The State of Markets: “How Long Does The Rally Last?”
Risk assets have performed well this week. In particular, after Tuesday’s ceasefire in the Middle East, markets have priced in a more dovish Fed. That is, the rates market has brought forward the timing of Fed cuts. There’s also been chatter that Trump may soon announce the new Fed chair (one expected to favour looser policy settings). As a result, major US tech centric indices like the NASDAQ100, along with the global equity market, have made new record highs this week (chart below). Treasury yields also moved lower across the curve, with the 10 year closing notably below its 200 day moving average.
The key question, therefore, is: How much near term upside is there in US/global equities? Is the pain trade still up, as we noted last week? Or, are markets about to pause – or giveback some of their gains?
Our SELL-off indicator bears watching closely in that respect. This week it has built to relatively high levels (currently on a reading of +16). At +20 it signals a potential, and imminent, wave of risk aversion in global markets. See today’s Daily RAG publication for detailed analysis.
Key US macro data this week includes ISM Manufacturing and Services PMI readings (on Tuesday and Thursday respectively). Elsewhere, the labour market data is the key theme of the week, with job openings on Tuesday, followed by Challenger job cuts and ADP data on Wednesday, and nonfarm payrolls on Thursday (i.e., June data). Events include comments from Powell, Lagarde, Bailey & Ueda (who will all participate in an ECB ‘policy panel’ discussion on Tuesday at the ‘Sintra ECB Central Bank Forum’). On Friday US markets are closed for Independence Day. Please see below for a full list of next week’s key macro data & events.
Key chart: DJ global equity index shown with 50 & 200 day moving averages
Upcoming important data/events this week:
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Events: |
Powell participates in a panel with Lagarde, Bailey & Ueda at the ECB Forum on Central Banking in Sintra (Tues, 2:30pm); market holiday in the United States on account of Independence Day (Fri). |
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Monday: |
UK GDP (Q1 final estimate, 7am); UK net consumer credit, mortgage approvals & M4 money supply (May, 9:30am). |
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Tuesday: |
US ISM manufacturing PMI (June, 3pm); US JOLTS job openings (May, 3pm); EZ headline & core CPI (June first estimate, 10am); Chinese Caixin manufacturing sector PMI (June, 2:45am). |
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Wednesday: |
US Challenger job cuts (June, 12:30pm); US ADP employment (June, 1:15pm). |
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Thursday: |
US nonfarm payrolls, hourly earnings & unemployment data (June, 1:30pm); US ISM services PMI (June, 3pm); Chinese Caixin service sector PMI (June, 2:45am). |
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Friday: |
German factory orders (May, 7am). |
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Key earnings: |
N/A |
Key Research
Monthly Global Asset Allocation No. 66, 27th June 2025:
“Japan: The Illusion of Lift-Off A.k.a. Reality Check (Bank Rally ≠ Boom)”
We favour a small OW position in Japanese large cap stocks in our strategic portfolio. Those stocks are typically companies with international exposure which should benefit from a cyclical upswing in the global economy over the next 12 – 18 months. Gains, though, should be externally driven, rather than ‘homegrown’, and should be enhanced by a broadening of sector leadership in the global equity market. Like the ‘noughties’, the YEN can rally in that environment (or at least remain stable/rangebound).
Small and mid-cap stocks, in contrast, are likely to be weighed down by weak domestic fundamentals in Japan. BoJ tightening, and sharply higher commercial bank lending rates have dampened growth in money and credit. That should result in weak domestic earnings growth – with the rising risk of further valuation compression for small and mid-caps. Added to which, Japan’s demographic drag is back; there’s no evidence of wealth effects; and job growth is likely to be weak in coming years.
Key North American macro data & events:
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Events: |
Speeches by the Fed’s Bostic on economic outlook (Mon, 3pm), Goolsbee in a moderated discussion (Mon, 6pm), Powell participates in a panel with Lagarde, Bailey & Ueda at the ECB Forum on Central Banking in Sintra (Tues, 2:30pm) & Bostic gives a speech on monetary policy (Thurs, 4pm); market holiday in the United States on account of Independence day (Fri). |
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Monday: |
US Chicago PMI (June, 2:45pm); US Dallas Fed manufacturing sector activity (June, 3:30m). |
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Tuesday: |
US S&P manufacturing sector PMIs (June final estimate, 2:45pm); US ISM manufacturing PMI (June, 3pm); US construction spending (May, 3pm); US JOLTS job openings (May, 3pm); US vehicle sales (June, 3pm); US Dallas Fed service sector activity (June, 3:30m). |
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Wednesday: |
US Challenger job cuts (June, 12:30pm); US ADP employment (June, 1:15pm); Canadian S&P Global manufacturing sector PMI (June, 2:30pm). |
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Thursday: |
US trade balance (May, 1:30pm); US nonfarm payrolls, hourly earnings & unemployment data (June, 1:30pm); US weekly jobless claims (1:30pm); US S&P service sector PMIs (June final estimate, 2:45pm); US ISM services PMI (June, 3pm); US durable goods orders (May final estimate, 3pm). |
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Friday: |
Canada S&P service sector PMI (June final estimate, 2:30pm). |
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Key earnings: |
N/A |
Fig B: US ISM Services PMI, shown with US recession bands
Key European macro data & events
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Events: |
Speeches by the ECB’s Lagarde in Sintra (Mon, 8pm), Guindos, Elderson & Schnabel chair ‘Policy Panel’ at the ECB Forum on Central Banking in Sintra (Tues, 8:30am – 11:40am), Guindos & Cipollone chair panel in at the ECB Forum on Central Banking in Sintra (Wed, 10am), Lagarde delivers closing remarks in Sintra (Wed, 3:15pm) & Villeroy speaks in Aix-en-Provence (Fri, 1:15pm); ECB publishes account of June policy meeting (Thurs). |
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Monday: |
German retail sales (May, 7am); German import price index (May, 7am); German unemployment (June, 8:55am); Eurozone M3 money supply (May, 9am); Italian headline CPI (June first estimate, 10am); German headline CPI (June first estimate, 1pm). |
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Tuesday: |
HCOB manufacturing sector PMIs for Spain (8:15am), Italy (8:45am), France (8:50am), Germany (8:55am) & Eurozone (9am) – all June final estimates apart from Spain & Italy; ECB 1 & 3 year CPI expectations (May, 9am); EZ headline & core CPI (June first estimate, 10am). |
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Wednesday: |
Spanish unemployment rate (Jun, 8am); Italian unemployment rate (May, 9am); Eurozone unemployment rate (May, 10am). |
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Thursday: |
HCOB services sector PMIs for Spain (8:15am), Italy (8:45am), France (8:50am), Germany (8:55am) & Eurozone (9am) – all June final estimates apart from Spain & Italy. |
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Friday: |
German factory orders (May, 7am); French industrial & manufacturing production (May, 7:45am); Spanish industrial production (May, 8am); HCOB construction sector PMI for Germany (June, 8:30am); Italian retail sales (May, 9am); Eurozone PPI (May, 10am). |
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Key earnings: |
N/A |
Fig C: EZ headline & core CPI, shown with recession bands
Key UK macro data & events
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Events: |
Speeches by the Bank of England’s Taylor in Sintra and at LSE (Wed, 11:30am & Fri, 6:30pm). |
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Monday: |
Lloyds business barometer (June, 12:01am); GDP (Q1 final estimate, 7am); Net consumer credit, mortgage approvals & M4 money supply (May, 9:30am). |
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Tuesday: |
BRC shop price index (June, 12:01am); Nationwide house prices (June, 7am); S&P manufacturing sector PMI (June final estimate, 9:30am). |
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Wednesday: |
N/A |
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Thursday: |
S&P service sector PMI (June final estimate, 9:30am). |
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Friday: |
New car sales (June, 9am); S&P construction sector PMI (June, 9:30am). |
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Key earnings: |
N/A |
Fig D: UK GDP growth (Q-o-Q%)
Key Asia-Pacific macro data & events
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Events: |
N/A |
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Monday: |
Japanese industrial production (May first estimate, 12:50am); Australian headline CPI (June, 2am); Australian private sector credit (May, 2:30am); Japanese housing starts (May, 6am). |
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Tuesday: |
Australian S&P manufacturing PMI (June final estimate, 12am); Japanese Jibun Bank manufacturing sector PMI (June final estimate, 1:30am); Chinese Caixin manufacturing sector PMI (June, 2:45am); Japanese ESRI consumer confidence (June, 6am). |
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Wednesday: |
Japanese monetary base (June, 12:50am); Australian building approvals & private sector houses (May, 2:30am). |
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Thursday: |
Australian S&P services sector PMI (June final estimate, 12am); Japanese Jibun Bank services sector PMI (June final estimate, 1:30am); Australian imports/exports, & trade balance (May, 2:30am); Chinese Caixin service sector PMI (June, 2:45am). |
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Friday: |
Japanese household spending (May, 12:30am); Australian household spending (May, 2:30am). |
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Key earnings: |
N/A |
Fig E: Japanese consumer confidence shown with recession bands
This week:
Longview on Friday, 27th June 2025:
“All Over for the Bears? A.k.a. US Corporate Sector in Rude Health”
Monthly Global Asset Allocation No. 66, 27th June 2025:
“Japan: The Illusion of Lift-Off A.k.a. Reality Check (Bank Rally ≠ Boom)”
Longview Letter No. 149, 25th June 2025:
“Return of the Cyclicals a.k.a. From MAG7 to Macro”
The SHORT VIEW (& market positioning), 24th June 2025:
“OIL: What Next?”
Prior week:
Longview on Friday, 20th June 2025:
“Oil, War & Our Latest Strategic Asset Allocation Update”
Quarterly Global Asset Allocation:
“Reflation & Climbing The Wall of Worry”
The SHORT VIEW (& market positioning), 17th June 2025:
“US Dollar: Secular Bear Market Underway”