Hey Folks, markets are looking at four weeks of upside action. Will the rally last? Get my take in this week’s round-up.
Major indexes rallied four weeks in a row after data showed signs that inflation, while still elevated on an annualized basis, had started to slow, supporting the view that the rise in consumer prices may have peaked. Meanwhile, the Feds reiterated they still had work to do in taming inflation, but the market still appeared to lower its expectations for a 75-basis-point (0.75 of a percentage point) rate hike in September. The big debate is whether the rally is over. Skeptics say that inflation isn’t contained, due in part to labor pressures, and that the Feds will continue to lift short-term rates aggressively. Fed Fund Futures sees the key federal-funds rate peaking at 3.5% to 3.75% by year end, up from 2.25% to 2.5% now. TSLA will be doing a 3;1 Stock Split after close of trading on Aug 24th.
Headline CPI inflation came in flat month over month, down from the 1.3% sequential uptick recorded in June and below the consensus estimate. On an annualized basis, headline inflation was 8.5%. Core inflation, which excludes volatile food and energy costs, was also below estimates and unchanged from the prior month. Meanwhile, the year-over-year increase in the producer price index fell 50 basis points sequentially to 9.8% in July, registering the first pullback in the headline number since April 2020.
However, comments from Fed officials reiterated they would continue to seek to tame inflation by raising interest rates.
Several major European countries announced that they would provide more emergency funds to bolster slowing economies and to help citizens tackle the cost-of-living crisis. But we did see Industrial production in the euro area rose for a third consecutive month in June. In the U.K. GDP shrank 0.6% compared with the previous month; the consensus forecast had called for a 1.3% contraction. In the second quarter, UK GDP fell 0.1% sequentially. The Bank of England (BoE) expects a recession to begin at the end of this year.
In Japan, inflation continues to be a top priority for the Cabinet, and Prime Minister Kishida said that the government will take new measures to cushion the impact of rising energy and food prices. He emphasized that fiscal spending would be used without hesitation to respond to inflation and rising coronavirus infections.
China reported a record trade surplus of USD 101.26 billion in July, surpassing the USD 90 billion consensus forecast. Exports rose a stronger-than-expected 18% from a year ago, while imports grew a less-than-forecast 2.3%. The consumer price index rose 2.7% in July from a year earlier, while the producer price index gained 4.2%. Both inflation readings came in below economists’ expectations.
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