By Mike Dolan
LONDON (Reuters) – What matters in U.S. and global markets today
By Mike Dolan, Editor-At-Large, Finance and Markets
World markets got a minor fillip from the expected 90-day rollover of the U.S.-China trade tariff truce, clearing one of Tuesday’s two big hurdles. Now for the July inflation report.
Much rides on the consumer price report – not least markets’ assumption of a Federal Reserve interest rate cut next month, but also the impact so far of rising tariffs as well as the reliability data compiled by the embattled Bureau of Labor Statistics. Annual inflation is expected to have ticked up a tenth to 2.8% and ‘core’ inflation built to 3.0% – the latter involving a 0.3% monthly gain, the biggest since January, and likely lifted by tariff-sensitive goods such as vehicle parts and toys.
* Chinese stocks nudged about half a percent higher after confirmation the recently-negotiated deals between Washington and Beijing officials in Stockholm would indeed see an extension of the existing deal until November. Although largely expected, the new order prevented a snapback to triple-digit tariffs between both sides and it settles for now with a 30% levy on Chinese exports to America and 10% Chinese tariffs on U.S. imports there. Wall Street futures were flat after ebbing slightly on Monday.
* Broader macro markets remained largely frozen ahead of the CPI report – with Treasury yields and the dollar flatlining and bond volatility gauges sinking to their lowest in three years. Aside from the CPI release, investors will keep half an eye on the latest NFIB small business survey for July and Federal budget data for last month too – with growing attention on the revenues being generated by unilateral tariff rises.
* Elsewhere, the Australian dollar eased marginally after the Reserve Bank of Australia delivered another widely expected quarter-point interest rate cut and Japan’s Nikkei surged more than 2% on its return from holiday amid a wave of tech enthusiasm. Gold prices nursed Monday’s setback after President Donald Trump said bullion would not be subject to tariff rises after all – clearing up confusion on the issue last week. Sterling was firmer after UK wage and retail numbers further dampened Bank of England easing speculation – as did better-than-forecast jobs numbers.
Today’s column looks at how after a turbulent year so far, with multiple potential disturbances to U.S. bond markets, Treasuries appear to be slumbering instead and implied volatility has ebbed to its lowest in three years.
Today’s Market Minute
* The United States and China on Monday extended a tariff truce for another 90 days, staving off triple-digit duties on each other’s goods as U.S. retailers get ready to ramp up inventories ahead of the critical end-of-year holiday season.
* Trump upended decades of U.S. national security policy, creating an entirely new category of corporate risk, when he made a deal with Nvidia to give the U.S. government a cut of its sales in exchange for resuming exports of banned AI chips to China.
* Australia’s central bank cut interest rates on Tuesday for a third time this year and signaled further policy easing might be needed to meet its inflation and employment goals as the economy lost some momentum.
* Western governments are increasingly worried about becoming too reliant on China for rare earths as well as some refined metals. Their challenge is to work out how to secure supply without taxpayers being unduly burdened, explains ROI columnist Clyde Russell.
* It’s becoming increasingly difficult to get any visibility on the U.S. labor market amid all the conflicting economic data. But ROI columnist Jamie McGeever argues that one figure may be worth paying attention to more than the rest.
Chart of the day
The Consumer Price Index report from the Labor Department’s Bureau of Labor Statistics is due Tuesday amid mounting concern over the quality of inflation and employment data. Budget and staffing cuts have led to the suspension of data collection for portions of the CPI basket in some areas across the country – and Trump’s firing of BLS boss Erika McEntarfer this month followed big downward revisions to May and June payroll counts.
Data collection suspensions come after years of what many describe as underfunding of the BLS under both Republican and Democratic administrations. Citing a need to “align survey workload with resource levels,” the BLS suspended CPI data collection completely in one city in Nebraska, Utah and New York. It has also suspended collection on 15% of the sample in the other 72 areas, on average. The share of different cell imputation in the CPI data – essentially modeled assumptions of where prices might be – jumped to 35% in June from 30% in May. Trump on Monday said he was nominating Heritage Foundation economist E.J. Antoni as the new BLS chief.
Today’s events to watch
* U.S. July consumer price index (8:30 AM EDT) NFIB July small business survey (6:00 AM EDT) July Federal budget (2:00 PM EDT)
* Kansas City Federal Reserve President Jeffrey Schmid and Richmond Fed President Thomas Barkin both speak
* U.S. corporate earnings: Cardinal Health
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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
(By Mike Dolan; Editing by Andrew Cawthorne)
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