After inflation, euphoria continues on the markets

Investors continue to be euphoric, particularly after Friday's sharp fall in inflation, even though core inflation remains high and is struggling to come down.

Friday's close, which saw another sharp rise, enabled the Nasdaq100 index to post its best ever first-half performance. The S&P500, meanwhile, had its best first half since 2019.

Asian markets continued the rally seen in the United States on Friday, particularly in Hong Kong, where the main index was up 2% this morning. An important meeting between China and the United States will also be watched by the markets this week, with US Treasury Secretary Janet Yellen travelling to China from 6 to 9 July to improve relations between the world's two leading powers.

Falling inflation and some recently published economic data are keeping markets euphoric, while taking care to avoid advanced economic data and any comments from central bankers indicating that monetary policy tightening is far from over.

The Fed, which is continuing to reduce its balance sheet, could raise its main rate twice again this year. On Wednesday evening, we will be watching for the publication of the Fed's minutes, giving more details of the latest US monetary policy decision.

Beyond these minutes, only two FOMC members will be speaking this week. A member of the ECB and its President, Christine Lagarde, will be speaking on Friday. In addition, the RBA in Australia will publish its monetary policy and is expected to raise rates by another 25 bps.

On the corporate front, with investors eagerly awaiting the first-half results season, which is due to kick off next week, Tesla and the electric car sector are likely to be surrounded at the start of the week. Indeed, BYD and Tesla have reassured us of the level of activity, while the latter has published its highest level of deliveries in its history.

This should enable the share price to rise strongly once again, but the numerous price cuts that have made this performance possible could put a little more pressure on the manufacturer's margins.

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On the statistics front, we shall be watching for the final European manufacturing PMI figures for June on Monday. These are expected to be at their lowest since June 2020. Excluding the covid effect, we have to go back to October 2008, when the subprime crisis began. In the United States, we will be looking at the same type of data, with the overall manufacturing PMI, as well as the ISM.

On Tuesday, only German foreign trade figures will be published, and the day is likely to be quiet, with the US markets closed for Independence Day.

Wednesday is services PMI day, when data will be published in China, Japan, certain European countries, notably Germany, and the eurozone. In the afternoon, industrial orders will be analyzed in the United States.

On Thursday, investors will be watching German industrial orders in the morning, followed by ADP non-farm payrolls and jobless claims. In addition, PMI services and the JOLTS report on job vacancies will be analyzed later in the afternoon.

Friday will be the most important day for investors in terms of statistics, with industrial production in Germany, but above all job creation in the non-farming sector in the US (NFP), rising wages and the unemployment rate. Although this data will be watched carefully, it should not offer any surprises and should not change the current market trend.