Bloomberg Daybreak Weekend: US Housing Data, Tesla Earnings, ECB Decision, Japan Election

US Housing Market Outlook

• 🏠 Existing home sales for June are expected to be down modestly sequentially but up slightly from last year's low pace, with the market still over 20% below normalized levels.
• 📉 New home sales are projected to decrease from last year, with builders increasingly resorting to base price cuts and heavy discounting to maintain sales pace.
• 📈 Home prices are still rising in the resale market, but at a slower pace, reflecting a shift towards a buyer's market; however, many local markets, like Tampa, Atlanta, and Austin, are already seeing price declines.
• 📦 New home inventories are at their highest in nearly two decades, a shift from the previous lack of resale inventory, leading to a potential pullback in new housing starts.
• ⚠️ Interest rates remain a significant concern, with volatility being a key issue; a sustained period in the high 5% to low 6% range would provide more comfort to home shoppers.

Tesla's Q2 Earnings and Future Prospects

• 🚗 Investors will focus more on Elon Musk's outlook for the remainder of the year and beyond rather than just Q2 earnings, which are expected to be in line with consensus.
• 🇨🇳 The revamped Model Y Juniper SUV's ramp-up is progressing well, with plans for an extended version in China expected to boost sales.
• 🤖 Tesla faces tough competition from Chinese rivals like BYD, which has significantly cut prices; Tesla aims to remain in the medium to high-price market.
• 🚕 The long-delayed robo taxi unit has launched, but meaningful revenue or profit is not expected until around 2027, with a strong focus on safety.
• 💰 The expiration of the $7,500 EV tax credits by September 30th will negatively impact Tesla's earnings, though the direct profit from selling these credits is estimated to be less than 5% of total profits.

European Central Bank and French Fiscal Policy

• 🏦 The European Central Bank (ECB) is expected to pause interest rate hikes in July, with focus shifting to the September meeting for new economic projections.
• 🇫🇷 France is implementing a plan to reduce its deficit to 4.6% next year and below 3% by 2029, involving €44 billion in savings and revenue increases, primarily through public spending cuts.
• ⚖️ The French government plans to cut public spending by €30 billion, increase revenue by 10%, and add two working days per year by cutting holidays, aiming to reassure investors about its fiscal trajectory.
• 🗣️ French Finance Minister Eric Lombard expressed confidence in the execution of the 2025 budget and the plan to put France back on track, despite initial negative reactions from opposition parties.
• 🇪🇺 The EU's role in mitigating fiscal challenges for member states like France includes engaging with the US on trade to boost confidence and demand across the region.
• 📉 Politicians urging the ECB for interest rate cuts are seen as a sign of desperation, with central bankers needing to remain independent amidst political pressures.
• 📊 Economists anticipate another rate cut from the ECB in September, but uncertainty remains high due to trade negotiations and economic forecasts.

Japan's Election and Economic Landscape

• 🇯🇵 Japan's upcoming upper house election could see the ruling coalition lose its majority, potentially leading to Prime Minister Shiguru Ishiba's resignation.
• 📈 Inflation and the rising cost of living are key issues, with opposition parties proposing more drastic solutions like cutting consumption tax, raising concerns about Japan's finances.
• 🍚 The symbolic issue of rice prices doubling has highlighted public frustration with inflation, prompting temporary government measures.
• 🏦 A significant ramp-up in government spending could affect the Bank of Japan's path towards monetary policy normalization.
• 🇺🇸 Trade negotiations with the US, particularly regarding tariffs on automobiles and steel, are critical for Japan, though there is doubt about whether any action can influence US decisions.
• 🗳️ Younger voters are showing increased interest in voting, which could shift support away from traditional ruling parties towards opposition parties.