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Markets Analysis From NICK LEESON


Wherever you look this week and whatever day you look at there is either a Central Banker speaking or an important Central Bank announcement.

In large part, the markets are looking for a rate cut, but the question is whether or not the FED will comply. A survey by the Wall Street Journal saw that nearly 40% of economists expect the central bank to ease next month. This would be the first rate cut in more than a decade.

Economists may be a conservative bunch, this is only a sample group, not ‘all’ economists and the markets are more aggressive at pricing in a rate cut, 87% chance of a rate cut in July and 26% as of Friday saying that it may be this week. I think the markets could be disappointed on both counts.

That being said, signs of the global economic slowdown continue to surface. Morgan Stanley had issued research at the weekend, suggesting that ‘business conditions are at their worst level since 2018’. Chinese Industrial Production also set a 17 year low last week.

There is also every possibility that tensions between Iran and the United States will flare up after two tankers were attacked last week.

European markets were broadly lower last week with the DAX leading losses after tech stocks came under pressure. Opening calls for the FTSE and DAX currently see them ahead by 27 and 29 points respectively at the opening bell. This follows gains in Asia overnight with the Hang Seng currently gaining 225 points and the Nikkei 225, 32 points.

In the UK, Boris Johnson is the clear leader for the next leader of the Conservative party. I was expecting the clarity to assist sterling but the currency is jittery over the belligerent attitude and the fact that if elected, BREXIT will happen, deal or not. Whilst sterling has strong support under 1.2500, I don’t think that we will get there and will look to add to my position on dips.

Monday – Draghi speaks at the ECB Forum on Central Banking

Tuesday – Draghi and Carney talk at the same forum

Wednesday – CPI y/y – UK, Draghi talks, FOMC Meeting and Statement, Fed Funds Rate

Thursday – Monetary Policy Committee meeting and statement, Bank rate decision, retail Sales m/m – UK, Carney talking at Mansion House Dinner

Friday – Flash Manufacturing and services PMI out of Germany and France

All in all a busy week, Fed Funds rate on Wednesday being the key factor but central banks in focus all week.

G20 starts next week and the potential for a substantive meeting on trade between Trump and XI – Trump is starting to court the voters and anything could happen!

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S. Jack Heffernan Ph.D. Economist at Knightsbridge holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Crypto, Mining, Shipping, Technology and Financial Services.