Market Report.
📈 Last Friday, PCE inflation data was released, the indicator most closely followed by the Fed to measure inflation.
📉 Although the reading is in line with expectations, it remains above the 2% ceiling set by the Fed. It therefore continues to be an obstacle to proceeding with rate cuts.
📉 On the other hand, annualised PCE has been fluctuating around 2.5% since 2024, so the current YoY PCE of 2.6% does not clearly indicate that Trump’s tariffs are causing inflation. In fact, the PCE reading published in March was higher, coming in at 2.7% above expectations.
🎉 There will not be much activity on Wall Street today, only futures are open due to the holiday, Labor Day.
🇨🇳 Chinese markets remained well-supported by optimism over its homegrown AI ventures. Hong Kong shares of Alibaba jumped nearly 19% on optimism over its cloud business, and there were reports of Huawei chips being used for AI model training.
⚖️ A federal appeals court ruled that most of President Trump’s global tariffs are illegal, dealing a major blow to the core of his aggressive trade policy. The court said the Constitution vests the power to impose tariffs exclusively in the legislative branch, not the president, challenged tariffs, including those on Canada, Mexico and China, exceeded Trump’s authority under the International Emergency Economic Powers Act (IEEPA).
🚨 The Trump administration argued IEEPA empowered the president to impose country-specific tariffs, but the court rejected that stance.
⏳ The ruling pauses the decision from taking effect until October 14, giving the Trump administration time to appeal to the Supreme Court. President Trump attacked the appeals court as “Highly Partisan” and asserted the Supreme Court will rule in his favor, claiming the decision would “literally destroy the United States of America” if allowed to stand.
🇨🇳 China and the EU must be celebrating the ruling. More importantly, China, which is still moving forward with a more concrete trade agreement with the US, could pause its trade ‘concessions’ to the US while waiting to see how the legal dispute over tariffs in the US is resolved.
📅 This week we will have the US employment report. One of the crucial pieces of data for determining the Fed’s monetary policy.
📰 Let’s remember that, at the beginning of last month, President Trump fired the Bureau of Labor Statistics (BLS) Commissioner Erika McEntarfer, hours after the agency reported that job growth in the U.S. had slowed to a near-halt. Trump accused McEntarfer, a Biden appointee, of manipulating the jobs data to try and boost Vice President Kamala Harris’ chances of victory before the election.
📊 Trump and congressional Republicans have repeatedly criticized the BLS over the years for its data collection and large revisions to economic reports. Trump’s firing of the BLS Commissioner over unfavorable jobs data is seen as an unprecedented attack on the independence and integrity of the federal statistical system.
🌏 This weekend, the international summit of countries was held in China. Modi and Xi met on the sidelines of the Shanghai Cooperation Organisation summit, in a show of solidarity among the “Global South” nations.
🤝 India and China have agreed that they are “development partners, not rivals” as Prime Minister Modi and President Xi discussed ways to improve trade ties amid global tariff uncertainty. The leaders agreed to focus on viewing each other as partners rather than rivals, and discussed reducing India’s large trade deficit with China.
🕊️ They emphasized the need to maintain peace and stability at their disputed Himalayan border, after a 2020 clash that triggered a military standoff. Direct flights between the two countries, suspended since 2020, are being resumed, and China has agreed to lift export curbs on some goods to India.
📉 Concerns about rising output and the impact of U.S. tariffs on demand offset supply disruptions from intensified Russia-Ukraine airstrikes. However, Russian oil exports to India are set to rise in September, despite U.S. secondary tariffs imposed on India for buying Russian oil. A Reuters poll showed oil prices are unlikely to gain much traction this year, as rising output from top producers adds to the risk of a surplus, and U.S. tariff threats weigh on demand growth.
🏭 Factory activity data from major Asian economies like China, Japan and South Korea showed weakening manufacturing, clouding the outlook for the region’s recovery. The upcoming OPEC+ meeting on September 7 will bring further supply cues, as U.S. crude oil production hit a record high in June.
📉 The chief executive of Russia’s Rosneft, Igor Sechin, has indicated unease with the OPEC+ strategy to speed up production hikes, stating that it has led to a more than 68% drop in Rosneft’s net income in the first half of the year. Sechin said Rosneft’s net income sank to 245 billion roubles ($3 billion) in the first half, due to weak oil prices that were dragged down by production hikes from Saudi Arabia and other OPEC states.
🤔 Sechin, a long-standing ally of President Putin, is known to be skeptical about cooperation with OPEC. He has previously criticized OPEC’s production cuts for spurring a rise in U.S. oil output. Industry sources have indicated that Russia had voiced concerns at OPEC+ meetings about the faster-than-planned output hikes, though it eventually supported the moves.
🏦 He also repeated his criticism of Russia’s central bank’s hawkish monetary policy, which he said has supported a strong rouble, further impacting Rosneft’s earnings.
Market View.
📉 Calm in the markets is observed considering today’s holiday on Wall Street. The futures of the S&P 500 and stock indices closed lower last week. The main burden falls on the technology sector due to various issues discussed in previous reports and heightened intervention from the Trump administration.
📊 The S&P 500 futures currently stand at 6465 points, while the other stock indices are at 23,430 points.
📈 The dollar index rose slightly on Friday with inflation data, which aligned with expectations, bringing the average for the past year. The financial press has characterised this data as indicating that inflation is increasing in the United States; however, this is not true, and in fact, the reaction of the dollar supports this view. The DXY dollar index has fallen below 98 points and is now at 97.60, a movement contrary to an inflationary scenario.
📈 Pairs such as the EUR/USD have experienced bullish development as a consequence, with this pair now above 1.17, currently trading at 1.1730.
📉 European markets have also weakened following the declines on Wall Street. The DAX 40 futures are trying to reclaim the 24,000-point mark, but there is a risk of strong bearish movements during this session and the next, currently trading at 24,030 points. The Eurostoxx 50, on the other hand, shows a bit more resilience but has also suffered declines, currently sitting at 5,375 points.
🌐 Crude oil continues to fluctuate amid internal conflicts among OPEC producers, with Brent crude approaching $68, currently trading at $67.60.
🏅 Gold has reached a historic high, breaking through $3,500, soaring to $3,555 in futures contracts. The decline of the dollar, the perception of an imminent interest rate cut in the United States this month, the increase in geopolitical tensions, and bullish forecasts on gold published by JP Morgan may be playing a crucial role.
📉 Finally, Bitcoin has lost its most recent support levels, falling below $111,000 and reaching $108,150.
