Indices rise amid lower inflation in the US. Oil returned to decline due to reduced tension in the Middle East

Wednesday’s US CPI report for July eased speculation that the Fed will cut rates by 50 bps next month instead of 25 bps. US CPI for July fell to 2.9% y/y from 3.0% y/y, slightly better than expectations of no change at 3.0% y/y and the lowest annualized growth in over three years. The July core CPI excluding food and energy, fell to 3.2% y/y from 3.3% y/y in June, matching expectations and the smallest annualized gain in over 3 years.

According to data compiled by Bloomberg, most of the companies that reported beat consensus on earnings, but only 43% beat revenue expectations, the lowest in five years.

Alphabet (GOOG) shares fell by 2.3% yesterday following a report that the US Department of Justice is considering options, including a possible company separation.

The Canadian dollar strengthened to 1.37 per US dollar, hitting a near one-month high, while the US dollar weakened to one-year lows after softer-than-expected inflation data. Meanwhile, Canada’s unemployment rate was unchanged at 6.4% in July, the highest in two and a half years, indicating a weakening labor market.

WTI crude oil prices fell by 1.7%, marking a second straight day of losses following President Biden’s comments that Iran may not attack Israel if a ceasefire in Gaza is reached. A new round of ceasefire talks is due to begin Thursday in Qatar, but Hamas said the group does not intend to participate in the talks. Also, the EIA reported an unexpected rise in US crude inventories, with a 1.357 million barrel increase last week, ending a six-week decline and defeating expectations of a 2 million barrel drop.

The US natural gas prices (XNGUSD) rose more than 5% to $2.27/MMBtu on Wednesday, the highest in about a month, thanks to lower production and prognoses of hotter weather in late August. The hotter weather is expected to increase the use of air conditioners, boosting gas demand.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) was up 0.58%, China’s FTSE China A50 (CHA50) was down 0.50%, Hong Kong’s Hang Seng (HK50) decreased by 0.35%, and Australia’s ASX 200 (AU200) was positive 0.31%.

The offshore yuan weakened to 7.16 per dollar, retreating from a one-week high, as traders reacted to mixed economic data from China. In the real estate sector, new home prices in 70 major cities fell 4.9 percent from a year earlier in July 2024, the sharpest decline since June 2015 and underscoring the deepening real estate crisis despite Beijing’s efforts to stabilize the sector. Industrial production also showed signs of weakness, with growth slowing to 5.1% in July from 5.3% in the previous month, the weakest since March. In addition, the unemployment rate rose to 5.2% in July after remaining at 5% for the previous three months. On a more positive note, retail sales rose, which increased at a 2.7% annualized rate in July, up from 2% in June, marking the 18th consecutive month of retail sales growth. Overall, the latest data paints a complex picture of China’s economic trajectory, heightening concerns and calling into question the strength of the country’s economic recovery.

The Australian dollar climbed above $0.66, resuming its recent rally as investors reacted to mixed reports on the country’s economy. A private survey showed that expectations for consumer inflation in Australia rose to 4.5% in August from 4.3% in July, the highest since April. Meanwhile, the country’s unemployment rate unexpectedly rose to 4.2% in July, the highest in two and a half years.

USD index 102.59 +0.03 (+0.03%)