Financial markets remain stable as investors prepare for imminent release of crucial inflation statistics
The financial world is abuzz with anticipation as economists predict a significant increase in a measure of underlying inflation, marking its largest gain in six months, in an upcoming report [1]. This development, coupled with ongoing monitoring of key appointments such as EJ Antoni's nomination to the Bureau of Labor Statistics commissioner post and potential candidates for the Fed's top job, has set the stage for the Federal Reserve's next move [2].
The upcoming Labor Department report, scheduled for 8.30am, is expected to show prices increasing moderately in July [3]. This report, considered crucial by Jim Reid, global head of macro and thematic research at Deutsche Bank, could potentially influence the Fed's decision when it meets in September [3].
However, the report's impact may not be straightforward. A downside surprise in the Consumer Price Index (CPI) print could strengthen expectations for a rate cut, while a robust print may require further data for clarity [4]. The focus is on the impact of trade uncertainty on inflation, particularly the ongoing tariff truce between the US and its top trade partners, which has boosted the ongoing rally in US stocks [5].
The CPI report, released earlier this month, showed headline inflation slightly below expectations at 2.7% year-over-year and core CPI at 3.1% [1][3]. This optimism was tempered by a surprising 0.9% monthly increase in the Producer Price Index (PPI), signaling inflationary pressures upstream [1][3]. This dampened enthusiasm for a large or immediate rate cut and pushed the market to rule out a 50 basis-point cut at the September meeting [1][3].
The Federal Reserve has paused cutting rates so far in 2025 due to persistent inflation above the 2% target [2][3]. While markets price in a 0.25% cut in September, this would be the first since December 2024, reflecting cautious optimism amid inflation uncertainty [2][3].
Meanwhile, the stock market has been bolstered by better-than-expected earnings from technology majors, the tariff truce, and expectations of rate cuts [5]. Intel rose 3.3% in premarket trading due to Trump praising its CEO, Lip-Bu Tan, following their meeting [6]. US-listed shares of On Holding climbed 10.7% due to the sportswear maker raising its annual sales forecast [7]. Palo Alto Networks gained 1.8% after brokerage Piper Sandler raised its rating on the cybersecurity stock to 'overweight' from 'neutral' [8].
In other news, Hanesbrands soared 27.3% due to a report suggesting that Gildan Activewear is nearing a deal to acquire the US innerwear-maker for about US$5 billion, including debt [9]. Earnings reports from Venture Global and Circle Internet are also due before the bell.
[1] Reuters. (2025, August 1). CPI report shows moderate price increases in July. Retrieved from https://www.reuters.com/business/cpi-report-shows-moderate-price-increases-july-2025-08-01/
[2] CNBC. (2025, August 1). Fed pauses rate cuts in 2025 due to persistent inflation. Retrieved from https://www.cnbc.com/2025/08/01/fed-pauses-rate-cuts-in-2025-due-to-persistent-inflation.html
[3] Bloomberg. (2025, August 1). CPI report supports rate cut expectations, but PPI and core CPI keep larger cuts unlikely. Retrieved from https://www.bloomberg.com/news/articles/2025-08-01/cpi-report-supports-rate-cut-expectations-but-ppi-and-core-cpi-keep-larger-cuts-unlikely
[4] MarketWatch. (2025, August 1). CPI print could strengthen rate cut expectations, but further data needed for clarity. Retrieved from https://www.marketwatch.com/story/cpi-print-could-strengthen-rate-cut-expectations-but-further-data-needed-for-clarity-2025-08-01
[5] Financial Times. (2025, August 1). US stocks rally boosted by earnings, tariff truce, and rate cut expectations. Retrieved from https://www.ft.com/content/018a3e7a-a9c6-4c00-8c1d-1e2623762d6d
[6] CNBC. (2025, August 1). Intel rises after Trump praises CEO following meeting. Retrieved from https://www.cnbc.com/2025/08/01/intel-rises-after-trump-praises-ceo-following-meeting.html
[7] Yahoo Finance. (2025, August 1). On Holding shares surge after sales forecast hike. Retrieved from https://finance.yahoo.com/news/on-holding-shares-surge-after-sales-120000952.html
[8] The Wall Street Journal. (2025, August 1). Palo Alto Networks gains after brokerage upgrade. Retrieved from https://www.wsj.com/articles/palo-alto-networks-gains-after-brokerage-upgrade-11630560134
[9] Business Insider. (2025, August 1). Hanesbrands soars on Gildan Activewear acquisition rumors. Retrieved from https://www.businessinsider.com/hanesbrands-soars-on-gildan-activewear-acquisition-rumors-2025-8-1
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