Global Markets Diverge as U.S. Inflation Surge
(MENAFN) Global markets showed mixed reactions Tuesday following a spike in US inflation driven by tariffs, while uncertainty lingers over the Federal Reserve’s next moves amid a cautious stance.
The US Consumer Price Index (CPI) increased by 0.3% in June month-over-month, aligning with forecasts, but annual inflation surged 2.7%, surpassing expectations. This monthly rise marks the highest since January, and the yearly gain is the largest since February.
Core CPI, which excludes volatile energy and food prices, edged up 0.2% monthly and 2.9% yearly in June, trailing slightly behind analysts’ estimates of 0.3% and 3%, respectively. May’s core inflation had shown a 0.1% monthly and 2.8% yearly rise.
Market experts suggest the Fed may postpone interest rate cuts amid tariff-induced inflation risks, awaiting clearer signals from inflation trends and labor market data. Although the odds of a September rate cut have diminished, markets still price in two potential rate reductions overall.
Investor focus now shifts to the upcoming Producer Price Index (PPI) report for additional insight into inflation dynamics.
Political pressures are mounting as President Donald Trump urges the Fed to slash rates, claiming a 3-point cut could save the US $1 trillion annually. Trump also hinted that Treasury Secretary Scott Bessent could replace Fed Chair Jerome Powell.
Federal Reserve officials maintain a guarded approach, expecting tariffs to drive inflation higher through the second half of the year, potentially pushing core inflation to 3% by year-end.
Meanwhile, the 10-Year US Treasury yield climbed to 4.49%, reflecting inflation concerns, while the US Dollar Index rose to 98.6 amid bets on continued Fed caution.
The strengthening dollar weighed on gold prices, which dropped 0.6% Tuesday to $3,325 per ounce before rebounding slightly to close at $3,337. Brent crude oil prices edged up 0.1% to $68.40 per barrel.
In corporate earnings, major US banks released second-quarter results. JPMorgan Chase saw net profits fall 17%, with shares dropping about 1%. Wells Fargo posted a 0.6% profit increase, but shares declined 5.5%. Citigroup’s profits rose 25%, accompanied by nearly a 4% boost in its stock price.
Nvidia’s shares surged 4% after the US government confirmed export licenses, enabling the company to continue selling its H20 AI chips in China. This gain helped lift the Nasdaq index.
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