July Starts With A Damp Squib In Sintra

WHERE WE STAND – Focus fell on the ECB’s annual policy forum in Sintra yesterday which, for those unaware, is a bit like the Fed’s annual Jackson Hole Symposium, only if it were instead organised by Ryanair.

The ‘big beasts’ of the central banking world were in attendance – Fed Chair Powell, ECB President Lagarde, BoE Governor Bailey & BoJ Governor Ueda – all appearing on a panel discussion together where, we got absolutely nothing by way of fresh information. All four spent the panel trying to say as little as physically possible, while also sticking resolutely to their familiar scripts.

As such, Lagarde reiterated the ECB’s ‘data-dependent and meeting-by-meeting’ approach to policy decisions; Ueda noted that inflation remains below the BoJ’s price target; Bailey flagged that the direction of trave for rates remains lower; and, last but not least, Powell repeated that the “prudent” thing to do on policy is to remain in ‘wait and see’ mode. Powell also refused to be drawn on whether he would remain as a Governor once his term expires next May – it’s highly unlikely, but I’d love if J-Pow stayed on the Board purely to wind up President Trump, who continued his attacks on the Fed yesterday.

Suffice to say, markets weren’t especially bothered by what happened in Sintra, with participants also relatively easily shrugging off inline eurozone CPI, as well as better than expected US ISM manufacturing and JOLTS job openings data.

Despite that, it proved to be a relatively soft start to the second half of the year in the equity complex, with the tech sector leading downside on Wall Street, as Trump and Elon Musk reignited their long-running feud. While the S&P closed just marginally in the red, this is quite clearly – in my mind – an opportunity to buy the dip, with the bull case of strong earnings growth, a solid underlying economy (as exemplified by yesterday’s data), and calmer rhetoric on trade, remaining firmly intact.

Sticking with equities, we had worrying news from the UK yesterday, that AstraZeneca (AZN LN) may be seeking to move their listing to the US.

Astra, the largest stock in the FTSE as of yesterday’s close, leaving the London market would be nothing short of a disaster, particularly with their potential departure stemming not from valuation worries, but as a result of the firm having become fed up with the UK’s operating environment – and, who can blame them! I would hope that Chancellor Reeves jumped straight on the phone to CEO Pascal Soriot in order to resolve his concerns, and provide re-assurance in rapid fashion. Then again, I won’t hold my breath on that one, given recent form, and just hope that whoever is the last to leave the London market remembers to turn off the lights on their way out.

Elsewhere, Treasuries traded softer across the curve, as the ‘one big beautiful bill’ continued to progress through Congress, remaining on track to reach Trump’s desk by Friday. The sell-off, though, which saw the front-end notably underperform, isn’t much to be excited about, as it really just puts benchmark yields back within the ranges that we’ve seen for the last few weeks, e.g. 10s between 4.25% and 4.50%. Again, it’s tough to see these bands breaking down soon.

Despite all the excitement elsewhere, things were somewhat more dull in the G10 FX space, where the dollar pared initial weakness as the day went on. My base case remains for the greenback to slowly but steadily grind lower over time, as confidence in the idea of monetary policy independence continues to be eroded.

Interestingly, ECB Vice President de Guindos gave  a green light to further EUR appreciation in remarks yesterday, but did add that a move above $1.20 would be “complicated”. I guess, then, that’s where this move will stop – or at least, pause – next!

LOOK AHEAD – A pretty barren docket ahead today, though it’s very much a case of ‘calm before the storm’ given how packed tomorrow’s calendar is.

Only two releases of note are on today’s slate, namely the latest eurozone unemployment figures, and last month’s US ADP employment report. Neither, frankly, are likely to be especially market-moving, especially with the ADP print really only being useful for telling us what the nonfarm payrolls print won’t be.

Besides that, trade headlines will remain in focus, with the market starting to pay increased attention to the issue, especially with just a week now until the pause on ‘Liberation Day’ tariffs is due to expire – even if the can is likely to be kicked down the road on that front. TACO!