Check out Wayne Cole's European and global markets the day before.
It was a risky start when Prime Minister Carney agreed to revoke the digital tax as per President Trump’s request, and news breaking trade talks began over. The new deadline for this work is July 21, extending Trump's original July 9 date.
The latter also looks like it has been expanded in other negotiations, with the Treasury Secretary’s secretary last week indicating that they may be completed by the Labor Day holiday on September 1.
Wall Street futures grew 0.4% at record highs, while stock futures in Europe and Germany were around 0.3%. Most Asian markets are also in black state, with oil prices falling further as the Middle East ceasefire is established.
Investors are alert to the progress of the huge U.S. tax cuts and spending bill, and are gradually growing in the Senate with signs of Trump's preferred July 4 deadline. Over time, Democrats are getting clerks to read every line in the 940-page bill, which may make them the only ones who know what is in it.
The Congressional Budget Office estimates that the bill will increase $33 trillion in debt over a decade, further testing foreign appetite for U.S. Treasury bonds and another blow to the cause of U.S. exceptionalism.
This effect is most obvious, with the euro clock rising 1.7% last week. James Reilly, an analyst at Capital Economics, noted that the dollar has fallen at this stage since the United States moved to the free-floating exchange rate in 1973.
The slide must put pressure on foreign investors to hedge their dollar exposure, which is sales in currency units during bearish cycles.
It doesn't help that investors will raise expectations for Fed policy to 65 basis points for the rest of the year. The July move remains an external opportunity, although it may change if Thursday’s salary report poses a drawback. In particular, the unemployment rate has risen above 4.3% since the second half of 2021 and will certainly sound an alarm in the Fed.
Key developments that could affect the market on Monday:
– The European Central Bank Forum in Sintra, Portugal begins
– German, Italian CPI data
– Fed's Bostic and Goolsbee speech
(Edited by Jacqueline Wong)
