US inflation stays in check, cooling bets on Fed rate hike

Stocks on Wall Street rallied as US consumer prices rose at a slower pace in July, meeting economists’ forecasts and helping cool expectations for a rate hike by the Federal Reserve next month, while oil prices remained steady as the Middle East stalemate continued.

The tech-heavy Nasdaq Composite led gains as strong results from cloud computing firm CoreWeave and server company Super Micro Computer renewed confidence in the artificial intelligence trade, while software giant Salesforce led the Dow Jones Industrial Average higher ahead of its earnings after the bell.

Meanwhile, US President Donald Trump is turning his mind to the upcoming midterm elections, with the White House floating wider exemptions for capital gains taxes, while the Democratic nomination for the Wisconsin governorship unexpectedly went with a moderate.

And New Zealand’s Reserve Bank will release its survey of inflation expectations today, while Vital Healthcare Property Trust is next up in the domestic earnings season and Taiko Critical Minerals holds its annual meeting in Auckland.

Pressure abates

The New Zealand dollar traded at 58.58 US cents at 7am in Auckland from 58.67 cents yesterday after US inflation data met expectations, rising 0.1% in July with the annual pace slowing to 3.4% from 3.5% in June.

“Another benign inflation print, following much weaker-than-expected payrolls data, provided no smoking gun for the Fed to change its tune and tighten policy in September,” Bank of New Zealand senior markets strategist Jason Wong said in a note. “However, August data for both series will be released ahead of that meeting and could still shift the outlook.”

CME Group’s FedWatch tool put a 39.9% chance of the Fed hiking at the September meeting.

Brent crude oil futures edged down to US$88.89 a barrel at 7am as Iran reorganised its military to be more aggressive, as the stalemate with the US dragged on.

Meanwhile, The New York Times reported that Gulf oil giants such as Abu Dhabi’s ADNOC and Saudi Arabia’s Aramco are spending billions of dollars to find ways to bypass the Strait of Hormuz.

The more benign inflation reading fuelled gains on Wall Street, with the S&P 500 rising 0.4% and the Nasdaq gaining 0.7%. The Dow nudged up 0.1%, with Salesforce, Nvidia and Merck & Co among the blue chip index’s leaders.

Cloud-computing firm CoreWeave surged 19% after reporting its fifth quarter of record revenue and a sales backlog of US$104 billion, while server company Super Micro Computer jumped 20% as its sales almost doubled in the June quarter.

Reuters reported that Google co-founder Sergey Brin urged AI staff to push faster on Alphabet’s Gemini model to close the gap with its rivals, which ultimately resulted in the recent shakeup of its DeepMind AI lab’s leadership.

Toronto-listed Constellation Software dropped 5.7% after the investor in software firms reported slower revenue growth than analysts predicted.

Hong Kong-listed Tencent beat forecasts as AI-assisted advertising drove an 11% increase in revenue in the June quarter.

Financial moves

Bank of America advanced as the Wall Street lender said it would buy as much as 49.9% of the non-bank lending arm of India’s Jio Financial Services for US$1.9 billion, joining the likes of Japan’s MUFG and Sumitomo Mitsui Financial Group’s push into the world’s most populous nation.

Goldman Sachs dipped as the investment bank agreed to buy exchange-traded fund platform Neos Investments for US$2.3 billion.

Nikkei Asia reported Japan’s five major online securities firms would let investors trade US-listed stocks through daytime hours as New York prepares to move to 23-hour trading.

Wendy’s jumped 12% on reports that Nelson Peltz’s Trian Fund Management was forming a consortium to take the fast-food chain private.

China’s Londian Wason New Energy Tech was valued at US$2 billion in the biggest IPO of a Chinese company in the US in more than a year, as the stock surged 18% in its debut. The company makes copper foil products used in electric vehicles, 5G communications and consumer electronics.

Across the Atlantic, stock markets declined, with the UK’s FTSE 100 down 0.1%, while Germany’s DAX slipped 0.2% and France’s CAC 40 fell 0.5%.

Norway’s sovereign wealth fund posted a record first-half profit, with gains in the values of Asian tech stocks pushing Norges Bank Investment Management back into positive territory in the June quarter. The fund’s equity investments generated a 16% return in the quarter, compared to a loss of 2.6% in the March period.

Media manoeuvres

Paramount Skydance’s chief legal officer Makan Delrahim told a media conference that the group was exploring all options to resolve the antitrust challenge in California to close its US$110 billion acquisition of Warner Bros Discovery, such as selling CNN or relocating from the state.

US press groups Intercept Media and the Freedom of the Press Foundation have filed a lawsuit against President Trump seeking to prevent him from posting official government information exclusively on Truth Social, which is selling faster access to his posts.

A group led by former Walt Disney Co chief Bob Iger and Joshua Kushner has agreed to buy a controlling stake of the Los Angeles Lakers from billionaire Mark Walter, valuing the franchise at US$12.5 billion.

New York City launched an investigation into marketing practices of prediction market operators Kalshi, Polymarket, Coinbase and Gemini Titan, and wrote letters to the companies asking how they comply with consumer protection laws.

Meanwhile, US President Trump was reported to be considering an increase in capital gains tax exemptions for primary home sales and reducing levies on investments ahead of the upcoming mid-term elections to preserve the Republican party’s majorities in the Senate and House of Representatives.

And Milwaukee County executive David Crowley won the Democratic nomination to run for governor of Wisconsin, upsetting Democratic socialist Francesca Hong, who led in the polls and had the backing of more progressive party members.

Former Chinese premier Zhu Rongji, who oversaw wide-ranging reforms of state-owned companies, has died.

Australian futures are pointing to a 0.2% decline for the S&P/ASX 200 index when trading opens across the Tasman, with earnings due from Insurance Australia Group, the ASX, Treasury Wine Estates, Telstra and Origin Energy.

Greg Boland, Moomoo market strategy consultant, said New Zealand’s S&P/NZX 50 index would likely open flat as the uncertainty over the Strait of Hormuz and elevated oil prices continued to weigh.

“The local market will also continue to focus on rising inflation expectations and the outlook for the Reserve Bank of New Zealand, while today's US PPI data provides another test of the inflation story,” Boland said in a note.

Reporting by Paul McBeth. Image from engin akyurt on Unsplash.