News page specific

Politics Is Back!

Politics came back into sharp focus in markets last week. Last weekend’s poor European election result and calling of a snap French election created significant uncertainty.

17 June 2024

Summary of markets last week:

Politics came back into sharp focus in markets last week. Last weekend’s poor European election result and calling of a snap French election created significant uncertainty. That drove a ‘risk off’ trade (in the Eurozone), as that uncertainty was priced in. Nation state government bond spreads over German bunds widened notably (in France, for example, spreads widened to 78bps from 49bps) while European equities sold off. The French CAC40 was 6.2% lower on the week; the Italian MIB was down 5.6%, while Germany’s DAX was 3% lower. On the latest polling Macron’s centrist camp was behind both the far right ‘Le Pen’ grouping (known as RN) and the far left ‘Popular Front’ coalition.

In the US, in contrast, equity markets made new highs propelled by better-than-expected US inflation data (and despite a slightly hawkish tilt at the Fed meeting). Leadership was narrow (once again) and came primarily from the mega cap tech area of the market. Nvidia, after a stock split, closed the week 9% higher (& is now again notably overextended to the upside - see chart); Apple was also a strong performer (up 8% after the developers’ conference and associated announcements); while Broadcom (a competitor to Nvidia in AI chips) closed the week +23% (after good earnings on Wednesday). Illustrating the narrowness of the advance, 7 of the 11 top level S&P500 sectors closed down on the week (while IT was +6.4%).

The focus this coming week will remain on the price action in EZ bond spreads. Key macro data themes that will be in focus include: i) various US housing data which is released throughout the week; ii) it’s also a key week for Chinese macro data (especially on Monday); while iii) three key central banks have monetary policy meetings this week (RBA, BoE & PBoC). See below for a summary of key events.

Key chart: Nvidia ‘over-extendedness indicator’ vs Nvidia share price ($ per share)

1-Jun-15-2024-12-05-08-9243-PM

The most important macro data, events & earnings reports out next week

Events:	RBA policy decision (Tues, 5:30am); US bank holiday (Wed); PBoC policy decision (Thurs, 2:15am); Bank of England policy decision (Thurs, 12pm).
Monday:	Chinese new & used home prices (May, 2:30am); Chinese data (May, 3am); US Empire manufacturing (Jun, 1:30pm).
Tuesday:	US retail sales (May, 1:30pm).
Wednesday:	UK headline & core CPI (May, 7am); US NAHB homebuilders index (Jun, 3pm).
Thursday:	US housing starts & building permits (May, 1:30pm); Eurozone consumer confidence (June first estimate, 3pm).
Friday:	Manufacturing & service sector PMIs for Japan (1:30am), France (8:15am), Germany (8:30am), Eurozone (9am), UK (9:30am) & US (2:45pm) – all June first estimates; US Conference Board leading index (May, 3pm); US existing home sales (May, 3pm).
Key earnings:	Accenture (Thurs).

Key Longview research published last week

You'll find some extracts from research we've published recently below. The full reports are available to subscribers. To see the options we have available for private investors, please click below.

VIEW PRIVATE PACKAGES

Quarterly Asset Allocation No. 58, 12th June 2024:
“China: ‘Pushing on a String’”

“Once every several decades, the private sector goes crazy about [an asset price] bubble. [When] the bubble bursts, people don’t want to borrow money at any interest rate – because balance sheets are so deeply under water…

…All these people are saving money. That money comes into the financial sector but there are no borrowers because people are repairing balance sheets. And when you enter that world, all the saved funds cannot re-enter the income stream. That becomes a deflationary gap in the economy. That’s when the balance sheet recession starts.”

Source: Richard Koo “Escape from the balance sheet recession and the QE trap”: An interview with Mike Riddell

China remains in the midst of a balance sheet recession, akin to Japan’s experience from the early 1990s onwards. The evidence for that has been building in recent months.

North America: Key events next week

Events:	Speeches by the Fed’s Harker on the economic outlook (Mon, 6pm), Cook gives acceptance remarks (Tues, 2am), Barkin on the US economy (Tues, 3pm), Collins gives keynote address (Tues, 4:40pm), Logan in Q&A (Tues, 6pm), Kugler & Musalem on the economy and monetary policy (Tues, 6pm & 6:20pm), Goolsbee in panel discussion (Tues, 7pm) & Barkin on the economic outlook (Thurs, 9pm); US bank holiday (Wed).
Monday:	Canadian housing starts (May, 1:15pm); US Empire manufacturing (Jun, 1:30pm); Canadian existing home sales (May, 2pm).
Tuesday:	US New York Fed services business activity (Jun, 1:30pm); US retail sales (May, 1:30pm); US industrial & manufacturing production & capacity utilisation (May, 2:15pm); US business inventories (Apr, 3pm); US total net TIC flows (Apr, 9pm).
Wednesday:	US NAHB homebuilders index (Jun, 3pm).
Thursday:	US current account balance (Q1, 1:30pm); US weekly jobless claims (1:30pm); US housing starts & building permits (May, 1:30pm); US Philadelphia Fed business outlook (Jun, 1:30pm).
Friday:	Canadian retail sales (Apr, 1:30pm); US S&P manufacturing & service sector PMIs (June first estimates, 2:45pm); US Conference Board leading index (May, 3pm); US existing home sales (May, 3pm).
Key earnings:	Lennar (Mon); Accenture, Kroger (Thurs).

Fig B: US Conference Board leading index (Y-o-Y %)

1-Jun-14-2024-02-59-31-0029-PM

Eurozone: Key events next week

Events:	Speeches by the ECB’s Lane at Reuters event (Mon, 9am), Lagarde at the company Pasqal (Mon, 10am), Guindos in Spain (Mon, 12:30pm), Knot in Dutch Parliament (Tues, 10am), Cipollone & Guindos at European Financial Integration 2024 conference (Tues, 1pm & 2:30pm), Villeroy in Paris (Tues, 5pm), Centeno in Lisbon (Wed, 9:30am) & Nagel at G-30 spring plenary meeting (Fri, 8am); Eurogroup in Luxembourg (Thursday – Friday).
Monday:	Italian core CPI (May, 9am); Eurozone labour costs (Q1 final estimate, 10am).
Tuesday:	German & Eurozone ZEW survey – expectations & current situation (Jun, 10am); Eurozone headline & core CPI (May final estimate, 10am).
Wednesday:	ECB current account (Apr, 9am); Eurozone construction output (Apr, 10am).
Thursday:	German PPI (May, 7am); Eurozone new car sales (May, 7am); Eurozone consumer confidence (June first estimate, 3pm).
Friday:	French INSEE business & manufacturing confidence (Jun, 7:45am); HCOB manufacturing & service sector PMIs for France (8:15am), Germany (8:30am) & Eurozone (9am) – all June first estimates.
Key earnings:	N/A

Fig C: Eurozone European Commission consumer confidence (index)

2-Jun-14-2024-03-02-01-9060-PM

UK: Key events next week

Events:	Bank of England policy decision & MPC minutes (Thurs, 12pm).
Monday:	Rightmove house prices (Jun, 12:01am).
Tuesday:	N/A
Wednesday:	Headline & core CPI, RPI & PPI (May, 7am); Land Registry house prices (Apr, 9:30am)
Thursday:	N/A
Friday:	GfK consumer confidence (Jun, 12:01am); retail sales (May, 7am); public sector finances (May, 7am); S&P manufacturing & service sector PMIs (June first estimates, 9:30am).
Key earnings:	N/A

Fig D: UK headline & core CPI (Y-o-Y %)

3-Jun-14-2024-03-04-50-8471-PM

Asia-Pacific: Key events next week

Events:	Chinese 1-year MLF announcement (Mon); RBA policy decision (Tues, 5:30am); BOJ minutes from April meeting (Wed, 12:50am); PBoC policy decision (Thurs, 2:15am).
Monday:	Japanese machinery orders (Apr, 12:50am); Australian consumer confidence (Jun, 2:30am) & ANZ job ads (May, 2:30am); Chinese new & used home prices (May, 2:30am); Chinese data (IP, retail sales, FAI & unemployment rate for May – all at 3am).
Tuesday:	N/A
Wednesday:	Japanese imports, exports & trade balance (May, 12:50am).
Thursday:	N/A
Friday:	Australian Judo Bank manufacturing & service sector PMIs (June for estimate, 12am); Japanese headline & core CPI (May, 12:30am); Japanese Jibun Bank manufacturing & service sector PMIs (June first estimate, 1:30am).
Key earnings:	N/A

Fig E: Chinese 70-city new home prices (Y-o-Y %, NBS)

4-1

Longview research published recently

Last week:

Longview on Friday, 14th June 2024:
“Brewing Shift in the Shape of Global Growth”

Quarterly Asset Allocation No. 58, 12th June 2024:
“China: ‘Pushing on a String”

Prior week:

Longview on Friday, 7th June 2024:
“Small - Not So Beautiful (Yet)…”

Tactical Equity Asset Allocation No. 245, 6th June 2024:
“Upward Momentum Expected to Continue (for now)”

Quarterly Asset Allocation No. 58, 4th June 2024:
“Eurozone: Above Trend Growth Ahead”

Politics Is Back!

Summary of markets last week:

The most important macro data, events & earnings reports out next week

Key Longview research published last week

North America: Key events next week

Eurozone: Key events next week

UK: Key events next week

Asia-Pacific: Key events next week

Longview research published recently

Last week:

Prior week:

Get the latest press coverage and blog updates to your inbox.

Related articles

The State of Markets: Emerging Complacency (& euphoria)

Copper: Buy the Rumour, Sell the Fact?

Greed & Fear