Report by Renta 4
European markets opened with little change (Eurostoxx 50 futures down 0.1%), whilst US futures are trading significantly higher (S&P 500 up 0.3%, Nasdaq 100 0.7% up) catching up with the European markets following last Friday’s bank holiday, which reflected some improvement in the economic outlook thanks to positive macroeconomic indicators (PMIs in expansionary territory, a slowdown in US labour market growth) and oil prices (stable at 72 USD/barrel) easing inflationary pressures on monetary policy.
Looking ahead to the week as a whole, on the corporate front, the US Q2 26 earnings season will get underway, albeit on a limited scale (just three S&P 500 companies), and it will not be until 14 July that it gains significance with the publication of investment bank results (in Spain, we will have to wait until 21 July). On Tuesday 7 July, SpaceX will be officially added to the Nasdaq 100. On the macro front, the key upcoming indicator will be the US CPI for June (14 July), which will be crucial in gauging whether the Fed can maintain its pause, whilst keeping an eye on developments in US-Iran negotiations and the Japanese yen. On the geopolitical front, attention will be focused on the NATO summit, whilst Samsung’s preliminary results will provide a snapshot of the AI demand cycle following last week’s volatility in the semiconductor sector. At the macro level, there are few key indicators, with the US’s June ISM services index (Monday) and the minutes of the Fed’s latest meeting standing out. In the Eurozone, the July Sentix investor confidence index and May producer prices and retail sales figures (Monday). And in China, June inflation data, including producer prices and the CPI.
In terms of the markets, we have seen a shift in investors’ focus from geopolitics towards monetary policy and the US economic cycle. The combination of moderating inflation on both sides of the Atlantic (Eurozone CPI at 2.8 per cent, crude oil at its lowest since February) and a cooling US labour market allows central banks to justify a pause, with Warsh proving less belligerent than feared and Lagarde pointing towards a better balance between inflation and growth. With expectations of rate rises moderating, though not without risk (geopolitics, second-round effects), the stock markets will need to rely on the Q2 26 earnings season to justify their valuations, with demanding consensus estimates heavily concentrated in Energy and Technology, as last week’s episode of volatility in the semiconductor sector reminded us. And all this whilst keeping a close eye on the negotiations between the US and Iran, which could extend beyond 18 August, and on the weakness of the yen, with the risk of currency intervention on the table. We believe the market will continue to be volatile in the coming weeks, awaiting the release of key macroeconomic data that will determine the direction of monetary policy.
