US stocks rally after Chairman Powell’s comments. Focus on key US data today ahead of Thursday’s bank holiday. Dovish ECB commentary to keep euro under pressure. Dollar/yen rally continues.
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Welcome to another episode of Global Market Insights, brought to you by XM.com, where we provide meaningful and informative content about the events that affect market trends and shape global markets. This is the Market Common Podcast at XM.com for Wednesday, July 3 by Hilesi Arrollopoulos. I'm Cristina Marujas. The ECB-dominated Forum held in centroportical managed to produce market-moving headlines for the Fed. Chairman Powell's comment that we are back in a disinflationary environment resulted in a strong rally in US equities. Both the S&P 500 and NASDAQ indices recorded new all-time highs led by technology stocks but not Nvidia, which has already recorded an impressive price jump in 2024. This equities reaction was interesting as Chairman Powell's speech was not as dovish as the disinflationary comment since he highlighted the need for more progress on inflation. The market showed unexpected sensitivity to dovish commentary, even though it has been consistently ignoring hawkish commentary or stronger data releases. This eagerness to get lower Fed rates is understandable, but it also raises the possibility of a strong correction if this week's data failed to appease the market. With the United States celebrating its Independence Day tomorrow and enjoying a rare mid-week bank holiday, the data calendar is pretty full today. The ADP employment change, the weekly jobless claims, and the challenger jobs cut are probably the best appetizer for Friday's non-farm payroll figures. In addition, the final print of the ISM Services Survey and the factory orders data could provide further evidence of a slowdown in the US economy and support the expectations for a September rate cut. In the meantime, speculation about President Biden's possible withdrawal from the November election continues with the top US pollsters already measuring up the likely replacements. Vice President Kamala Harris and Michelle Obama feature in the short list, with the latter possibly being the Democrat's best bet of winning Donald Trump. A plethora of European Central Bank speakers will be on the wires again today, including President Lagarde and Uber Dove Notch, with the euro managing to easily digest yesterday's barrage of dovish commentary. The European Central Bank doves are desperately trying to lay the path for another rate cut in September, but most ECB hawks remain adamant that significant progress has to be made to justify such a decision. Lagarde is trying to find the balance between the two sides, but her role will increasingly become tougher, especially if data does not gradually weaken further. In the meantime, France is preparing for Sunday's second round of the parliamentary elections. Monday's positive reaction in most European stock markets was probably premature, since Lipens National Rally Party could still gain the majority in the parliament and make President Macron's life difficult for the next three years. The effort from both the left-wing New Frontier Party and Macron's alliance to support common candidates in the second round is not progressing well, as centrist candidates are not overly fond of supporting members of ultra-left parties. Dollar Yen continues its journey north, testing the Bank of Japan's patience, as data disappoints again. Similarly to China's results, the June PMI Services Survey from Japan dropped to the lowest point since April 2022. Should next week's data calendar, which includes average cash earnings and producer prices index figures disappoint, the Bank of Japan will probably have to abandon any thoughts of adopting a more hawkish stance at the July 31 meeting. This was today's Marketcom and Podcast at XM.com. [BLANK_AUDIO]
