Check outside next week to see if the ECB has raised interest rates in a row? Google, Tesla, Intel report latest results
The international market has been in a state of flux this week. Federal Reserve Chairman Warsh appeared in Congress to reiterate his determination to control inflation, and the situation between the United States and Iran has become tense again. U.S. stocks fell across the board, with the Dow falling 0.93% for the week, the Nasdaq falling 2.90% for the week, and the S&P 500 index falling 1.55% for the week. The three major European stock indexes were divided. The British FTSE 100 index rose 0.98% on the week, the German DAX30 index fell 0.94% on the week, and the French CAC40 index was flat.
The international market has been in a state of flux this week. Federal Reserve Chairman Warsh appeared in Congress to reiterate his determination to control inflation, and the situation between the United States and Iran has become tense again. U.S. stocks fell across the board, with the Dow falling 0.93% for the week, the Nasdaq falling 2.90% for the week, and the S&P 500 index falling 1.55% for the week. The three major European stock indexes were divided. The British FTSE 100 index rose 0.98% on the week, the German DAX 30 index fell 0.94% on the week, and the French CAC 40 index was flat. There will be a lot to watch next week. The preliminary purchasing managers' values for the manufacturing and service industries in July in the United States, the Eurozone, and the United Kingdom will be released together, which will provide a direct reflection of the operating prosperity of enterprises in each economy at the beginning of the second half of the year. The European Central Bank will announce its interest rate decision; the United Kingdom will usher in a new prime minister to take up his duties, and a series of key economic data such as inflation will be released at the same time. Investors will closely track the situation in the Middle East to see whether tensions between the United States and Iran continue to escalate or show signs of easing. The US stock market earnings season kicks off, and the results of Google and Tesla will be unveiled. Google Tesla earnings report coming Warsh will attend hearings on the semi-annual monetary policy report before both houses of Congress this week. Warsh said that he will continue to make anti-inflation the core of his policy, promote internal reforms of the Federal Reserve, and reiterate that he will maintain the independence of the central bank. Next week's economic data will be relatively light, with the initial July purchasing managers' PMI values for the manufacturing and service industries to be released on Friday (24th) attracting attention. The renewed conflict in the Middle East has pushed up oil prices, and this boom data will fully reflect the performance of the US economy this month. Previous U.S. CPI and PPI inflation data were lower than expected, and the market lowered expectations for the Federal Reserve to raise interest rates. This PMI will verify whether the U.S. economy can continue to show resilience in recent months. Refinitiv (LSEG) data shows that U.S. money markets are now fully pricing in a 25 basis point interest rate hike by the Federal Reserve in December. Elmar Volcker, senior fixed income analyst at German State Bank LBBW, said in a research report: "The short-term inflation cooling trend has not been interrupted. Against this background, there is almost no logic to support the Federal Reserve's next interest rate meeting to raise interest rates." U.S. economic data worthy of attention next week also include the Conference Board's June leading economic indicators, initial jobless claims and the monthly rate of new home sales in June. As the earnings season enters its second week, the financial reports of Google and Tesla will receive widespread attention. In addition, the performance of Texas Instruments and Intel will also have an impact on chip stocks that have been volatile recently. The situation in the Middle East has heated up again, pushing up international oil prices. The front-month contract of WTI crude oil rose 15.52% on the week to US$82.49/barrel, and the front-month contract of Brent crude oil rose 15.91% on the week to US$88.10/barrel. The market’s attention simultaneously turned to the Bab el-Mandeb Strait, the gateway to the southern tip of the Red Sea. According to data from Commerzbank, the daily crude oil transportation volume of this waterway increased from less than 3.9 million barrels in February to 7.2 million barrels in April, indicating that its strategic importance continues to increase. When the Strait of Hormuz briefly resumed navigation at the end of June, the shipping traffic in the Bab el-Mandeb Strait returned to normal for a time; but after the Hormuz shipping was blocked again this time, the traffic volume in the Bab el-Mandeb Strait surged again. If the Bab el-Mandeb Strait is blocked, global crude oil supply will further tighten and oil prices will face greater upward pressure. The precious metals market fell for the second consecutive week, as the conflict between the United States and Iran continued to escalate, pushing up energy prices, and market inflation concerns increased, reinforcing expectations for the Federal Reserve to raise interest rates. COMEX gold futures for July delivery on the New York Mercantile Exchange fell 2.23% on the week to US$4,012.70 per ounce, and COMEX silver futures fell 6.31% on the week to US$56.03 per ounce. Chris Gaffney, president of EverBank Global Markets, said: "The core driver of this round of gold decline is the strength of the U.S. dollar, coupled with rising concerns about global inflation, which has driven up interest rates in various countries." Since the outbreak of the U.S.-Iran conflict at the end of February, gold has fallen by about 25%. The market generally believes that the inflation driven by the war will force the Federal Reserve to maintain high interest rates for a long time, and gold, which has no interest income, will continue to be under pressure. Although gold is regarded as an inflation hedge, rising interest rates are usually negative for such zero-coupon precious metal assets. Gaffney added: "The recent slight cooling in inflation data has reduced the probability of raising interest rates at the next Federal Reserve interest rate meeting, but global interest rates are still rising; the current surge in oil prices may force the Federal Reserve's monetary policy to shift to a more hawkish stance."
Data from the CME FedWatch tool showed traders were pricing in a roughly 53.3% chance of the Fed raising interest rates in September. Federal Reserve Vice Chairman Philip Jefferson said on Thursday that he supports continuing to raise interest rates if inflation does not improve in the short term. Goldman Sachs pointed out in a research report: "The current proportion of gold allocation in private investment portfolios is still at a low level; a series of geopolitical risks such as the US-Iran conflict may push private investors to follow the example of central banks of various countries and accelerate the allocation of gold to achieve asset diversification." ECB may remain on hold The Eurozone will usher in two core events next week: the European Central Bank’s monetary policy decision on Thursday (23rd) and the initial value of the July Purchasing Managers Index (PMI) on Friday (24th). The market expects the European Central Bank to keep its policy rate unchanged, having just raised interest rates by 25 basis points in June. However, due to the second round of inflation risks brought about by rising energy prices, there is still the possibility of another interest rate hike in September. Von Grich, chief analyst at Nordea Bank, said: "Inflation in June was lower than expected and the situation in the Middle East is turbulent. The central bank should wait and see more data before taking action. Nordea Bank predicts that interest rates will remain unchanged at this interest rate meeting. However, the conflict in the Middle East has escalated again and the option of raising interest rates cannot be completely ruled out. Our baseline scenario is to raise interest rates again in September." Ryan Jayasaputra, an economist at the investment company Investec, said: "Theoretically, there are reasons for the central bank to continue to raise interest rates, but it would be a more prudent choice to wait and see until the September meeting." He added that the escalating conflict between the United States and Iran may suppress the PMI prosperity of the manufacturing and service industries; however, the increase in oil prices in this round is limited, well below the peak in late April, and the impact on the economy is controllable. In the UK, Burnham will succeed Starmer as Prime Minister next Monday (20th). Investors focus on the new cabinet list to judge the direction of future fiscal expenditures and tax policies. British public sector borrowing reached 23.3 billion pounds in May, a 30% year-on-year increase; rising fiscal expenditure pressure and weak tax revenue will push up the cost of government bond issuance financing. Next Wednesday (22nd), the UK's June CPI inflation and PPI producer price index will be the core data, and the market will use this to evaluate the possibility of the Bank of England raising interest rates in the coming months. As a net energy importer, the UK's conflict in the Middle East will directly increase domestic inflationary pressure by pushing up oil prices. Refinitiv data shows that UK money markets are pricing in a 25 basis point interest rate hike in November.
Data from the CME FedWatch tool showed traders were pricing in a roughly 53.3% chance of the Fed raising interest rates in September. Federal Reserve Vice Chairman Philip Jefferson said on Thursday that he supports continuing to raise interest rates if inflation does not improve in the short term. Goldman Sachs pointed out in a research report: "The current proportion of gold allocation in private investment portfolios is still at a low level; a series of geopolitical risks such as the US-Iran conflict may push private investors to follow the example of central banks of various countries and accelerate the allocation of gold to achieve asset diversification." ECB may remain on hold The Eurozone will usher in two core events next week: the European Central Bank’s monetary policy decision on Thursday (23rd) and the initial value of the July Purchasing Managers Index (PMI) on Friday (24th). The market expects the European Central Bank to keep its policy rate unchanged, having just raised interest rates by 25 basis points in June. However, due to the second round of inflation risks brought about by rising energy prices, there is still the possibility of another interest rate hike in September. Von Grich, chief analyst at Nordea Bank, said: "Inflation in June was lower than expected and the situation in the Middle East is turbulent. The central bank should wait and see more data before taking action. Nordea Bank predicts that interest rates will remain unchanged at this interest rate meeting. However, the conflict in the Middle East has escalated again and the option of raising interest rates cannot be completely ruled out. Our baseline scenario is to raise interest rates again in September." Ryan Jayasaputra, an economist at the investment company Investec, said: "Theoretically, there are reasons for the central bank to continue to raise interest rates, but it would be a more prudent choice to wait and see until the September meeting." He added that the escalating conflict between the United States and Iran may suppress the PMI prosperity of the manufacturing and service industries; however, the increase in oil prices in this round is limited, well below the peak in late April, and the impact on the economy is controllable. In the UK, Burnham will succeed Starmer as Prime Minister next Monday (20th). Investors focus on the new cabinet list to judge the direction of future fiscal expenditures and tax policies. British public sector borrowing reached 23.3 billion pounds in May, a 30% year-on-year increase; rising fiscal expenditure pressure and weak tax revenue will push up the cost of government bond issuance financing. Next Wednesday (22nd), the UK's June CPI inflation and PPI producer price index will be the core data, and the market will use this to evaluate the possibility of the Bank of England raising interest rates in the coming months. As a net energy importer, the UK's conflict in the Middle East will directly increase domestic inflationary pressure by pushing up oil prices. Refinitiv data shows that UK money markets are pricing in a 25 basis point interest rate hike in November.