Market Commentary: Monday 8th July

After the drama of the domestic political landscape, what have we in store this week? Funnily enough, more politics. The result of the French election was closely watched over the weekend. The country has a hung parliament, the left-wing coalition called the New Popular Front have the largest majority, while Emmanuel Macron's centrists staged an unexpected comeback, pushing the far-right National Rally (RN) into third. In the US, Joe Biden is under pressure. Both Rep. Mike Quigley from Illinois and Rep. Angie Craig from Minnesota publicly urged Biden to reconsider his intention to run for President again.

Away from politics, highlights of the week ahead will include Federal Reserve Chair Jerome Powell testifying on Tuesday and Wednesday before the Senate and House. The expectation is that Powell will set expectations for the Basel 3 Endgame capital proposal. As for data front, the US inflation report for June is on Thursday. The consensus call is for a 0.1% MoM and 3.1% YoY change, with the core CPI is expected to increase by 0.2%. If the CPI report print is in line with the market, this sees the Fed starting its cutting cycle in December.

Earning season also begins this week with Citigroup, JPMorgan, Wells Fargo and Bank of New York Mellon are reporting quarterly earnings on Friday.  Projections for the second quarter of 2024 suggest earnings increase of 8.6% compared to the same period in the previous year, with revenues also expected to rise by 4.7%. This anticipated growth rate is the most significant since the 9.9% uptick observed in the first quarter of 2022, hence the equity rallies. Any earning results that are disappointment may result in a reversal of the recent equity rallies.

As for today we are data light, Indian Prime Minister Narendra Modi visits Moscow, and the biggest mover over the weekend has been Bitcoin which fell 3.6% to $55,226.86.

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