There politics continues to enter with a straight leg on markets, with this week’s earthquake that saw the president Biden to renounce the possibility of re-election White House, effectively creating a comparison between Trump and current Vice President Harris in November.
Markets, politics enters with force
The gaze of the insiders is also turned towards central banks. Trading rooms are now discounting a move by the Federal Reserve in September, although some are even speculating that it could come next week, although this is considered unlikely by most analysts. Little insight came from the data on inflation measured by household consumption, which, despite falling slightly, was in line with expectations, in June. The US economy, on the other hand, was stronger than expected, with the preliminary reading of second-quarter GDP at 2.8%.
In the UK, the BoE smeets next week after recent data disappointments, with wage and services inflation remaining stubbornly high. However, with headline inflation at 2.0% but set to rise in the coming months, “the BoE has a narrow window to potentially cut rates next week,” said Mark Dowding, Fixed Income CIO at RBC BlueBay.
Also highly anticipated in Japan BoJ meeting next week, with rising expectations for more concrete policy action, despite the yen’s moves. Analysts expect a normalization of monetary policy and an end to QE.
There People’s Bank of China cut short-term rates by 10 basis points, pushing down long-term borrowing costs and bond yields. Investors were disappointed by the move, which underscored the ongoing weakness in the economy.
The macroeconomic scenario
This week, the Bureau of Economic Analysis reported that the U.S. economy grew at an annualized rate of 2.8% in the second quarter of 2024. Consumer spending once again fueled overall growth, adding +1.6 percentage points. In addition, spending on goods rebounded in the 2nd quarter, after contributing to growth in the 1st quarter. Across the pond, PMIs continue to point to subdued growth in the manufacturing sector in Europe, while the services sector is expanding moderately.
Spreads, currencies and commodities
The EUR/USD pair slides to a 2-week low ahead of the US PCE data, which does not appear to have an impact on the September FOMC monetary policy announcement. UK demand has supported sterling, which has been by far the best-performing currency in the world so far. At the end of the week, oil has made a sharp U-turn: the September WTI futures are down 2% at $76.7 a barrel, while the equivalent Brent delivery is trading at $80.7 (-1.9%).
Positive session for goldwhich brings home a gain of 0.89%.
Spread unchangedwhich stands at +138 basis points, with the yield on the 10-year BTP standing at 3.75%.
Weekly stock market performance
The weekly performance of the main European stock exchanges is at two speeds. The Cac-40 in Paris takes home a -0.7%. The drop in Frankfurt is fractional -0.4%. The drop in Piazza Affari is more marked: FTSE MIB -1.65%. London, on the other hand, rises +1.20%, followed by Madrid +0.55%. The American indices are also on their way to closing the week in negative territory: the Nasdaq 100 loses 3%, the S&P 500 1.99% and the Dow Jones Industrial 1.3%.
The best and worst at Piazza Affari
Among the worst titles of the week are: Stellantis -16% and St -30% which paid the price with their respective half-yearly results. At the top of the main FTSE MIB basket are, instead,and, Banca Generali and Hera both taking home a gain of over 4 percentage points.
