Global Economic Dynamics

1

At the Democratic National Convention in Chicago, party leaders praised President Biden's tenure and gradually shifted focus towards supporting Vice President Kamala Harris's political future. Biden delivered an opening speech expressing his support for Harris, hoping she would continue his legislative and policy legacy while preventing Republican Trump from returning to power. During the convention, leaders from various factions praised Biden's leadership and expressed support for Harris. Meanwhile, celebrities and social media influencers backing Harris actively participated, aiming to attract more voters through the convention.

Analysis:

Impact on FX:Limited direct impact.

FX Pair:None

Impact on Shares:Potential boost for companies associated with the Democratic Party's policies.

Companies:Social media platforms, political consulting firms.

2

Elon Musk‘s Super Political Action Committee (Super PAC) supporting Trump is hiring campaign staff in North Carolina, reflecting concerns among Trump’s supporters about his declining support in this Republican-friendly state. The Musk-funded committee is also working on voter mobilization in Michigan, showing its commitment to Trumps return to the White House. Meanwhile, Trump holds a lead over Kamala Harris in North Carolina, but the gap is narrowing, and Democrats believe the state's competitiveness is increasing.

Analysis:

Impact on FX:Limited direct impact.

FX Pair:None

Impact on Shares:Potentially positive for media companies covering the election; negative for sectors impacted by political uncertainty.

Companies:Social media platforms, political consultancy firms.

3

Gold prices surged past $2,500 per ounce, hitting a record high, driven mainly by market expectations that the Federal Reserve will soon lower interest rates. Gold has risen 21% year-to-date, making it one of the best-performing commodities. Factors driving the gold price include falling U.S. real interest rates, increased holdings by hedge funds and speculators, and strong physical demand for gold bars, particularly in Asia. However, demand from China has weakened, especially as the Peoples Bank of China paused gold purchases, turning the Shanghai gold premium negative. The future trajectory of gold will depend on the Fed's monetary policy adjustments and sustained market interest in the metal.

Analysis:

Impact on FX:Potential weakening of the USD as gold prices rise due to expected rate cuts.

FX Pair:USD/JPY, EUR/USD

Impact on Shares:Positive for gold mining companies and ETFs tracking gold prices.

Companies:Gold miners, precious metal ETFs.

4

The heirs of Seven & i Holdings' founder, Masatoshi Ito, could gain substantial financial benefits by supporting a takeover bid from Canada‘s Alimentation Couche-Tard for the 7-Eleven parent company. If successful, this acquisition would be one of the largest foreign takeovers of a Japanese company. However, due to 7-Eleven’s significant social and economic role in Japan, especially in emergency response, the Ito family may be reluctant to relinquish this family legacy. Additionally, the takeover could face resistance from the Japanese government and the public.

Analysis:

Impact on FX:Limited direct impact.

FX Pair:None

Impact on Shares:Positive for Seven & i Holdings if the acquisition proceeds; potential resistance could affect stock volatility.

Companies:Seven & i Holdings, Alimentation Couche-Tard.

5

The yield on Indias 10-year government bonds has stalled after hitting the lowest level since 2022. Despite seven consecutive weeks of declining yields, factors such as the narrow spread between yields and the RBI's 6.5% policy rate, potential oil price spikes due to Middle East tensions, and technical support since the pandemic may prevent yields from breaking below the key 6.85% threshold. Analysts believe that if the Reserve Bank of India begins cutting rates, it could provide new momentum to the market. However, the market widely expects that the RBI will wait for the Federal Reserve's actions and might not cut rates until the fourth quarter of this year.

Analysis:

Impact on FX:Potential weakening of INR if bond yields remain low without corresponding rate cuts.

FX Pair:USD/INR

Impact on Shares:Mixed impact on Indian financial stocks; positive for bonds if rates are cut.

Companies:Indian government bonds, financial institutions.

6

At this week‘s global central bank annual meeting in Jackson Hole, the divergence among central bankers over the future path of interest rates is more pronounced than ever. Although inflation has decreased, it remains above the 2% target, forcing central banks to make tougher choices between curbing inflation and avoiding a recession. As central banks in the U.S., Europe, and other countries take different approaches to tackling inflation and slowing economic growth, market uncertainty has increased, leading to fluctuating investor expectations. Fed Chair Jerome Powell’s speech at the meeting will have a significant impact on future monetary policy.

Analysis:

Impact on FX:Increased volatility in major currencies depending on central bank decisions.

FX Pair:USD/EUR, USD/JPY

Impact on Shares:Potential volatility in global equities; rate-sensitive sectors could be particularly affected.

Companies:U.S. and European banks, global financial markets.

7

The Reserve Bank of Australia (RBA) indicated in its latest meeting minutes that it expects to maintain the current 12-year high interest rate of 4.35% for an extended period to ensure inflation returns to the target range next year. While further rate hikes were discussed, the decision was made to keep rates unchanged. The central bank emphasized that it will adjust policy based on changes in economic data and remains vigilant about persistent inflation risks. Unlike other countries, Australias pace of rate hikes has been slower, meaning it may need to keep rates higher for longer as other central banks begin their rate-cutting cycles.

Analysis:

Impact on FX:Potential support for AUD due to continued high-interest rates.

FX Pair:AUD/USD

Impact on Shares:Mixed impact; potential negative effect on interest-rate-sensitive sectors like housing, positive for financials.

Companies:Australian banks, real estate developers.

8

Japans ruling Liberal Democratic Party (LDP) has scheduled a leadership election for September 27, with the winner almost certain to succeed outgoing Prime Minister Fumio Kishida and become the next prime minister. The election will be limited to LDP members and parliamentarians, with the general public not participating. The process includes nominating candidates, the start of the official campaign period, candidate debates, and the final vote. If no candidate wins a majority, a second-round vote will be held between the top two candidates, with parliamentarians making the final decision.

Analysis:

Impact on FX:Political uncertainty may weaken the JPY.

FX Pair:USD/JPY

Impact on Shares:Potential volatility in Japanese equities; impact will depend on the policies of the new LDP leader.

Companies:Japanese banks, export-oriented companies.

9

United Auto Workers (UAW) President Shawn Fain accused Stellantis NV of attempting to renege on commitments made during last year's contract negotiations, specifically the reopening of an idled car factory in Illinois. Fain, speaking at the Democratic National Convention in Chicago, stated that the UAW would take all necessary action to force Stellantis and other companies to honor their promises. Stellantis has seen sales and market share decline significantly over the past year due to rising prices and aging models, while facing pressure from layoffs and outsourcing. The UAW is preparing for a potential nationwide strike against Stellantis.

Analysis:

Impact on FX:Limited direct impact.

FX Pair:None

Impact on Shares:Negative for Stellantis if a strike occurs; potential disruption in the automotive supply chain.

Companies:Stellantis, U.S. auto parts suppliers.

10

Zambia‘s energy regulator has approved the construction of the country’s second coal-fired power plant, following the worst drought in decades that slashed hydropower generation. The plant will be led by Maamba Collieries Ltd., controlled by Indias Nava Ltd., with a projected capacity of 300 megawatts, doubling the capacity of the existing plant in southern Zambia. Zambia relies on hydropower for about 85% of its electricity, but the drought has lowered water levels, causing severe power shortages and prompting the government to cut its 2024 economic growth forecast to 2.3%. Despite the challenges in securing financing for coal plants, Zambia is pushing ahead with the $400 million project.

Analysis:

Impact on FX:Potential weakening of ZMW due to increased reliance on coal and economic challenges.

FX Pair:USD/ZMW

Impact on Shares:Positive for coal producers; potential negative impact on Zambian energy sector.

Companies:Maamba Collieries Ltd., coal suppliers.

11

Brazilian analysts have raised their forecast for the year-end benchmark interest rate, citing stronger-than-expected economic performance. According to the central banks weekly survey released on Monday, the benchmark Selic rate is expected to reach 10% by December 2025, up from the previous forecast of 9.75%. The key rate forecast for the end of 2024 remains unchanged at 10.5%. Although the central bank paused its rate-cutting cycle in June, it has indicated that it might raise rates again if economic activity continues to exceed expectations and inflation accelerates. Analysts expect inflation to reach 4.22% this year and 3.91% in 2025.

Analysis:

Impact on FX:Potential strengthening of BRL if rates are raised.

FX Pair:USD/BRL

Impact on Shares:Positive for Brazilian financials; potential pressure on consumer sectors due to higher borrowing costs.

Companies:Brazilian banks, consumer goods companies.