Macro Wrap

US equities whipsawed on conflicting headlines about Powell’s fate as Fed chair before closing modestly higher after President Trump said he has no plans to fire Powell. The DJIA, the S&P500, and the Nasdaq Composite Index rose 0.5%, 0.3%, and 0.3% respectively. The Eurostoxx 50 fell 1.1%. The Dollar Index fell 0.2% to 98.39 and EUR-USD rose 40 pips to 1.1640. The US 2Y yield fell 5bp to 3.89% and the 10Y yield dipped 3bp to 4.46%. The German 10Y yield fell 2bp to 2.69% while the UK 10Y yield edged up 1bp to 4.64%. Brent crude oil prices fell 0.3% to USD68.52 while gold rose 0.7% to USD3,347

US producer price index (PPI) was unchanged from a month earlier in Jun from an upwardly revised 0.3% gain in May. On a y/y basis, producer prices rose 2.3%, the least since Sep. The benign print suggests limited passthrough of higher US tariffs by manufacturers to their clients so far. Overall neutral to negative to USD.

UK's June's inflation came in a shade higher than expected, accelerating to 3.6% y/y for headline and 3.7% y/y for core (May: +3.4% y/y and +3.5% y/y). Prices on a monthly basis also unexpectedly picked up to +0.3% from +0.2% m/m previously, with transport costs, particularly motor fuels, making the largest upward contribution to inflation, and more than offset the downward pressure from housing & household services, particularly owner occupiers' housing costs. Sentimentally negative GBP.

Economic calendar – Eurozone: CPI, UK: Jobless claims, Unemployment, US: Retail sales, Initial jobless claims, Philadelphia Fed factory index, Business inventories. US retail sales will be of focus today as investors assess the effects of Trump’s tariffs on consumer spending. After an outsized -0.9% drop in May.