EXECUTIVE SUMMARY
- CROWDSTRIKE, MICROSOFT SHARES SINK AFTER WORLDWIDE TECH OUTAGE
- BIDEN NEARS EXIT DOOR AS PRESSURE MOUNTS FOR WITHDRAWAL
- FED’S DALY SAYS ‘NOT THERE YET’ ON INFLATION
- MACRON REPELS FRENCH LEFT AS CENTER HOLDS TOP PARLIAMENT JOB
MNI (LONDON) - Figure 1: Betting market implied probability of next Democratic nominee, %
Source: electionbettingodds.com
NEWS
GLOBAL (MNI): Crowdstrike Update: Airports, Payments and Broadcasting Still Impacted
The spillover impact of Crowdstrike's "bad patch" for their Falcon Sensor system continues to reverberate around the global economy, with key services globally still hindered. So far impacts include, but are not limited to: US airlines including Delta, American and United have grounded all flights, while European, Australian, American and Indian airports all see significant delays in processing times, from security clearance to ticket administration. Payments have been impacted, with some electronic payment methods being declined in store - particularly contactless. Exchanges and financial news providers have reported sporadic issues - the LSE have stated their exchange is operating as normal, however the news filing RNS system has been impacted.
FED (MNI): Fed’s Daly Says ‘Not There Yet’ on Inflation
The Federal Reserve is making progress toward bringing inflation back to its 2% target but it’s too soon to claim victory, San Francisco Fed President Mary Daly said Thursday. “We’re not at price stability yet, we have to be really confident we’re going to get there,” Daly said during a Q&A at the Dallas Fed. Officials must must also be watchful of a weakening labor market to ensure things don’t deteriorate unexpectedly, she said.
FED (MNI): Fed's Bowman Wants a More Effective Discount Window
Federal Reserve Governor Michelle Bowman said Thursday the central bank should ensure the discount window is used more effectively when the financial system is under duress such as during last year's bank failures. “This must include ensuring the payments infrastructure that supports bank funding mechanisms is equipped to operate not just during business-as-usual conditions, but especially during stress events," she said in prepared remarks to a conference at the Dallas Fed.
US (MNI): Biden Nears Exit Door as Pressure Mounts for Withdrawal
President Joe Biden is seen to be nearing the point where he officially announces his withdrawal from the presidential race as the slow but steady series of Democrat lawmakers calling for him to drop out continues. On 18 July, Sen. Jon Tester (D-MT) became the second US senator to call for Biden to end his candidacy. Political betting markets have swung around wildly over the past week, but now Biden is assigned just a 16.1% implied probability of being the Democrat nominee according to electionbettingodds.com [compliling Betfair, Smarkets and Polymarket data].
US (BBG): Trump Basks In Total Control of GOP as Biden Campaign Hits Low
With a speech at the Republican National Convention that recounted harrowing details of an assassination attempt, Donald Trump basked in a moment that showed his grip on the party to be tighter than ever - and veered into territory Democrats hope is his Achilles heel. Trump’s address in Milwaukee on Thursday was the finale of a raucous convention that borrowed heavily from his roots as a TV showman and where emboldened Republicans reveled in the party’s soaring fortunes.
CANADA (BBG): Canada Finance Minister Upbeat on Economy Amid Carney Reports
Canada’s finance minister says the country is on track for a soft landing, with inflation in retreat, interest rates on the way down and no recession in sight. But Chrystia Freeland is realistic enough to know that a little bit of good economic data isn’t enough to turn around the political fortunes of Prime Minister Justin Trudeau’s administration. Polls show his deepening unpopularity – with the public frustrated about the cost of living, housing shortages, crime and a host of other issues.
ECB (MNI): ECB's Villeroy Says Market Rate Expectations Pretty Reasonable
Market rate expectations for the ECB rate outlook look "pretty reasonable", Bank of France Governor Francois Villeroy told BFM TV Friday. He said that the ECB would remain data dependent when asked about what the ECB might decide to do in September, but noted that the Governing Council would be much more focused on its own projections for 2025 and 2026 than on the data "fluctuations of 2024". Inflation continues to recede as expected - "if a little more slowly...but still steadily," he said, although he accepted the outlook for economic activity and growth are more uncertain, he said.
ECB (BBG): ECB’s Simkus Agrees With Market Bets for Two More Cuts in 2024
European Central Bank Governing Council member Gediminas Simkus said he agrees with investor wagers on two more reductions in interest rates this year. The first could come at the next monetary-policy meeting, the Lithuanian official told reporters in Vilnius. The disinflation trend is “clear,” he said, while warning that rises in services prices remain rapid. “If there are no surprises or black swans and inflation converges as expected, further monetary-policy easing will undoubtedly be on the table in the next meetings,” Simkus said Friday.
ECB (BBG): ECB’s Muller Says It’s Important Not to Precommit on September
The European Central Bank shouldn’t precommit to a certain outcome before its next meeting, according to Governing Council member Madis Muller. “I think it’s important that if the next ECB Governing Council meeting is in September that we wouldn’t promise too much in advance,” the Estonian central banker said on Friday, adding that it’s hard for him to say how many interest-rate cuts there may be in 2024.
ECB (MNI): ECB SPF Sees Largely Unchanged Headline HICP Expectations
Summary Expectations for headline HICP inflation were largely unchanged from the previous survey (conducted in the second quarter of 2024).Headline inflation was expected to decline from 2.4% in 2024 to 2.0% in 2025 and further to 1.9% in 2026 (unchanged apart from a 0.1 percentage points downward revision for 2026). Longer-term HICP inflation expectations (for 2029 in this round, 2028 in the previous round) were unchanged at 2.0%.
FRANCE (MNI): Election of Parliament President Boosts Macron, But No Guarantee of Stable Government
The re-election of President of the National Assembly Yal Braun-Pivet on the evening of 18 July provides a welcome boost to President Emmanuel Macron ahead of what are likely to prove lengthy and potentially rancorous negotiations over the formation of France's next gov't. Braun-Pivet, who has held the role since 2022, won in the third round of voting, garnering the support of 220 deputies, compared to 208 for the nominee of the leftist New Popular Front (NFP), Andre Chassaigne and 141 for Sebastien Chenu of the right-wing nationalist Rassemblement National (National Rally, RN).
ISRAEL (BBG): Israel’s Tel Aviv Hit in Deadly Drone Strike Claimed by Houthis
One man was killed in the heart of Tel Aviv by an explosion from a suspected drone on Friday morning, with Yemen’s Houthi militants claiming responsibility. The Iran-backed group said it attacked Israel’s commercial capital with a new type of drone difficult for radar to detect and vowed to target the city and other parts of the country again. If confirmed, it would mark the first deadly attack on Israel by the Houthis, who have also been assaulting ships much closer to home in recent months.
CHINA (BBG): Chinese Investors Dump Record Amount of US Stocks and Bonds
Chinese investors sold a record amount of US stocks and bonds in May as diplomatic tensions remained elevated between the world’s largest economies. Funds in the Asian nation offloaded a net $42.6 billion worth of long-term securities consisting of Treasury, agency, corporate and other bonds as well as equities, according to the latest data from the US Department of the Treasury released Thursday. Sales in the first five months of this year totaled $79.7 billion, an all-time high for the January-May period.
CHINA (MNI): China Enhances Fiscal Response to Boost Economy
MNI (Beijing) China will strengthen fiscal efforts and maintain an accommodative monetary stance to boost the economy, which is suffering from insufficient demand, said Han Wenxiu, deputy director in charge of routine work at the Office of Central Financial and Economic Affair Commission in a press conference on Friday. Beijing must implement effective macroeconomic policies, such as speeding up the issuance and use of local government special bonds to promote infrastructure construction and major projects, and increase fiscal support for technological innovation, the green economy, and emerging industries to optimise industrial upgrades, he said.
CHINA (MNI): China to Boost Consumer Spending, New Industries
MNI (Beijing) China will aim to expand consumer demand and quicken the development of emerging industries to help offset the property slowdown and rising trade tensions, said Han Wenxiu, deputy director in charge of routine work at the Office of Central Financial and Economic Affair Commission in a press conference on Friday.
INDIA (BBG): India May Cut Budget Gap Target Slightly After Cash Boost
Prime Minister Narendra Modi’s government will likely reduce its fiscal deficit target slightly, according to people familiar with the matter, signaling an intent to keep a grip on finances as speculation grows about increasing demands from allies. The gap for the year through March 2025 could be 5% of gross domestic product or even lower, the people said, compared with the 5.1% target set before the national elections. A final decision is expected to be taken in the coming days before Finance Minister Nirmala Sitharaman gives her budget speech on July 23, they said.
ARGENTINA (BBG): Argentina Overcomes Key Hurdle Impeding End of Currency Controls
Argentina’s central bank repurchased the majority of put options from financial entities Thursday, bringing President Javier Milei one step closer to lifting currency controls. Private banks and other institutions resold 13.2 trillion pesos ($14.2 billion) of put options stemming from sovereign peso bonds to the monetary authority. That’s more than half of the 20 trillion pesos in put options - pledges by the central bank to buy back the notes if they fall below a certain price - that existed when talks began a month ago.
DATA
UK DATA (MNI): Too Early to See Consumer Take on UK Election - GfK
- UK JUL GFK CONSUMER CONFIDENCE INDEX -13
UK consumer confidence edged higher in July, but the outcome was based largely on data from the first week of the month and wasn't impacted by the result of the UK's July 4 general election, the head of a leading survey said Thursday. "Lets look at the data overall as a holding month, with most of the survey completed before the actual election results were known," GfK head of Client Strategy Joe Staton told MNI.
UK JUN RETAIL SALES -1.2% M/M, -0.2% Y/Y (MNI)
UK JUN PSNCR GBP6.62 BN (MNI)
UK JUN CGNCR GBP14.48 BN (MNI)
UK JUN PSNB GBP+14.51 BN (MNI)
UK JUN PSNB-X GBP+13.59 BN (MNI)
GERMANY DATA (MNI): Intermediate PPI Deflation Continues to Fade in June
- GERMANY JUNE PPI -1.6% Y/Y (-1.6% FCAST, -2.2% PRIOR)
- GERMANY JUNE PPI +0.2 % M/M (+0.1% FCAST, 0.0% PRIOR)
German June producer prices came in in line with expectations on a yearly comparison, at -1.6% Y/Y, higher than May's -2.2% Y/Y as energy and intermediate goods deflation continue to fade. On a sequential basis, producer prices increased slightly more than expected, at +0.2% M/M (vs +0.1% cons; 0.0% prior). Looking at the individual categories, energy deflation came in at its highest yearly rate since June 2023 as base effects continue to drop out of the comparison.
JAPAN DATA (MNI): Japan June Core CPI Rises 2.6% vs. May +2.5%
- JAPAN JUNE CORE CPI +2.6% Y/Y; MAY +2.5%
- JAPAN JUNE CORE-CORE CPI +2.2% Y/Y; MAY +2.1%
- JAPAN JUNE SERVICES PRICES +1.7% Y/Y; MAY +1.6%
The year-on-year rise of Japan's annual core consumer inflation rate accelerated to 2.6% in June from May’s 2.5% due to higher energy prices and firm food prices excluding perishables, data released by the Ministry of Internal Affairs and Communications showed on Friday. June’s index stayed above the Bank of Japan’s 2% target for the 27th consecutive month. Utility bills contributed more to inflation as government assistance aimed at electricity and gas customers reduces starting in May, which will be reflected in June spending.
FOREX: Havens Outperform as Tech Outages Hinder Global Operations
- The strong USD backdrop so far Friday is persisting into the NY crossover, with the USD Index extending the bounce off yesterday's lows to near 0.7% and narrowing in on the 200-dma of 104.388.
- Flight to safe havens and a broad risk-off theme remains the key driver here, with the spillover effects of the bad patch from Crowdstrike grounding flights globally, impacting exchanges, stopping some electronic payments and interrupting global newsflow.
- Resultingly, the JPY is real outperformer, prompting EUR/JPY to ease off yesterday's highs and re-orient focus on the gravitational influence of the 50-dma at 170.82.
- Risk and growth proxy currencies are among the poorest performers, keeping Scandi currencies weaker against all others in G10. USD/NOK has cleared to new multi-month highs, taking out 10.8699 resistance in the process - the 61.8% retracement for the downleg off the early May high.
- Focus for the duration of Friday trade turns to Canadian retail sales data for May and appearances from Fed's Williams and Bostic.
BONDS: Bunds/Gilts Off Lows as Outages Drive Risk-Off Moves
Bund and Gilt futures have recovered from intraday lows as markets see broad-based risk-off moves following reports of widespread global system outages.
- A "bad patch" from cybersecurity company Crowdstrike has been cited as the likely trigger for the outages.
- Bund futures remain -12 at 132.51 though, following yesterday’s post-ECB rally which saw another step closer to resistance at 132.80 (Jun 25 high).
- ECB commentary yesterday and this morning (including source reports) has highlighted that the 2024 rate outlook is uncertain.
- Bloomberg sources signalled concerns that the ECB may only be able to deliver one additional cut this year.
- Meanwhile Reuters sources noted that Governing Council hawks could still support a September rate cut if the data allowed.
- Gilts underperform Bunds despite the weaker-than-expected retail sales data, with futures -22 at 98.59.
- 10-year peripheral spreads to Bunds are a little tighter despite the outage-induced equity market weakness.
EQUITIES: Recent Move Lower in E-Mini S&P Appears to Be a Correction
A bull cycle in Eurostoxx 50 futures remains intact, despite the pullback in prices early Friday. The move lower this week does undermine the bullish theme somewhat, with price having traded through the 50-day EMA, exposing the next support at 4860.00, the Jun 14 low. Clearance of this level would expose 4846.00, the Apr 19 low and a key reversal point. For bulls, a move higher and a break of 5087.00, the Jul 12 high, would again highlight a bullish theme. The trend condition in S&P E-Minis is bullish and yesterday’s move lower appears to be a correction. The continuation higher last week and this week’s cycle high, confirms a resumption of the uptrend and maintains the bullish sequence of higher highs and higher lows. MA studies are in a clear bull-mode set-up too, highlighting positive market sentiment. Sights are on 5741.34, a Fibonacci projection. Firm support is at 5597.81 the 20-day EMA.
- Japan's NIKKEI closed lower by 62.56 pts or -0.16% at 40063.79 and the TOPIX ended 7.8 pts lower or -0.27% at 2860.83.
- Elsewhere, in China the SHANGHAI closed higher by 5.176 pts or +0.17% at 2982.309 and the HANG SENG ended 360.73 pts lower or -2.03% at 17417.68.
- Across Europe, Germany's DAX trades lower by 159.03 pts or -0.87% at 18196, FTSE 100 lower by 48.59 pts or -0.59% at 8156.35, CAC 40 down 46.43 pts or -0.61% at 7541.09 and Euro Stoxx 50 down 29.58 pts or -0.61% at 4841.26.
- Dow Jones mini down 103 pts or -0.25% at 40856, S&P 500 mini down 8.25 pts or -0.15% at 5586.5, NASDAQ mini down 42.75 pts or -0.21% at 19856.5.
Time: 09:50 BST
COMMODITIES: Gold Extends Moderate Pullback from Cycle Highs
WTI futures initially traded lower this week marking an extension of the corrective cycle. However, the contract has recovered from Tuesday’s low and this signals the end of a corrective phase. Note that support at the 50-day EMA, at $79.43, remains intact. This average represents an important pivot level and a clear break would highlight a stronger reversal. Initial key resistance to watch is $83.58, the Jul 5 high. The trend condition in Gold remains bullish and this week’s gains reinforce current conditions. The yellow metal has breached key resistance and the bull trigger at $2450.1, the May 20 high. This confirms a resumption of the medium-term uptrend and opens the $2500.00 handle next. Moving average studies are in a clear bull-mode set-up, highlighting a rising trend. Initial support is at $2382.6, the 20-day EMA.
- WTI Crude down $0.18 or -0.22% at $82.65
- Natural Gas down $0.04 or -1.69% at $2.088
- Gold spot down $24.55 or -1% at $2420.14
- Copper down $0.75 or -0.18% at $427.4
- Silver down $0.47 or -1.58% at $29.358
- Platinum down $4.84 or -0.5% at $967.43
Time: 09:50 BST
| Date | GMT/Local | Impact | Country | Event |
| 19/07/2024 | 1230/0830 | * |  CA | Industrial Product and Raw Material Price Index |
| 19/07/2024 | 1230/0830 | ** | CA | Retail Trade |
| 19/07/2024 | 1440/1040 |  US | New York Fed's John Williams | |
| 19/07/2024 | 1700/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |
| 19/07/2024 | 1700/1300 | US | Atlanta Fed's Raphael Bostic |