In recent market updates, signs of a cooling U.S. economy have emerged as the second half of 2024 begins. The U.S. Federal Reserve Chair Jerome Powell is set to speak at the European Central Bank's annual forum in Sintra, Portugal, providing potential insights into future monetary policy.
Key economic indicators show U.S. manufacturing underperforming, with the Institute for Supply Management's June survey revealing a third consecutive month of contraction. The prices paid by factories for inputs have also dropped to a six-month low, indicating weak demand. Consequently, the U.S. economic surprise index has hit its most negative reading in nearly two years, and the Atlanta Fed's 'GDPNow' tracker has decreased to 1.7%, its lowest level this year.
Despite these economic concerns, the futures market prices indicate less than a 70% chance of a Federal Reserve rate cut in September, with speculation about whether the first cut will occur before November's election. The bond market is also showing signs of stress, with the 10-year Treasury yields reaching a monthly high and the yield curve showing less inversion.
Political factors are also influencing market dynamics, including President Joe Biden's recent performance in a presidential debate and a U.S. Supreme Court ruling on former President Donald Trump's partial immunity from prosecution. These developments have increased the odds of a potential Trump victory in the upcoming election, influencing long-term Treasury yields and causing fiscal concerns.