From Marc to Market:
Overview: Today's US CPI is the focus but the bar to a Fed cut next month is low, and it could prove anti-climactic. The more moderate inflation reading creates more space for the central bank to respond to signs of a continued slowing of the US labor market and adopt less restrictive policy. The dollar is mixed as the North American session gets under way. The rate cut by the Reserve Bank of New Zealand, not a total surprise, but has seen fall 1%. A softer than expected UK CPI report is threatening to snap sterling's five-day advance. Firmer than expected Swedish inflation dampens talk of a 50 bp cut next week. This lifted the krona to the top of the G10 performers today. The euro set a new high since early January near $1.1030. A large set of options expire today slightly higher. Emerging market currencies are mostly firmer today, and the offshore yuan is at a six-day high. News that Japanese Prime Minister Kishida will not see re-election had little market impact.
Equities are mostly higher today. In the Asia Pacific region, China and Hong Kong were exceptions among the large bourses. Europe's Stoxx 600 is around 0.20% higher and is rising for the sixth session of the past seven. US index futures are little changed. Asia Pacific bonds rallied. In Europe, the low CPI readings saw 10-year Gilt yields drop four basis points, while the firmer CPI reading in Sweden saw its 10-year yield jump six basis points. Most of the benchmark yields in Europe are 1-2 bp higher. The 10-year US Treasury yield is flat near 3.84%. Gold remains firm near $2478. The record high was set last month around $2483. September WTI is pinned in the lower end of yesterday's range and holding above $78. The high set Monday was slightly above $80....*****
...America
The focus is squarely on the US July CPI today. The July PPI, reported yesterday, was a little softer than expected with a 0.1% gain in the headline (2.2% year-over-year from a revised 2.7% in June) and a flat core reading (2.4% year-over-year from 3.0% in June). The median forecast in Bloomberg's survey projects a 0.2% rise in both in the headline and core CPI. The year-over-year pace may be flat at 3.0% for the headline, depending on rounding, while the core rate may tick lower to 3.2% from 3.3%. A 0.2% increase in the headline rate would translate to less than a 0.5% annualized rate over the last three months, down from 2.0% in the same year-ago period. Favorable base effects in August and September, when the headline CPI rose by 0.5% and 0.4%, respectively, in 2023 suggests the year-over-year pace will slow. The Fed will have August's CPI in hand (September 11) before it meets again (September 17-18). A 0.2% increase in the core CPI would put the three-month annualized rate at 2.0% down from 2.4% in the previous three months and 3.2% in the comparable 20023 period. The bar to a quarter-point cut in September seems low. We suspect it will take an exceptionally disappointing August jobs report to put a 50 bp cut truly on the table....
....MUCH MORE
