5 Things You Need to Know to Start Your Day: Americas

Good morning. Investors await US CPI, the dollar weakens to the lowest since January against the euro and UK inflation gives the Bank of Eng [View in browser]( [Bloomberg]( Good morning. Investors await US CPI, the dollar weakens to the lowest since January against the euro and UK inflation gives the Bank of England a boost. Here’s what traders are talking about. — [David Goodman]( Want to receive this newsletter in Spanish? [Sign up to get the Five Things: Spanish Edition newsletter](. CPI day It’s CPI day in the US. Forecasters[ expect a modest 0.2% increase]( both the consumer price index and the core gauge excluding food and energy — which would mark the smallest three-month rise for the latter since early 2021. That would leave the headline rate unchanged at 3%. Fed path The big question for bond traders is whether the data[ reinforces the case for a faster pace of Federal Reserve interest-rate cuts.]( Traders are split on whether the central bank will opt for a quarter- or half-point reduction in September, with swaps pricing in 36 basis points of easing. In all, they see about one percentage point worth of cuts in the remaining months of 2024. Dollar drops The euro rose to its strongest level against the dollar since January ahead of the data, surpassing $1.10. US futures[were steady]( following a 1.7% rally in the S&P 500 on Tuesday that was fueled by cooler-than-forecast US producer price data. European stocks tracked an advance from Asia. UK inflation The UK released its own inflation report today and the[numbers were better than expected.]( Headline inflation rose to a lower-than-expected 2.2%, while a troublesome services gauge slipped the most in a year. The data sent the pound lower and prompted investors to beef up bets that the Bank of England will lower borrowing costs twice more this year. UBS beat UBS led gains in European [financial services stocks]( the bank’s second-quarter profit beat estimates thanks to strong client inflows and investment banking revenue. Meanwhile, miners dropped as iron ore slumped to the lowest since May 2023.  [China Baowu Steel Group Corp]( the world’s largest steel company, said the sector in China is facing[a crisis more serious than the downturns of 2008 and 2015.]( What we’ve been reading This is what’s caught our eye over the past 24 hours. - rises as Japan Prime Minister Kishida [says he will step down.]( - [Secretive dynasty missed out on billions]( advisers got rich - AstraZeneca’s market value [soars past £200 billion](. - Norway $1.7 trillion fund [returns 8.6%]( on tech stock surge. - US considers a rare antitrust move: [Breaking up Google](. And finally, here’s what Joe’s interested in this morning Good morning and happy CPI day. For years, CPI day was *the* big data point of the month due to the obsession with defeating inflation. But things have changed a bit. CPI is still a big deal obviously, but we’re now in a world where markets are hyper-focused on the labor market. So much so that last Thursday the S&P 500 surged over 2% after a benign Initial Jobless Claims report. The inflation data is obviously still important, especially when Fed officials continue to say things like “waning more confidence” or “needing to see more data” before being ready to start cutting rates. So while we wait, a few quick notes in no particular order: - Consensus is for a 0.2% increase in both headline and core. - Yesterday’s PPI was cool, with the ex-food and energy coming in at 0.0% vs. the 0.2% expected. - As I wrote yesterday, the NY Fed’s latest Survey of Consumer Expectations showed the public’s outlook for inflation continuing to fall, with the [3-year outlook]( actually at its lowest level in over a decade. - This morning we got UK CPI, which came in at -0.2% MoM vs. expectations of -0.1%. I think it makes sense to look at the data from other countries to get a better grasp on our own situation since inflation has been a global phenomenon. Yes, the timing and magnitude of the inflation shock varied from one country to another. But there’s clearly been a huge global component to the shock. To see ongoing cooling elsewhere indicates that the general disinflation story is intact. - Meanwhile, markets are pricing in a coinflip for the September meeting between a 25 and 50 bps cut. This is a far cry from where we were in the middle of that crazy selloff at the beginning of last week when traders were pricing in an emergency inter-meeting cut. - Fed speak over the last week has been generally cautious. Nobody we’ve heard from has expressed any real urgency about a rapid pivot from the existing path. Yet obviously stocks haven’t minded. After yesterday’s big rally, the S&P is back to where it was prior to the July 31 Fed decision. Joe Weisenthal is the co-host of Bloomberg’s Odd Lots podcast. Follow him on X [@TheStalwart]( Like Bloomberg's Five Things? [Subscribe for unlimited access]( to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. 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