As we dive into the day ahead in European and global markets, there are several key events shaping the investment landscape. Let’s take a closer look at what’s happening and how it may impact your portfolio.
The day kicked off with the news of President Joe Biden dropping out of the race, a move that was not entirely unexpected. The market reaction has been relatively subdued so far, with Wall Street futures showing a modest uptick, bond yields slightly lower, and the dollar remaining stable.
Biden threw his support behind his VP Kamala Harris, positioning her as the frontrunner for the Democratic nomination, which is set to take place at the Democratic convention on Aug. 19-22. There is also speculation that the party may opt for a virtual nomination ahead of the convention.
According to PredictIT, an online betting site, the odds for a victory by Donald Trump have dipped slightly to 59 cents, while Harris has seen a 13-cent increase to 40 cents. California Governor Gavin Newsom, another potential Democratic contender, lags behind at 3 cents.
Goldman Sachs analysts noted that they do not anticipate significant shifts in the Democrats’ fiscal and trade policy agenda if Harris secures the nomination.
In a surprising move, China’s central bank announced a rate cut, reducing its seven-day repo rate by 10 basis points. This led to a decline in longer-term borrowing costs and bond yields across the curve, despite recent efforts by the PBOC to push rates higher. The yuan also weakened slightly following the announcement, albeit in a moderate fashion.
Overall, investor sentiment in Asia was mixed, with Chinese blue chips retracting around 0.6% after a brief rebound last week. Concerns over U.S. restrictions on chip sales and the potential for a global trade war under a Trump administration weighed on markets, particularly in Taiwan.
Tech stocks saw a rotation out into smaller caps and banks last week, resulting in a $900 billion loss from the S&P 500 technology sector. This pullback was not unexpected, given the outsized gains made by tech giants like Alphabet, Tesla, Amazon, Microsoft, Meta Platforms, Apple, and Nvidia, which have collectively driven around 60% of the S&P 500’s gains this year.
Looking ahead, we can expect a flurry of second-quarter earnings reports this week, with Tesla and Google-parent Alphabet taking the spotlight among the “Magnificent Seven” megacap companies. Analysts are optimistic, with annual earnings growth of 17% projected for the tech sector and 22% for communications.
Key developments to watch for on Monday include a speech by Bank of England Executive Director Victoria Saporta, the release of the National Activity Index for June by the Federal Reserve Bank of Chicago, and earnings reports from companies such as Verizon, Nucor, and Brown & Brown.
Stay tuned as we continue to monitor these market-moving events and provide insights to help you navigate the ever-changing financial landscape. Extreme Investor Network is your go-to resource for expert analysis and actionable information to help you make informed investment decisions.