Global Markets Watch: Economic Signals, Leadership Changes, and Market Movements Across Asia, Europe, and the US

1

Chicago Federal Reserve Bank President Austan Goolsbee expressed increasing concern over the labor market as inflation pressures ease and employment data disappoint. He noted that the current interest rates are “very tight” and are only appropriate if the economy is overheating. Goolsbee also mentioned that while the rising unemployment rate could indicate more people entering the labor market, it might also be a sign of deteriorating economic conditions. He hinted that if the economy continues to weaken, the Federal Reserve may need to focus more on the labor market and could consider lowering interest rates in the coming months.

Analysis:

Impact on FX:A dovish shift in the Federal Reserve's stance could lead to a weaker USD.

FX Pair:USD/JPY, EUR/USD

Impact on Shares:Potential positive impact on U.S. equities if the market anticipates rate cuts.

Companies:Financial institutions sensitive to interest rate changes, such as banks and mortgage companies.

2

Japan's economy experienced a rebound in the second quarter, driven by private consumption, with an annualized growth rate of 3.1%, exceeding expectations. This suggests that the virtuous cycle of income growth and increased consumption long pursued by the Bank of Japan might be taking shape. Data shows that corporate wage increases and government tax rebates have boosted personal spending, especially after four consecutive quarters of declining consumption. This economic growth provides strong support for the Bank of Japan's case for further rate hikes and sets a positive backdrop for the upcoming Liberal Democratic Party leadership election. Meanwhile, although exports grew for seven consecutive months, increased imports reduced the net contribution of exports to economic growth.

Analysis:

Impact on FX:Positive for the JPY as economic strength supports rate hikes.

FX Pair:USD/JPY

Impact on Shares:Positive impact on sectors benefiting from consumer spending, such as retail and automotive.

Companies:Japanese retail companies, automotive manufacturers like Toyota.

4

Columbia University President Minouche Shafik announced her resignation after a tumultuous period of protests and campus divisions triggered by the Israel-Gaza war. Shafik, who took office last year, decided to step down in response to internal tensions and criticism of the university's handling of allegations of anti-Semitism. In her resignation statement, Shafik mentioned that she believes it is best to leave now to help the school face future challenges. Katrina Armstrong, CEO of Columbia University Irving Medical Center, will temporarily succeed Shafik.

Analysis:

Impact on FX:None.

FX Pair:N/A

Impact on Shares:None.

Companies:N/A.

5

Singapore has filed charges against former Citibank relationship manager Wang Qiming in what is considered the largest money laundering case in the country's history. Wang faces 10 charges, including falsifying documents to deceive Citibank Singapore. The scandal has shaken Asia's wealth management hub after authorities seized assets worth S$3 billion (about US$2.3 billion), including cash, real estate, and cryptocurrencies. Singaporean authorities have vowed to crack down on the use of the financial system for money laundering.

Analysis:

Impact on FX:No direct impact on SGD, but the case could affect Singapore's financial reputation.

FX Pair:USD/SGD

Impact on Shares:Potentially negative for financial institutions in Singapore.

Companies:Citibank, other major financial institutions in Singapore.

6

Indonesian President Joko Widodos plan to build a new capital city, Nusantara, in Borneo aims to alleviate overcrowding and flooding in Jakarta and serve as his biggest political legacy. However, the $29 billion project faces investment shortfalls and construction delays. Despite beginning to work from the under-construction presidential palace and planning to hold Independence Day celebrations there, logistical difficulties have forced a significant reduction in the guest list. The future of this ambitious project remains uncertain after a new president takes office.

Analysis:

Impact on FX:Limited impact on IDR unless project delays significantly affect investor confidence.

FX Pair:USD/IDR

Impact on Shares:Infrastructure and construction companies in Indonesia may face volatility.

Companies:Indonesian construction firms involved in the Nusantara project.

8

With Japanese Prime Minister Fumio Kishida announcing that he will not seek re-election, the next prime minister will face challenges such as inflation, financial market volatility, worsening security environment, and a potential change in U.S. presidency. Although the upcoming election is highly competitive, the new leader's policies are likely to align with Kishida's. Kishida hopes that stepping down will help the Liberal Democratic Party (LDP) regain support. Despite political scandals, the LDP is expected to remain in power in the next national election. The new prime minister may continue existing economic and foreign policies, particularly in relations with the U.S. The LDP will elect a new leader by the end of September, determining Japan's future political direction.

Analysis:

Impact on FX:Potentially positive for JPY as political stability could boost investor confidence.

FX Pair:USD/JPY

Impact on Shares:Japanese equities may react positively if the new leader is seen as economically stable.

Companies:Japanese financial and defense companies.

9

Thai Prime Minister Srettha Thavisin was removed from office by the Constitutional Court less than a year after taking office, marking the fourth time in 20 years that a Thai prime minister has been ousted. This event highlights the continued dominance of the Thai monarchy over the country's political power. Srettha's ousting has sparked discussions on the selection of a new prime minister, with the ruling coalition's Pheu Thai Party planning to nominate 75-year-old Chavalit Yongchaiyudh as the new candidate. Despite Thailand's complex and uncertain political environment, royalist forces and conservatives continue to dominate the national political landscape, hindering the establishment of true democracy in Thailand.

Analysis:

Impact on FX:Potential volatility for THB due to political instability.

FX Pair:USD/THB

Impact on Shares:Negative impact on Thai equities, particularly in sectors sensitive to political risk.

Companies:Thai companies in the financial and tourism sectors.

10

After Bill Ackman‘s hedge fund Pershing Square Capital Management disclosed a stake in Nike, the company’s stock rose 3.3% in after-hours trading. Pershing Square holds about 3 million shares of Nike, worth approximately $229 million. While Nike faces sales challenges, Ackman plans a “low-key” approach to working with the company‘s management. The impact of this investment on the company’s strategic direction is not yet clear. Additionally, Nike‘s board is controlled by company co-founder Phil Knight and his son, who hold almost all the voting power. This marks Pershing Square’s second investment in Nike after a profitable short-term investment in 2018.

Analysis:

Impact on FX:Limited direct impact.

FX Pair:USD

Impact on Shares:Positive for Nike stock in the short term.

Companies:Nike.

11

The World Health Organization (WHO) has declared the rapidly spreading monkeypox outbreak in Africa as a global health emergency. This decision aims to curb the spread of this potentially deadly virus. The mutated monkeypox virus from the Democratic Republic of Congo has spread to at least six African countries, infecting about 15,000 people and causing over 500 deaths this year. The announcement led to a significant increase in the stock price of vaccine manufacturer Bavarian Nordic. WHO is developing a response plan and calling on donors to fund this effort. The Africa Centers for Disease Control and Prevention (Africa CDC) has also declared a public health emergency across the continent to pool resources to combat the outbreak.

Analysis:

Impact on FX:None.

FX Pair:N/A

Impact on Shares:Positive for pharmaceutical companies involved in vaccine development.

Companies:Bavarian Nordic, other vaccine producers.

12

At a rally in North Carolina, Republican presidential candidate Donald Trump questioned the significance of the economy as the most important election issue, despite his higher support in economic matters compared to his opponent Kamala Harris. Trump reiterated his commitments to cutting taxes, increasing domestic energy production, and maintaining the Affordable Care Act. While acknowledging the importance of the economy, he also discussed other social issues. Trump‘s campaign is currently working to counter Harris’s rising momentum in the polls, particularly in key swing states. Meanwhile, Harris plans to deliver a speech in North Carolina this week, focusing on her economic plan to lower consumer prices.

Analysis:

Impact on FX:None.

FX Pair:N/A

Impact on Shares:Possible market volatility depending on election outcomes.

Companies:U.S. companies in energy and healthcare sectors.

14

International mediators plan to meet with Israeli negotiators in Doha, Qatar, in an effort to reach a ceasefire agreement to prevent a potentially larger-scale conflict in the Middle East. Although Hamas will not directly participate in the talks, the mediators plan to brief them afterward. The negotiations will focus on how to pause the 10-month-long conflict between Israel and Hamas, with mediators working to bridge key differences. Israel insists on completely destroying Hamas, while Hamas demands that any ceasefire must be permanent and require the withdrawal of Israeli troops. Meanwhile, Iran and Hezbollah in Lebanon have threatened to retaliate against Israel, further complicating the negotiation landscape.

Analysis:

Impact on FX:Potential volatility for USD and regional currencies due to geopolitical risks.

FX Pair:USD/ILS, USD/IRR

Impact on Shares:Negative for companies with exposure to the Middle East, particularly in the defense sector.

Companies:Defense contractors, companies with significant Middle Eastern operations.