Marketmind: Federal Reserve hawks and escalating tensions with China exert continued pressure on global markets

A preview of the upcoming events in European and global markets by Kevin Buckland

Today, the focus of the markets lies on U.S. policymakers, as the Federal Reserve solidifies its hawkish stance overnight, while Janet Yellen embarks on a visit to China precisely when Beijing imposes restrictions on the export of chip-making metals.

Investors in the Asia-Pacific region have clearly taken notice, resulting in a decline in stocks and an increase in bond yields, signaling that Europe should prepare for similar circumstances.

The main insight from the minutes of the Federal Reserve’s June meeting last night reveals that the decision to maintain the status quo was not entirely unanimous, with the hawks merely biding their time.

Traders widely anticipate an interest rate hike in July, yet the possibility of another hike afterward remains uncertain.

Over the next 48 hours, there will be no fewer than four reports on the U.S. labor market, culminating with the release of the U.S. non-farm payrolls on Friday.

In the meantime, the U.S. Treasury Secretary arrives in China to commence a three-day visit. Although Beijing is experiencing a warm temperature of 36 degrees Celsius, the atmosphere remains frosty due to the absence of the customary red carpet. Instead, a warning has been issued regarding restrictions on the export of gallium and germanium, which were described as a “well thought-out heavy punch,” but also acknowledged as “just a start.”

While China claims that it is not targeting any specific country, the United States, supported by less-enthusiastic allies like Japan and the Netherlands, has progressively increased restrictions on chip technology trade with China over the past few months.

Furthermore, another rivalry between billionaires Mark Zuckerberg and Elon Musk is intensifying, this time in the tech industry.

Zuckerberg recently announced that sign-ups for his potential Twitter-rivaling app, Threads, exceeded 5 million within the first four hours.

However, no updates have been provided regarding their proposed confrontation.

Later today, Britain will release the construction PMIs for June, while Germany will publish factory order figures for May.

Key developments that could impact the markets on Thursday include:

• Yellen embarking on a three-day visit to China
• Release of the construction PMIs for June in the UK and Germany, along with Germany’s factory orders for May
• Reports on initial jobless claims, the ADP employment report, JOLTS job openings, ISM non-manufacturing PMI, and S&P Global PMIs.