US PPI and jobless claims in focus

Mainland European indices are leading the way higher, with the FTSE 100 lagging behind despite a raft of better-than-expected data out of the UK. The US administration continues to put pressure on the Fed, with Trump calling for rates to be slashed to 1% while Scott Bessant has announced that there are 11 candidates for the Chair role. Could we see a period where each of those 11 candidates compete to show they are the most dovish critical of Powell. With US earnings season largely complete (>90% reported), trade fears abating, and the Fed entering a more dovish phase, it comes as no surprise to see equity markets in good shape.

This morning brought a raft of economic data out of the UK, with a welcome 0.4% bounce in monthly GDP pushing back on the negativity that has dominated the narrative of late. Coming off the back of two negative monthly readings, the rebound for June has helped lift hopes that the black hole in the public finances could be smaller than the £50bn speculated by the NIESR. However, while we have seen stronger monthly GDP, industrial production, and exports data, it is worthwhile noting that the 0.3% Q2 growth figure is a marked slowdown from the 0.7% seem in the first quarter. From a market perspective, todays data has helped ease the pressure on the BoE which is now essentially 50/50 for another rate cut this year.

Looking ahead, US inflation comes back into focus with PPI factory prices providing yet another look into the effects of Trump’s trade policy. Thus far we have seen little impact of tariffs on the PPI input cost prices, although that could be a case of businesses simply drawing down on stockpiles thus far. Meanwhile, traders will be keeping a close eye out for the latest jobless claims data, with the recent NFP revisions highlighting the potential narrative around a weakening jobs market. Notably, last week saw the highest continuing jobless claims figure since November 2021, and thus another push higher could provide a timely reminder that the Fed need to act before things get any worse.