Well my mom and poppa told me“Son you gotta earn some money”, if you want to go ridin next Sunday

The big data day came and went as core consumer prices eased slightly to 4.7%, but the overall rate rose modestly to 3.2%. The other less widely anticipated data was the jobless claims number which came in line with expectations. Stocks continue to struggle as August has a feel of Déjà vu about it. Will yesterday’s news change the overall expectation the Fed will change its stance on interest rates? The bond market moves yesterday suggest probably not. The correlation between the dollar basket and the stock market continues as the currency has been gaining in the past few weeks, as stocks have stalled. The initial rally in the S&P 500 faded yesterday.

Later today we get a raft of UK data including Industrial and Manufacturing production, GDP, which is expected to report a very modest amount of growth in this quarter and construction output. Over in the US, we get the latest Michigan Consumer sentiment and the monthly producer price data.

Bond and equity markets continue to see different outcomes this year. The US yield curve remains deeply inverted if slightly less so than earlier in the year, suggesting that bond investors remain deeply suspicious the US economy will slip into recession at some point this year. The equity market,  as we know continues to look on the brighter side of life.

Even though Moody’s decided to cut the ratings of 10 regional banks in the past week and put 6 larger ones on watch, according to Capital Economics financial strains continue to ease. Quoting the report, overall, stress across core financial markets appears about as low as at any point since the Russian invasion of Ukraine started in early 2022, and risk premia have moderated over recent months on growing hopes of a “soft landing” in the US. Although they do go on to say in their view risk sentiment will deteriorate in the coming months.

There will be a lot of demand for capital in the coming weeks as the US treasury department looks to auction debt maturing across the curve. In the past week, 103 billion dollars of new debt was issued ranging from 3 to 30 years. The government is being forced to increase its funding requirements in response to higher spending and reducing tax revenues, to fund its growing budget deficit. The latest estimate from the treasury department is that the funding requirement in the coming quarter will be one trillion dollars, an increase of some 250 billion dollars previously forecast.