With the expected decline in PCE inflation indicators, supporting the hope of the Federal Reserve cutting interest rates by the end of the year, market concerns have eased. The overall performance of the US stock market in the first half of the year was strong, with the Nasdaq Composite Index, mainly composed of technology stocks, rising by more than 18%.
Looking ahead to next week, in terms of economic data, investors are most concerned about non farm payroll data, which will affect the Federal Reserve's interest rate cut path. However, a series of reports currently show that non-agricultural data has been severely distorted and its impact on the market has also decreased.
The non farm payroll in the United States is expected to increase by 180000 in June, with the unemployment rate stabilizing at 4%. Any signs of a slowdown in the job market could increase the likelihood that the Federal Reserve will start cutting interest rates as early as September.
James Knightley, Chief International Economist of Dutch International Group, stated in a report that the market currently believes that the possibility of a rate cut in September is 72%, and if non farm data slows down beyond expectations, it will help consolidate this prospect.
Prior to this, the market will search for further clues about the health of the US job market from next Tuesday's JOLTS job vacancies, Wednesday's ADP data, and initial jobless claims data.
However, compared to the lack of explosive economic data, the two elections in Europe are more eye-catching. This week's fierce confrontation between Biden and Trump has made the foodies overjoyed, and has also caused some waves in the financial markets, while the political storm in Europe may set off huge waves.
This Sunday, France will hold the first round of parliamentary elections, and far right parties may take the lead in the election. Before the election, a key risk barometer, the yield difference between 10-year French and German treasury bond, exceeded 0.80 percentage points. The benchmark French CAC 40 index fell by 0.85% in the first half of the year, while other European markets rose one after another.
Analysis suggests that Sunday's vote is almost certain to lead to a second round of elections on July 7th to determine the composition of the 577 seats in the National Assembly. Although the results are not yet clear, opinion polls show that President Macron's party lags behind the far right parties, the National Alliance and the Left Party Alliance. Many people believe that the most likely scenario is a hung parliament, where no political party gains an absolute majority, which will pose some risks to the market.
The UK will hold a general election next Thursday, and the election results may be announced early Friday. It is expected that the opposition Labour Party will easily win a majority of seats. In view of the fact that the election results do not appear to be too uncertain, and the Labour Party has no plans for large-scale government spending, the impact on the British pound, British treasury bond bonds and the British stock market may be slightly positive, but the impact is limited.
Investec economist Lottie Gosling said in a report, "Although Labour's approval rating has declined over the past five weeks, its advantage over the Conservative Party has been maintained. In the few days remaining in the election, apart from Labour's huge victory on July 4th, there should be no surprises, so it is expected that the UK financial market will not experience too much volatility during the election period."
After the Japanese yen briefly broke through the 161 level and fell to a 38 year low, investors are paying attention to discussions of Japan's intervention in the currency market. Japanese Finance Minister Junichi Suzuki stated that the government will take appropriate action to address the excessive volatility of the yen, but he will not comment on whether he believes the yen has weakened excessively in the near future.
In addition, the European Central Bank will hold its annual seminar in Sintra, Portugal from July 1st to 3rd, with keynote speakers including Federal Reserve Chairman Powell and European Central Bank President Lagarde, who may reveal some of the latest clues on monetary policy.
Overview of important events next week:
Monday (July 1st): China's June Caixin Manufacturing PMI, UK June Nationwide House Price Index Monthly Rate, Eurozone June Manufacturing PMI Final Value, UK June Manufacturing PMI, Germany June CPI Monthly Rate Initial Value, US June S&P Global Manufacturing PMI Final Value, US June ISM Manufacturing PMI, US May Construction Expenditure Monthly Rate
Tuesday (July 2nd): Initial annual CPI rate for June in the Eurozone, monthly CPI rate for June in the Eurozone, May unemployment rate in the Eurozone, and job vacancies for JOLTs in the United States in May; Federal Reserve Chairman Powell, European Central Bank President Lagarde, and Brazilian Central Bank President Neto delivered speeches at the Central Bank Forum held by the European Central Bank; The Federal Reserve of Australia announces the minutes of its monetary policy meeting in June
Wednesday (July 3rd): US API crude oil inventory for the week ending June 28th, China June Caixin Service PMI, Eurozone June Service PMI final value, UK June Service PMI, Eurozone May PPI monthly rate, US June ADP employment, US initial unemployment claims for the week ending June 29th, US May trade account, US May factory order monthly rate, US EIA crude oil inventory for the week ending June 28th, speech by New York Fed Chairman Williams, and speech by European Central Bank President Lagarde
Thursday (July 4th): EIA natural gas inventories in the United States for the week ending June 28th, Switzerland's June quarterly adjusted unemployment rate, Switzerland's June CPI monthly rate, Federal Reserve release of monetary policy meeting minutes, European Central Bank release of June monetary policy meeting minutes, UK general election, US stock market closed for one day
Friday (July 5th): Germany's May quarterly adjusted industrial output monthly rate, France's May industrial output monthly rate, Eurozone May retail sales monthly rate, Canada's June employment, US June unemployment rate, US June quarterly adjusted non-farm employment, New York Fed Chairman Williams delivering a speech, Saudi Aramco announcing official crude oil prices around the 5th of each month
Saturday (July 6th): The total number of oil wells drilled in the United States for the week ending July 5th, and the President of the European Central Bank, Lagarde, delivered a speech