Highlights
U.S. market bulls charged forward in the week, reversing the previous week’s drop and reaching new record highs supported by solid corporate earnings reports and generally favourable economic data. Earnings season began in earnest on Tuesday with several big banks reporting earnings. JP Morgan Chase, the largest U.S. bank, and Citigroup both reported better-than-expected results for the second quarter. Then on Thursday, well-known consumer-facing names such as PepsiCo, United Airlines, and Netflix released reports that beat forecasts. However, reports emerged on Wednesday that President Trump intended to fire the chair of the Federal Reserve, Jerome Powell, dampening the upbeat mood in the markets, but the move was quickly reversed when Trump said he wasn’t going to remove Powell. President Trump, along with a significant number of Republicans, have made repeated calls for the removal of Mr. Powell as the Chair of the Fed, citing multiple policy errors and alleged misuse of funds. Powell’s term officially ends in May 2026—just 10 months from now— but that’s far too long for them. The President posits that the Fed Chair is unnecessarily slowing down the growth of the U.S. economy while Mr. Powell and several members of the Federal Open Market Committee (FOMC) maintain that the inflationary effects of the U.S. trade policy shifts are yet to be seen and the policy rate is at a “good place” for the committee to respond in case of any material shocks. Financial markets are increasingly aware that whether Powell stays until May or not, Trump and the Senate intend to appoint officials who will aggressively cut rates which is piling upward pressure on long-term yields and precious metals. In the U.K., labour market data showed continued softening, with payroll employment slipping, job vacancies declining for a third year, and unemployment ticking up to 4.7%. Wage growth, though still elevated, showed signs of slowing. In addition to this, June inflation surprised to the upside at 3.6%, topping forecasts further complicating the Bank of England’s rate path. Traders have trimmed expectations but still anticipate two cuts in 2025, as the BoE walks a tightrope between cooling wage dynamics and persistently sticky inflation. Japan’s stock markets registered modest gains over the week, with the Nikkei 225 Index rising 0.63% although the Returns were capped by political uncertainty ahead of Japan’s Upper House election on July 20, where a possible outcome could be that Prime Minister Shigeru Ishiba’s ruling Liberal Democratic Party-Komeito coalition-fails to retain majority control. Investors’ focus is likely to be on how pro-economy and reformative the new cabinet will be, as well as how dovish or hawkish a fiscal policy it adopts.
Data Highlights
Canada’s inflation rate rose to 1.9% in June, matching analysts’ expectation. The Consumer Price Index in the U.S for June showed that inflation rose to 2.7% also matching market expectation. In the U.S the retail sales rose to 3.9% in June, this came in higher than analyst’s expectation of a 3.6% rise. In the U.K the inflation rate rose to 3.6% in June, higher than the analysts’ forecast of 3.4%. In the Eurozone the inflation rate rose by 2% as expected by market analysts. Japan inflation rate reduced to 3.3% in June, from a high of 3.7% in the previous month. In Australia the unemployment rate rose to 4.3% in June, the figure came in above market expectation of 4.1%.
Week Ahead
Eurozone Interest Rate Decision, Canada Retail Sales – Thursday | U.K Retail Sales YoY – Friday
