I’ll do my crying in the rain

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In the last 24 hours, we have had a raft of US data that analysts can dissect and draw conclusions about the current health or otherwise of the US economy. The start of the month was full of optimism after a dodgy April for stocks, helped by the May Fed meeting in which Powell indicated that the first-rate cut might come in September. As bond yields started to rise again, which led to a lacklustre bond auction, stocks have had a pretty sorry end to the month. The S&P 500 has given back almost 2% in the past five days. Yesterday’s headline news was that the 2nd estimate for US GDP was revised lower to 1.3% from the original estimated 1.6%. On the inflation front, there was some moderately good news, as the report showed the GDP price index revised slightly lower to a 3.0% annual rate in Q1 versus a prior estimate of 3.1% and up 2.4% from a year ago but remained above the Fed’s 2.0% target.

Then you had the Fed’s Beige Book, which consensus concluded was a little downbeat but also indicated that pricing pressure was easing as consumers are pushing back on further price increases. The message here seems to be that the US economy is weakening, and prices remain sticky, but there are signs that the weaker economy is resulting in weaker pricing.

Interestingly, aside from Nvidia, a couple of big take names, Salesforce, of particular note as the stock fell 20% on its earnings and Dell, despite meeting expectations, also fell just by not as much. The Nasdaq tech index had a particularly poor day on Thursday. Also noteworthy, despite all the recent apparent nervousness, is the Vix fear gauge, which has risen in the past few days but remains close to its historic lows, so there are no real signs of panic yet. The bond market has consistently failed to predict the path of US interest rates over the past couple of years, both on the way up and the way down. Maybe, but just maybe, the tide may once again be turning in favour of at least one cut in the US before the year’s end. Later today, we get the monthly Personal Consumption and Expenditure Index estimate, considered a gauge of US inflation and the Fed’s preferred measure. The annual rate, having jumped last month, is expected to come in at 2.6% year over year.

Turning to Europe but remaining on the same theme, we will get the latest inflation data for the euro area later today. The year-on-year rate is expected to stay fairly steady at 2.5%, largely unchanged from the previous month. The question is, will the ECB pull the trigger in next month’s ECB meeting? Today’s outcome will further influence the debate.

What the news last night that Donald Trump was found guilty of 34 criminal charges does for the US election, who knows?