Morning Bid: Parsing Biden TV flop, France poll, PCE time
Send a link to a friend
[June 28, 2024] A
look at the day ahead in U.S. and global markets from Mike Dolan
If TV debates decided elections, world markets seem remarkably calm
about the prospect of a Donald Trump return to the White House as the
first half of the trading year ends on Friday.
It may be too early to stake bets on November's U.S. election outcome
just yet, and there are many pressing issues on the table before then -
not least a critical update on Friday on the PCE inflation gauge favored
by the Federal Reserve and the first round of the French assembly
election at the weekend.
But U.S. President Joe Biden's poor performance in Thursday's first of
two televised face offs with Trump would appear to put the former
President in pole position, with opinion polls before the event showing
the two neck and neck.
Perhaps one reason for investor hesitancy was post-debate speculation
that Democrats may push Biden to stand aside and see an alternative
candidate selected at the party's convention instead.
Either way, U.S. stocks and the dollar were marginally higher early on
Friday and Treasury yields steady. The VIX 'fear index' of equity
volatility, and related futures on that index covering the election,
remain subdued near the lowest levels of the year.
Even currencies potentially most sensitive to Trump's pledges on tariff
rises or immigration barriers, like China's yuan or Mexico's peso were
undisturbed.
Once again, the big mover on the currency markets was Japan's yen, which
continued to wend its way to new 38-year lows and briefly breached 161
per dollar in the face of continued Japanese government warnings about a
repeat of April's intervention to support it.
Japan appointed a new top foreign exchange diplomat as the yen plumbed
new lows, heightening expectations of imminent action by Tokyo to shore
up the ailing currency. Atsushi Mimura, a financial regulation veteran,
replaces Masato Kanda.
French bonds markets grew nervier, meantime, ahead of the two-round
French elections on Sunday and July 7. The risk premium on French
government bonds over German equivalents rose to its widest since the
euro zone crisis 12 years ago with polls still suggesting far right
parties with the highest percentage vote, though still short of an
overall majority in parliament.
The spread between German and French 10-year yields reached 84 basis
points, its widest since September 2012, although nominal 10-year French
yields remained below peaks seen late last year.
Back on Wall Street, the economic picture appeared to darken somewhat.
First-time applications for U.S. unemployment benefits drifted lower
last week but the number of people on jobless rolls jumped to a 2-1/2
year high in mid-June, suggesting the labor market was cooling amid
slowing economic growth.
[to top of second column] |
Media crews work at the press room in the McCamish Pavilion on the
Georgia Institute of Technology campus ahead of the first 2024
presidential debate between Democratic presidential candidate U.S.
President Joe Biden and Republican presidential candidate former
U.S. President Donald Trump in Atlanta, Georgia, U.S., June 27,
2024. REUTERS/Marco Bello/File Photo
Other data showed non-defense capital goods orders excluding
aircraft, a closely watched proxy for business spending plans,
unexpectedly dropping 0.6% last month and the goods trade deficit
widened 2.7% to $100.6 billion.
All of which saw the Atlanta Fed's real-time 'GDPNow' estimate fall
to 2.7%, with U.S. economic surprise indexes at their most negative
in almost two years.
Better news is expected from the PCE inflation release for May out
later. A 0.1% monthly increase in the core PCE is forecast and that
would bring the annual core rate down to 2.6% - its lowest in more
than three years.
Still, Fed officials still appear in no rush to loosen interest
rates. Atlanta Fed President Raphael Bostic said on Thursday that
inflation "appears to be narrowing" and that should allow one rate
cut later this year - less that the 45bp priced into futures markets
right now.
More hawkish Fed governor Michelle Bowman reiterated her stance: "We
are still not yet at the point where it is appropriate to lower the
policy rate, and I continue to see a number of upside risks to
inflation."
And reflecting the thorny fiscal problems facing whoever wins next
year's elections, the International Monetary Fund on Thursday called
on the U.S. to raise taxes to curb rising debt levels while
applauding "robust, dynamic" growth in the world's largest economy.
Elsewhere in company news, Nike lunged 12% in out of houses trading
on Thursday after it forecast a surprise drop in fiscal 2025
revenue, hurt by faltering demand for its sneakers as consumers
covet newer brands such as On and Hoka.
Key developments that should provide more direction to U.S. markets
later on Friday:
* US May personal income and consumption and PCE inflation gauge,
Chicago June business survey, University of Michigan final June
consumer sentiment survey
* Federal Reserve Board Governor Michelle Bowman, San Francisco Fed
President Mary Daly and Richmond Fed President Thomas Barkin speak
* Iranian Presidential election
(By Mike Dolan, editing by William Maclean mike.dolan@thomsonreuters.com)
[© 2024 Thomson Reuters. All rights
reserved.]
This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content.
|