Equity futures pared earlier gains and are looking to open flat this morning after another U.S. inflation reading came in a slightly higher than expected. All measures of monthly producer prices were more than consensus. PPI for final demand increased by 0.2% m/m and 1.7% y/y. A key driver was a 0.4% rise in service costs, while goods prices remained flat due to a sharp drop in energy costs. Excluding food, energy, and trade, core prices increased by 0.3% for the second consecutive month and 3.3% annually. This follows a similar uptick in consumer prices. Despite the increase, economists are noting that the risks to the economy from cost pressures have fallen in recent months, allowing Fed policymakers to start reducing interest rates next week amid concerns about the labour market. Investors are also digesting the latest jobs data out of the U.S. which showed jobless claims rising for the first time in three weeks, signaling a potential slowdown in hiring. Initial claims for unemployment benefits increased by 2,000 to 230,000 in the week ending September 7, slightly above the forecast of 226,000. Continuing claims, representing the number of people still receiving unemployment benefits, also climbed to 1.85 million for the week ending August 31. This data reflects ongoing challenges in the labour market amid potential shifts in Fed actions.
The ECB has cut interest rates for the second time this year, reducing the deposit rate by 25 bps to 3.5%. This move aligns with market expectations as inflation in the eurozone moves towards the central bank’s 2% target, although economic growth remains sluggish. The ECB also trimmed its forecasts for GDP in 2024, 2025 and 2026 — now seeing expansion this year of 0.8% compared with 0.9% in the last round of quarterly projections. The inflation outlook was broadly unchanged. The ECB highlighted the need for continued data-driven adjustments to monetary policy, with concerns over both inflation and weak economic performance. While further rate cuts are expected, officials remain cautious about the long-term impact on the economy, especially given the eurozone’s ongoing struggles with slow growth and wage pressures.
The UK economy unexpectedly remained stagnant for a second consecutive month in July, with no GDP growth after similar results in June, as declines in production and construction were offset by modest gains in the services sector. The economy, which outperformed its G-7 peers in the first half of 2024, is expected to slow in the second half, with economists forecasting weaker growth. Prime Minister Keir Starmer’s government is relying on economic expansion to address budget gaps and improve living standards. These figures come ahead of the Bank of England’s monetary policy decision next week, where markets expect rates will be kept on hold after the central bank cut rates by 25 bps last month, the first cut since the onset of the pandemic.
A relief for would-be car owners as car prices in Canada continued their decline in August, with used vehicle prices dropping 1.0% from the previous month and 10.4% from the prior year. Compared to their peak in February 2022, used car prices have decreased by 20.2%, though they remain 16.1% higher than in July 2019. New car prices were largely unchanged in July but were down 1.2% year-over-year. Higher inventories have contributed to this price drop, with average transaction prices for new vehicles falling for the 11th consecutive month.
Canadian businesses are experiencing a higher rate of payment fraud compared to consumers, with 20% reporting incidents in the past six months and 15% losing money. Common fraud types include impersonation, intercepted e-transfers, and credit card fraud. Despite these challenges, businesses remain confident in their ability to protect themselves, with 65% of fraud victims receiving reimbursement. Many businesses are implementing protective measures like limiting sensitive information, verifying e-commerce sites, and using two-factor authentication. Staying ahead of the fraudsters will require businesses to continue to adopt advanced technologies and remain collaborative with industry peers.
The U.S. dollar is facing a tough road ahead due to multiple factors, including the upcoming Fed interest rate cuts, the U.S. elections, and rising geopolitical tensions. Currency managers expect heightened volatility, with much of that depending on the Fed’s trajectory and whether the market has correctly priced in rate cuts relative to other major economies. While some expect modest dollar recovery, others anticipate a significant downturn, especially if Fed easing becomes more aggressive. Investors are also focused on broader economic conditions, such as global growth prospects, which will influence the dollar’s future movements.
Must have been quite a view. Earlier this morning, billionaire Jared Isaacman and SpaceX engineer Sarah Gillis made history, performing the world’s first commercial space walk. While outside of the Dragon, the pair conducted a number of tests to check the mobility of the space suits. The Polaris Dawn mission also made history on Tuesday when the SpaceX Dragon capsule reached a peak altitude of 1,400 kilometers (870 miles) above Earth, sending the crew farther than any humans have traveled since the Apollo program that sent astronauts to the moon. Isaacman, 41, CEO and founder of the Shift4 credit card-processing company, has declined to disclose how much he invested in the flight.
Diversion: That’s so embarrassing
