Thursday Jul 4 2024 09:31
4 min
Programming note: I should be around for some UK election coverage tonight and tomorrow. For what it’s worth, I don’t think we see massive moves on the results. A thumping Labour win seems fully priced in — but we are not sure if the market is ready for what that will mean.
The UK election takes place today, while the U.S. is off on holiday and a Thursday July 4th makes for a long weekend. Swiss inflation undershot a bit, declining to 1.3% in June from 1.4% in May. Otherwise, data is quite light today.
European stock markets are a little higher, with France’s CAC 40 index rallying 0.7% and Germany’s DAX index up 0.4%.
The FTSE 100 index is up 0.6% in early trade after polling stations opened across the country for the UK election. Sterling rose to its highest in three weeks versus the U.S. dollar, but this was a move on the other side as Treasury yields dipped on some soft U.S. data, which also pushed the euro to its best in three weeks.
Oil prices have come down a bit after rising on Hurricane Beryl.
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Yields fell on weaker U.S. economic data yesterday, maybe helping to push up the tech-heavy Nasdaq and sending the Dow Jones and Russell 2000 indices down a smidge. Gold rose sharply as yields declined and the dollar moved south.
Continuing jobless claims rose for the ninth straight week. A weak PMI pushed yields down and again underlined the fact that the case for cutting interest rates is getting stronger.
The ISM Services PMI came in at 48.8 vs. 52.8 expected – a new four-year low and 5 percentage points lower than May’s figure of 53.8. There is some real weakness there which sent Treasury yields lower.
Factory goods orders were –0.5% vs +0.2% expected. Durable goods orders ex-transportation –0.1% vs +0.4% prior — again more softness in the data that the Fed should be starting to think about.
There was little in the FOMC minutes to signal serious concern about overheating and policy needing to stay this tight. Remember, rising real interest rates mean policy is getting more restrictive just as things are slowing down. But the Fed may be mindful about the US presidential election in November.
Investors seem to be a bit calmer about the French election. New polls and analysis of the run-offs suggest Marine Le Pen’s Rassemblement National (RN) will fall short of an absolute majority – it’s not particularly new information.
This Republican Front stuff smells very anti-democratic; I wonder what the average homme on the rue makes of it?
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