Daily Broad Market Recap – July 1, 2024

The absence of surprises from the French parliamentary elections over the weekend helped to kick off the third quarter of 2024 trading on a strong note on Monday.

Which assets saw notable moves at the beginning of the week?

We discuss the main market drivers in detail below!

headlines:

• Canada Markets on Canada Day Holiday
• Final reading of the Jibun Bank Japan Manufacturing PMI for June: 50.0 (exp: 50.1, previous)
• The Melbourne Institute inflation gauge remains at 0.3% m/m as expected in June.
• Caixin Manufacturing PMI for June: 51.8 (F 51.5, Previous 51.7)
• German Preliminary CPI June: (0.2% expected, 0.1% previously)
• Swiss Manufacturing PMI June: 43.9 (45.2 expected, 46.4 previous)
• The Eurozone final manufacturing PMI was revised down from 45.6 to a two-month low of 45.8 in June.
• The S&P Global UK Final Manufacturing PMI was revised down from 51.4 to 50.9 in June.
• The S&P Global US Final Manufacturing PMI was revised to 51.6 in June from 51.7;Selling prices rose at the slowest pace since the beginning of the year.“
• The US ISM Manufacturing PMI fell from 48.7 to 48.5 in June; the price index fell from 57.0 to 52.1; and the employment index contracted from 51.1 to 49.3.
• At a forum, European Central Bank President Christine Lagarde said:It will take some time before we can collect enough data to be sure that the risks of above-target inflation have passed.“
• New Zealand’s NZIER quarterly business confidence index fell from -25 in Q1 to -44 in Q2 2024 as high interest rates continued to dampen demand
• The UK’s BRC Shop Prices Index rose 0.2% in June after a 0.6% rise in May as retailers’ prices held steady.

Price movement in the broad market:

Traders began the week feeling relieved after the first round of the French elections. The far-right National Rally party won, as many expected, easing some concerns about future politics in the region.

This optimism has extended to “risk” assets like bitcoin and crude oil. Bitcoin got an extra boost from excitement over the potential approval of an ETH exchange-traded fund later this month. Meanwhile, crude oil prices in the US have been rising as buyers factor in the summer driving season and potential disruptions from Hurricane Beryl affecting oil and gas production in the Caribbean. BTC/USD hit a multi-day high above $63,700, while WTI crude hit $83.50.

In the US session, all eyes were on Treasury yields. Manufacturing PMIs released during the session highlighted some weakness and easing price pressures. However, the increased prospects for a Trump presidency following last week’s debate have sparked discussions about expansionary fiscal policies and rising inflation.

The yield on the 10-year US Treasury note hit a four-week high of 4.49% before settling at 4.46%.

Forex Market Behavior: US Dollar vs Major Currencies

Comparison between the US dollar and major currencies Chart by TradingView

A bit of risk-off after the French elections over the weekend and the start of Q3 2024 sent the US dollar slightly lower during the Asian session.

However, the US dollar started to recover during the European session as traders waited for key events such as Powell’s speech and the upcoming FOMC meeting minutes.

In the US trading session, dollar buying gained momentum, possibly due to higher US Treasury yields. As mentioned earlier, talk of a possible Trump presidency has raised concerns about rising inflation and the Federal Reserve keeping interest rates higher for longer.

Despite weaker-than-expected manufacturing PMIs, the dollar gained against most of its peers, though it saw only modest gains against the pound and euro. Both currencies were supported by the relatively decisive French parliamentary elections held over the weekend.

Potential catalysts coming up on the economic calendar:

• Spain Unemployment Rate Change at 7:00 AM GMT
• Italy Unemployment Rate at 8:00 AM GMT
• Eurozone CPI report at 9:00 am GMT
• Eurozone unemployment rate at 9:00 am GMT
• Canada Manufacturing PMI at 1:30 PM GMT
• European Central Bank President Lagarde will speak at 1:30 p.m. GMT.
• Fed Chair Powell to Speak at 1:30 PM GMT
• US JOLTS Job Openings at 2:00 PM GMT
• Australian Retail Sales at 1:30am GMT (July 3)

Traders are looking ahead to another busy day as today’s euro zone inflation report could add to or dampen speculation of a rate cut by the European Central Bank. The US JOLTS job openings report could also be in focus ahead of Friday’s expected US nonfarm payrolls report.

And don’t forget the central bankers! Fed Chair Powell and ECB President Lagarde will be on a panel where we might hear about their latest policy biases. Don’t even think about missing it!

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