Frank Kelly’s Geopolitical Week Ahead | June 3, 2024

Mexico election

In Mexico, former Mexico City Mayor Claudia Sheinbaum is ahead in all polls. But her opponent, Xóchitl Gálvez, has run a smart campaign and put reforms and economic development on the nation has put serious pressure on Sheinbaum and the Moreno Party coalition. Interestingly, Sheinbaum is seen as possibly being more left-wing than current President Andres Manual Lopez Obrador (AMLO), but voter pressure may keep her leftist tilt in check.

India election

In India, Indian Prime Minister Narendra Modi and his Bharatiya Janata Party (BJP) appear to be on the cusp of an enormous victory, picking up even more seats in parliament than before and potentially paving the way for Modi to push through sweeping reforms highly attractive to investors.

European Union election

Finally, in Europe, voters across the European Union (EU) will vote for members of the European Parliament. Polls suggest the result could be a significant right-wing tilt of the EU Parliament. It will also decide who the next EC (European Commission) President will be (likely a re-election of current President Ursula von der Leyden) and the entire European Commission.

This week in history

We would note two important and somber anniversary’s this week, one ensuring freedom and the other crushing it: The first being the 80^th Anniversary of D-Day on June 6 and the second 35^th Anniversary of the Tiananmen Square massacre in Beijing.

Economic week ahead

Looking at the economic radar screen this week, markets will be watching the European Central Bank decision on interest rates on Thursday. Elsewhere in Europe, Germany releases industrial production figures, factory orders and the latest trade balance numbers. 

In the US, the jobs report coming out Friday is being closely watched by market participates in advance of the Federal Reserve Board meeting in two weeks.  Canada’s Reserve Bank meets on interest rates.

Turning to Asia, China releases the Caixin PMIs and the May trade balance.  And in Japan the Ministry of Finance’s Q1 Financial Statements Statistics of Corporations come out as well the Monthly Labor Survey for April.

U.S. financial regulatory week ahead

Of particular note It was 90 years ago this week that President Franklin Roosevelt established the Securities and Exchange Commission (SEC). The SEC will celebrate the historic event on Wednesday with a gathering of former SEC Chairs in Washington.

We will also be watching this week as Treasury Secretary Janet Yellen and Acting Comptroller of the Currency Michael Hsu take part, on behalf of the Financial Stability Oversight Council (FSOC) in a Brookings Institution conference entitled "Artificial Intelligence & Financial Stability.”  The development of AI is of growing concern to financial regulators on a number of fronts and this conference and the high-level engagement of the Treasury Secretary and Head of the OCC are good examples of how high-level that concern has gotten recently.

Looking back on the last week, the US Supreme Court handed down an important (and unanimous) decision that rejected a broad approach to exempting national banks from state regulations. The decision requires courts to take a “nuanced” approach to federal laws when coming in conflict with state laws.

Also last week, House Financial Services Committee Chair Patrick McHenry (R-NC) announced he will hold a hearing on the scandals at the Federal Deposit Insurance Corporation (FDIC). He intends to call FDIC Chair Martin Gruenberg up to testify before the full committee where he will face renewed calls to step down immediately (Gruenberg has steadfastly said he is staying until a replacement is nominated and confirmed by the US Senate, which will likely take not happen until early 2025).