Politics and money are never far apart. After U.S. politicians and world leaders were given their chance to react to the attempted assassination of former president and 2024 Republican candidate Donald Trump, it wasn’t long before attention turned to how markets will interpret the shock. Today, we look at how a stunning turn of events comes ahead of an already pivotal week for markets and the economy.
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Morning markets
Global markets were mixed as investors weighed whether the Trump assassination attempt increased his chances of a second term in the White House.
Wall Street futures were higher on improving odds of a Trump win, while interest rate cut hopes continued to lift sentiment. TSX futures were flat.
Overseas, European stocks opened lower, after weak economic data from China helped set a cautious tone. Britain’s FTSE 100 slipped 0.25 per cent, Germany’s DAX declined 0.22 per cent and France’s CAC 40 retreated 0.49 per cent.
In Asia, Hong Kong’s Hang Seng closed 1.52 per cent lower, while the Nikkei paused for a holiday in Japan.
The Canadian dollar traded at 73.28 U.S. cents.
In focus
A shock adds weight to an already pivotal week
A police officer closes access to the rally site.Sue Ogrocki/The Associated Press
Because the shooting of Trump happened over the weekend, markets will have had plenty of time to digest both the assassination attempt and the fact that he is recovering well. When president Ronald Reagan was wounded in an assassination attempt on Monday, March 30, 1981, trading was halted early on the New York Stock Exchange at 3:17 p.m., with markets down slightly. Stocks rebounded sharply the next day.
Even with America’s long history of violence aimed at its political leaders, markets are expected to be volatile when they open today. But some traders are already suggesting that the attempt on Trump’s life has bolstered his chance of victory. That could push the U.S. dollar higher, while the yield curve on U.S. Treasuries could steepen further, as investors place bets that a second Trump presidency would bring looser fiscal policies, more trade restrictions and higher inflation risk.
Potential for more volatility is adding even more weight to a week of economic events that could prove pivotal for the world in the months ahead.
In the United States
The attempted assassination of Trump, who is expected to become the official Republican candidate at the party’s convention this week, isn’t likely to calm investors who were already on edge over calls for Joe Biden to step down as the Democratic nominee.
The spectre of political violence introduces a “whole new level of potential instability,” one analyst said.
It’s uncertainty and volatility, and of course markets don’t like that. It’s not an environment anyone wants to see.
— Jack Ablin, chief investment officer at Cresset Capital, Chicago
It’s probably not what markets wanted to see now in particular:
- Federal Reserve chief Jerome Powell is speaking in Washington today, with more Fed officials making remarks throughout the week.
- On their minds will be retail sales data, which lands July 16. Investors will be looking for further evidence of a rate cut in September to fend off a slowing economy.
- The country’s economy is expected to continue to lose momentum near-term “as high prices and elevated interest rates sap domestic demand,” according to a recent report.
- It’s also a week of bellwether banks: Goldman Sachs delivers its earnings results today, while Bank of America and Morgan Stanley are tomorrow.
In Britain
Two reports this week are expected to reaffirm the Bank of England’s position on holding its key lending rate at its next meeting in August.
- Inflation data on Wednesday and jobs on Thursday will be key for the central bank, which is worried about the strong pace of wages growth, Reuters reports.
- The British economy grew by 0.4 per cent in May, statistics reported on Thursday showed.
- The broad-based recovery might bring a spring to the step of Prime Minister Keir Starmer, as he heads to 10 Downing St. for his first week on the job.
Across Europe
The European Central Bank made its first cut in five years last month, and it’s not expected to follow with another this week. But investors will be parsing the decision for signs of the bank’s next moves.
- Markets are betting its next cut will come in September – the same month the U.S. Fed is expected to move.
- Investors are rethinking spending and trade estimates, as elections across the 20-nation zone test their comfort levels.
In China
The country is expected to consider major reforms to its fiscal system at a twice-a-decade policy meeting starting today.
Reforms on the agenda of the country’s Third Plenum are aimed at giving regional governments a lift and the broader economic recovery a boost. The meeting coincides with a flurry of economic data releases this week that include gross domestic product, retail sales and industrial output.
- Data today is expected to show the world’s second-largest economy grew at 5.1 per cent – its slowest rate in three quarters, Bloomberg reports.
- The government is also facing slow domestic and demand and a shrinking property sector.
- The country’s ability to grow domestically could prove more important, as it fights with the European Union over tariffs on Chinese electric vehicles.
With files from Reuters
Charted
Never be Royals?
Canada’s two largest banks recently did some in-house reshuffling for very different reasons: Toronto-Dominion Bank, as it tries to repair its troubled compliance division; and Royal Bank of Canada, to ready its next generation of leadership.
It was a reminder of RBC’s strength relative to its Big Five bank rivals, and that’s resulted in a stark divergence in share prices. Year-to-date, RBC’s stock price is up 13 per cent, more than double the second-place performer, CIBC. Meanwhile, TD, Scotiabank and Bank of Montreal have floundered.
In fact RBC is priced at one of the largest valuation premiums to its peers in nearly three decades, based on its price-to-book value versus the average of the next four big banks. History suggests that one way or another, that gap will narrow again.
The outlook
On our radar and reading list
Zoom in: On the earnings front in Canada, Corus Entertainment updates its third quarter this morning, while companies reporting in the U.S. today include BlackRock.
Zoom out: On Tuesday, Statscan will release inflation numbers for June. On Friday, it will release retail sales data for May.
Getting vocal: Canada can’t afford to be myopic about welcoming new people to the country, so, as the backlash against migration grows, it’s time for business leaders to step up, Rita Trichur writes.
Disruption’s costs: Maybe more taxes on big tech isn’t such a bad idea after all, John Rapley argues.
Gloom boom: Are you bracing for the apocalypse? There’s a timeshare for that.