Macro-News round-up
#MarketNews
📈 President Biden’s decision to resign before of the US Presidential elections in November and his support for Kamala Harris have been the primary stories of the past few days. Although this does not guarantee Harris’s candidature, a number of other potential contenders, like Pennsylvanian Josh Shapiro and California’s Gavin Newsom, have already backed Harris.
🗓️ The week will be quiet according to the economic agenda. However, on Thursday we will get the US Q2 growth rate. On Friday we will get the US PCE inflation rate. If it turns out to be in line with expectations or lower, the market will continue the bullish course it took a few weeks ago and everything is in line with the Fed’s plan.
🇨🇳 The Chinese plenum affirmed Xi’s long-term vision and introduced policies aiming to address debt risks, property woes and technological challenges facing China’s economy through state-directed reforms. Xi Jinping unveiled plans to bolster finances of indebted local governments by shifting more tax revenue from central to local authorities, such as allowing local governments to receive a greater share of excise tax revenues. These fiscal and tax reforms seek to balance spending and revenue responsibility between central and local governments. Private enterprises will play a larger role in major tech projects under plans to develop controllable supply chains.
🇨🇳 From a montetary perspective, China cut several of its major interest rates on Monday in a surprise move, including the 7-day reverse repo rate, benchmark lending rates, and rates on its standing lending facility. The cuts come after weaker-than-expected Q2 economic data in China and a Communist Party leadership meeting where achieving growth targets was emphasized. Growing expectations the Fed will cut rates also provided room for China to ease given pressure the yuan has faced from a wide US-China yield gap.
📊 Market Start:
US futures seem to stabilise. The mini SP500 and Nasdaq 100 see the levels lost last week. As a reminder, last week saw a fall in the technology sector and a rise in all other sectors, which we call equity in mutual funds. The Russell 2000 index made a spectacular move higher.
The dollar has managed to regain some of its lost value. The DXY index is trading at 104.25 points, having promptly lost support at 104 last week. The EURUSD, which almost reached 1.0950, has retreated below 1.09 today.
US bond premiums rebounded after Biden’s announcement and his withdrawal from the presidential race. The US 2-year bond rebounded back to 4.50%.
The European market, which has been volatile and sideways for several weeks, starts the week in positive territory. The Dax 40 is moving away from the 18,000 point support and is trying to resume its bullish tone, currently trading above 18,400 points.
📈 BTC bitcoin seems to have consolidated above 65,000 over the weekend and is currently trading at $67,000, close to its all-time high.
🛢️ Crude oil and gold have retreated at the end of last week and are starting this week relatively low.
🌎 Geopolitics:
🇮🇱 The top UN court deemed Israel’s occupation illegal and the EU signaled backing this stance, increasing pressure on Israel amid the ongoing conflict. The ICJ ruled that Israel’s 57-year occupation of Palestinian territory is illegal under international law and must end as soon as possible. The EU’s foreign policy chief said the ruling is “largely consistent with EU positions” and called for backing the ICJ’s authority on such decisions. Israel denounced the ruling as “lies” but the EU urged thorough analysis and reaffirmed commitment to all ICJ decisions regardless of subject. In 1967, Israel seized the West Bank, East Jerusalem, Golan Heights, Gaza and Sinai in the Six-Day War from neighboring Arab states. It began settling the occupied territory, now declared illegally occupied by the UN and returned Sinai to Egypt in 1979 under a peace deal.
🇮🇱 Additionally, this weekend Israel and its allies attacked Yemen in a massive operation involving US, UK and IDF forces. The port and airport have been destroyed. Biden may have violated the War Powers Act by not obtaining prior Congressional approval.Hours later, on Saturday night, Israel also began bombing southern regions of Lebanon. The Israeli government described these attacks as a retaliation for the hostilities it had suffered.
