Financial Analyst/Content Writer, RADEX MARKETS
Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.
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The June CPI report was music to the ears of investors on Tuesday, as inflation in the United States cooled even faster than economists had been predicting. The headline year-over-year figure fell to 3.5% from 4.2% in May, while the month-over-month change actually saw prices deflate by 0.4%. The slowdown in inflation was not unexpected, but the extent of the fall has taken markets by surprise. Falling crude oil prices in June were always going to have a positive effect on the latest CPI reading, but crucially, the core inflation rate, which excludes energy prices, also underwent an acute drop, settling to 0% on a monthly basis, while the yearly figure sank from 2.9% down to 2.6%. The dramatic easing of inflation also makes the Federal Reserve’s job a little easier, with interest rate traders now mostly writing off the possibility of a rate hike during the next meeting on the 29th of July. For that matter, the odds of a rate hike happening before the end of the year also decreased, with markets no longer as confident as they were on Monday. Despite the positive signs, Fed Chairman Kevin Warsh made it clear during his congressional testimony yesterday that the central bank remains committed to tackling increasing consumer prices, claiming that the Fed has “no tolerance” for high inflation. The Producer Price Index follows later today, possibly adding another layer of confirmation to the cooling inflation narrative. With that said, crude oil prices are once again on the rise this week, with Brent Crude hitting $85 per barrel while WTI trails behind at $79.
The prospect of lower rates on the dollar played into the hands of precious metals during yesterday’s session, with gold gaining $50 per ounce to reach $4,050 by the daily close, while silver managed to add a dollar to its tally, closing the day at $58.7 per ounce. All well and good, but the big winner on Tuesday was Bitcoin, which shot up to near $65,000 per coin, thereby locking in its highest daily close in the past four weeks. The wider cryptocurrency sphere likewise enjoyed a rare moment in the sun, while being perfectly cognizant of the fact that the Clarity Act bill is once again stalling through the US Senate, as banking groups urge lawmakers to strengthen the provisions relating to stablecoins.
Speaking of banking groups, a number of major US banks reported strong earnings yesterday, translating to equally strong moves for JP Morgan (JPM), Bank of America (BAC) and particularly Goldman Sachs (GS), which rose an impressive 9% after reporting record-breaking quarterly profits. The rise in Goldman Sachs was just enough the cover the calamitous drop in IBM, which plummeted an eye-watering 25% yesterday after the company pre-announced its earnings results. The report did not make for good reading, with revenue falling far below expectations and earnings per share nowhere near estimates. In a statement, CEO Arvind Krishna claimed that customers had turned their spending power towards storage and memory purchases, shunning the mainframe and software products that IBM is known for. All in all, it was a mixed bag for US indices, with the Dow closing flat and the S&P 500 and Nasdaq making minor gains.
About the Author
Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.
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