Xinhua Finance and Economics, Shanghai, July 1 (Ge Jiaming) The US PCE inflation data fell as expected and the weak consumer spending supported the market's hopes for the Federal Reserve to cut interest rates by the end of the year, and US stocks continued to fluctuate at high levels; The political turmoil in France is affecting the trend of European markets, France is facing a "double kill of stocks and bonds", and the euro continues to weaken.
Judging from the performance of the whole week, the Dow fell slightly by 0.08% for the whole week; The Nasdaq and the S&P 500 both hit new record highs, but the trend diverged throughout the week, with the Nasdaq up 0.2% and the S&P 500 down 0.08%. The U.S. dollar edged higher for the week and rose for four consecutive weeks.
In Europe, the French political turmoil is gradually becoming a "black swan" event in the European market, with the first round of voting in the French National Assembly election on June 30, the yield on French 10-year government bonds soared to 3.328%, the highest level since November last year, and the spread with German government bonds widened to 86 basis points, the highest since 2012. France's CAC 40 index fell 1.96% for the week, hitting a new low since January; Germany's DAX has performed relatively well, rising slightly by 0.39% for the week.
In Japan, the Nikkei 225 index rose strongly by 2.56%, but the yen continued to "lose ground", and under the influence of the imbalance between supply and demand of the yen, the dollar once exceeded 161 against Japan, refreshing the high since December 1986.
Cryptocurrencies collectively retreated, with Bitcoin falling more than 1% and falling below $61,000, the lowest in nearly eight weeks since May 1.
The strong trend of the US dollar weighed on most metals, COMEX August gold futures edged up 0.09% last week, COMEX July silver futures continued to decline, falling nearly 0.5% last week, and spot silver returned to $29 on Friday but fell more than 1% last week.
Driven by the sharp rise in technology stocks, the Nasdaq led the way, with major stock indexes rising nearly 6%, the S&P 500 and the Dow up 3.5% and 1.1% respectively.
The U.S. dollar rose 1.2% in June under the Fed's "hawkish" statement, and the strong U.S. dollar also weighed on non-U.S. currencies last week, with the euro falling more than 1% in June, the largest monthly decline since January, and the yen falling nearly 2% in June.
Against the backdrop of a strong dollar, most commodities fell in June, with spot silver falling 4% in June, copper falling 4.7% in June, and aluminum falling nearly 5% in June. Iron ore fell 4.62% in June, and rebar fell 4.37%.
The first trading week in the second half of 2024 kicked off today, whether it is blockbuster economic data, the next move of many overseas central banks, or the election progress of some countries in Europe and the United States, which may trigger violent volatility in global markets.
U.S. non-farm payrolls data for June
At 20:30 Beijing time on July 5 (Friday), the U.S. Department of Labor will release the U.S. non-farm payrolls data for June, which is crucial for the market to judge the Fed's policy path.
Economists expect the non-farm payrolls to slow to 188,000 in June and the unemployment rate to stabilize at 4%, despite the "distorted" non-farm payrolls data, which rose more than expected to 272,000 in May.
More signs of weakness in the job market at a time when US inflation is cooling will pave the way for the Fed to cut interest rates for the first time in September. The Federal Open Market Committee (FOMC) of the US Federal Reserve (FOMC) was cautious about the timing of rate cuts this year in the "dot plot" released at its June meeting, expecting only one rate cut in 2024.
According to the Chicago Mercantile Exchange (CME) Fed Watch tool, the market is pricing in a nearly 60% chance of a 25 basis point rate cut by the Fed in September, and investors may raise their rate cut bets if the jobs report highlights a slowdown in the labor market.
James Knightley, chief international economist at ING, said in the report that a larger-than-expected slowdown in the non-farm payrolls data would help boost market confidence in the Fed's interest rate cut in September.
Until then, the market will further observe the health of the US job market from the JOLTS job openings to be released at 22:00 on Tuesday, July 2 and the ADP data to be released at 20:15 on Wednesday, July 3.
Fed Chairman Jerome Powell and ECB President Christine Lagarde delivered speeches
The ECB will hold its annual seminar in Sintra, Portugal, July 1-3, with speeches by Fed Chair Jerome Powell and ECB President Christine Lagarde.
The interest rate path of the world's major central banks fluctuates with macroeconomic data, and the Fed's interest rate cut cycle has not yet arrived; Although the European Central Bank has started to cut interest rates for the first time this year, there is still a lot of uncertainty about the path of interest rate cuts in the second half of this year.
The market will continue to pay attention to Powell and Lagarde's statements on inflation and the prospect of interest rate cuts. The Fed is expected to maintain a neutral stance overall, and Powell will continue to "trade time for space" and wait for more positive inflation data to curb US demand and inflation.
Investors are now pricing in a 46bp rate cut by the ECB by the end of the year, with a 61% chance of leaving it unchanged at the July meeting and an 83% chance of a rate cut at the September meeting. The report will not change the ECB's stance as the Eurozone June CPI is expected to slow slightly to 2.5% y/y on Tuesday, July 2, compared to May.
The two general elections in the United Kingdom and France may affect the market
At 20 o'clock local time on June 30 (2 o'clock on July 1, Beijing time), the first round of voting in the French National Assembly election ended. Preliminary vote counts show that in the first round of voting, the far-right National Alliance won 33% of the votes, leading the vote. The Left Alliance "New Popular Front" received 28.5% of the votes, ranking second; The ruling Ba'ath Party and the centrist coalition came in third with 22 percent of the vote.
Industry analysts believe that although the preliminary results of the first round of voting in the French National Assembly election show that the far-right National Alliance is ahead, the lead is not as big as some polls before the election, so the euro rebounded, and Euro Stoxx 50 index futures rose 1%.
The UK will hold elections for the House of Commons on Thursday, July 4, and the results may be announced on the morning of Friday, July 5, with pollster Savant polling 46% support, up 2 percentage points from the previous week. Conservative support fell 4 percentage points to 21 per cent, taking Labour's lead to 25 points, with Labour expected to win a majority.
Analysts believe that the impact on the pound, gilts and the UK stock market is likely to be slightly positive, but limited, given the greater certainty of the election outcome and the fact that Labour has no plans for large-scale government spending.
Will there be a next step for the Japanese authorities?
The yen exchange rate last week erased all the gains since the Japanese authorities first spent 9.8 trillion yen to intervene in the currency market, falling to a nearly 40-year low, and the market began to speculate about when the time will come for the Japanese authorities to intervene again.
The yen's continued depreciation has prompted frequent warnings from the Japanese authorities, who have appointed Atsushi Mimura as the new vice minister of finance, replacing the retiring Masato Kanda as the top official in charge of foreign exchange affairs.
Investors generally believe that how to defend the falling yen after Jun Mimura takes office will become a severe test for him, but it may be difficult for the Japanese government to intervene in the foreign exchange market again to reverse the current trend of yen depreciation.
The CICC Foreign Exchange Research Group believes that it is more difficult for the Japanese authorities to implement foreign exchange intervention in the short term. On the one hand, Japan's recent re-inclusion in the U.S. Treasury Department's list of currency manipulation may be related to previous foreign exchange interventions. On the other hand, it is not rational to "stick" to a certain point of view, which may lead to more speculative money.
Francesco Pesole, a foreign exchange strategist at ING, also said that foreign exchange intervention is a temporary measure to curb exchange rate fluctuations, rather than a solution to structural overselling. "Everyone knows that the impact of the US macroeconomy and the Fed on the yen is more important than any other factor."
Editor: Tan Rui
Statement: Xinhua Finance is a national financial information platform undertaken by Xinhua News Agency. In any case, the information published on this platform does not constitute investment advice. If you have any questions, please contact customer service: 400-6123115