📉 News Market Report:
📉 Markets are rapidly rethinking assumptions that drove gains this year as doubts grow around the global economic outlook. Stock markets have sold off led by tech on questions over the payoff from massive AI spending. Something has started to change since yesterday in the stock markets. If during the last week the falls in the technology sector were attributed to a redistribution of capital, as reflected in the Nasdaq falls with rises in the Russell 2000, this pattern seems to have been broken. Yesterday the Russell 2000 joined the losses. Metals like copper have also declined on concerns over slowing demand, tightening supply and weak China spot prices.
📈 US data releases could lead to a change in the script. We have been assuming for weeks that the Fed will cut rates. This has generated optimism in stock markets. In yesterday’s report we commented on the macroeconomic reasons that would justify a rate cut, the data is supportive. However, yesterday the estimated Q2 growth rate for the US economy came in at 2.8% versus the expected 2%. Also, jobless claims came in lower than expected. The US economy would continue to show strength, in which case a rate cut would not be so urgent, and could change the market scenario.
📊 In a few hours we will know the PCE inflation rate, if it rises, it could mean an unexpected turnaround in equities, triggering a sell-off.
🇬🇧 The UK could be closer to a rate cut. The pound has cooled over the last few days, losing strength after all the rally it made against the dollar when it momentarily broke above 1.30. According to a Bloomberg Economics analysis, after the effects of Taylor Swift’s concert tour and volatile components disregarded by central bank officials are taken out, services inflation has decreased more than the headline figure indicates. That could convince hesitant BOE policymakers that they can lower borrowing costs from a 16-year high on August 1st, coinciding with a slowdown in wage growth.
🇪🇺 The European Union has increased tariffs on Chinese electric vehicles by up to 48%. As a result, China’s new green car producers are collaborating with domestic businesses to make their vehicles domestically produced.
🚄 On the first day of the opening of the Olympic Games in Paris, chaos breaks out in train stations due to sabotage on high-speed trains. Several fires have caused damage to high-speed train networks.
🌍 Geopolitics:
🇮🇱 Netanyahu’s speech to the US Congress proposed the extension of the 2020 Abraham Accords – which included pacts with regional powers such as the United Arab Emirates and Sudan – to a NATO-type regional military alliance. Iran’s Foreign Ministry reproached the US for not executing the arrest warrant issued by the International Criminal Court against Netanyahu. Meanwhile, in the face of massive protests outside the US Congress, Netanyahu accused the demonstrators of being financed by Iran.
