tuesday and Wednesday.
🌏 In Asia, China will release its CPI inflation rate and PPI index on Wednesday. Also, New Zealand will decide on its interest rate.
🇬🇧 On Thursday, the UK GDP rate, industrial production and trade balance will be released. Germany will also release its inflation rate, and the US will publish both standard and core inflation.
🧾 On Friday, China’s trade balance, France and Spain’s inflation rate, and the US PPI data will be released.
Geopolitics:
🇫🇷 Le Pen’s party, RN, obtained more than 10 million votes, constituting 37% of the total votes. The second most voted party was the NFP, with more than 6.9 million votes. According to the electoral law, the NFP will be the party with the largest number of MPs and will obtain a majority in Parliament. The RN party, paradoxically, will be the third largest political force in parliament, behind Macron’s party.
⚠️ Nevertheless, the two key risk factors for France and the European market seem to remain latent: on the one hand, the negotiations for the formation of a government. On the other hand, the budgetary commitment that this government will have, considering, once again, that France is in a public deficit of 5.5%.With no party likely to secure a majority in the French parliament, Macron may consider a technocratic government like in Italy to avoid another election.However, Italy’s technical governments responded to strong external pressure over debt fears, less of an issue in France so far.
🇭🇺 After the visit to Kiev and Moscow, Hungary’s President Orban visit China to discuss, among other things, the peace proposal for Ukraine.The visit comes just ahead of a July 11-12 NATO summit expected to focus on setbacks in Ukraine, where Orban has taken a softer stance than other EU leaders.Hungary has attracted major Chinese investment and projects, touting over 15 billion euros in battery and EV manufacturing deals under Orban’s “Eastern opening” policy.
🇬🇧 Newly appointed UK Prime Minister Keir Starmer announced his first overseas trip will be to the NATO summit in Washington DC on July 9th.At the summit, Starmer says he will reiterate the UK’s “unshakeable support” for NATO and express continued backing for Ukraine amid the war.Both the Labour and Conservative parties in the UK have pledged to spend 2.5% of GDP on defense.The King’s Speech opening parliament will offer signs of the UK’s renewed approach to relations with Europe under the new government.
