By Mike Dolan
July 15 (Reuters) –
What matters in U.S. and global markets today
By Mike Dolan, Editor-at-Large, Finance and Markets
A torrent of new information hit markets on Tuesday, with a mostly positive tilt for both stocks and bonds.
A surprisingly large decline in U.S. consumer price inflation for June soothed interest rate hike nerves, with the headline drop clearly tracking big swings in energy prices.
I’ll get into that and more below.
But first, check out my latest column on one way that Europe is looking to rein in China’s humming export engine.
And listen to the latest episode of the Morning Bid daily podcast, where we discuss June inflation, corporate earnings and more.
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MELTING CORE
The drop in headline U.S. inflation may well be reversed in July given the resumption of hostilities in the Gulf, but the first drop in monthly core CPI in more than six years – a marginal fall of 0.02% – takes the annual core inflation rate down to just 2.6%.
Futures have wiped out almost all chances of a Federal Reserve rate hike later this month as a result, and Treasury yields fell back sharply.
Fed Chair Kevin Warsh gave little away in his congressional testimony on Monday but restated the Fed’s determination to get inflation back to its 2% target.
The corporate earnings season also kicked off in earnest, with the big banks all doing well on a mix of volatile market trading and big fee paydays from a wave of IPOs. Goldman Sachs’ stock was the pick of the bunch as it surged 9%.
It was more mixed in the tech world. IBM plunged 25% in its biggest one-day drop on record after a big miss and an admission that it had flubbed the switch of business trends from software services to AI data centre buildouts.
It also said that AI spending was eating into customers’ software budgets. That caught many software service stock prices in the slipstream of IBM’s own slide.
But Europe’s ASML reported blockbuster results on Wednesday, and much like TSMC’s sales update earlier this week, the chip manufacturer highlighted continued chip sector demand as it upped its annual revenue forecasts yet again.
World oil prices continued to bubble back up above $85 a barrel, meantime, as U.S.-Iran hostilities persisted even as President Trump U-turned on plans for a 20% toll on Hormuz shipping. A resumption of the blockade on Iran’s ships goes into effect today.
Elsewhere, China’s second-quarter GDP growth slowed to a below-forecast 4.3%, although June industrial and retail updates were above estimates. The yuan firmed. Asia stocks are up more broadly, as are U.S. stock futures ahead of Wednesday’s bell.
Chart of the day
U.S. consumer inflation slowed more than expected in June as energy prices retreated, but there was also the first drop in monthly core prices, which exclude volatile energy and food, in more than six years.
Weighed down by a surprisingly big drop in auto insurance as well as declines in communication, healthcare and hotel room prices last month, the monthly core CPI index actually declined – albeit by a sliver at -0.02%, rounded up to zero in some reports.
But while the report appeared to quash market speculation about a Fed rate rise as soon as this month, it didn’t dispel futures market pricing for a hike later this year. And annual price gains across a range of sectors are still far in excess of the Fed’s 2% target – a target that Fed Chair Kevin Warsh insisted would be met by the central bank, come what may.
Today’s events to watch
• U.S. June PPI (8:30 a.m. EDT), New York Fed manufacturing survey for July (8:30 a.m. EDT)
• Fed issues Beige Book (2 p.m. EDT)
• Fed’s Lisa Cook, New York Fed’s John Williams and St. Louis Fed’s Alberto Musalem speak
• U.S. corporate earnings: BlackRock, BNY, Morgan Stanley, Johnson & Johnson
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(By Mike Dolan)
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