Market 08/07: Biden commits to continuing the campaign

US election update: Biden commits to continue the race

Biden affirms twice on certainly continuing to run:

• Biden's letter to Congress: he "firmly commits" to continue the race

• Speaking to MSNBC: “I will not explain further what I will do: I am running for president.”

Market prediction: Biden back to 50% for Democratic nomination and Harris down to 36%, after previously being nearly even

Despite the chaos around who will be the Democratic nominee, Trump's win probability in the presidential election remains at ~60%

New York Fed: Next year's inflation expectations lower than expected - but still high

Consumer inflation expectations for 1 and 3 years ahead (NY Fed survey) have cooled - but still not too optimistic:

• 1-year inflation down to 3.0% (previously: 3.2%)

• 3-year inflation: 2.9%

• 5-year inflation: 2.8%

However, consumers expect prices of all items to rise more slowly next year.

Income growth expectations continue at 2%

Money market records all-time high in assets

Money market funds (MMFs) just recorded record assets of 6.15 trillion USD

• 51.2 billion USD flowed into MMF funds in the week ending 07/02, the largest amount in 3 months.

• Warren Buffett's Berkshire Hathaway currently holds 3% of the US Treasury bill market, worth ~158 billion USD

• Fed keeping base rates high + Treasury increasing T-Bill issuance makes money market assets a safe cash haven.

  • Read more: US public debt obsession: footprints in the financial markets…

Japan: Base wages strongest increase - stocks back to peak after nearly 35 years

Japanese workers' base wage level +2.5% Y/Y in May - strongest increase since 1993

• Wages excluding bonuses and commissions +2.7% Y/Y

Real wages adjusted for inflation -1.4% Y/Y (April: -1.2% Y/Y) - 26th consecutive month of decline

• … due to the weakening Yen and rising commodity prices pushing up import costs.

Tokyo Topix index hits all-time high - surpassing the 1989 peak

Crypto market: Basel Committee announces framework requiring banks to report crypto trading activities

• New regulations require banks to report information on crypto trading activities and the impact of crypto assets on total assets

  • Approves multiple amendments to crypto asset safety standards.

  • The regulatory framework will be released at the end of this month and implemented from 2026.

• German government continues to transfer additional 1000 BTC worth $56 million to Bitstamp, Coinbase, and 1 unidentified wallet address

• $171 million in short positions liquidated from the market in the past 24 hours

Economic events for the week of 07/08 - 07/14

• Fed Chair Powell's testimony - Tuesday

• OPEC monthly report - Wednesday

• June CPI inflation - Thursday

• June PPI inflation - Friday

• Michigan Consumer Sentiment - Friday

• Total of 9 Fed officials speaking events this week

• This week's earnings release schedule:

Other news: Left-wing alliance gains ground in French election

1. French election update: Comeback by the left-wing bloc

• Left-wing NFP alliance wins 182 seats

• President Emmanuel Macron's centrist alliance: 163 seats

• Le Pen's far-right National Rally (RN) party - predicted to win last week, with 143 seats.

• However, the seat counts of the 3 groups are not much different => this could start a new phase of political instability in France!

• EUR and French government bond futures fall due to concerns over public debt: as public spending is expected to surge after the left-wing alliance's victory:

  • Estimated public spending pledges during the campaign by the parties:

    • New Popular Front party: additional ~+179 billion EUR ($194 billion) per year

    • Far-right RN party: additional ~+71 billion EUR

    • Macron's party and allies: additional ~+21 billion EUR

2. Citi predicts Fed may cut rates 8 consecutive times starting from September - equivalent to a 200 bps rate cut

3. Boeing reaches plea deal with US Department of Justice to avoid criminal trial. Boeing will have to:

• Face a fine of up to $487 million

• Install corporate monitor

• Invest at least $455 million over 3 years in compliance and safety programs

• Face 3 years of probation

4. Shipping stocks fall as Red Sea situation improves:

   • Gaza ceasefire deal could halt Houthi rebel attacks → opportunity for shipping companies to return to the Red Sea.

5. Tropical Storm Beryl makes landfall in Texas, 2 million people lose power and are stranded due to severe flooding.