As we head into another week full of unknowns, DB's Jim Reid notes this morning that one question that we don't need to ask anymore is whether you think Joe Biden will be the Democratic Party nominee for President in November. On Friday speculation was rife that he would stand down as early as the weekend but bullish remarks by Biden on Saturday morning put some doubts to that speculation. However by Sunday afternoon Biden had unexpectedly withdrawn - through a tweet, and has yet to make any public appearance - and endorsed Kamala Harris. While it seems difficult to see a path for someone to pip her to the nomination, we are in uncharted territory so you couldn't completely rule it out. The Democratic convention starts on August 19th so if someone was going to challenge they'd need to be building up momentum well ahead of that. Unless there was a groundswell of support for that candidate it seems a very high hurdle to supplant Harris. The Clintons have endorsed Harris even if Obama hasn't - he is reportedly saving his nomination for his 'wife' - although his practise is not to do so until a nomination has been secured. Overnight, potential rivals Newsom and Buttigieg have also thrown their support behind Harris, although don't be surprised if they reverse in the last minute. In terms of the polls, the match-up between Trump and Harris has been slightly narrower than with Biden in recent times with Trump 1.9pp ahead at the national level instead of 3pp according to Real Clear Politics poll aggregates. However with the attention now likely to be firmly on Harris this could move notably in either direction over the next few days and weeks. Perhaps for now it slightly reduces the impetus for Trump trades but there's a long way to go.
Political thriller aside, and as we await to see if Biden will really hold a press conference - and is, in fact, alive and not held hostage by Democratic sponsors - the other main events this week all point to Friday's US core PCE deflator. En route to this,
the main other highlights are US Q2 GDP on Thursday, the global flash PMIs and the Bank of Canada rate decision on Wednesday.
With the core PCE deflator, DB economists expect a 0.14% MoM reading given the CPI and PPI components that feed into it. There could be some downward revisions to prior months that could edge this month up nearer to 0.2% so one to watch as a whole rather than the June number alone. The base case at DB is that the YoY rate will dip to 2.5% which is below the Fed's YE '24 prediction of 2.8% at their June FOMC. However the economists point out that base effects from low H2 prints last year will make further progress much more challenging. Nevertheless the recent run, especially in rents, suggest that the Fed will be having increasing confidence that inflation is moving back closer to 2%. For Q2 US GDP, economists expect a 1.9% growth print, although with durable goods out at the same time there might be a bit more uncertainty than usual.
We also have a big week for earnings that includes Tesla and Alphabet which will become the first of the “Magnificent Seven” to report in the latest round of results; tomorrow we also get the latest earnings out of LVMH. Strategists at Morgan Stanley said companies in Europe have made a positive start to the second-quarter reporting season, with 29% beating profit expectations, but the tone was less positive on Monday, with Ryanair plunging after the Irish budget carrier cut its outlook for ticket prices in the crucial summer travel period.
Don't expect to hear from Fed officials as they are on their blackout period ahead of next week's FOMC.
Below, courtesy of DB, is a day-by-day calendar of events
Monday July 22
Tuesday July 23
Wednesday July 24
Thursday July 25
Friday July 26
Finally, looking at just the US, Goldman notes that the key economic data releases this week are the durable goods report and the Q2 GDP advance release on Thursday, and core PCE inflation on Friday. Fed officials are not expected to comment on monetary policy this week, reflecting the blackout period in advance of the FOMC meeting on July 30-31.
Monday, July 22
Tuesday, July 23
Wednesday, July 24
Thursday, July 25
Friday, July 26
Source: DB, Goldman