💸 TL;DR

US inflation fell more than expected in June, with stocks rallying as tech companies gained. UK bank stocks also rose after passing stress tests. The UK Pound strengthened due to diverging inflation between the UK and US and Gold prices surged as US Treasury yields eased.

📰 What’s moving markets?

• US CPI eased further in June with Headline CPI at 3.0% (estimate: 3.1%) and core CPI at 4.8% (estimate: 5.0%)

• Stocks rallied on the news with tech companies being among the top gainers as investors suggest the end of the Fed’s hiking cycle is in sight. The Nasdaq 100 was up 1.24% yesterday while the S&P 500 was up 0.74%. Europe also traded higher on the news of weak US inflation with the FTSE 100 gaining 1.83% and EuroStoxx 50 +1.72%.

• UK Bank stocks rallied after passing the annual BoE stress test, and have been further bolstered by the prospect of higher rates in the UK which can improve bank profitability. Lloyds was up 2.62% and Barclays was up 3.30% yesterday.

• The UK Pound has strengthened as inflation diverges between the UK and the US implying that the BoE might have to hike rates significantly more than the Fed. GBPUSD has broken past the $1.30 barrier.

• The Nasdaq rebalance will cause Tesla's weight in the index to decrease from 4.5% to 2.8%, while Meta's weight will increase from 4.2% to 5.1%.

• Gold, which does not pay a yield, has shot up in price to the highest levels since June, now trading at 1,957 as the yields on US Treasuries have eased, making gold a comparatively less costly investment. US 2yr Treasury currently pays 4.72% yield.

📊 Chart of the day

Short interest is on the rise, reaching 1.8% of the total S&P 500 market cap.

S&P 500 short interest as a % of S&P 500 market cap

📅 Coming up this week

Monday 10th July

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Tuesday 11th July

• UK Average Earnings (including bonuses) expected: 6.80%, last: 6.40%, actual: 6.90%

• UK Unemployment Rate expected: 3.80%, last: 3.80%, actual: 4.00%

• Germany Headline CPI (YoY) expected: 6.40%, last 6.10%, actual: 6.40%

• Japan PPI Inflation (YoY) expected: 4.30%, last 5.10%, actual: 5.1%

Wednesday 12th July

• US Headline CPI (YoY) expected: 3.10%, last: 4.00%, actual: 3.00%

• US Core CPI (YoY) expected: 5.00%, last: 5.30%, actual: 4.80%

• Bank of Canada Interest Rate Decision expected: 5.00%, last: 4.75%, actual: 5.00%

Thursday 13th July

• UK GDP (MoM) expected: -0.40%, last: 0.20%

• France Headline CPI (YoY) expected: 4.50%, last 5.10%

• US PPI Inflation (YoY) expected: 0.40%, last 1.10%

• US Initial Jobless Claims expected: 249k, last 248k

• South Africa Gold Production (YoY) expected: -1.10%, last 27.40%

• South Africa Mining Production (YoY) expected: 3.30%, last 2.30%

• Delta Air Lines Q2 Earnings expected EPS: $2.42

• Pepsico Q2 Earnings expected EPS: $1.95

Friday 14th July

• JP Morgan Q2 Earnings expected EPS: $3.66

• Citi Q2 Earnings expected EPS: $1.45

• United Healthcare Q2 Earnings expected EPS: $2.10

• Wells Fargo Q2 Earnings expected EPS: $1.16

• State Street Q2 Earnings expected EPS: $2.10

📈 The markets at a glance