- US June CPI M/M: 0.3%e v 0.1% prior; Y/Y: 3.1%e v 4.0% prior; Core CPI (ex food and energy)M/M: 0.3%e v 0.4% prior; Y/Y: 5.0%e v 5.3% prior
- Microsoft (NASDAQ:MSFT) gets go-ahead to buy Activision; prompts excitement for further deal making.
- Impressive demand for 3-year note auction
US stocks rose as bond yields remained capped as Wall Street looks like it is ready to move beyond a pivotal inflation report that should suggest interest rates will stay higher for longer. Headline CPI might fall to 2.9% and core could see the lowest reading since 2021, but sticky inflation signs will likely remain.
Stock market sentiment also got a boost as profit estimates for JPMorgan (NYSE:JPM) eye another strong quarter. Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) are expected to post weaker profits.
Broadening strength is also exciting the stock market bulls as cyclicals performed well. In order for stocks to continue on rising, Wall Street just can’t rely on the AI trade.
UK Wages are too hot
The BOE is going to have a tough decision with the August 3rd policy meeting as hot wages should keep the bets going for further tightening. Weekly earnings at 7.3% matched last month’s, which was also the record high seen in mid-2021. The case for the BOE to hike by 50bps got a lot stronger and that has helped take the British pound to a 15-month high against the dollar.
Oil market to remain tight
Crude Oil WTI prices are getting a boost as expectations grow for the oil market to remain tight despite all lingering growth concerns. The IEA expects strong demand from China and developing nations. The short-term crude demand outlook shouldn’t be that bad as everyone is taking a vacation that requires some travel this summer.
WTI crude has a solid floor in place and it will take a lot to go wrong for oil prices to lose its footing.
Gold tries to shine
Gold hit a 3-week high but traders won’t see an extension of this rally until we get beyond the inflation report and possibly some bank earnings. Gold bulls want to see inflation expectations to continue to tumble. Tomorrow’s inflation report if cooler than expected could help gold find a home above the $1950 level.
What might prove troubling for gold is what is shelter disinflation. Shelter prices are coming down, but not quickly enough and in several cities, rents are still increasing. Gold will have to fight more hawkish Fed speak, but for now it seems the $1900 level could hold.