Donald Trump got this close to being assassinated this weekend while he was giving a speech in an election rally. He was lucky that the bullet only grazed his ear, but he showed his resilience by demonstrating strength and defiance just minutes after being shot. The image of strong and heroic Trump with blood on his face, fist up in the air and with an American flag waving behind him as security guards were taking him away from the scene marked the weekend – and came as a perfect contrast to old and weakened Biden since the TV debate. Cherry top, Trump said that he would attend the Republican National Convention next week. All in all, even though the assassination incident on Trump was shocking – and spurred the worries of a deeply divided America where political violence is taking over – it boosted the chances that Trump will win the presidential election in November from 61% before the shooting to 67% after, according to PredictIt. And if history is any indication, such events have been a boon for a candidate in past elections.
Bitcoin – which has been struggling since the beginning of June – jumped past the $62K after the incident on flight to safety and because Trump backs the asset, the US dollar opened the week slightly higher and gold remains surprisingly unreactive to the news. US futures, on the other hand, are in the positive this morning as the S&P500 performed well under Trump and increased odds for Trump victory are also perceived as good news for the market. Happy Monday!
Other than that
It feels like ages ago but another set of good news for the market came last week, remember, when Federal Reserve (Fed) President Jerome Powell said that the only risk to the US economy is no longer inflation but also the cooling jobs market – a speech that sent the probability of a September rate hike to above 90% although Powell didn’t want to give any hint regarding the timing of the first rate cut. The latest set of CPI figures came in softer-than-expected and investors greatly overlooked the stronger-than-expected PPI figures released Friday.
It’s worth noting that producer prices in the US unexpectedly jumped last month, PPI rose from 2.4% to 2.6% while core PPI jumped from 2.6% to 3%. It’s soothing that the Fed is no longer only focused on inflation but it does not mean that they will completely disregard the inflation numbers. They still matter.
But anyway, the markets didn’t panic much on PPI but decided to focus on soft Michigan index that revealed softer inflation expectations and murkier sentiment. As such, the US 2-year yield dived to 2.45% and the 10-year closed last week below 4.20% mark. The S&P500 hit a fresh record, Nasdaq gained, but the real winner of the week was the small caps. The Russell 200 jumped more than 6% in just three sessions and traded at the highest levels since January 2022 on hope that the Fed rate cuts would benefit more to the small caps than to Big Tech.
Data and earnings
Inflation data came in slightly higher than expected in France and in Spain, and cemented the idea that the European Central Bank (ECB) will stay pat when it meets this Thursday. Traders will be looking for hints of another cut in September. The EURUSD is slightly lower this morning on the back of a broadly stronger US dollar on Trump assassination attempt, but the rising odds of September cut from the Fed remain supportive of a further rise and we can see the EURUSD settle within the 1.10/1.12 range between now and September.
Across the Channel, Brits will reveal their latest CPI numbers on Wednesday and according to some predictions, headline CPI may have eased below the 2% mark in June – which could spur the Bank of England (BoE) cut expectations for the August meeting and bring in the topsellers near the 1.30 psychological mark against the US dollar.
On the earnings front, the first big US bank earnings were mixed on Friday. JP Morgan fell 1.21% despite reporting a record profit after a surge in dealmaking boosted investment fees by 50%. Yet expenses exceeded expectations and net interest income came below estimates. Citigroup fell 1.81%. As JPM, Citi benefit from increased investment banking revenue – that jumped 60% at Citi – but expenses didn’t please investors. While Wells Fargo tanked 6% despite better-than-expected earnings and revenue because net interest income, there, fell 9% as customers preferred higher yielding products.
Today, Goldman Sachs and Balckrock are due to report earnings, tomorrow: Morgan Stanley, Thursday: Netflix and TSM and on Friday: American Express.
All I know is that earnings, especially the Big Tech earnings, would better meet and beat expectations for the rally in major US indices to continue. Otherwise, even the Fed cut bets may not prevent a meaningful downside correction.
China announces disappointing GDP as communist party kicks off important meeting
In China, the week starts with bad news. The Q2 GDP growth dived below 5% to 4.7% level, retail sales grew slower than expected and the slump in house prices accelerated. The communist party will hold a once-in-five-years meeting to address the issues and could come with some measures to help give investors some hope – especially measures to stop bleeding in the crumbling property market and measures to further boost production to make up for the feeble consumer spending,. It’s certainly why the CSI 300 is better bid this morning, while US crude opens the week under pressure, as copper futures hardly find buyers to test the 50-DMA to the upside on fear that the sluggish Chinese growth will keep the global demand prospects under a certain downside pressure.
