US PPI inflation and bank earnings in play today

An upbeat start to the day in Europe has seen the FTSE 100, CAC, Ibex, and EURO STOXX 50 all high fresh record highs, coming off the back of a softer than expected inflation gauge out of the US yesterday. In a week that has been dominated by talk of US instability as Trump and the DoJ attempt to push out Powell for essentially not cutting fast enough, we are seeing a shift in sentiment that could see European and Asian equities gain ground on their US counterparts. From a UK perspective, we are already seeing talk of yet another black hole in the public finances, with the MoD warnings of a £28bn budget deficit that needs to be funded over the coming four-years. Question marks over whether this will come to fruition could take some of the froth out of stocks such as BAE Systems and Rolls-Royce. Nonetheless, for the FTSE 100, the focus has been on the commodities space, with the likes of Fresnillo, Glencore, Rio Tinto, and Antofagasta gaining ground.

While we have seen US inflation remain relatively stable under Trump thus far, that narrative could start to change if the surge in commodity prices start to put pressure on companies reliant on the likes of gold, silver, copper, lithium, platinum, tin, nickel, rhodium, and palladium. In a world where Trump has reiterated the need for everyone to look after themselves, it comes as no surprise to see countries and businesses stockpile key commodities to hedge future price rises and avoid being caught short in a supply squeeze. In a world that faces a surge in defence spending, huge AI buildouts, an energy transition, strategic stockpiling, and rising fiscal expansion, the rise in prices for these strategic commodities shows precious little sign of slowing given the lack of any immediate rise in supply.

Today sees US inflation back in view, following yesterday’s CPI gauge that saw both headline and core CPI flatline. With concerns growing around the cost of inputs for manufacturers, today’s PPI inflation gauge will be of particular interest for traders. Nonetheless, with US inflation seemingly under control for now, the Fed will have to increasingly focus on the full employment part of their mandate, with the ongoing weakness in the jobs market highlighting the need to ease further. Meanwhile, the US banks are back in the limelight following yesterday’s JP Morgan Chase release that saw the stock fall 4% despite beating on the top and bottom line. It is the turn of Bank of America, Wells Fargo and Citigroup today, with many watching for a follow up on Jamie Dimon’s criticism of the attack on Powell and the Trump’s 10% credit card interest rate cap.