Markets were mixed over the week. Equity markets struggled to gain traction, while bond markets were also broadly flat. The major news that occurred was the decision by Joe Biden to step down as the Democratic nomination for the Presidential Election in November, while the CrowdStrike computing upgrade led to what has arguably been the largest IT failure ever, with computers dependent on Microsoft Windows failing, impacting businesses and consumers globally.
While Biden has reaffirmed, he will see out his full term, his VP Kamala Harris now looks the favoured candidate to win the Party’s nomination at the DNC in mid-August. While the market has been focused on the Presidential election, all three branches of government (White House, Congress and Senate) will be going to the polls in November, further complicating the policy framework of the Executive branch depending on which Party controls both the House as well as the Senate. And while the Republican Party has the current momentum, with around 4 months to go before the Presidential election, there still remains a lot of (political) time left in the campaign.
On the policy front, expectations that the Fed will cut at its September meeting continues to be our base case. The potential for a ‘soft landing’ in the US remains, with the June retail spending data above estimates despite some softening in labour markets. This week, in addition to the ongoing US reporting season, markets will be focused on a multitude of US data that includes 2q24 GDP figures, PCE (inflation) and PMI data, labour market strength and finally business conditions (Michigan survey).
In Australia, the release of PMI figures (Judo Bank) will be the main focus. In China, the Politburo wrapped up its Third Plenum, reaffirming its aim of boosting domestic technology as the country grapples with ongoing trade restrictions in key semiconductor chips. In addition, government policy will focus on driving up domestic demand as it seeks to stabilise the economy. Whether this translates into meaningful reform remains to be seen, but the near-term growth outlook remains weak in our view and will continue to impact EM markets. In the UK, markets will digest the release of PMI data (June), while in Japan, both PMI and CPI (f’cst no change) will be the main focus over the week.
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