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What’s happening: US stocks edged lower on Friday, ahead of the debate between Presidential candidates Joe Biden and Donald Trump.
What happened: US stock indices came under pressure on some profit taking, with the S&P 500 having extended gains for three straight weeks.
Despite the decline on Friday, US stock indices ended the first half of 2024 with gains.
Why it matters: Current US President Joe Biden and former President Donald Trump clashed in the first debate of the 2024 elections late Thursday. Biden, who is now 81, oscillated between shaky and incoherent, while Trump repeated his previous agenda of cutting taxes and hiking tariffs.
The performances, in which Trump came in ahead by default, stroked fears of inflation resuming its upward trajectory if the former President were to win on November 5.
With the news on Friday being dominated by the debate, markets failed to rejoice the inflation data release. The core Personal Consumption Expenditures (PCE) price index, which is the Federal Reserve’s preferred measure of inflation, eased to 2.6% in May, from 2.8% in April. The figure was in-line with market expectations and the lowest rate since March 2021.
The Dow Jones index shed 45.20 points, or 0.1%, to close at 39,118.86 on Friday. The S&P 500 lost 22.39 points, or 0.4%, to settle at 5,460.48, while the Nasdaq 100 declined by 106.16 points, or 0.5%, to finish the trading day at 19,682.87.
Both the Dow Jones index and S&P 500 ended the week in the red, down around 0.1%, while the technology-heavy Nasdaq 100 rose 0.2%, extending gains for the fourth straight week.
Despite the weekly decline, all three major US stock indices recorded gains for June as well as the first half of 2024. The Dow Jones index finished June and the first half up 1.76% and 3.72%, respectively. The S&P 500 rose 3.67% in June and 14.5% in the first half. The Nasdaq 100 climbed 5.05% in June and jumped 18.97% in the first six months of this year.
What to watch: Investors will monitor the US Presidential elections, with Joe Biden feeling the pressure from his party to step down after Friday’s debate. Markets will also watch the ISM manufacturing PMI due to be released by the US today. The ISM manufacturing PMI, which had unexpectedly declined to 48.7 in May, is expected to improve to 49 in June.
Context: The EUR/USD rose on Friday, extending the previous day’s gains, ahead of the French elections.
Details: French President Emmanuel Macron called for a snap parliamentary vote on June 9. Voting got underway on Saturday and will continue through this week, with the results scheduled to be declared on July 7.
Markets see a high probability of the far-right party taking power in the National Assembly, the lower house of parliament, for the first time and Jordan Bardella, who is just 28 years old, becoming the new Prime Minister. A liberal President and a far-right Prime Minister could spell significant challenges for France.
Preliminary estimates showed France’s annual inflation easing to 2.1% in June, from 2.3% in May. This marks the lowest rate since August 2021. Preliminary estimates also showed Spain’s annual consumer price inflation easing to 3.4% in June, from an over one-year high of 3.6% in May, and Italy’s remaining unchanged at 0.8%.
Germany announced that the number of unemployed individuals had increased by 19,000 to 2.781 million in June, higher than the market forecasts of 15,000. This also marked the 18th consecutive period of rising unemployment in the country.
Weakness in the US dollar drove the EUR/USD forex pair higher. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell to 105.87 on Friday.
The EUR/USD rose by 0.10% to 1.0716 on Friday, after climbing to a high of 1.0720 earlier in the session, just after the US reported its PCE inflation data. The release showed the Federal Reserve’s preferred measure of inflation easing to 2.6% in May.
What to watch: Investors await the release of Germany’s preliminary data on consumer price inflation, scheduled to be reported today. Germany’s CPI index, which had risen to 2.4% in May after a three-year low of 2.2% in the previous couple of months, is expected to ease to 2.3%.
ECB President Christine Lagarde’s speech will also be in focus today.
Other Markets: European indices closed mostly lower on Friday, with the STOXX Europe 600, CAC 40 and FTSE 100 down by 0.23%, 0.68%, and 0.19%, respectively, and the DAX 40 up by 0.14%.
Ukraine asked Western countries to further relax the restrictions on the use of weapons against military targets in Russia. The news sent the RUB/USD sharply lower in forex trading on Thursday.
The au Jibun Bank Japan Manufacturing PMI was revised lower to 50.0 in June, from a preliminary reading of 50.1. The figure being lower than May’s 50.4 exerted pressure on the JPY/USD forex pair.
Australia’s ANZ-Indeed job ads declined by 2.2% in June, after a 1.9% drop in May. This being the fifth straight month of decline in job ads sent the AUD/USD lower in forex trading this morning.
China’s General Manufacturing PMI rose to 51.8 in June, from 51.7 in May. The figure being higher than market estimates of 51.2 lent support to the CNY/USD forex pair.
Indonesia’s annual inflation rate eased to 2.51% in June, from 2.84% in May. The figure also came in better than market expectations of 2.70%, sending the IDR/USD slightly higher in forex trading this morning.
US ISM manufacturing PMI and consumer spending, Brazil’s balance of trade, South Korea’s inflation rate, Russia’s consumer confidence, and Mexico’s business confidence and fiscal balance.
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