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Stock Market Movements Amidst Holiday and Economic Insights

As the U.S. commemorates Independence Day, stock markets are slated to close on Thursday. Concurrently, minutes from the Federal Reserve’s June assembly reveal that while inflation appears to be easing, the evidence is insufficient to assert a sustained decline. Across the Atlantic, the U.K. braces for a general election, and President Joe Biden reiterates his pursuit of a second term.

1. U.S. Markets Pause for Independence Day

In observance of Independence Day, U.S. stock markets will remain shuttered on Thursday. Preceding the holiday, both the S&P 500 and Nasdaq Composite achieved record closing highs during a shortened trading session, buoyed by indications of a cooling labor market, which could potentially justify a Federal Reserve rate cut later in the year.

However, declines in healthcare and consumer sectors weighed down the Dow Jones Industrial Average, which dipped by 0.06%. Notably, Tesla (NASDAQ) shares surged 6.5% following a smaller-than-expected drop in second-quarter vehicle deliveries.

2. Fed Minutes Reveal Cautious Optimism on Inflation

Federal Reserve minutes indicate that inflationary pressures are abating, yet policymakers seek further proof of a persistent cooling trend before reducing interest rates. The Federal Open Market Committee resolved to maintain its key policy rate at a range of 5.25%-5.50%, the highest in over two decades.

Participants deemed it premature to consider a rate cut without additional data affirming inflation’s downward trajectory toward the 2% target. Most committee members concurred that the current policy stance is sufficiently restrictive to temper inflation and overall economic activity.

3. U.K. Election Day

On a relatively light economic day, investors are keenly observing the U.K. general election for political clarity. The Labour Party is poised to secure a substantial victory, potentially ending the Conservative Party’s 14-year reign.

Despite the anticipated shift, markets remain relatively calm. Labour’s commitment to fiscal responsibility contrasts with the Conservative Party’s tarnished economic management reputation after years of political turmoil. In France, a critical legislative runoff vote is imminent, with the far-right National Rally poised for a significant influence.

4. Biden Affirms Re-election Bid

President Joe Biden reaffirmed his intention to seek re-election, despite skepticism from within the Democratic Party following a debate that raised concerns about his readiness. Through a senior aide’s statement on the social platform X, Biden declared, “I am running. I am the leader of the Democratic Party. No one is pushing me out.”

Biden’s determination follows a debate performance that sparked unease among Democrats, with prominent figures like Netflix (NASDAQ) co-founder Reed Hastings suggesting he should withdraw from the race.

5. Oil Prices Decline

Crude prices retreated on Thursday from recent highs, influenced by soft U.S. economic data raising concerns over future demand. By 03:30 ET, U.S. crude futures (WTI) had fallen 0.8% to $83.18 per barrel, while Brent crude declined 0.7% to $86.69 per barrel.

This downturn was driven by weak labor market data and disappointing PMI figures from the U.S., hinting at a potential slowdown in the world’s largest economy. Additionally, underwhelming PMI data from China exacerbated worries about the robustness of the economic recovery in the top crude importer. Nonetheless, losses were tempered by Energy Information Administration data showing larger-than-expected declines in U.S. crude and fuel stockpiles last week.

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