US Stocks Muted As Investors Wait On CPI Data To Set Fed’s Path

Economic

Stocks

Summary:

US stocks were little changed Monday soon after the open as investors geared up for a week filled with data that could determine how quickly the Federal Reserve resumes its interest-rate cuts.

The S&P 500 Index advanced 0.1% as of 9:39 a.m. in New York, gaining for a second-straight session. The Nasdaq 100 Index was flat and the Cboe Volatility Index hovered just below 16.

A swath of economic data begins on Tuesday with the consumer price index for the month of July, which will provide an opportunity to examine the impact tariffs have had on inflation amid a cooling labor market. Those figures will be critical to whether the Fed lowers interest rates in September, according to Anna Wong, chief US economist at Bloomberg Economics.

“The key report this week is tomorrow’s CPI and the stakes here are clear: if CPI prints hotter than expected, you will see September rate-cut expectations fall (possibly sharply) as the Fed will be concerned that tariffs are now starting to push inflation higher,” said Tom Essaye at The Sevens Report. “Given that expected rate cuts have helped stocks rally for weeks now, that would be a new negative influence on the markets.”

Also on the horizon this week will be data on producer prices and retail sales.

Chipmakers are being watched after Nvidia Corp. and Advanced Micro Devices Inc. reportedly agreed to pay 15% of their revenues from Chinese AI chip sales to the US government in a deal to secure export licenses. The deal may encourage the White House to target other industries and goods, according to Hinrich Foundation’s Deborah Elms.

“This marks the beginning of a new phase of taxation for Donald Trump, with the President targeting specific businesses in a bid to raise money through market access,” said Joshua Mahony, chief market analyst at Scope Markets.

Also likely being watched is Intel Corp. Chief Executive Officer Lip-Bu Tan’s visit to the White House. A wide-ranging conversation with President Donald Trump comes after the Republican called for his removal last week.

A record share of fund managers see US stocks as too expensive following the sharp rally from April’s tariff-driven lows, according to a Bank of America Corp. survey. About 91% of participants indicated that US stocks were overvalued, which is the highest proportion in data going back to 2001.

Meanwhile, strategists at Citigroup Inc. raised their target for the S&P 500, saying tax cuts should offset the negative impact from tariffs on US companies. Results in the second quarter have shown an “impressive beat,” though second-half earnings projections have mostly stayed intact, the team led by Scott Chronert said.

Among singular stocks, Micron Technology Inc. jumped after raising its fiscal fourth-quarter revenue and earnings outlook, citing “improved pricing” for a key product.

Source: Bloomberg Europe

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Samantha Luan

Political

Economic

North Korea has denounced a major joint exercise planned by the South Korean and U.S. militaries as "direct military provocation" and warned of counteraction, despite signs of easing tension across the border under a new leader in Seoul.North Korea's Defence Minister No Kwang Chol said its military has an "absolute mission" to defend national security against the large-scale 11-day drills by South Korea and the United States, which he said posed a real and dangerous threat.

"The armed forces of the DPRK will cope with the war drills of the U.S. and the (South) with thoroughgoing and resolute counteraction posture and strictly exercise the sovereign right," No said in a statement issued via the KCNA state news agency on Monday.DPRK is short for the Democratic People's Republic of Korea, North Korea's official name.

No said the drills staged under the pretext of defence against threats were additional proof of the confrontational intent by the two countries that raises hostility and further destabilises regional security.North Korea routinely denounces military drills by the South and the United States, having called some previous exercises "a rehearsal" for nuclear war on the Korean peninsula, even as Pyongyang conducted a range of missile tests and live fire artillery exercises.

South Korea and the United States said last week the annual exercise would begin on August 18 to test command control and troop mobilisation under an upgraded security strategy against a heightened threat of nuclear warfare by North Korea.However, the allies said a major part of the field exercise would be postponed and conducted separately next month, citing weather conditions. The postponement was widely seen as prompted by South Korea's liberal President Lee Jae Myung, who won a snap election in June, to ease tension with Pyongyang.

Ties between the rival Koreas had plunged to some of the most hostile points in recent years, as the North pressed on with developing nuclear attack capabilities and dramatically boosted military ties with Russia.While Pyongyang has publicly rebuffed renewed outreach by Lee and Washington for dialogue, it was making moves seen as reciprocating some South Korean actions to ease tensions.

South Korea said on Saturday it had detected the North's military removing some loudspeakers at the border, days after the South began dismantling similar equipment that had blared propaganda across the border.North Korea also seemed to have used a more restrained tone in criticisms about the U.S.-South Korea joint exercises, said an official at Seoul's Unification Ministry, which oversees ties between the Koreas.Pyongyang "appears to focus on expressing its position on the drills, rather than making military threats," ministry spokesperson Koo Byoungsam said at a briefing on Monday.

Source: Reuters

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Adam

Economic

China–U.S. Trade War

The U.S. and China have yet to announce an extension to their tariff deadline, with tensions over several thorny issues flaring up again just as a fragile truce nears its expiry.

Following the latest bilateral meeting in Stockholm in July, Beijing had struck an optimistic tone, saying that both sides would work toward extending the tariff truce by another 90 days.

U.S. negotiators, however, had put the ball in President Donald Trump’s court on prolonging the tariff truce. Trump, so far, has offered little indication on whether he will go for an extension, stoking concerns that tensions between the world’s two largest economies could rise again.

In May, the two sides agreed to a 90-day tariff truce that reduced duties the prohibitive 145% in April while also pausing a series of punitive measures, allowing room for further negotiation to reach a lasting deal. That agreement is set to expire Tuesday.

China’s U.S.-bound shipments currently face a 20% tariff related to the country’s alleged role in the flow of fentanyl into the U.S. and a 10% baseline tariff, stacked on top of a 25% duty on certain goods imposed during Trump’s first term. American goods to China are subject to over 32.6% tariffs, according to the Peterson Institute for International Economics.

The Office of the United States Trade Representative and Ministry of Foreign Affairs of China did not respond to CNBC’s requests for comments.

While an official tariff extension still hangs in the balance, experts widely expect a summit between Trump and Xi to take place in Beijing in the coming months.

“That implies a more stable U.S.-China relationship ... but by no means a friendlier one,” said Ian Bremmer, president and founder of Eurasia Group, noting that both sides are “structurally heading more toward decoupling as a consequence of the new global trade and geopolitical environment.”

Purchase agreement, transshipment

Despite the tariff truce, trade between the Washington and Beijing has been hit substantially.

China’s July trade data showed its exports to the U.S. shrank for a fourth consecutive month, falling 21.7% from a year earlier. Shipments in May had sunk by the most since the start of the pandemic, according to data from the Wind Information.

A potential trade deal could involve China committing to ramp up purchases of U.S. goods, particularly energy, agricultural goods, and if the U.S. allowed it, semiconductors and chipmaking equipment, said Julian Evans-Pritchard, head of China economics at Capital Economics.

China’s overall imports from the U.S. dropped 10.3% in the January to July period.

The final deal could take various forms, said Evans-Pritchard, noting that one of the most probable outcome would be a “sequel” to the phase-one agreement signed in January 2020.

At that time, China had agreed to a $200 billion increase in annual purchases of U.S. goods and services relative to the 2017 levels, a target that Beijing eventually failed to meet as the pandemic disrupted trade.

“It is plausible that Trump may treat the Phase One deal as unfinished business, revamping it with even higher purchase targets,” added Evans-Pritchard.

In a post on Truth Social Sunday night stateside, Trump said he hoped China to “quickly quadruple its soybean orders.” China has ramped up soybean purchases in recent months, with imports volumes growing 36.2%, 10.4% and 18.4% in May, June and July, respectively, according to Wind Information.

China’s total exports to the U.S. have dropped 12.6% this year as of July. That has, however, been largely offset by a 13.5% export growth to Southeast Asian nations, drawing scrutiny over the so-called “transshipment” of goods.

Trade experts have warned that exports — a critical growth driver for China’s economy — could slow down in the coming months as Trump levies a blanket 40% tariff on goods routed through third-party countries, although providing little clarity over how those shipments would be defined.

Semiconductor export controls

Tensions between the U.S. and China on semiconductor export controls have also escalated in recent weeks, even as Nvidia plans to resume sales of its H20 chip to China, reversing export controls on H20 sales imposed by Trump in April.

The H20 resumption signaled a “modest course correction rather than a strategic shift,” said Gabriel Wildau, managing director at political consultancy Teneo, noting that substantial export-control loosening will not occur.

That said, Trump may consider offering concessions on export controls that others in his administration consider “excessive” in order to conclude a deal with Beijing, Wildau added.

The resumption of H20 sales comes as national security hawks in the Trump administration warn that U.S. chips and other technology could strengthen China’s AI sector and its military. Others argue that further restrictions risk backfiring, and could prompt Beijing to accelerate efforts to develop domestic alternatives and reduce reliance on American suppliers.

Chinese officials have pushed for the U.S. to ease export controls on high-bandwidth memory chips — whose shipments to China were banned by former President Joe Biden in 2024 — the Financial Times reported Sunday. Nvidia and AMD

have agreed to give the U.S. government 15% of their revenues from chip sales to China in order to secure export licenses, Financial Times reported.

“What we are seeing is in effect the monetization of U.S. trade policy in which American companies must pay the US government for permission to export. If that’s the case, we’ve entered into a new and dangerous world,” said Stephen Olson, senior visiting fellow at ISEAS-Yusof Ishak Institute and a former U.S. trade negotiator.

Rare-earth exports

The leverage that Beijing wields through its dominance of rare earths could be an additional factor pushing Trump to offer concessions — and a card that Beijing will almost certainly use, according to experts.

Beijing agreed to relax its export ban on rare-earth metals and magnets to the U.S. in June and moved to expedite licensing process following a series of negotiations, although few details were made available about its commitment to speed up shipments of the critical minerals.

In June, the country’s rare-earth exports globally surged 60% to 7,742 metric tons, highest since January 2012, according to data on Wind Information, before dropping to 5,994.3 metric tons in July.

China’s exports of rare-earth magnets to the U.S. in June jumped more than seven times from the prior month, with American firms receiving about 353 metric tons of the permanent magnets in June, according to official customs data. A similar country-specific breakdown will be released on Aug. 20.

Secondary tariffs over Russian crude

Another thorny issue in the U.S.-China negotiation is Trump’s threat of punishing Beijing with additional tariffs over its purchases of Russian oil.

China has been the largest purchaser of Russian oil, followed by India, which saw U.S. tariffs doubled to 50% last week.

Answering a question on whether he would consider penalizing China for the same reason, Trump said: “I can’t tell you yet. But I can — we did it with — we did it with India. We’re doing it probably with a couple of others. One of them could be China.”

China’s overall imports from Russia edged higher in July to $10.06 billion, the highest level since March, although down 7.7% overall this year from the same period in 2024, according to the latest customs data.

Xi held a phone call with President Vladimir Putin on Friday ahead of the Russian leader’s meeting with Trump over the Russia-Ukraine that is now in its fourth year.

The phone call with Putin appeared “urgent” as it took place during Xi’s scheduled annual summer vacation, said Neo Wang, lead China economist at Evercore ISI.

“Both Xi and Putin would want to leverage their close ties in negotiations with Trump by making him guess what was actually talked about or even agreed on during their call,” Wang added.

Source: cnbc

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Adam

Commodity

Oil steadied after its biggest weekly drop since end-June, as US President Donald Trump’s push to end the war in Ukraine eases concerns about supplies from top producer Russia.

Brent traded near $67 a barrel, after sliding 4.4% last week. On Friday, Trump didn’t reveal additional measures against Moscow or buyers of its crude as he announced a summit with Russian President Vladimir Putin in Alaska. He had earlier declared an Aug. 8 deadline for the Kremlin to reach a ceasefire.

US and Russian officials are working toward an agreement that would lock in Moscow’s occupation of territory seized during its military invasion, according to people familiar with the matter. The US is working to get buy-in from Ukraine and its European allies on the deal, which is far from certain, they said.

Oil Holds Near $67 as Traders Look Ahead to Trump-Putin Meet_1

Brent Oil Steadies After Run of Declines | Focus shifting to Trump's meeting with Putin in Alaska

Oil has lost more than 10% this year as OPEC+ brings back production faster than initially planned, ending curbs made in 2023, even as slowing economic growth threatens to cut consumption. A peace deal with Ukraine could see an end to sanctions on supply from Russia, removing the risk of disruption to Moscow’s flows after Trump’s comments in recent weeks that he would put measures in place against its biggest buyers.

“This is not a deal which will be closed on Friday, but rather the start of a process,” said Bjarne Schieldrop, chief commodities analyst at SEB AB. “Trump is very, very unlikely to slap sanctions on Russian oil while this process is ongoing, i.e. no disruption of Russian oil in sight.”

Investors may get further insight into the supply-demand balance later this week, with the Organization of the Petroleum Exporting Countries set to release its monthly market analysis and the US Energy Information Administration its Short-Term Energy Outlook on Tuesday. The International Energy Agency is due to publish its monthly report on Wednesday.

Source: Bloomberg

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Adam

Stocks

U.S. stock futures climb ahead of week of major economic data releases that could help determine the trajectory of interest rates in the coming months. Meanwhile, artificial intelligence remains front of mind for investors, contributing to a spike in the tech-heavy Nasdaq Composite to a new record closing high last week. AI-darling Nvidia promises to give the U.S. government a cut of its sales in China, media reports say, while enterprise AI application software group C3.ai unveils a preliminary earnings statement that falls short analysts’ expectations.

Futures higher

U.S. stock futures rose on Monday, as investors geared up for a week filled with key economic data points and assessed the staying power of a boom in enthusiasm around artificial intelligence.

By 03:00 ET (07:00 GMT), the Dow futures contract had risen by 108 points, or 0.2%, S&P 500 futures had gained 12 points, or 0.2%, and Nasdaq 100 futures had advanced by 37 points, or 0.2%.

The tech-heavy Nasdaq Composite jumped in the prior session, closing at a fresh all-time high, while other major averages also climbed.

Underpinning the Nasdaq’s new peak was a rally in Apple, with the iPhone-maker’s stock price surging by more than 13% last week -- its largest weekly gain since 2020 -- thanks in part to hopes that the company’s vow to plug additional investment into the U.S. will allow it to evade much of President Donald Trump’s sweeping tariffs. The benchmark S&P 500’s tech and communication services indices also ended at fresh highs.

Meanwhile, expectations that recent signs of slowing in the U.S. labor market will lead the Federal Reserve to cut interest rates at its next gathering in September offered further support to equities (more below).

Nvidia promises to give cut of China AI chip sales to U.S. government - reports

Nvidia is reportedly set to pay the U.S. government 15% of the returns it makes from the sale of its artificial intelligence to China, according to several media reports.

Citing people familiar with the matter, the reports said Nvidia CEO Jensen Huang met with President Trump at the White House last week and agreed to grant Washington a cut of the money it rakes in from its business in the large -- and lucrative -- Chinese market.

Peer Advanced Micro Devices has also agreed to the same deal, the reports said.

Nvidia was reportedly given licenses by the Commerce Department to begin sales of its China-specialized H20 AI chip two days after the meeting, even though the White House said one month ago it had granted the company a green light to sell the processors in the country.

C3.ai shares plummet

Shares of C3.ai (NYSE:AI) were sharply lower in extended hours trading after the enterprise AI application software group issued a disappointing preliminary earnings announcement.

The statement, released after the close of markets on Friday, showed that the firm now anticipates total revenue for its fiscal first quarter will between $70.2 million to $70.4 million, while its adjusted loss would be $57.7 million to $57.9 million.

Analysts had been anticipating quarterly revenue of $104 million and an operating loss of $27.3 million. C3.ai added that it is also completing a restructuring of its sales and services organization.

The Redwood, California-based firm will release its complete results for the period on September 3.

Data ahead this week

On the economic calendar, traders will be keeping particularly close tabs on the release of U.S. consumer price data for July on Tuesday.

A separate gauge of producer prices for final demand is due out on Thursday, while a metric of American retail sales and a survey of consumer sentiment are expected to be published on Friday.

Along with the labor market, inflation remains the other crucial pillar of the Federal Reserve’s two-pronged mandate. The outlook for rates has been complicated by data earlier this month which showed weak job growth in July and a sharp downward revision to the numbers for June and May -- all indications of a cooling labor market which may bolster the case for rate cuts that could fuel investment and spending.

Yet, at the same time, inflation has remained stubbornly elevated above the Fed’s stated 2% target, driving worries that a reduction in borrowing costs could spur inflationary pressures.

Fed’s Bowman backs rate cuts

Against this backdrop, the Fed has largely adopted a "wait-and-see" attitude to rate decisions, opting instead for more clarity to emerge around the impact of Trump’s tariffs on the broader economy.

However, cracks have started to appear amongst Fed policymakers, with media reports suggesting that many officials are becoming more open to the idea of impending cuts. This after two Fed rate-setters dissented from the majority at the Fed’s July gathering, arguing instead for reductions.

One of those dissenters, Fed Governor Michelle Bowman, reiterated this stance in a speech on Saturday, saying the July jobs report had underscored her worries around the state of the labor market. In effect, she argued, the softness in the jobs picture has outweighed any fears around spiking price gains.

The comments come as Trump has been frequently calling on the Fed to quickly ratchet down rates -- a campaign that has made Fed Chair Jerome Powell a particular recipient of the president’s ire and raised doubts around the longstanding independence of the central bank.

Source: investing

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Thomas

Economic

The U.S. dollar was consolidating on Monday before Tuesday's deadline for Washington and Beijing to strike a tariff deal and a key U.S. inflation report that could help determine whether the Federal Reserve lowers borrowing costs next month.

The dollar index was up less than 0.1% to 98.30 after last week's 0.4% fall. Against the yen, the U.S. currency traded at 147.87 , up 0.1%. Japanese markets were closed on Monday for the Mountain Day holiday.The euro was down less than 0.1% at $1.1636, while sterling was down 0.2% at $1.3435.

The dollar softened last week as investors adjusted their expectations for interest rate cuts from the Fed after soft data on U.S. jobs and manufacturing.

Fed officials have sounded increasingly uneasy about the labour market, signalling their openness to a rate cut as soon as September.Cooling inflation could cement bets for a cut next month, but if signs emerge that U.S. President Donald Trump's tariffs are fuelling price rises, that might keep the Fed on hold for now.

"It's important to note ahead of tomorrow's data that the bar for a hawkish surprise is higher," said Francesco Pesole, FX strategist at ING.

Pesole added that a 0.3% monthly rise in core CPI would give the Fed room to lower interest rates, given the deterioration in the labour market.

Economists polled by Reuters expect core CPI to have risen 0.3% in July, pushing the annual rate higher to 3%.

Money market traders are pricing in around a 90% chance of a rate cut next month, while 58 basis points of easing are priced in by year-end, implying two quarter-point cuts and around a one-in-three chance of a third.

Personnel moves at the Fed have also weighed on the dollar recently. Trump is preparing to install rate-setters that support his dovish views on monetary policy, including a new chair for when Jerome Powell's term ends in May.

Trade talks were also in focus as Trump's August 12 deadline for a deal between the U.S. and China neared, particularly on chip policy."The market has fully priced in the idea that we're going to get an extension," said Chris Weston, head of research at Pepperstone Group Ltd in Melbourne, adding that another 90-day truce was most likely.

With the U.S. and China seeking to close a deal averting triple-digit goods tariffs, a U.S. official told Reuters that chip makers Nvidia (NVDA.O), opens new tab and AMD (AMD.O), opens new tab had agreed to allocate 15% of China sales revenues to the U.S. government, aiming to secure export licences for semiconductors. "I don't know if that's going to be a good thing or a bad thing, but if it puts closure on the matter, it's not a bad outcome," Weston said.

"If this is Trump saying 15% and we'll call it a day, that may not be too bad."

The offshore yuan fluctuated between gains and losses, trading at 7.1913 to the dollar, after weekend data showed China's producer prices fell more than expected in July, while consumer prices were unchanged. The Australian dollar fetched $0.6514 , trading down 0.2% ahead of a rate decision on Tuesday, in which it is widely expected that the Reserve Bank of Australia will cut rates by 25 bps to 3.60%, after second-quarter inflation came in weaker than expected and the jobless rate hit a 3-1/2-year high.

Cryptocurrencies jumped, with bitcoin rising as high as $122,308, not far from its July 14 record of $123,153.22, after Trump's executive order on Thursday freed up cryptocurrency holdings in U.S. retirement accounts.

Ether rose as high as $4,346.01, its highest since December 2021.

Source: Kitco

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ING

Economic

Forex

Political

Inflation endorses pause expectations

In June, we made the case for Norges Bank to start cutting rates, but defaulted to the consensus call for a hold as we had doubts that policymakers would go against market pricing. Markets were taken entirely by surprise by the June cut.

The implied chance of a cut at the 14 August meeting is also close to zero, but this time the chances of a surprise are also much lower, in our view. The main reason is underlying inflation, which had moderated to 2.8% in May but then jumped back to 3.1% in June and July. Swings in headline CPI appear less relevant for Norges Bank, but the acceleration to 3.3% in July further endorses the case for a hold.

NOK is also being watched quite closely by the central bank, and the 4% trade-weighted decline since June is a hawkish argument. One final reason for a pause is the vicinity to the 8 September parliamentary vote in Norway, where the latest polls place a centre-left coalition slightly ahead. Central banks often tend to tread a bit more carefully before electoral events. Thursday’s meeting is an interim one, with only a short statement published and no economic projection update.

NOK has room to recover

Markets are fully pricing in a September cut and an 80% chance of a follow-up reduction in December. This is in line with our forecast, but we admit that the risks are becoming more skewed to just one cut by year-end, as inflation has surprised on the upside and the krone’s underperformance both warrant caution with rate cuts.

EUR/NOK has re-approached 12.00, with the euro’s idiosyncratic strength and oil price declines both contributing to keeping the pair supported. Rallies beyond 12.00 generally prove unsustainable in the pair, and given markets are largely pricing in the Norges Bank easing cycle, we don’t see major downside risks for NOK. We also think Norges Bank might deliver a slightly more hawkish tone at this meeting.The economic and rate fundamentals underpinning a lower EUR/NOK call remain intact, in our view, and we still expect a return to 11.60-11.70 by year-end.