Equity futures are up this morning and bond yields fell after the latest inflation reading gave investors confidence that the Fed will be able to cut rates in September. The Fed’s preferred inflation measure, the core personal consumption expenditures price index, rose 0.2% in June, and 2.6% year-over-year. This mild pace, coupled with a 0.2% rise in inflation-adjusted consumer spending, suggests the Fed’s efforts to control inflation are working without significantly harming the economy (just look at yesterday’s GDP print). These latest economic prints are encouraging signs for officials seeking to manage inflation while sustaining economic stability.
The yen’s recent rally is impacting global markets, leading to a rise in the yuan and declines in Japanese stocks, gold, and Bitcoin as investors reassess their leveraged positions. The shift is driven by increasing expectations that Japan-US interest rate spreads will narrow, partly due to stronger-than-expected U.S. GDP data and potential rate cuts by the Fed. The yen’s strength, fueled in part by the unwinding of carry trades, is causing widespread liquidation across markets and increasing volatility. Focus is now on the upcoming Bank of Japan meeting, with a high chance of a rate hike, potentially influencing market dynamics further.
Recent company earnings have highlighted the impact rising costs have had on sales across various industries, including food, cars, and luxury goods. Companies like Nestle, Unilever, Stellantis, and Whirlpool have reported lower revenues and profits as consumers cut back on spending and seek value. This trend affects both everyday items and big-ticket purchases, with major retailers and automakers experiencing drops in sales and revising their earnings forecasts downward. The luxury sector, including brands like LVMH, is also feeling the impact, particularly in China, where high-end consumption has cooled. Airlines and e-commerce are similarly struggling with reduced demand and lower-value purchases, contributing to a challenging economic environment for businesses worldwide.
Emerging-market stocks fell to a five-week low as China’s second monetary-easing move this week failed to alleviate concerns about the country’s economic slowdown. The MSCI benchmark for EM equities declined for the ninth time in ten days, heading for its first monthly drop since January, driven largely by losses in Chinese stocks amid skepticism about the effectiveness of stimulus measures. China’s economic challenges persist with sluggish consumer demand and limited impact from stimulus measures, leading to outflows from U.S. ETFs investing in Chinese stocks. Global concerns around AI and political risks, including the upcoming U.S. presidential elections, also added to market volatility.
Uncertainty about when and how much the federal government will reduce temporary residents is complicating Canada’s fiscal and monetary policy. The Bank of Canada raised its population growth forecasts to 3.3% this year, expecting a slower deceleration than previously anticipated, due to delays in limiting non-permanent resident inflows. This has potential implications for economic growth, inflation, and tax revenues. The uncertainty is expected to impact the BoC’s interest rate decisions and cast doubt on fiscal targets, including the budgetary deficit and debt levels, especially with additional unbudgeted expenditures like increased defense spending.
Value meal launches by McDonald’s and other fast-food chains will be under scrutiny as U.S. restaurants report their quarterly results in the coming weeks. Chains like McDonald’s, Burger King, and Wendy’s introduced value meals to attract customers amid rising menu prices. Analysts are interested in how consumers responded to these discounts and the duration necessary to boost traffic. Recent value meal initiatives include McDonald’s $5 value meal, Burger King’s $5 “Your Way Meal,” and Wendy’s $3 breakfast deal, but their long-term effectiveness remains uncertain. Foot traffic data shows only modest increases for these chains. McDonald’s is anticipated to report a profit decline and slower same-store sales growth, while Wendy’s and Burger King are also expected to show deceleration in their upcoming reports.
Devastating wildfires have engulfed Canada’s iconic town of Jasper. Parks Canada has not been able to assess the full extent of the destruction and loss of businesses, homes, and historic buildings as ongoing efforts to contain the fires continue. Hundreds of firefighters from Canada and beyond have descended on the town, looking to contain what they can for now. Some rain tonight is supposed to offer a respite, however warmer temperatures over the weekend are expected to return. Video and pictures circulating will be heartbreaking to see, especially If you are one of the fortunate ones to have experienced the absolute beauty of Jasper.
The opening ceremony for the 2024 Olympics held in Paris will begin at 1:30 pm ET. Exactly 100 years ago, Paris last hosted the Olympics and according to Olympics.com, the games included 126 trials in 17 sports, 135 of the 3,089 athletes were women, and 44 countries on all continents were represented. Today, there are 32 sports in the Olympic programme (28 returning, 4 new), 329 medal events, and over 10,000 athletes from the territories of 206 National Olympic committees will compete, half of which will be women, a first for the Olympic games. Two gold medalists will be Canada’s flag bearers; decorated sprinter Andre De Grasse, and weightlifting champion Maude Charron. There is a rumour that Celine Dion and Lady Gaga will perform and Snoop Dogg will be one of the final torchbearers? Go Canada!
Diversion: Don’t know how to break it to him.
