MFS Week in Review
A review of the week's top global economic and capital markets news.
A review of the week's top global economic and capital markets news.
For the week ending 19 July 2024
As of midday Friday, global equities were modestly lower on the week, though small-cap and value stocks benefited from a large-scale rotation out of large-cap growth ones. The yield on the benchmark U.S. 10-year note was little changed on the week at 4.23% while the price of a barrel of West Texas Intermediate crude oil dropped around US$3 to US$79.85. Volatility, as measured by the Cboe Volatility Index (VIX), rebounded to 16.5 from 12.4 a week ago.
MACRO NEWS
Obama ups pressure on Biden to leave presidential race
A Thursday afternoon article in the Washington Post said that former U.S. President Barack Obama told allies that current President Joe Biden’s path to reelection in the presidential race has greatly diminished and that he thinks the president needs to seriously consider the viability of his candidacy. This is the clearest sign yet that Democratic Party elders are making a concerted effort to push Biden from the race. Also circulating this week were reports that Senate Majority Leader Chuck Schumer, House Minority Leader Hakeem Jeffries and former House Speaker Nancy Pelosi have all appealed to Biden to stand aside for fear that a poor performance at the top of the ticket could cause Democrats to lose control of the Senate and fail to regain control of the House of Representatives. Friday morning, NBC News reported that Biden’s family has started discussing his plan to exit the race, though the White House quickly issued a denial. Betting markets now give Vice President Kamala Harris a 57% chance of becoming the Democratic nominee. Biden‘s odds have dropped to 28%.
Trump picks Vance as running mate
On the first day of the Republican National Convention, former U.S. President Donald Trump, days after surviving an assassination attempt while campaigning in Pennsylvania, chose Ohio Senator J.D. Vance as his vice-presidential running mate. The 39-year-old Vance, a Yale-educated lawyer, is from the populist wing of the Republican Party. While serving in the Senate, he has found common cause on certain economic issues with left-wing populists such as Elizabeth Warren and Bernie Sanders. Trump accepted his party’s nomination on Thursday night, stressing national unity in his address to delegates before shifting to his standard stump speech.
U.S. retail sales beat expectations
While at the headline level, retail sales were unchanged in June, they rose sharply after stripping out the volatile food, gasoline, auto and building materials components. That measure, the so-called control group, rose 0.9% from May, prompting economists to raise their Q2 gross domestic product forecasts.
ECB says decision on September cut “wide open”
The European Central Bank kept interest rates unchanged on Thursday, saying that inflation measures were either stable or had edged down in June but that price pressures are still high, services inflation is elevated and headline inflation is likely to remain above target well into next year. Wages are still rising at an elevated rate, ECB President Christine Lagarde said, adding that inflation is expected to fluctuate around current levels for the rest of the year. Economic risks are tilted to the downside. The decision on whether to cut rates in September is wide open, she said. The market is pricing in an 85% chance of a cut at that meeting.
QUICK HITS
THE WEEK AHEAD
Next week will be a quiet one from a data perspective. U.S. existing home sales will be released Tuesday. On Wednesday, flash purchasing managers’ indices are due out as are U.S. new home sales data. Also on Wednesday, the Bank of Canada will meet to set interest rates, with a cut almost fully priced in by investors. The market’s first look at Q2 U.S. GDP data is set for Thursday, with core PCE the highlight on Friday.
EARNINGS NEWS
With about 14% of the constituents of the S&P 500 Index having reported for Q2 2024, blended earnings per share (which combines reported data with estimates for those that have yet to report) shows that earnings rose around 9.7% compared with the same quarter a year ago, according to data from FactSet. This was faster than the 6% pace set in Q1. Sales growth is up 4.6% year over year.
Past performance is no guarantee of future results.
Sources: MFS research, Wall Street Journal, Financial Times, Reuters, Bloomberg News, FactSet Research, CNBC.com.
This commentary was first published in the United States by MFS and is distributed in Canada by SLGI Asset Management Inc., with permission.
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