In a surprising turn, US consumer prices decreased last month, when they were expected to grow. This shows disinflation is ongoing and Fed rate cuts are not far away.

According to data from the Labor Department's Bureau of Labor Statistics released this morning, the Consumer Price Index (CPI) fell by 0.1% in June on a monthly basis, after remaining steady last month. Year-on-year, the CPI increased by 3.0% through June, a deceleration from the 3.3% increase seen in May. Economists were expecting an average monthly rise of 0.1% and on an annual basis, a 3.1% gain.

The core CPI, which excludes volatile components such as food and energy, rose 0.1%, against 0.2% expected. On a yearly basis, it advanced by 3.3% instead of 3.4% forecast.

The pace of consumer price increases has moderated from the 9.1% peak seen in June 2022. However, the CPI is still significantly outpacing the Fed's preferred inflation measures for its 2% target. The Personal Consumption Expenditures (PCE) price indexes, for instance, both rose by 2.6% in May.

Another report this morning seems to confirm that the economy is cooling. US jobless claims reached 222,000 in the July 6 week, while 235,000 was expected.

With a cooling labor market and a decelerating economy, financial markets and most economists are anticipating that the Fed will begin lowering rates as early as September. The soft landing scenario seems the most likely, although some fear that the economic slowdown could be more severe than expected. Futures on Wall Street rose after the report, but then retreated to remain flat.

Yesterday, the Nasdaq 100 hit a new closing record, surpassing its previous day's high by 1.09%. The index is a mirror of the technology sector, but also of investors' appetite for risk. It has gained 23% since January 1. In Europe, stock markets ended a three-day slump with a rebound yesterday.

In other news, OPEC has maintained its forecast for robust growth in world oil demand in 2024. While some analysts see this as tacit recognition that hydrocarbons are making a comeback, others see it more as a strategy to support prices. The oil cartel forecasts demand growth of 2.25 million barrels per day (mbpd) this year, and 1.85 mbpd in 2025, figures that are far more optimistic than those of the International Energy Agency, which expects growth of 960,000 barrels per day in 2024 and 1 mbpd in 2025. This divergence of views underlines the prevailing uncertainty and, above all, the complexity of accurately forecasting energy market movements. OPEC is maintaining a much more aggressive stance, aimed at shaping expectations and capturing investor interest. Could this policy prove counter-productive in the long term, if actual demand fails to keep pace with ambitious projections? Only time will tell.

On the corporate front, Costco WholeSale issued a trading update after the Wall Street close. The retailer's sales were up in June, and the highlight: Costco Wholesale will be raising annual membership fees for the first time in seven years for its US and Canadian customers. Investors will have another opportunity to scrutinize US consumer spending with PepsiCo's results today.

In Asia-Pacific this morning, markets are in Olympic form. The Nikkei 225 gained 1.0% in Japan, while Hong Kong soared 2%. The KOSPI advanced by 0.8%, but India's SENSEX was flat. Sydney's ASX200 gained 0.9%. European indexes are bullish.

Today's economic highlights:

The June consumer price index and weekly jobless claims are today’s main indicators. The full agenda is here. 

The dollar is down 0.5% to EUR 0.9182 and GBP 0.7730. The ounce of gold is up to USD 2403. Oil is holding steady, with North Sea Brent at USD 85.19 a barrel and US light crude WTI at USD 82.23. The yield on 10-year US debt falls to 4.18%. Bitcoin is trading at USD 58,658.

In corporate news:

  • Apple - The EU antitrust authorities have agreed on Thursday to the group's proposal to open its "tap-and-go" mobile payment system to rivals, ending a four-year investigation that could have resulted in a significant fine.
  • PepsiCo announced on Thursday a quarterly revenue of $22.50 billion, which fell short of analysts' expectations of $22.57 billion, due to weak demand mainly in the United States, the soda maker's largest market. The stock is down about 2% in pre-market trading.
  • Delta Air lines said on Thursday that it expects lower profits than analysts anticipate for the third quarter, citing downward pressure on prices in the "low-cost" segment of the market. The stock is down 7% in pre-market trading.
  • JPMorgan is set to publish its quarterly results on Friday and has set a goal to attract 15% of the country's consumer deposits, said Marianne Lake, CEO of Consumer and Community Banking, in an interview with Reuters.
  • Citigroup - Two U.S. banking regulators have imposed a fine of $136 million on the group, accused of not making sufficient progress in resolving data management issues identified in 2020, the Federal Reserve announced on Wednesday. The stock was down 1.1% before the opening.
  • Costco Wholesale - The membership-only online supermarket will increase the fees charged to its American and Canadian members for the first time in seven years. The stock was up 2.8% before the opening.
  • Honeywell stated on Wednesday that it will purchase the liquefied natural gas processing technology from Air Products for $1.81 billion in cash.
  • Olin is down 1.4% before the opening after reporting a temporary disruption of operations at its Freeport, Texas, site following the passage of Hurricane Beryl.
  • Alcoa is up 3% after hours, having reported preliminary second-quarter revenue of $2.85 billion, compared to the $2.80 billion expected by consensus.
  • WD-40 is up 8.8% in pre-market trading after reporting better-than-expected results for the third quarter.

Analyst recommendations:

  • Albemarle Corporation: Wells Fargo downgrades to equalweight from overweight with a price target reduced from USD 145 to USD 100.
  • Antero Resources Corporation: Gerdes Energy Research LLC upgrades to buy from neutral with a price target raised from USD 38 to USD 40.
  • Darden Restaurants, Inc.: Jefferies downgrades to underperform from hold with a price target reduced from USD 154 to USD 124.
  • Doubleverify Holdings, Inc.: Baptista Research downgrades to buy from outperform with a price target reduced from USD 39.60 to USD 28.70.
  • Interactive Brokers Group, Inc.: Keefe Bruyette & Woods downgrades to market perform from outperform with a price target raised from USD 128 to USD 135.
  • Kbr, Inc.: Baptista Research upgrades to outperform from hold with a price target raised from USD 72.10 to USD 76.20.
  • Lamar Advertising Company: Citi downgrades to neutral from buy with a target price of USD 122.
  • Levi Strauss & Co.: Baptista Research upgrades to outperform from hold with a price target reduced from USD 22.60 to USD 22.10.
  • Microchip Technology, Inc.: Morgan Stanley downgrades to equal weight from overweight with a target price reduced from USD 102 to USD 100.
  • On Semiconductor Corporation: Morgan Stanley downgrades to underweight from equalweight with a price target reduced from USD 70 to USD 65.
  • Ryan Specialty Holdings, Inc.: Wells Fargo downgrades to equalweight from overweight with a price target raised from USD 58 to USD 60.
  • Spotify Technology S.a.: Jefferies upgrades to buy from hold with a price target raised from USD 242 to USD 385.
  • United Therapeutics Corporation: Morgan Stanley downgrades to equalwt from overwt with a price target raised from USD 310 to USD 321.
  • Wolfspeed, Inc.: Baptista Research downgrades to hold from buy with a price target reduced from USD 35.60 to USD 26.20.
  • Costco Wholesale Corporation: Jefferies maintains its buy recommendation and raises the target price from USD 860 to USD 1050.
  • E.l.f. Beauty, Inc.: Piper Sandler & Co maintains its overweight recommendation and raises the target price from USD 210 to USD 258.
  • Estee Lauder: Piper Sandler & Co maintains a neutral recommendation with a price target reduced from USD 141 to USD 108.
  • International Paper Company: RBC Capital maintains its outperform rating and raises the target price from USD 43 to USD 52.
  • Oshkosh Corporation: Jefferies remains at hold with a target price reduced from USD 135 to USD 105.
  • Siteone Landscape Supply, Inc.: Jefferies remains at a hold recommendation with a price target reduced from USD 160 to USD 125.
  • Solaredge Technologies, Inc.: BMO Capital Markets maintains its market perform recommendation with a price target reduced from 56 to USD 26.
  • W.r. Berkley Corporation: Evercore ISI maintains its in-line recommendation and reduces the target price from 85 to USD 57.
  • Anglo American Plc: RBC Capital downgrades to sector perform from outperform with a price target reduced from GBX 3100 to GBX 2600.
  • Rotork Plc: HSBC upgrades to buy from hold with a price target raised from GBP 3.35 to GBP 3.80.