Global inflationary pressures continue to ease. The RBA will have a new governor

By JustMarkets

At yesterday’s stock market close, the Dow Jones Index (US30) increased by 0.14%, while the S&P 500 Index (US500) added 0.85%. The NASDAQ Technology Index (US100) closed positive by 1.58% on Thursday.

Factory inflation (PPI) in the US declined over the past month, another sign that overall inflationary pressures are cooling. But the labor market remains resilient, and this could be a trigger for the US Fed to raise rates even higher. The US jobless claims fell by 12,000 to 237,000 over the past week.

Federal Reserve Bank of San Francisco President Mary Daly said it was too early for policymakers to say they had done enough to bring US inflation back to target levels. The policymaker added that although the consumer price data released on Wednesday was “very positive,” she would take a “wait-and-see stance” as the Fed remains firmly committed to bringing inflation down to 2%.

Federal Reserve Bank of St. Louis President James Bullard, an influential US Fed official who called for aggressive interest rate hikes to combat the recent spike in inflation, has stepped down after 15 years in office. Bullard, 62, will step down completely on August 14 to become dean of the School of Business.

Equity markets in Europe were mostly up yesterday. Germany’s DAX (DE30) increased by 0.74%, France’s CAC 40 (FR40) gained 0.52%, Spain’s IBEX 35 (ES35) added 0.33%, and the UK’s FTSE 100 (UK100) closed up by 0.32%.

The ECB’s monetary policy report from its June meeting confirmed that the ECB still believes policy tightening is necessary. As a result, another 25bp rate hike in July is a done deal. For the ECB to stop after that, it needs to see a further improvement in inflation dynamics, a transmission of monetary tightening to the real economy, including the labor market, and a downward revision of inflation forecasts. Committee officials do not consider a decline in inflation to be a sufficient condition for ending the tightening cycle if a robust labor market and strong wage growth prevail at the same time.

Oil prices rose in Asian trading on Friday and traded near 10-week highs on prospects of supply cuts amid disruptions in Libya and Nigeria. Oil markets rose sharply this week, following a decline in the dollar, as softer-than-expected US inflation data spurred bets that the Federal Reserve is close to peaking interest rates. In addition, the Organization of the Petroleum Exporting Countries (OPEC) highlighted rising global oil demand in 2023 in its monthly report released on Thursday.

Asian markets traded higher on Thursday. Japan’s Nikkei 225 (JP225) increased by 1.00% for the day yesterday, China’s FTSE China A50 (CHA50) jumped by 1.58%, Hong Kong’s Hang Seng (HK50) was up by 2.81%, and Australia’s S&P/ASX 200 (AU200) closed positive by 1.08%. On Friday, most Asian stocks continued to rise, ending a positive week amid signs of slowing inflation in the US. Hong Kong’s Hang Seng Index had its best weekly performance, rising nearly 6% as big tech stocks benefited from bets that the Chinese government will loosen its grip on the country’s largest internet companies.

Singapore’s economy grew slightly more than expected in the second quarter. GDP grew by 0.3% in the latest quarter, with Singapore avoiding a technical recession after GDP contracted by 0.4% last quarter. Singapore’s export sector is suffering badly due to slowing demand in China, a major trading partner.

Philip Lowe will not be reappointed as governor of the Reserve Bank of Australia (RBA). Michelle Bullock will take over as RBA governor in September. Ms. Bullock has been deputy governor of the bank since April 2022, having served since 1985.

S&P 500 (F)(US500) 4,510.04 +37.88 (+0.85%)

Dow Jones (US30) 34,395.14 +47.71 (+0.14%)

DAX (DE40)  16,141.03 +118.03 (+0.74%)

FTSE 100 (UK100) 7,440.21 +24.10 (+0.32%)

USD Index  99.43 −0.85 (−0.85%)

• – US FOMC Member Waller Speaks at 01:45 (GMT+3);
• – Japan Industrial Production (m/m) at 07:30 (GMT+3);
• – Switzerland Producer Price Index (m/m) at 09:30 (GMT+3);
• – Eurozone Trade Balance (m/m) at 12:00 (GMT+3);
• – US Michigan Consumer Sentiment (m/m) at 17:00 (GMT+3).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.