Global Economic and Financial Updates: July 17, 2024

1

The most speculative sectors of the US stock market are soaring at a pace unseen since the pandemic, as investors bet on imminent rate cuts. The Russell 2000 small-cap index rose 12% in the past five days, while the S&P 500 gained 1.6% and the Nasdaq 100 fell 0.3%. This surge is driven by recent inflation data, particularly the CPI report, causing two-year Treasury yields to drop and traders to move up their Fed rate cut expectations.

Analysis:

Impact on FX:Rate cut expectations could weaken the USD.

FX Pair:EUR/USD, USD/JPY

Impact on Shares:US Market: Positive impact on speculative sectors.

Companies:General Market Indices

2

Demand for luxury goods and beauty products is declining in certain regions, impacting the wealth of some of the world's richest individuals. LVMH founder Bernard Arnault lost his top spot on Bloomberg‘s Billionaires Index, and L’Oréal heiress Françoise Bettencourt Meyers briefly lost her title as the worlds richest woman.

Analysis:

Impact on FX:Declining luxury demand could weaken the EUR.

FX Pair:EUR/USD, EUR/JPY

Impact on Shares:European Market: Negative impact on luxury sector stocks.

Companies:LVMH (MC.PA), LOréal (OR.PA)

3

US President Joe Biden plans to propose a series of reforms to significantly reshape the Supreme Court, including term limits for current lifetime justices. This move marks a significant change as Biden seeks political support to bolster his presidential campaign.

Analysis:

Impact on FX:Political reforms could lead to USD volatility.

FX Pair:EUR/USD, USD/JPY

Impact on Shares:US Market: Mixed impact on market sentiment.

Companies:General Market Indices

4

Due to a heatwave in the northeastern US, subway services in New York City and commuter trains in Washington, D.C. faced cancellations and delays. Washington reached 104°F (40°C) on Tuesday, the third consecutive day above 100°F. NYC issued a heat advisory, and parts of New Jersey issued extreme heat warnings.

Analysis:

Impact on FX:Economic disruption could weaken the USD.

FX Pair:EUR/USD, USD/JPY

Impact on Shares:US Market: Negative impact on transportation sector stocks.

Companies:Major US transportation companies

5

Australia‘s second-largest pension fund, Australian Retirement Trust (ART), announced a merger with smaller rival Qantas Super, marking further consolidation in Australia’s $2.6 trillion pension industry. The merger will add A$9 billion in assets to ART, bringing its total assets under management close to A$300 billion.

Analysis:

Impact on FX:Increased consolidation could strengthen the AUD.

X Pair:USD/AUD, EUR/AUD

Impact on Shares:Australian Market: Positive impact on financial sector stocks.

Companies:ART, Qantas Super

6

Nikon Corp. is attracting attention from US defense and aerospace companies for its metal 3D printers. The company is expanding its customer base, particularly in digital manufacturing. Following its acquisition of German 3D printing specialist SLM Solutions Group, Nikon has established a subsidiary in California and appointed former US Joint Chiefs of Staff Chairman Mike Mullen as a strategic advisor.

Analysis:

Impact on FX:Increased international interest could strengthen the JPY.

FX Pair:USD/JPY, EUR/JPY

Impact on Shares:Japanese Market: Positive impact on Nikon and related stocks.

Companies:Nikon Corp. (7731.T)

7

Russia and Ukraine are set to exchange 180 prisoners in a deal brokered by the UAE, marking the sixth such exchange facilitated by the Gulf nation this year. Each side will release 90 prisoners, and nearly 1,400 prisoners have been exchanged this year under UAE mediation.

Analysis:

Impact on FX:Increased geopolitical stability could weaken the USD.

FX Pair:EUR/USD, USD/JPY

Impact on Shares:Global Market: Positive impact on market sentiment.

Companies:General Market Indices

8

US retail sales in June recorded the largest increase in three months, excluding auto dealers affected by a cyberattack. Consumer confidence rebounded at the end of Q2, with retail purchases excluding autos rising 0.4%. Overall retail sales remained flat due to a 2% drop in auto dealer revenues.

Analysis:

Impact on FX:Increased consumer confidence could strengthen the USD.

FX Pair:EUR/USD, USD/JPY

Impact on Shares:US Market: Positive impact on retail sector stocks.

Companies:Major US retailers

9

Singapore's exports fell more than expected in June, with electronic shipments remaining weak, indicating challenges for the trade-dependent economy. Non-oil domestic exports fell 8.7% year-on-year, worsening from a revised 0.7% decline in May, missing the median forecast of a 1.3% drop.

Analysis:

Impact on FX:Weak export data could weaken the SGD.

FX Pair:USD/SGD, EUR/SGD

Impact on Shares:Singapore Market: Negative impact on export sector stocks.

Companies:Major Singaporean exporters

10

New Zealand's inflation rate fell more than expected in Q2 to a three-year low, though domestic price pressures remain. Annual inflation dropped from 4% in Q1 to 3.3%, below economists' expectations of 3.4% and the Reserve Bank of New Zealands forecast of 3.6%. Quarterly inflation was 0.4%, below the 0.5% expected.

Analysis:

Impact on FX:Lower-than-expected inflation could weaken the NZD.

FX Pair:USD/NZD, EUR/NZD

Impact on Shares:New Zealand Market: Mixed impact on general market indices.

Companies:General Market Indices