Rise and shine everyone and Happy Friday.

Markets seem to have shaken off what is being called an awful debate between the two US Presidential candidates. As the market gears up for the PCE Inflation data release, traders are expecting a softer reading, particularly after the last CPI reading that came in softer.

Today’s expectations are flat for the monthly change at the headline level and 0.1% for core inflation - both marked decelerations after the previous month.

Quarterly PCE numbers released yesterday with the GDP growth numbers came in higher though, as GDP growth also came in marginally higher at 1.4%.

In other news, Mexico held rates yesterday in light of rising inflation and an uncertain political situation. Banxico is nothing, if not cautious. This is the second hold since their first rate cut in this cycle.

In Asia, the markets are focused yet again on intervention in Japan.

US Equity Futures are trading higher. Amazon hit the $2T market cap mark yesterday. Walgreens and Nike both crashed on earnings. US treasury yields are moving higher, actually, they started moving higher after the debate yesterday.

Commodities are also higher this morning, with NatGas, Copper, and Platinum leading the way. Bitcoin is flat.

The first US Presidential Debate

I managed to watch half of it, and yes I can imagine why Former President Trump would be the clear winner. He did come across as more prepared. However, I have to say that he veered off-topic and side-stepped many of the direct questions - instead, he focused mostly on attacking policies and criticizing the President. Despite the mic’s being muted, both candidates talked towards each other more than anything else.

President Biden was clearly frustrated by many of the accusations, saying much of the discourse was not factual. We knew that President Biden would play it more calmly, but he seemed almost too muted though and often times, cited incorrect figures. There’s now a major question about his candidacy.

According to Election Betting Odds, Trump's odds to win elections are now at 59.5% (v 55.7% pre-debates), Biden's odds are at 23.2% (v 34.9% pre-debates), Newsom's odds to replace Biden and win elections now at 9.5% (v 2.6% pre-debates).

But, let’s talk about what we want to focus on - the discussion that could affect markets. Unfortunately, the discourse wasn’t clear and most of the debate was spent defending previous stances instead of articulating future policies.

Both candidates presented contrasting views on fiscal spending, with Biden focusing on recovery and growth through investment and Trump advocating for reduced spending and controlling inflation through different economic policies.

Biden discussed that he’d maintained many of Trump's tariffs but made strategic adjustments, arguing they protect American industries and workers from unfair foreign competition. He emphasized collaborating with allies to address global trade imbalances.

Trump proposed expanding tariffs, including a universal baseline tariff on all imports and significantly higher tariffs on Chinese goods. He argued these measures are essential to protect American jobs and industries and reduce the trade deficit.

So nothing really new.

European Macro Data

This morning's European market activity was data-driven. The UK FTSE 100 outperformed other indexes following an upward revision to the UK's Q1 GDP in the final reading.

France saw its inflation move closer to the European Central Bank's (ECB) target, with the lowest annual pace since 2021, just 0.1% off the target. However, there is still concern over Spain's core inflation, which increased for the second consecutive month on a year-over-year basis. Meanwhile, German unemployment spiked to its highest level in over three years.

Despite the positive June inflation report in France, the French CAC 40 underperformed, possibly due to the upcoming election voting on Sunday.

Chart of the Day - BofA’s Flow Show

Calendars

(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics)