This morning’s economic releases are stronger than expected on several fronts, which is generating confusion among market participants ahead of pivotal monetary policy announcements out of Tokyo and Washington. In the US, job openings and consumer confidence beat projections, developments that coincide with a firmer-than-anticipated economic recovery in Europe. Rate watchers are responding by carefully scaling back the probabilities of imminent US and EU cuts amidst the troublesome reality that price pressures could once again accelerate. This risk is especially pronounced against the backdrop of what’s been a bumpy ride for disinflation. Emblematic of this fact are reports this morning pointing to inflation picking up steam in Berlin but decelerating in Madrid.

Bond Bulls Swallow Bitter JOLTS Pill
The number of businesses posting help wanted signs declined just marginally last month, issuing a blow to bond bulls who are looking for supporting evidence of a September reduction from the Fed. Job openings declined to 8.18 million, beneath an upwardly revised 8.23 million in the previous period but above the median estimate of 8 million. Quits declined, however, pointing to existing workers feeling increasingly pessimistic about replacing their current paychecks elsewhere. Continuing unemployment claims are reflecting the same dynamic, as jobless folks are taking longer to secure labor opportunities. Past performance is not indicative of future results

Jobs Weigh Upon Consumer Sentiment
Softer employment conditions were also a dominant theme in this morning’s consumer confidence print, with folks feeling the worst about current labor opportunities since March 2021. Still, people are feeling slightly better than they did last month on the back of improved expectations for the future. The Conference Board’s headline figure rose to 100.3, better than the awaited 99.7 and June’s downwardly adjusted 97.8. Sentiments shifted in a bifurcated way, however, with the Present Situation Index slipping from 135.3 to 133.6 while the Expectations Index climbed from 72.8 to 78.2 during the period. Overall, households are still suffering from the familiar headwinds of elevated prices and tall interest rates, but worsening job security is the newest development weighing on families. Also hurting consumer psyche are uncertainty about November’s presidential election, a fresh 12-year low in home purchasing plans and deteriorating discretionary budgets. Past performance is not indicative of future results

Europe GDP Beats Expectations
Across the Atlantic in Europe, second-quarter economic growth expanded at the same pace as the previous period. The European Union’s Gross Domestic Product (GDP) release pointed to a 0.3% gain in activity, which was better than the 0.2% projection. Strong momentum in Paris and Madrid neutralized an unexpected 0.1% contraction in Berlin, the region’s largest economy. Past performance is not indicative of future results

Digital Transactions and Home Product Sales Point to Healthy Consumers
Digital payment volumes and sales of home products imply that consumers are resilient, although at least one airline has experienced a revenue decline. These are a few observations from the following earnings highlights:  

Stocks Reverse on Profit-Taking
Market participants used this morning’s equity gains as an opportunity to unload stocks in the afternoon ahead of pivotal announcements from the Fed and Bank of Japan (BoJ) tomorrow as well as four of the Mag7 reporting this week. Stocks have plunged into the red with the Nasdaq Composite and S&P 500 benchmarks down 1.4% and 0.7%. The Dow Jones Industrial and Russell 2000 baskets are struggling to hold on, but are bucking the trend for now; they’re both up 0.1%. Sectoral split is negative with six out of eleven segments south on the session. Technology, consumer staples and consumer discretionary are taking the most pain, with the categories lower by 2.4%, 0.9% and 0.8%. Financials, energy and real estate are piloting the bulls, sporting gains of 1%, 0.7% and 0.3%. Treasurys and the dollar are relatively steady, however, as they await clues and commentaries from central bankers. The 2- and 10-year maturities are changing hands at 4.38% and 4.17% while the dollar appreciates relative to the euro, pound sterling and Aussie and Canadian dollars but depreciates versus the franc, yuan and yen. Commodities are taking a beating, with crude oil, copper and lumber down 1.7%, 0.8% and 0.6%. Silver and gold are trying to offset some of the bearishness with little success; they’re up by 0.3% and 0.1%. WTI crude is trading at $74.61 on worries that Beijing, the world’s largest energy importer, may fall into a recession this year. This Chinese headwind is countering supply concerns stemming from escalating geopolitical tensions between Israel and the Tehran-backed Hezbollah militia.

Investors Shift Focus to Central Banks and AI
This week’s events are critical as we approach the weakest seasonal period for equity investors. A stacked economic calendar is lined up with big-tech earnings and central bank decisions. In Tokyo, traders will look for the BoJ to likely continue tightening policy, increasing the potential for a stronger yen and an unwinding of stock holdings. In Washington, market participants are hoping the Fed is sensitive to the risk in today’s erratic consumer behavior amidst a turn in labor market conditions. Big-tech earnings are also significant, with artificial intelligence (AI) optimism serving as the number one catalyst to this year’s stock market rally. Bullish players will be aiming for a bright picture on the future of AI in Mag7 earnings calls while bears wish that firms allude to AI delivering to the bottom line years from now, rather than right now.More By This Author:Trump Trade Rallies On Ahead Of A Big Week: Fed, BoJ, Jobs
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