Global Economic Overview
- U.S. Consumer Momentum: Slowing, with notable signs of deceleration.
- UK Savings Rate: Increased to 11.1% in Q1, positively impacting GDP.
- Sweden's Central Bank: Dovish rhetoric, with 2-3 rate cuts expected this year.
- Inflation Data: Disappointing figures from Australia and Canada.
- China PMI: Important release on Monday for gauging economic trajectory.
- Japanese Tankan: Also on Monday, crucial for understanding policy direction.
- RBA Minutes: Key focus on Tuesday due to reaction to inflation data.
- Eurozone CPI: Set for release on Tuesday, critical for ECB's trajectory.
- Global Flash PMI: Wednesday will provide global growth insights.
- Germany's Factory Orders & IP: Significant data due Thursday and Friday.
Political Developments
- US Presidential Elections: This week's first debate affects market pricing.
- EU Leadership: Ursula von der Leyen's renomination impacts EU structure and direction.
- UK General Election: Scheduled for July 4th, anticipated with close attention.
- French Legislative Elections: Two rounds crucial for European sentiment.
US Macroeconomic Evolution
- ISM Manufacturing: Data release on Monday.
- JOLTs Job Openings: Important labor market data due on Tuesday.
- Fed Minutes: Wednesday's release will clarify rate cut outlook.
- Independence Day: Thursday marks a market holiday.
- Payrolls Report: Critical data due on Friday, focusing on economic momentum.
Transcript
Matt Jones
Welcome to "The Long & Short of the Week Ahead", a production of Eurizon SLJ Capital that takes a look at the macro-economic themes of the week ahead and has been recorded for professional investors.
My name is Matt, Head of Distribution for Eurizon SLJ Capital, and I'm joined by Neil Staines, Senior Portfolio Manager.
Welcome back, Neil. It's great to have you here with us again.
Neil Staines
Thank you very much Matt. It's great to be here.
Matt Jones
So the global macro economic backdrop remains complex with lots of moving parts of the current juncture. How are we thinking about the global economy into next week?
Neil Staines
Yeah, thanks very much, Matt. It is indeed. A very complex global macro backdrop. We've seen some further signs of slowing in the global economy, US consumer momentum in particular, but also notably at the end of this week a tick up in the UK savings rate to 11.1% in Q1. I think that's interesting given the spending, driving an upgrade in GDP as well. There's been more dovish central bank rhetoric from Sweden, noting two to three rate cuts coming likely for the rest of this year. And also some disappointing inflation data in Australia and Canada. Next week on Monday, we get China PMI is going to be very important to gauge the trajectory of arguably one of the most important economies in the global macro dynamic at the moment. We also get Japanese Tankan on a Monday, and that will be important, not just given the fact that the close of this week we've changed the currency head at the MOF, but also in terms of where we are in terms of the policy trajectory in Japan. It should be a certainly an interesting month with the Bank of Japan meeting at the end of July. On Tuesday, we get the RBA minutes, and that's going to be a big focus given the out-performance to the top side of recent inflation data. Recent RBA speakers have played down the reaction function to the top side to that, but markets have tried to price in a upside rate hikes from the RBA. We get Eurozone CPI also on Tuesday, and that's going to be a big focus for the trajectory of the ECB. Wednesday's global flash PMI, so again, the global context comes back into focus, and how that growth trajectory on a global basis is playing out. And Germany will be the focus for Thursday and Friday with factory orders and IP.
So broadly a complex backdrop for the global financial markets. Many moving parts and a lot to look out for next week.
Matt Jones
Politics continues to be a dominant focus for many countries and broad financial markets at the moment. Which I guess makes next week quite an important one.
Neil Staines
It certainly does. Absolutely. Yeah. Thanks Matt. It's political developments are going to be very important. We've already seen over the last couple of weeks the significance in terms of price action from the general elections that we saw in South Africa, Mexico, and India, we touched on those last week.
But again, they're still having influence on the financial markets today. We had the first debate in the US Presidential elections this week and that's going to shape expectations and market pricing into next week, and ahead of that very important November US election. This week also saw the successful renomination of Ursula von der Leyen as EU commission head. That's going to shape the structure and direction of the EU going forward. So a lot still to look out for there on the political front, but really the big events of next week, it's going to be the UK general election on the 4th of July. Perhaps polls was suggesting that there's not much to surprise markets there, but we'll certainly pay attention, nonetheless.
And that's going to be sandwiched between round one and round two of the French legislative elections. And that's all very important to shape sentiment in France and across Europe.
Matt Jones
And finally it's that week again. Job's week in the US so how are we looking at the US macro evolution? And what are we looking out for next week?
Neil Staines
Yeah, absolutely. It's a huge week for the US. On Monday we get ISM manufacturing, and its services counterpart on Wednesday. Tuesday sees JOLTs job openings it's going to be very important to see the narrowing of that demand and supply dynamic within the labor market.
Wednesday is also the Fed minutes from the last FMOC meeting where we saw the dots trimmed down to just one rate cut at the median dot for this year. So that's going to be important. Thursday is the independence day holiday and Friday it's payrolls. Now the theme of late has been the cooling of US economic momentum, and particular, domestic demand or the consumer, and that third release of US Q1 GDP, highlighted that having gone from 2.5%, in the consumption components of GDP, down to 1.5 at the latest reading, and that's significant as Powell referenced that 2.5 as still outlining the strength of the US consumer. So some doubts may be calling back into that. And as we've highlighted, jobs weakness constitutes the most acute trigger for a dovish Fed reaction function or the highest sensitivity to that with a big implications for bonds, for equities and for the dollar. So a huge focus for markets next week.
Matt Jones
Fantastic. Thank you for joining us once again and outlining your thoughts on the week ahead. I look forward to catching up with you again next week.
Disclosure
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