Nasdaq celebrated good inflation numbers when they were announced, but the rally fizzled out by lunchtime, with many markets back where they began by midday. It’s unlikely that this data will cause the Fed to pivot to rate cuts, and Fed fund futures put just 26% odds of a 25-basis point rate hike at the November meeting, with modest expectations that we’ll see the first of several rate cuts as early as next March. A jump in weekly jobless claims caught the attention of traders, suggesting that the tight labor market is starting to loosen a bit, falling in line with the Fed’s objective of easing wage inflation. But it’s just one week’s data, and the numbers overall remain tight. Crude oil prices posted modest losses after posting fresh nine-month highs overnight.
Bottom-line: risk-off.
TODAY’S MAJOR NEWS
US inflation numbers edge down
- Consumer Price Index (CPI) inflation rose 3.2% year-on-year in July, better than the expected 3.3%, but up from 3.0% last month
- Core CPI, ex volatile food and energy prices, rose 4.7% year-on-year in July, below the anticipated 4.8%
- A breakdown of this morning’s inflation data still raises questions in some sectors …
- Fuel oil prices rose 3.0% month-on-month
- Shelter costs rose 0.4% month-on-month in July, but trending in the right direction
- Services less energy rose 0.4% month-on-month, consistent with where that sector has been for the past four or five month
- While other sectors are seeing slowing price rises …
- Food inflation seems to be calming, with month-on-month gains of 0.3% for food consumed at home and 0.2% gains for food consumed away from home
- Used car prices fell 1.3% in July, while new-car prices fell 0.1%
- Electricity costs fell 0.7% month-on-month in July
First time benefit claims edging up
- First-time claims for unemployment benefits rose to 248,00 in the week ending August 5, ahead of expectations, and up from 227,00 the previous week
- That pushed the four-week moving average to 231,00, up from 228,250 claims the previous week
- Continuing claims in the week ending July 29 fell by another 8,00 to 1.684 million
- The four-week moving average for continuing claims fell 9,250 to 1.701 million
Ukraine works on safe corridor for grain shipments
Ukraine worked with the International Maritime Organization to create a temporary safe corridor for cargo ships, it announced today. The routes will be used primarily to allow ships trapped at ports not covered by the Black Sea Grain Initiative to finally leave those ports after being trapped there since February 2022. The ships will have cameras on them to prove their peaceful intents. The IMO’s involvement provides a sense of protection under international maritime law, although Ukraine clearly states that risks remain from mines in the water as well as possible Russian strikes. All eyes will now be on Russia’s response to the ships moving through these corridors.
TODAY’S MAJOR MARKETS
Equity markets sell off after early gains
- Equity markets sold off by lunchtime after early gains, with the Nasdaq and S&P 500 down by 0.1% and 0.2%, respectively, while the Russell 2000 was off 0.6%
- Global markets were up, with the DAX and Nikkei 225 up 1.3% and 0.8%, respectively, while the FTSE 100 was up 0.4%
- The VIX, Wall Street’s fear index, rose to 18.8
Currencies unchanged, Bonds sell off
- The dollar index was unchanged against a basket of currencies to 102.3
- The Euro was up 0.4% against the dollar, Sterling was unchanged, and the Yen was down 0.5%
- Bonds sold off, with 2-year and 10-year Treasuries yields rising to 4.76% and 4.08%
Commodities see oil profit-taking
- Gold and Silver prices were unchanged and up 0.6%, respectively, at $1,952 per ounce and $22.9 per ounce
- Crude oil prices saw overnight profit taking, off 1.5% to $83.2 per barrel
- New-crop soybean prices were strongest in the grain complex as traders position for the possibility that USDA will cut its yield forecast tomorrow, further tightening the new-crop balance sheet
- Corn and wheat prices are consolidating just above recent lows, but with a firmer tone to them ahead of tomorrow's USDA report
Analysis by Arlan Suderman, Chief Commodities Economist: [email protected]
Market outlook by Paul Walton, Financial Writer: [email protected]
