(The opinions expressed here are those of the author, a
columnist for Reuters.)
By Mike Dolan
July 15 (Reuters) -
What matters in U.S. and global markets today
By Mike Dolan, Editor-at-Large, Finance and Markets
A torrent of new information hit markets on Tuesday, with a
mostly positive tilt for both stocks and bonds.
A surprisingly large decline in U.S. consumer price inflation
for June soothed interest rate hike nerves, with the headline
drop clearly tracking big swings in energy prices.
I'll get into that and more below.
But first, check out my latest column on one way that Europe is
looking to rein in China's humming export engine.
And listen to the latest episode of the Morning Bid daily
podcast, where we discuss June inflation, corporate earnings and
more.
Subscribe to hear Reuters journalists discuss the biggest news
in markets and finance seven days a week.
MELTING CORE
The drop in headline U.S. inflation may well be reversed in July
given the resumption of hostilities in the Gulf, but the first
drop in monthly core CPI in more than six years - a marginal
fall of 0.02% - takes the annual core inflation rate down to
just 2.6%.
Futures have wiped out almost all chances of a Federal
Reserve rate hike later this month as a result, and Treasury
yields fell back sharply.
Fed Chair Kevin Warsh gave little away in his congressional
testimony on Monday but restated the Fed's determination to get
inflation back to its 2% target.
The corporate earnings season also kicked off in earnest, with
the big banks all doing well on a mix of volatile market trading
and big fee paydays from a wave of IPOs. Goldman Sachs' stock
was the pick of the bunch as it surged 9%.
It was more mixed in the tech world. IBM plunged 25% in its
biggest one-day drop on record after a big miss and an admission
that it had flubbed the switch of business trends from software
services to AI data centre buildouts.
It also said that AI spending was eating into customers'
software budgets. That caught many software service stock prices
in the slipstream of IBM's own slide.
But Europe's ASML reported blockbuster results on Wednesday, and
much like TSMC's sales update earlier this week, the chip
manufacturer highlighted continued chip sector demand as it
upped its annual revenue forecasts yet again.
World oil prices continued to bubble back up above $85 a barrel,
meantime, as U.S.-Iran hostilities persisted even as President
Trump U-turned on plans for a 20% toll on Hormuz shipping. A
resumption of the blockade on Iran's ships goes into effect
today.
Elsewhere, China's second-quarter GDP growth slowed to a
below-forecast 4.3%, although June industrial and retail updates
were above estimates. The yuan firmed. Asia stocks are up more
broadly, as are U.S. stock futures ahead of Wednesday's bell.
Chart of the day
U.S. consumer inflation slowed more than expected in June as
energy prices retreated, but there was also the first drop in
monthly core prices, which exclude volatile energy and food, in
more than six years.
Weighed down by a surprisingly big drop in auto insurance as
well as declines in communication, healthcare and hotel room
prices last month, the monthly core CPI index actually declined
- albeit by a sliver at -0.02%, rounded up to zero in some
reports.
But while the report appeared to quash market speculation
about a Fed rate rise as soon as this month, it didn't dispel
futures market pricing for a hike later this year. And annual
price gains across a range of sectors are still far in excess of
the Fed's 2% target - a target that Fed Chair Kevin Warsh
insisted would be met by the central bank, come what may.
Today's events to watch
* U.S. June PPI (8:30 a.m. EDT), New York Fed manufacturing
survey for July (8:30 a.m. EDT)
* Fed issues Beige Book (2 p.m. EDT)
* Fed's Lisa Cook, New York Fed's John Williams and St.
Louis Fed's Alberto Musalem speak
* U.S. corporate earnings: BlackRock, BNY, Morgan Stanley,
Johnson & Johnson
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