Political Uncertainty and Economic Indicators
As the second half of 2024 begins, signs of a cooling U.S. economy emerge, alongside heightened political activity in the U.S. and Europe. Federal Reserve Chairman Jerome Powell is expected to provide insights later today, which could influence market movements.
Political Landscape
U.S. Elections: The U.S. election betting market has intensified after last week's debate, with President Joe Biden's performance affecting his chances against Republican challenger Donald Trump. The Supreme Court's ruling on Trump's partial immunity has increased the odds of a Trump victory, potentially impacting future tax policies and tariffs.
European Elections: France is in the midst of parliamentary elections, and Britain heads to the polls on Thursday. The outcomes of these elections could significantly affect market sentiments.
Economic Indicators
U.S. Manufacturing: The Institute for Supply Management's June survey revealed that U.S. manufacturing missed forecasts and contracted for a third consecutive month. Prices paid by factories for inputs dropped to a six-month low.
Economic Surprise Index: The U.S. economic surprise index is at its most negative reading in nearly two years.
GDP Tracker: The Atlanta Fed's GDPNow tracker has decreased to 1.7%, its lowest level of the year.
Federal Reserve and Interest Rates
Market speculation about a potential Fed rate cut continues, with less than a 70% chance of a cut in September. Powell’s speech at the European Central Bank’s forum in Sintra, Portugal, might provide additional insights.
Labor market data, particularly U.S. job openings for May, will be crucial later today.
Market Reactions
Bonds : Political uncertainty and fiscal implications have impacted bond markets. U.S. 10-year Treasury yields reached their highest in a month, and yield curves have steepened.
Stocks : U.S. technology stocks saw gains on Monday, but concerns in the bond market reflected broader political anxieties. French stocks showed volatility ahead of the parliamentary election's second round.
Currencies : The euro fell back from two-week highs to approximately 1.0710. The dollar strengthened, reaching a 38-year high against the yen.
Global Market Movements : China: Mixed corporate surveys led to lower stock markets.
Japan : The Nikkei index rose over 1%, reaching 40,000 for the first time in three months, buoyed by a weaker yen.
U.S. : Wall Street futures were down 0.4%, with Treasury yields dipping slightly ahead of the market open.
Upcoming Events : U.S. May JOLTS job openings data
Speeches from key financial figures: Federal Reserve Chair Jerome Powell, ECB President Christine Lagarde, and ECB board members at the ECB's annual forum in Sintra.
These factors collectively shape the economic and market outlook as the world navigates through political uncertainties and economic data releases.
source : investing.com