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Abstract:This week's global market analysis covers significant movements and events. Fed Chairman Powell's cautious stance on interest rates impacts the USD. TSMC benefits from Samsung's strike. Geopolitical tensions rise with Putin's diplomacy. PBOC plans bond sales to stabilize CNY. Key economic events include Core CPI, PPI, and Michigan Consumer Sentiment for the USA, and GDP data for the UK. These factors influence currency movements and market sentiment globally.
Singapore-listed Yoma Strategic Holdings Ltd.'s stock plummeted 22%, the biggest drop since February 2021. The company announced that its chairman, Serge Pun, is cooperating with Myanmar authorities (indicating potential issues with Myanmar property investments and the possibility of the CEO not returning).
Analysis:
Impact on FX:Increased corporate instability could weaken the SGD.
FX Pair:USD/SGD, EUR/SGD, GBP/SGD
Impact on Shares:
Singapore Market: Negative impact on Yoma Strategic Holdings and related stocks.
Companies:Yoma Strategic Holdings Ltd. (YOMA.SI)
X Corp. (formerly Twitter) and its owner Elon Musk won a lawsuit over the firing of thousands of employees after acquiring the social media platform in October 2022. The lawsuit alleged that X Corp. and Musk owed severance pay of at least $500 million to around 6,000 terminated employees under the Federal Employee Retirement Income Security Act (ERISA). The plaintiffs, the company's former global head of compensation and benefits and another former manager, claimed that employees received only one month's pay as severance.
Analysis:
Impact on FX:Positive legal outcome could stabilize the USD.
FX Pair:EUR/USD, USD/JPY, GBP/USD
Impact on Shares:
US Tech Market: Positive impact on X Corp. and related tech stocks.
Companies:X Corp. (formerly Twitter), Tesla (TSLA), SpaceX (private)
Global regulators are intensifying scrutiny of the complex business of offshore pension management, potentially putting millions of expatriates' retirement savings at risk. Many expatriates work in financial centers around the world, accumulating significant assets and pensions. As they move between countries, transferring these funds becomes expensive and risky.
Analysis:
Impact on FX:Increased regulatory scrutiny could weaken the USD.
FX Pair:EUR/USD, USD/JPY, GBP/USD
Impact on Shares:
Global Financial Market: Negative impact on financial sector stocks.
Companies:Major global financial institutions
European Central Bank Governing Council member Fabio Panetta stated that there should not be excessive concern over stubborn service sector inflation and still strong wage growth. Speaking at the annual meeting of the Bank of Italy, he noted that while concerns about rising service prices are not unfounded, they should be viewed in a different context as service prices behave differently from goods prices (hinting at the possibility of ignoring inflation for continuous rate cuts).
Analysis:
Impact on FX:Continued dovish stance could weaken the EUR.
FX Pair:EUR/USD, EUR/JPY, EUR/GBP
Impact on Shares:
European Market: Potential positive impact on market sentiment due to continued monetary easing.
Companies:Major European firms
Due to cold weather in June, UK consumer spending on clothing significantly decreased, another sign of weak economic growth caused by poor weather conditions. Barclays Bank reported that weak retail sales last month led to a 0.6% year-on-year decline in card spending, the first drop since the COVID-19 lockdown in early 2021. The British Retail Consortium (BRC) and KPMG reported that total retail sales fell 0.2% in June, in contrast to a 4.9% annual growth in the same month last year.
Analysis:
Impact on FX:Weak economic growth could weaken the GBP.
FX Pair:GBP/USD, EUR/GBP, GBP/JPY
Impact on Shares:
UK Market: Negative impact on retail sector stocks.
Companies:Marks & Spencer (MKS.L), Next plc (NXT.L)
Insiders attending the Bank of Japan market participants' hearing revealed that Japan's largest banks are calling for the central bank to significantly reduce its monthly bond purchases (yield curve control).
Analysis:
Impact on FX:Potential reduction in bond purchases could strengthen the JPY.
FX Pair:USD/JPY, EUR/JPY, GBP/JPY
Impact on Shares:
Japanese Market: Positive impact on financial sector stocks.
Companies:Mitsubishi UFJ Financial Group (8306.T), Sumitomo Mitsui Financial Group (8316.T)
A survey by National Australia Bank (NAB) showed that business confidence jumped 6 points to 4 in June, the highest level since early 2023. However, another survey by Westpac showed that consumer confidence fell 1.1% to 82.7 in July, with pessimists far outnumbering optimists. The index has been below 100 since March 2022.
Analysis:
Impact on FX:Mixed economic signals could lead to AUD volatility.
FX Pair:AUD/USD, EUR/AUD, GBP/AUD
Impact on Shares:
Australian Market: Mixed impact on business and consumer sector stocks.
Companies:National Australia Bank (NAB.AX), Westpac Banking Corp (WBC.AX)
NATO allies have pledged to provide Ukraine with five long-range air defense systems as part of new support commitments, despite leaders failing to offer a pathway for Ukraine to join NATO. New assessments indicate that the conflict with Russia is heading towards an indefinite stalemate.
Analysis:
Impact on FX:Continued geopolitical tensions could strengthen the USD as a safe-haven currency.
FX Pair:EUR/USD, USD/JPY, GBP/USD
Impact on Shares:
Global Market: Negative impact on market sentiment.
Companies:Defense sector stocks, Lockheed Martin (LMT), Northrop Grumman (NOC)
Disclaimer:
The views in this article only represent the author's personal views, and do not constitute investment advice on this platform. This platform does not guarantee the accuracy, completeness and timeliness of the information in the article, and will not be liable for any loss caused by the use of or reliance on the information in the article.
The Japanese Yen (JPY) strengthened against the US Dollar (USD) on Thursday, boosted by stronger-than-expected Q2 GDP growth in Japan, raising hopes for a BoJ rate hike. Despite this, the USD/JPY pair found support from higher US Treasury yields, though gains may be capped by expectations of a Fed rate cut in September.
The global economy is displaying complex regional dynamics. While U.S. retail sales and employment data highlight economic resilience. Meanwhile, geopolitical tensions, such as the Israel-Gaza ceasefire talks, and central banks' divergent strategies add further uncertainty. Investors remain cautious, balancing potential opportunities in emerging markets with risks from global economic shifts.
This year's arbitrage gains have been erased, with 65%-75% of these positions closed. The dollar's reaction has been as expected but slightly disappointing, with a significant 100 basis point rise in U.S. short-term interest rates impacting it. JPMorgan has reduced its dollar forecasts, now predicting USD/JPY at $146 in Q4 2024 and $144 in Q2 2025, down from $147. Despite a weakening job market, other economic data remains strong.
The past week has seen significant economic developments influencing the financial markets. The US stock market faced a sharp decline, resulting in a $6.4 trillion loss in market value, while hedge funds engaged in substantial buying activity. Meanwhile, Goldman Sachs CEO David Solomon expressed confidence in the US economy, suggesting no need for emergency measures. Other notable events include geopolitical tensions, financial instability in firms like Prospect Capital, and changes in global ec