Daily Market Comment – Inflation slowdown knocks US dollar, sends stocks flying
- US inflation slows by more than expected, traders unwind rate hike bets
- Dollar retreats, stock markets party, but bonds and gold not buying it
- Disney reports decent earnings, producer price data coming up next
The bond market sided with them. Yields at the long end of the curve quickly recouped all their losses to trade even higher despite a solid 10-year Treasury auction, amid a realization that inflation is still running at more than four times the Fed’s target. In turn, this dynamic took its toll on gold. With long-dated yields completely shrugging off the softer CPI readings and then some, the force of gravity saw gold erase its initial gains to close the session in the red.There is a conflict of narratives playing out in different asset classes, with forex and equities hailing this dataset as the beginning of the end in the inflation battle, whereas bonds and precious metals are not really buying it. Producer prices coming upAs for today, the spotlight will turn to the latest batch of producer prices from the US, which will help calibrate market expectations around how inflation will evolve in the coming months. Commodity prices continued to retreat in July while supply chains healed, and the PPI is expected to reflect those improvements. In corporate news, Disney shares are up almost 8% in pre-market trading after the entertainment conglomerate reported earnings that blew estimates out of the water across every metric. Most importantly, the streaming service continues to add subscribers at an impressive speed, fueling hopes that Disney will be among the last companies standing in the streaming war. Finally in geopolitics, the latest reports suggest that China’s recent military muscle-flexing around Taiwan is leading the White House to reconsider earlier plans to lift some of the Trump-era tariffs imposed on Beijing.
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