Bye Bye Biden, hello Kamala?
In a move without precedent in modern era, Biden decided to drop out of race for the White House on Sunday evening – endorsing vice president Kamala Harris as Democratic nominee.
- Biden will continue to serve out full mandate as US president.
- Donations to Harris’s campaign surged past 50 million USD on Sunday as Biden’s resignation freed up financial support that had been sidelined – signal of new wave of enthusiasm on the Democratic front.
- The new scenario puts the “Trump trade” into question casting more (and new) uncertainty into the market.
ECB - no news, good news?
ECB left rates unchanged in July meeting with the central bank continuing to stress a data dependent meeting-by-meeting approach.
- President Lagarde indicated September meeting as being “wide open” as significantly more information will be available to Governing Council.
- ECB does not expect significant improvements in inflation for the rest of 2024 amid high wage pressures and stagnating productivity. Improvement in wages expected for 2025.
- Compared to June communication, more concern was shown on growth outlook.
- Markets still pricing just under two cuts for the whole of 2024 with September being current favorite.
China - mission revitalize growth
The People's Bank of China cut the seven-day repo rate by 0.10% from 1.8% to 1.7% (last intervention in August 2023) – the move is in line with policymakers determination to reach 5% growth target as conveyed by Third Plenum.
- Chinese banks quickly followed by lowering main benchmark lending rates.
- Decision needed to prop up growth after a lack of short term stimulus from Communist Party meeting disappointed investors.
- Beijing desires to move growth drivers away from debt fueled sectors (property).
- Growing conviction that the Fed is going to begin cutting rates in September provides more maneuverability for the PBoC going forward.
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