Macroeconomics: The Day Ahead for 5 July

Services and national PMIs top the day’s run of data, with French and Spanish Industrial Production to digest and precious little else that might move markets. The June FOMC minutes tops the events schedule, with the ECB’s Expectations survey and some ECB & Fed speakers, and German Finance Minister Lindner’s 2024 Budget press conference being the other items of note. In terms of the FOMC minutes, it will be the colour of the debate around slowing the pace of rate hikes to alternate meetings, as the Fed weighed still sticky core inflation, against assessing the cumulative impact of 500 bps of rate hikes, and per se the risks of doing too much vs. doing too little. The discussion around the resilience of risk asset performance will be as much of interest, as that on the relative resilience of the economy, above all private consumption.

** World – June Services PMIs **

Flash Services PMIs indicated a clear loss of momentum across the G7, though most notably France, the latter above all dictated by the high level of social unrest, but overall suggesting that the resilience of the sector relative to the contraction in Manufacturing is ebbing away, as was also evident in the China and Indian PMIs readings overnight, though India’ services sector continues to expand robustly. That said, it has to be added in respect of the US (PMI & ISM tomorrow), the very downbeat tone of manufacturing surveys is not being mirrored by hard data, with today’s Factory Orders seen expanding 0.8% m/m, echoing last week’s Durables Orders. The negative business view on the US economy may in part be due to downbeat view on Wall Street, but also due to businesses struggling to adjust to the much less predictable post-pandemic operating environment, particularly in terms of order flows.