ON DECK FOR MONDAY, JULY 22
![ON DECK FOR MONDAY, JULY 22](/content/experience-fragments/scotiabank/global_economics/en/daily_points/july_2024/2024-07-22/master/_jcr_content/root/image.img.png/1721648412630.png)
KEY POINTS:
- Stocks rally as US Presidential contest reset
- Polls are mixed on Harris who enjoys an early lead into the August DNC
- Chinese equities drop despite PBOC rate cuts that have done nothing to date
- Nothing on tap in the US, Canada
- Global Week Ahead reminder
Relatively light market developments are driving equities higher with bonds little changed so far. The US curve is very slightly bull flattening in 2s10s while MXN is among the currency leaders, but in general, there is little market reaction to Biden’s decision to drop out of the US presidential race which resets the contest against 78 year-old Trump.
There is also little reaction to China’s surprising and small rate cuts. The PBOC cut the 7-day and 1-month Standing Lending Facility rates by 10bps each after deciding to leave its 1-year Medium-Term Lending Facility Rate unchanged last week. That set up reductions in the 1- and 5-year Loan Prime Rates charged by Chinese banks to 3.35% and 3.85% respectively. The 5-year rate is the key benchmark for property financing markets. Chinese stocks moved lower as its rates curve bull steepened by a few basis points. The currency took the moves largely in stride. Rate cuts have totalled 75bps for the 5-year LPR and 35bps for the 1-year LPR over the past year (chart 1) and a half and have not done anything to reenergize growth in China’s economy given myriad other challenges.
![Chart 1: People's Bank of China Loan Prime Rates](/content/experience-fragments/scotiabank/global_economics/en/daily_points/july_2024/2024-07-22/master/_jcr_content/root/image_1066088309.img.png/1721648494791.png)
Now the process focuses upon picking a Democratic nominee either at the Democratic National Convention on August 19th to 22nd, or through a virtual roll call before then. Polling for alternative candidates versus Trump still put Trump in the lead including against Biden’s choice of Kamala Harris, but they don’t all agree and that doesn’t necessarily mean anything anyway. First, polls can be wildly inaccurate. Second, Trump won in 2016 without winning the popular vote.
![Chart 2: US Presidential First Polls After Biden Bows Out](/content/experience-fragments/scotiabank/global_economics/en/daily_points/july_2024/2024-07-22/master/_jcr_content/root/image_1066088309_cop.img.png/1721648535799.png)
As a reminder, the Global Week Ahead—The Coal Miner’s Central Bank was first sent Friday and is available here.
Key topics:
- BoC expected to cut again despite rising inflation risk
- Why the BoC won’t change QT
- Canada’s front-end is cheap to the US
- US Q2 GDP to inform the slowing debate
- US PCE inflation may be very soft…
- …and this time it might stick
- PMIs: EZ, UK, US, Japan, Australia
- Russian central bank expected to hike
- Turkey’s central bank likely to extend pause
- US earnings season intensifies
![Rates Table](/content/experience-fragments/scotiabank/global_economics/en/daily_points/july_2024/2024-07-22/master/_jcr_content/root/image_2113613682.img.png/1721648459023.png)
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DISCLAIMER
This report has been prepared by Scotiabank Economics as a resource for the clients of Scotiabank. Opinions, estimates and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. Neither Scotiabank nor any of its officers, directors, partners, employees or affiliates accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents.
These reports are provided to you for informational purposes only. This report is not, and is not constructed as, an offer to sell or solicitation of any offer to buy any financial instrument, nor shall this report be construed as an opinion as to whether you should enter into any swap or trading strategy involving a swap or any other transaction. The information contained in this report is not intended to be, and does not constitute, a recommendation of a swap or trading strategy involving a swap within the meaning of U.S. Commodity Futures Trading Commission Regulation 23.434 and Appendix A thereto. This material is not intended to be individually tailored to your needs or characteristics and should not be viewed as a “call to action” or suggestion that you enter into a swap or trading strategy involving a swap or any other transaction. Scotiabank may engage in transactions in a manner inconsistent with the views discussed this report and may have positions, or be in the process of acquiring or disposing of positions, referred to in this report.
Scotiabank, its affiliates and any of their respective officers, directors and employees may from time to time take positions in currencies, act as managers, co-managers or underwriters of a public offering or act as principals or agents, deal in, own or act as market makers or advisors, brokers or commercial and/or investment bankers in relation to securities or related derivatives. As a result of these actions, Scotiabank may receive remuneration. All Scotiabank products and services are subject to the terms of applicable agreements and local regulations. Officers, directors and employees of Scotiabank and its affiliates may serve as directors of corporations.
Any securities discussed in this report may not be suitable for all investors. Scotiabank recommends that investors independently evaluate any issuer and security discussed in this report, and consult with any advisors they deem necessary prior to making any investment.
This report and all information, opinions and conclusions contained in it are protected by copyright. This information may not be reproduced without the prior express written consent of Scotiabank.
™ Trademark of The Bank of Nova Scotia. Used under license, where applicable.
Scotiabank, together with “Global Banking and Markets”, is a marketing name for the global corporate and investment banking and capital markets businesses of The Bank of Nova Scotia and certain of its affiliates in the countries where they operate, including; Scotiabank Europe plc; Scotiabank (Ireland) Designated Activity Company; Scotiabank Inverlat S.A., Institución de Banca Múltiple, Grupo Financiero Scotiabank Inverlat, Scotia Inverlat Casa de Bolsa, S.A. de C.V., Grupo Financiero Scotiabank Inverlat, Scotia Inverlat Derivados S.A. de C.V. – all members of the Scotiabank group and authorized users of the Scotiabank mark. The Bank of Nova Scotia is incorporated in Canada with limited liability and is authorised and regulated by the Office of the Superintendent of Financial Institutions Canada. The Bank of Nova Scotia is authorized by the UK Prudential Regulation Authority and is subject to regulation by the UK Financial Conduct Authority and limited regulation by the UK Prudential Regulation Authority. Details about the extent of The Bank of Nova Scotia's regulation by the UK Prudential Regulation Authority are available from us on request. Scotiabank Europe plc is authorized by the UK Prudential Regulation Authority and regulated by the UK Financial Conduct Authority and the UK Prudential Regulation Authority.
Scotiabank Inverlat, S.A., Scotia Inverlat Casa de Bolsa, S.A. de C.V, Grupo Financiero Scotiabank Inverlat, and Scotia Inverlat Derivados, S.A. de C.V., are each authorized and regulated by the Mexican financial authorities.
Not all products and services are offered in all jurisdictions. Services described are available in jurisdictions where permitted by law.