French Political Turmoil Throws Spotlight On Debt Vulnerability

Economic

Political

Summary:

Overseas investors who own half the nation’s bonds could demand higher borrowing costs, warn analysts.

Political upheaval in Paris is prompting the financial vulnerabilities of the Eurozone’s second-biggest economy to be reappraised, investors have warned.

Many fear that the prospect of dysfunctional politics, flagging growth and a steadily rising debt burden may dent France’s long-term attractiveness to foreign investors who hold around half the country’s government debt.

Traders doubt that this will result in turmoil akin to the gilts market crisis triggered by former UK prime minister Liz Truss in 2022, as the country’s finance minister has warned. But they fear that France’s bond market could increasingly resemble Italy’s over time, facing permanently higher borrowing costs and becoming a potential flashpoint when bloc-wide crises hit.

“This is causing some consternation amongst those investors who maybe have been complacent about France’s political risks and fiscal sustainability risks,” said Mark Dowding of RBC BlueBay Asset Management.

If France enacts the wrong policies over time, “there is no reason why it can’t end up in a situation akin to where Italy sits today,” he added.

Borrowing costs have already widened in response to the prospect of either the far-right Rassemblement National forming the next government, or the increasingly likely prospect of an unstable hung parliament.

Since President Emmanuel Macron announced a snap election early last month, the gap between yields on 10-year French and German debt — a measure of risk — has rocketed from 0.48 percentage points to 0.85 percentage points last week, although it has since fallen to 0.71 percentage points.

According to Rohan Khanna of Barclays, the yield on French bonds is at its highest level relative to a combination of those on ultra-safe German Bunds and traditionally riskier Spanish debt since the beginning of the 2000s. French Political Turmoil Throws Spotlight On Debt Vulnerability_1

French Political Turmoil Throws Spotlight On Debt Vulnerability_1

The first-round victory of Marine Le Pen’s RN and its allies on Sunday and the NFP’s second-place finish have bolstered fears of further political turmoil ahead of the second round on July 7. It has also intensified market fears of either political deadlock or a potential move away from market-friendly policies, which could damage confidence after the election.

Pollsters believe a hung parliament or an outright majority for the RN are the most likely outcomes after the second round. In the case of a strong finish for the RN, President Emmanuel Macron could face an uncomfortable power-sharing arrangement with the far-right known as “cohabitation”.

The uncertainty comes at a time of budgetary weakness in France. S&P Global lowered its credit rating in May, following a downgrade by Fitch. France is forecast to run a budget deficit of 5 per cent of GDP next year, modestly down from 5.3 per cent this year but still one of the highest in the EU and above that of Italy, according to the European Commission.

France is also reliant on overseas investors — including a big cohort of Japanese institutions looking for secure European sovereigns — to buy its bonds. While this gives it a more diversified investor base than some, it also leaves it more vulnerable to a sharp change in sentiment, say analysts. French Political Turmoil Throws Spotlight On Debt Vulnerability_2

French Political Turmoil Throws Spotlight On Debt Vulnerability_2

Half of French government debt is held by non-residents, compared with about 27 per cent in Italy and 43 per cent in Spain, according to Eurostat data. While Italian households hold 11 per cent of the country’s debt, that figure for France is 0.1 per cent.

Markets are nervous about what the Japanese investors will do in particular, as shifts in Japanese monetary policy could make their trades less profitable, said Tomasz Wieladek, an economist at T Rowe Price. French Political Turmoil Throws Spotlight On Debt Vulnerability_3

French Political Turmoil Throws Spotlight On Debt Vulnerability_3

On June 19, the commission proposed opening an excessive-debt procedure for France, as Brussels warned of “high risks” emerging from its debt sustainability analysis over the medium term. The general government debt ratio is on track to rise continuously to about 139 per cent of GDP in 2034, it stated.

France has so far avoided the kind of crises experienced in Italy and the UK in recent years. In 2018, the spending plans of Italy’s coalition of the Five-Star Movement and the League party pushed the gap between Italian and German 10-year bond yields to more than 300 basis points. That was the highest level since the aftermath of Silvio Berlusconi’s premiership, reflecting investors’ assessment of Italy’s political risk.

Analysis by JPMorgan suggests France could weather a sudden leap in borrowing costs. A “shock” under which borrowing costs leap by 1.5 percentage points over a two-year period would only lift the debt-to-GDP ratio to just over 115 per cent, marginally above its central projections, the bank said in a recent note. French Political Turmoil Throws Spotlight On Debt Vulnerability_4

French Political Turmoil Throws Spotlight On Debt Vulnerability_4

That is partly because France’s debt stock is relatively long-dated, with an average maturity of 8.5 years, according to S&P. That means that just 8-10 per cent of its debt comes up for refinancing every year, according to Barclays, slowing the impact of a rise in borrowing costs.

“The Liz Truss scenario seems unlikely at this point — I don’t see a sudden disruption to the French bond markets,” said Holger Schmieding, chief European economist at Berenberg, who predicts Le Pen’s party will seek to be relatively moderate on fiscal policy. French Political Turmoil Throws Spotlight On Debt Vulnerability_5

French Political Turmoil Throws Spotlight On Debt Vulnerability_5

However, the country’s long-term fundamentals are not good, Schmieding said, especially if France diverges from Macron’s pro-growth policies. A confrontational approach with Brussels is seen as raising the risk of wider turbulence in the EU. Some investors also worry that a wider sell-off in French debt would spark contagion in other European countries, forcing the European Central Bank to intervene.

France’s public debt rose above 115 per cent of GDP in 2020, nearly double that in 2007. Last year, its debt-to-GDP ratio was the EU’s third-largest, after that of Greece and Italy, at 111 per cent of GDP.

Against that backdrop, Schmieding pointed to the potential for higher borrowing costs or further credit rating downgrades, particularly if growth falters.

“It adds up to a serious fiscal issue over the longer term,” said Schmieding. French Political Turmoil Throws Spotlight On Debt Vulnerability_6

Source:Financial Times

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Samantha Luan

Central Bank

Economic

Forex

Yen's renewed selloff captured some attention in the otherwise subdued Asian session today. With no new comments from Japanese authorities, market participants are left to speculate on when and where the next intervention might occur. A pivotal moment on the horizon is BoJ's meeting on July 31, where the central bank is expected to outline its tapering plans for bond purchases. Additionally, there is prospect that BoJ might raise interest rates again to counteract the negative impacts of Yen's depreciation on the economy. Some analysts suggest that if BoJ's measures fail to meet market expectations, Yen could plunge straight to 170 level against Dollar. However, the immediate focus remains on whether 165 is the intervention threshold.

In the broader currency markets this week, Sterling and Euro are currently the strongest currencies, followed by Dollar and Aussie. It is worth noting, however, that these four currencies are still trading within last week's ranges relative to each other, indicating a lack of decisive strength among them. Swiss Franc is the weakest performer, followed by Yen and Kiwi, with Loonie positioned in the middle.

Technically, NASDAQ's rally resumed overnight and closed at record high above 18k handle. For now, near term outlook will stay bullish as long as 17494.01 support holds. Next target is 100% projection of 12543.85 to 16538.86 from 15222.77 at 19217.78. A key focus for Q3 will be whether this risk-on sentiment, particularly in the tech sector, will persist. Yen Falls Again: How Much Lower Could It Go?_1

Yen Falls Again: How Much Lower Could It Go?_1

In Asia, at the time of writing, Nikkei is up 1.24%. Hong Kong HSI is up 1.00%. China Shanghai SSE is down -0.41%. Singapore Strait Times is up 1.20%. Japan 10-year JGB yield is up 0.0118 at 1.104. Overnight, DOW rose 0.41%. S&P 500 rose 0.62%. NASDAQ rose 0.84%. 10-year yield fell -0.043 to 4.436.

Australia's retail sales rises 0.6% mom on sales events boost

Australia's retail sales turnover increased by 0.6% mom to AUD 35.94B in May, well above expectation of 0.3% mom. On an annual basis, sales grew by 1.5% yoy.

Robert Ewing, ABS head of business statistics, highlighted the influence of early end-of-financial-year promotions and sales events on the boosted turnover.

Despite this seasonally adjusted rise, the underlying trend in spending remains flat. Retail businesses have increasingly relied on discounting and sales events to drive discretionary spending, following several months of restrained consumer activity.

Japan's PMI services finalized at 49.3, ending 21-month growth streak

Japan's PMI Services was finalized at 49.4 in June, a significant drop from May's 53.8, ending a 21-month growth sequence. PMI Composite was finalized at 49.7, down from May's 52.6, marking the first contraction in seven months.

Trevor Balchin, Economics Director at S&P Global Market Intelligence, highlighted the service sector's recent strong upturn "ended abruptly". He noted that the Business Activity Index dropped by -4.4 points during was the largest decline since January 2022 and among the biggest on record.

Despite the concerning headline figures, Balchin pointed out that the underlying details were "less concerning". The fall in new business was merely a "pause" rather than an "outright decline" in demand. This pause is partly due to the weak yen boosting international new business. Additionally, the 12 month outlook and job growth remained "relatively strong".

China's Caixin PMI services drops sharply to 51.2

China's Caixin PMI Services fell sharply to 51.2 in June, down from 54.0 in May, significantly below expectations of 53.4. This marks the lowest reading since October 2023 but remains in expansionary territory for the 18th consecutive month. PMI Composite also declined from 54.1 to 52.8, signaling an eighth month of expansion.

Wang Zhe, Senior Economist at Caixin Insight Group, stated, "Supply and demand expanded, with the manufacturing sector outperforming services." He noted that employment at the composite level contracted, while price levels remained stable. However, price levels in the services sector were weaker compared to manufacturing.

"Notably, the gauge for future output expectations recorded a five-year low," Wang added, indicating weak optimism among both manufacturers and service businesses. This suggests that while current activity remains in growth territory, there are significant concerns about future performance across sectors.

Looking ahead

Eurozone will release PMI services final and PPI in European session while UK will release PMI services final. Later in the day, US will release ADP employment, jobless claims, trade balance, ISM services and factory orders. FOMC minutes will be featured too. Canada will also publish trade balance.

GBP/JPY Daily Outlook

GBP/JPY's rally continues today and intraday bias stays on the upside. Current up trend should target 100% projection of 191.34 to 200.72 from 197.18 at 206.56 next. On the downside, below 203.87 minor support will turn intraday bias neutral and bring consolidations. But outlook will remain bullish as long as 201.59 resistance turned support holds, in case of retreat. Yen Falls Again: How Much Lower Could It Go?_2

Yen Falls Again: How Much Lower Could It Go?_2

In the bigger picture, long term up trend is still in progress. Next target is 100% projection of 155.33 to 188.63 from 178.32 at 211.62. Outlook will stay bullish as long as 197.18 support holds, even in case of deep pullback. Yen Falls Again: How Much Lower Could It Go?_3

Yen Falls Again: How Much Lower Could It Go?_3

Source: ActionForex

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Samantha Luan

Economic

Consumer confidence has hit a bit of a snag. After showing a sharp improvement in March, the Current Situation Index (CSI) dipped slightly from 98.5 to 97.1 in May 2024. This indicates a slowdown in recovery, with concerns about the overall economic situation, employment, price levels, and income. However, there's a silver lining: spending remains strong, pointing to a sustained recovery since the COVID-19 pandemic.

Future expectations have also taken a hit. The Future Expectations Index (FEI), which reached a four-year high of 125.2 in March 2024, fell to 124.8 in May 2024. Consumers foresee increased spending over the next year but are less optimistic about the economic situation and employment prospects.

Despite a steady decline in headline inflation, households expect prices to rise in the near future. For the next three months, inflation expectations have edged up by 20 basis points (bps) to 9.2%, even though the current perception has dropped by 10 bps to 8%. Looking a year ahead, median inflation expectations have increased by 10 bps to 9.9%. This outlook is driven by persistent food price shocks and uncertainties surrounding the monsoon season. Interestingly, cities like Chennai, Kolkata, and Delhi anticipate double-digit inflation for the next year, whereas Ahmedabad and Jaipur expect lower inflation rates. Gender-wise, men expect higher inflation compared to women.

The latest survey of professional forecasters reveals an upward revision in India's GDP growth forecast. For FY25, the GDP growth is now projected at 6.8%, up by 10 bps, though this is slightly lower than the RBI's recent estimate of 7.2%. For FY26, the forecast has been raised by 20 bps to 6.7%. These revisions are largely driven by expectations of increased Gross Fixed Capital Formation (GFCF), which is now projected to grow by 8.6% in FY25. Private Final Consumption Expenditure (PFCE) growth remains steady at 6.0% despite recent slowdowns.

Forecasts for real Gross Value Added (GVA) growth have also been adjusted upwards. For FY25, the real GVA growth is now expected to be 6.6%, buoyed by improved projections for the industrial sector, with agriculture and services also seeing modest increases. The forecast for FY26 remains unchanged at 6.4%.

On the inflation front, the median forecast for headline inflation in FY25 is 4.5%, aligning with the RBI's estimate. Inflation is expected to dip sharply in Q2 FY25 but then rebound to around 4.7-4.6% in the subsequent quarters. Core inflation is projected to rise from 3.3% in Q1 FY25 to 4.3% by Q4 FY25.

In terms of trade, merchandise exports and imports are expected to grow by 3.9% and 5.2% respectively in FY25, marking a slight improvement from previous projections.

While consumer confidence shows signs of strain and households brace for higher inflation, professional forecasters remain optimistic about India's economic growth, driven by robust capital formation and steady consumption.

Source:Investing

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Glendon

Economic

GameStop Stock (GME) has become one of the most talked-about and controversial stocks in recent years, captivating both Wall Street and Main Street investors alike. The company's journey from a struggling brick-and-mortar video game retailer to a symbol of retail investor power has been nothing short of extraordinary.

The GameStop Saga

In early 2021, GameStop's stock price skyrocketed from around $17 to a peak of $483 in a matter of weeks, driven by a combination of factors including a short squeeze, social media frenzy, and retail investor enthusiasm. This unprecedented surge was largely orchestrated by retail investors, many of whom were members of the Reddit forum r/WallStreetBets, who saw an opportunity to profit from the stock's high short interest and challenge institutional investors.

The event, often referred to as the "GameStop saga," had far-reaching implications for the financial markets, regulatory bodies, and the perception of retail investors' power in the stock market. It led to congressional hearings, changes in brokerage policies, and a renewed focus on market structure and fairness.

Company Fundamentals

Despite the stock's meteoric rise, GameStop's underlying business has faced significant challenges. The company has been struggling with the shift to digital game downloads and online retail, which has eroded its traditional business model of selling physical game discs and consoles in stores.

In response to these challenges, GameStop has been attempting to transform its business. The company has been closing underperforming stores, expanding its e-commerce capabilities, and exploring new revenue streams such as collectibles and digital products. However, the success of this transformation remains uncertain, and the company continues to face stiff competition from online retailers and digital game platforms.

Stock Performance and Volatility

Since the initial surge in early 2021, GameStop's stock has remained highly volatile. While it has not returned to the extreme heights seen during the short squeeze, it has maintained a significantly higher valuation compared to its pre-2021 levels.

The stock's performance has been largely disconnected from the company's fundamental business metrics, with many analysts arguing that its price is primarily driven by speculation, momentum trading, and its status as a "meme stock". This disconnect between stock price and fundamentals has made traditional valuation methods challenging to apply to GME.

Investor Sentiment and Social Media Influence

One of the most notable aspects of GameStop stock is the strong and passionate retail investor base it has cultivated. Many of these investors, often referred to as "apes" within their community, express a strong belief in the company's potential for transformation and view their investment as a way to challenge traditional Wall Street practices.

Social media platforms, particularly Reddit and Twitter, continue to play a significant role in driving sentiment and information sharing about GME. This has created a unique dynamic where online chatter can have a substantial impact on the stock's price movements.

Risks and Considerations

Investing in GameStop stock comes with several significant risks:

High Volatility: The stock's price can experience extreme swings in short periods, potentially leading to substantial gains or losses.

Valuation Concerns: Many analysts argue that the stock's price is disconnected from the company's fundamental value, raising concerns about a potential bubble.

Business Transformation Uncertainty: The success of GameStop's efforts to transform its business model remains uncertain.Regulatory Scrutiny: The events surrounding GameStop have attracted regulatory attention, which could lead to changes in market rules that may impact the stock.

Dependence on Retail Sentiment: The stock's performance is heavily influenced by retail investor sentiment, which can be unpredictable and subject to rapid shifts.

Conclusion

GameStop stock remains a highly controversial and polarizing investment. While it has delivered extraordinary returns for some investors, particularly those who bought in early during the 2021 surge, its future remains uncertain. The stock's performance continues to be driven by a complex interplay of factors including retail investor sentiment, short-selling dynamics, and the company's ongoing efforts to transform its business.

For potential investors, it's crucial to approach GME with caution and a thorough understanding of the risks involved. As with any investment, it's advisable to conduct thorough research, consider your risk tolerance, and potentially consult with a financial advisor before making any investment decisions.

The GameStop saga has undoubtedly left a lasting impact on the financial markets, challenging traditional notions of market dynamics and investor behavior. As the story continues to unfold, it will likely remain a subject of intense interest and debate in the investment community for years to come.

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Cohen

Central Bank

Economic

Australian retail sales rose by more than expected in May with spending largely driven by discounts in the face of elevated borrowing costs, an outcome that further strengthens the case for an interest rate hike this year.

Sales advanced 0.6% from the prior month, making it the biggest increase in four months, official figures showed on Wednesday. The outcome, which was double the pace that analysts forecast, follows a 0.1% gain in April.

In response, yields on policy-sensitive three-year bonds rose as much as 4 basis points to 4.17% as rates traders boosted the odds for an interest rate hike this year. Stocks pared gains.

Sales were driven “by watchful shoppers taking advantage of early end-of-financial year promotions and sales events,” said Robert Ewing, head of business statistics at ABS. “Many retailers started end-of-financial year sales early, offering larger discounts than usual and noted that shoppers remain price-sensitive in response to persistent cost-of-living pressures.”

Australia Retail Sales Jump, Boosting Case for RBA Hike_1

Retail sales can be an important consideration in policy decisions given consumption accounts for more than half of gross domestic product. The Reserve Bank of Australia has repeatedly highlighted that the outlook for household spending remains a key uncertainty following its 13 rate hikes between May 2022 and November 2023.

Indeed, Wednesday’s data showed retail sales rose just 1.7% from a year earlier, running well below the 4%-5% pace seen in early 2023.

The underlying weakness is a key reason why many economists are circumspect about reading too much into today’s surprise. Callam Pickering, previously an RBA economist and currently APAC analyst for job site Indeed Inc., pointed out that May’s increase followed two consecutive months of tepid results.

“That sets the scene for another weak June quarter outcome once we account for inflation,” he said. “Quite simply, this remains one of the weakest retail markets we have seen in Australia for generations.”

National Australia Bank’s Tapas Strickland said the data does add to rate hike probabilities for August, though “it is still unclear given the hints at discounting mentioned by the Statistician whether the pickup will be sustained.”

Even so, there is relief on the horizon for Australians, with tax cuts and energy rebates having kicked in this week.

“Consumer spending could rise in earnest from this quarter, given that tax cuts will provide a shot in the arm to households’ real incomes,” said Abhijit Surya of Capital Economics. “However, we suspect that households will choose to bank most of their tax cuts.”

The RBA next meets on Aug. 5-6, with some economists predicting the central bank may tighten policy further to take the benchmark rate to 4.6% — a level not seen since October 2011. The board has placed a high bar to raising rates again, while saying that further tightening cannot be ruled out.

The consensus among economists so far is still that the RBA will hold rates at 4.35% this year, though some believe a hike in August cannot be ruled out if second-quarter inflation report due July 31 surprises on the upside.

Figures last week showed a partial gauge of consumer prices rose by more than expected for a third straight month in May, prompting money markets to price in odds of a rate hike this year. At the same time, the labor market remains tight, with unemployment hovering around 4%.

Minutes of the RBA’s June meeting released on Tuesday showed a rate hike remains in play, with the policy-setting board emphasizing on the need to remain “vigilant” to upside price risks.

Source:Bloomberg

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Cohen

Economic

China’s services activity expanded at the slowest pace in eight months and confidence hit a four-month low in June, dragged down by slower growth in new orders, a private-sector survey showed on Wednesday, suggesting more economic stimulus is needed.

The Caixin/S&P Global services purchasing managers’ index (PMI) eased to 51.2 from 54 in May, marking the lowest reading since October 2023 but remaining in expansionary territory for the 18th straight month. The 50-mark separates expansion from contraction.

The survey, which covers mostly private and export-oriented companies, aligned with a broader official PMI released on Sunday that showed activity in the services sector dropped to a five-month low.

The world’s second-largest economy has reported patchy growth in recent months, reinforcing calls for more policy support to achieve an ambitious growth target of around 5 per cent.

The new orders subindex fell to 52.1 in June from 55.4 the previous month. Overseas demand also eased slightly even on top of strong exports in May.

Business confidence levels eased to the lowest level since March 2020 with concerns about the global economy and rising competition.

China’s Services Activity Growth Hits 8-month Low As New Orders Slow, Caixin PMI Shows_1

Service providers were scaling back hiring again last month after adding employment in May.

But slower rates of inflation for both input and output prices offered a respite to business owners who were grappling with higher input material, labour and transport costs.

The Caixin/S&P’s composite PMI, which tracks both the services and manufacturing sectors, fell to 52.8 from 54.1.

Markets are now focused on a leadership gathering in the middle of July, known as the third plenum, which may announce some reforms.

Measures that redistribute income from central authorities to local governments, thus reducing their reliance on land sales, would top the agenda of the gathering, according to policy advisers.

“Fiscal and tax reforms should focus on creating more optimistic expectations among market participants,” said Wang Zhe, senior economist at Caixin Insight Group.

Source:scmp

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FastBull Featured

Daily News

[Quick Facts]

1. There are calls for Biden's withdrawal from the 20224 election.

2. Powell: U.S. on disinflationary path, but more data needed before rate cuts.

3. Fed's Goolsbee: Holding rates steady equals tightening monetary policy.

4. ECB's Lagarde: No need to reduce services inflation to 2%.

5. U.S. job vacancies unexpectedly surge.

6. ECB's Lane says the July meeting is unlikely to see another rate cut.

7. Eurozone inflation slows, but service inflation remains strong.

[News Details]

There are calls for Biden's withdrawal from the 20224 election

Some Democrats call for President Joe Biden to withdraw from the 2024 presidential race, citing his poor debate performance.

Some Democratic lawmakers on Tuesday raised new questions about whether Biden should continue to run for this year's presidential election. This is a new call after Biden's poor performance in last week's debate.

Some political donors have called on him to drop out of the race, while other Democrats have publicly expressed concern that Biden is not capable of defeating Trump in November.

A Reuters/Ipsos poll after the debate showed one in three Democrats thought Biden should quit the race.

Powell: U.S. on disinflationary path, but more data needed before rate cuts

The U.S. is back on a "disinflationary path," Federal Reserve Chair Jerome Powell said on Tuesday, but policymakers need more data before cutting interest rates to verify that recent weaker inflation readings provide an accurate picture of the economy. The Fed wants to ensure that inflation continues to move towards the target before considering easing policy. Given the strength we see in the economy we can approach the question of rate cuts carefully, Powell said, while also noting that policymakers don't want to keep policy too tight for too long and "lose the expansion."

Fed's Goolsbee: Holding rates steady equals tightening monetary policy

Chicago Fed President Goolsbee said on Monday that our policy is restrictive, and the real federal funds rate (nominal interest rate minus inflation) has reached the highest level in decades. As inflation falls, it gets tighter. That means the Fed would be tightening monetary policy "by default" and not "by choice."

The real economy is weakening from a strong condition. If the Fed is going to put more downward pressure on demand, it will have to start thinking about the real side of the economy.

Goolsbee said he would be confident about cutting rates "if we get more months of inflation readings like what we've seen in the last couple of months. U.S. high inflation in the first quarter of this year seems to be temporary, and it is expected to continue to decline until it falls to the target level of 2%.

ECB's Lagarde: No need to reduce services inflation to 2%

The European Central Bank (ECB) has made considerable progress on the disinflationary path, said ECB President Christine Lagarde at the ECB Forum on Central Banking on Monday. She predicted that inflation would remain close to 2% for 12 months before reaching the 2% target in the second half of next year.

HICP services inflation remained strong in June, in large part because wages have finally caught up with prices. We don't need to reduce services inflation to 2% because manufacturing products growing at less than 2% will eventually lead to a balance between goods and services prices. Close attention needs to be paid to services inflation stickiness to ensure that the ECB does not cut rates too quickly.

U.S. job vacancies unexpectedly surge

U.S. JOLTs job openings rose to 8.14 million in May from 7.91 million in April, sharply above the market-expected 7.91 million.

The ratio of job openings to those who are unemployed fell to 1.22 available jobs per job seeker, matching the figure seen in February 2020, a month prior to the pandemic breakout.

The report again suggests that the labor market is robust in the U.S.. So far, there are no signs of a slowdown in job growth this year, so consumer purchasing power is expected to continue to increase and the economic expansion looks solid. Other seasonally adjusted indicators of labor turnover suggest that the U.S. job market continues to hold steady, cooling gradually in recent months but remaining at historically high levels.

ECB's Lane says the July meeting is unlikely to see another rate cut

ECB Chief Economist Lane said on Tuesday that the July meeting is unlikely to see another rate cut, and patience is needed to collect data to ensure that the ECB is moving toward its 2% inflation target. The focus of the July meeting is expected to be economic issues. The latest release of inflation data has not dispelled our concerns about services inflation.

Eurozone inflation slows, but service inflation remains strong

Eurozone Harmonised Index of Consumer Prices (HICP) grew by 2.5% year-on-year in June, lower than the previous month's 2.6% but in line with market expectations. Core HICP increased at a rate of 2.8% year-on-year, also lower than the previous 2.9% but in line with market expectations.

Despite the decline in headline inflation in the euro area, services inflation remains high. Indeed, the underlying upward pressure on prices seems to be consolidating, especially with high wages in the services sector. The ECB's hawkish bias and its focus on sticky wage growth indicate no rate cuts at the July meeting.