Market Watch: Investors await US consumer prices release, expecting Federal Reserve interest rate cut in September. UK inflation was mild, while UBS’s quarterly profit was impressive.
U.S. CPI
The release of the US CPI number is expected to confirm benign inflationary pressures, allowing the Federal Reserve to cut its policy rate from the 5.25%-5.50% range.
The July CPI increased by 0.1%, indicating a 2.2% increase in the 12 months through July. The data is expected to lead to a 50 basis point cut in September, with the headline CPI remaining at 3.0% on an annual basis.
UBS Earning
Swiss bank UBS reported a Q2 net profit of $1.14 billion, surpassing analysts’ expectations. The profit compared to a $528 million forecast in a poll of analysts. UBS CEO Sergio Ermotti said the results reflect significant progress since the Credit Suisse acquisition.
However, UBS warned that the macroeconomic outlook was clouded by ongoing conflicts, geopolitical tensions, and upcoming U.S. elections, which could lead to higher market volatility.
UK inflation
UK inflation increased to 2.2% in July, above the Bank of England’s 2% target, but still below the 41-year high of 11.1% in October 2022.
Annual services inflation fell to 5.2% from June’s 5.7%. Annual wage growth excluding bonuses slowed to its lowest in nearly two years at 5.4%. The Bank of England cut its base rate earlier this month.
Economic Calendar
- 07:00 AM MBA Mortgage Applications
- 08:30 AM Consumer Price Index
- 10:30 AM EIA Petroleum Inventories
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Recent data indicating a possible cooling in the U.S. economy have alleviated some persistent inflation concerns, fueling hopes that the Federal Reserve will start to bring interest rates down from more than two-decade highs as soon as September. Along with the Dow, the benchmark and tech-heavytouched record marks last week.
The durability of the strength on Wall Street will likely be tested by a fresh batch of corporate results this week, including quarterly returns from artificial intelligence darling Nvidia (see below). Durable goods and consumer sentiment data will also be in focus as markets hunt for more evidence that growth is moderating enough to give the Fed justification for rolling out rate cuts this year.
Recent data indicating a possible cooling in the U.S. economy have alleviated some persistent inflation concerns, fueling hopes that the Federal Reserve will start to bring interest rates down from more than two-decade highs as soon as September. Along with the Dow,
The durability of the strength on Wall Street will likely be tested by a fresh batch of corporate results this week, including quarterly returns from artificial intelligence darling Nvidia (see below). Durable goods and consumer sentiment data will also be in focus as markets hunt for more evidence that growth is moderating enough to give the Fed justification for rolling out rate cuts this year.
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MFitch Ratings has downgraded China’s credit rating outlook to “Negative” from “Stable” due to concerns over growing public debt and slowing growth in the world’s second-largest economy. The agency affirmed China’s rating at A+, citing increasing risks to China’s public finance outlook. Concerns over slowing economic growth have grown in recent months, with Fitch expecting gross domestic product growth to fall to 4.5% in 2024.
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U.S. inflation data for February is expected to provide insights into the future direction of Federal Reserve monetary policy. The overall consumer price index (CPI) is expected to match the previous month’s pace of 3.1% annually, with the core CPI expected to slow to 3.7% from 3.9% in January. However, the month-on-month gauge is expected to shed light on price gains momentum.
Fed officials have made cooling inflation the main objective of interest rate hikes, which have brought borrowing costs to over two-decade highs. They suggest cuts may be coming later this year, but need more evidence that price growth is sustainablely easing back down to their 2% annualized target. Analysts at ING believe inflation is likely too hot for comfort.
U.S. inflation data for February is expected to provide insights into the future direction of Federal Reserve monetary policy. The overall consumer price index (CPI) is expected to match the previous month’s pace of 3.1% annually, with the core CPI expected to slow to 3.7% from 3.9% in January. However, the month-on-month gauge is expected to shed light on price gains momentum.
Fed officials have made cooling inflation the main objective of interest rate hikes, which have brought borrowing costs to over two-decade highs. They suggest cuts may be coming later this year, but need more evidence that price growth is sustainablely easing back down to their 2% annualized target. Analysts at ING believe inflation is likely too hot for comfort.