Macro Matters – Weekly review, w/c July 01

TradeDay Macro Matters

Macroeconomic / Geopolitical Developments

• US stock indices held H1 2024 gains last week

• US PCE inflation data cools

• Biden falters in Presidential debate

• Japanese Yen multi-decade low boosts Nikkei

• Big, holiday-shortened week ahead: Fed Minutes and US Jobs data

• What’s Ahead

US Stock Indices Held H1 2024 Gains Last Week

Despite a quiet week, U.S. stock indices sustained their H1 2024 gains. The S&P 500 and Dow Jones dipped 0.1%, while the Nasdaq Composite rose 0.2%. The S&P 500 ended H1 2024 with a 14.5% gain, led by an AI-driven tech surge, while the Nasdaq posted an 18.5% increase. Concerns about market breadth and over-reliance on mega-cap tech stocks have begun to surface, as investors await Q2 earnings reports for further market direction.

US PCE Inflation Data Cools

The Personal Consumption Expenditures (PCE) index, the Fed’s preferred inflation measure, showed a year-on-year increase of 2.6% in May, down from 2.7% in April. Core PCE also fell to 2.6%, signaling a slowdown in inflation. Consumer spending rose modestly, reinforcing optimism for a soft landing where inflation cools without triggering a recession. Fed Chair Jerome Powell emphasized the need for sustained evidence of cooling prices before considering rate cuts, likely later in the year.

Biden Falters in Presidential Debate

President Biden struggled during the recent Presidential debate, faltering on key points and raising concerns about his fitness for office. His opponent, Donald Trump, capitalized on Biden’s missteps, accusing him of weak immigration policies and economic mismanagement. Biden labeled Trump a “felon” over his legal troubles, but Trump retaliated by highlighting recent controversies involving Biden’s son, Hunter. Analysts suggest Biden’s performance could raise doubts about his re-election bid, while Trump’s rhetoric continues to polarize voters.

Japanese Yen Multi-Decade Low Boosts Nikkei

The Japanese Yen fell to a 38-year low against the US Dollar, sparking concerns about potential government intervention. The Yen’s weakness has been driven by interest rate differentials and its role in carry trades. While initially benefiting Japanese exporters, prolonged Yen depreciation could harm the economy through higher import costs. The Nikkei 225 has gained 4% in USD terms this year, though concerns about volatility and intervention persist.

Big, Holiday-Shortened Week Ahead: Fed Minutes and US Jobs Data

This week features key economic updates, with US jobs data and Fed minutes taking center stage. The June jobs report, expected Friday, could indicate whether the labor market’s strength supports a Fed rate cut. Nonfarm payrolls are forecasted to rise by 189,000, down from May’s 272,000. Wednesday’s Fed minutes will offer insights into policymakers’ views on inflation and potential rate moves. The July 4th holiday will shorten the trading week, with early closures on July 3rd.

What’s Ahead

Geopolitics Watch:

• UK Parliamentary Election (Thursday)

• US Independence Day Holiday (Thursday)

Central Bank Watch:

• Reserve Bank of Australia Minutes (Tuesday)

• US FOMC Minutes (Wednesday)

Macro Data Watch:

• 07/01/2024: Global Manufacturing PMI, US ISM Manufacturing PMI, German CPI

• 07/02/2024: RBA Minutes, EU CPI

• 07/03/2024: Global Composite and Service PMI, US ISM Services PMI, ADP Employment, FOMC Minutes

• 07/04/2024: US Independence Day, UK Parliamentary Election, German Factory Orders

• 07/05/2024: EU Retail Sales, Canadian and US Employment Reports

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