US stocks, Nikkei 225 notch record highs again while FTSE declines

US stocks closed at record highs again, as did the Nikkei 225 index in Tokyo.

European shares dropped on Tuesday, with the FTSE 100 giving up some early gains to finish down 0.7%, a little less than the fall for Europe. Shares this morning are a little firmer, with the FTSE 100 up around a quarter of a percent to 8,172 in early trade. French stocks underperformed in early trade. Real yields came down a bit more to lift gold even as the dollar bounced.  

Oil prices skidded lower for a fourth day ahead of EIA inventories later today.

Fed Chair Powell cautious in testimony to Congress, markets price in September cut

Market attention yesterday was on the Jay Powell testimony to Congress. He said the US economy was no longer overheated and cited the risk of moving too early and too late.  

“Elevated inflation is not the only risk we face,” he told lawmakers in Congress. “Reducing policy restraint too late or too little could unduly weaken economic activity and employment."  

It was a cautious tone from Powell, but the US dollar did firm up a bit as it caught some bid from a three-week low. Markets are pricing in a pretty good chance of an interest rate cut in September and maybe one more by December. Powell continues today, followed by a 10-year Treasury bond auction.  

Labour unveils £7.3bn “national wealth fund”, Dyson cuts 1,000 UK jobs

The Labour Party continued to unravel its economic policy moves in the opening days of the new government – yesterday it was a £7.3bn national wealth fund designed to spur investment. Not to be cynical, but I've seen this kind of thing before, and I am yet to see much evidence it works. And, dare I say, is that it from Labour?

There is only so much you can do without spending – i.e. borrowing – a lot more. Pressure to spend more will come, though maybe not yet.  

Meanwhile, Dyson cut 1,000 UK jobs on the same day. Sterling retreated a bit yesterday after hitting its highest against the dollar in almost a month, but GBPUSD is just about holding onto 1.28. 

RBNZ decision more dovish than expected  

The RBNZ decision was a bit more dovish than thought. The central bank signaled much more confidence that inflation would return to target, teeing up a potential cut before the end of the year.

It seemed in marked contrast to the May decision, where policymakers had made sure to keep an additional rate hike on the table. The kiwi retreated after the hold.

China inflation data mixed

China CPI and PPI inflation data was mixed. Consumer inflation slowed, whilst producer prices slowed at the slowest rate in 16 months.  CPI rose 0.2% vs 0.4% expected, PPI fell 0.8%.  

Japanese PPI rose to 2.9%, though the month-on-month figure was a little below forecast at 0.2%. The yen weakened, edging down towards last week’s four-decade low.  

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