US megabanks post records as tame inflation cools Fed hike bets

Wall Street was back on the rise with bigger-than-expected dip in consumer prices prompting bond traders to pare back their bets on the Federal Reserve hiking interest rates, while JPMorgan Chase, Goldman Sachs and Bank of America set a strong tone for earnings season as the lenders notched up records in the latest quarter.

Oil prices continued to push higher as the US and Iran continue to trade strikes in the Middle East, while President Donald Trump backed away from charging a 20% levy on vessels passing through the blockaded Strait of Hormuz after pushback from allies in the Gulf.

New York state imposed a one-year moratorium on new data centres in the Empire state amid concerns over rising household power prices and strains on water infrastructure, while International Business Machines tumbled the most in a single day after warning of a weaker-than-expected profit in the second quarter.

And that positive lead from Wall Street is expected to carry through to the antipodes, with Australian futures pointing to a strong start to the day for the ASX, while Statistics New Zealand’s monthly credit and debit card spending figures will be in focus.

Making money

The major banks led gains on Wall Street as major lenders notched up record results to kick off the latest quarter earnings season. The Dow Jones Industrial Average was marginally higher with Goldman Sachs up 8.2% and JPMorgan gaining 4.1%, while a 24% slump for IBM weighed on the blue-chip index after the company downgraded its earnings outlook.

JPMorgan chief Jamie Dimon used the earnings call to push back against higher capital requirements for banks, urging regulators to not set them artificially high. Meanwhile, the Financial Times reported that Brussels was considering loosening capital requirements for European lenders, following similar moves in the US and UK.

The Nasdaq Composite advanced 1% with tech stocks back in favour – Nvidia was up 4.1% in late trading – as tamer inflation than expected cooled fears the Fed would need to hike the federal funds rate.

Meanwhile, Fed chair Kevin Warsh reiterated the central bank’s commitment to keeping price increases in check, telling US policymakers that the softer reading didn’t mean taming inflation had been accomplished.

Brent crude oil futures rose 2.4% to US$85.08 a barrel at 7am in Auckland as tensions between the US and Iran remain elevated, while President Trump dropped his brief plan to levy shipping traffic passing through the naval blockade, saying he preferred his Gulf allies investing in America.

“Investors will continue to balance easing inflation and strong corporate earnings against higher energy prices and ongoing geopolitical uncertainty, with both likely to influence market direction in the days ahead,” Moomoo market strategy consultant Greg Boland said in a note. “The NZX is expected to open on the front foot this morning after Wall Street recovered on softer-than-expected US inflation and a strong start to the US earnings season.”

Australian futures are pointing to a 0.5% gain for the S&P/ASX 200 index, while the kiwi dollar rose to 58.10 US cents from 57.89 cents after Reserve Bank chief economist Paul Conway’s comments yesterday added to expectations for another domestic rate hike.

Shared confidence

The Sharesies index rose 13 points to 57 in the June quarter, showing a broad improvement in investment confidence among the 1 million users of the wealth platform, and returning to levels last seen before the Middle East conflict broke out.

New York state imposed a one-year moratorium on the construction of large new data centres, amid concerns that the facilities are lifting power prices for households and stretching water systems, while the White House is reportedly working with utilities and developers on a voluntary pledge to keep a lid on prices.

Bloomberg reported Chinese artificial intelligence firm DeepSeek has started preparing for an initial public offering in Mainland China, with a view to listing next year, and Samsung Electronics is reportedly looking to follow SK Hynix in offering American depositary receipts.

European stock markets gained, with the UK’s FTSE 100 up 0.3%, Germany’s DAX gaining 0.1% and France’s CAC 40 edging higher.

Local data today include Stats NZ’s electronic card spending for June.

Reporting by Paul McBeth. Image from Vandan Patel on Unsplash.