U.S. Indices were choppy on Friday, with early upside faded amid mixed sectoral performance. Utilities, Consumer Discretionary and Real Estate outperformed, while Energy, Healthcare and Communication lagged. The focus on Friday was largely on commentary from Fed Governor Waller, who reiterated his call for a 25-basis point rate cut in July (more below). Meanwhile, US data saw strong housing data while the University of Michigan Consumer Survey also impressed, coinciding with easing inflation expectations. The dovish commentary from Waller, coupled with easing inflation expectations and tough trade updates on the EU, T-Notes were bid across the curve, although the Dollar was flat with NZD and AUD outperforming. Energy prices were hit on Reuters source reports that Greek tanker operators shipping approved Russian oil exports are expected to continue doing so despite a new wave of tougher sanctions by the EU that will further tighten restrictions, sources said. Gold prices were green but silver was flat, crypto was mixed with Bitcoin lower and Ethereum up amid Trump signing the GENIUS Act into legislation as expected. There were also reports that Trump would open up 401k plans to alternative investments, including digital assets and metals. Fed Governor Waller continues to call for a 25-basis point rate cut in July, citing rising risks to the economy as justification for easing. He added that if underlying inflation stays contained and growth remains tepid, further cuts may be warranted. Waller argued the Fed should not wait for the labour market to deteriorate before acting, warning that delaying cuts risks requiring more aggressive moves later. He noted mounting evidence of labour market weakness, pointing to the JOLTS report, Quits rate, and Beige Book, none of which show a “super healthy” jobs picture. When asked if he would dissent at the July meeting to support a cut, Waller declined to commit, saying he would consider all arguments at the meeting. He added that while it is not critical to act immediately, there is no strong reason to delay either. On inflation, Waller reiterated that tariffs tend to have a one-off effect that the Fed can generally look through. He said a July rate cut could give the Fed room to pause in coming meetings, and noted that, excluding tariffs, inflation is nearing the 2% target. While tariffs will likely push inflation higher in the near term, he expects the effect to fade next year. He added that market-based inflation expectations remain well anchored. Waller estimated that a sustained 10% tariff could lift inflation by 0.75% to 1% this year but said upside risks to inflation remain limited. At the same time, he warned of growth risks, with GDP tracking around 1%. He also emphasised that monetary policy should be moving closer to a neutral setting, which he estimates to be around 3%, though he acknowledged significant uncertainty around the long-run neutral rate. Finally, on speculation that he could be the next Fed Chair, Waller said no one from the Trump administration has approached him about the role. Housing starts rose by 4.6% in June to 1.321 million, above the 1.3 million forecast and 1.263 million print in June (revised up from 1.256 million). Building Permits rose by 0.2% to 1.397 million, also above expectations of 1.39 million and the prior 1.394 million. Pantheon Macroeconomics highlight that starts remain below last year’s average of 1.371 million, and look set to continue the trend lower in H2 this year. Looking into the data, the consultancy points out that the recent weakness is entirely due to single-family starts, which fell to 883k in June, the lowest level since last July. Multi-family starts rose to 438k from 337k. The desk also notes that total permits are a better guide to the trend in housebuilding than starts and are consistent with a slight fall in total starts in July. Pantheon writes “Demand remains undermined by high mortgage rates and the tariff hit to consumers’ confidence. Furthermore, a glut of unsold properties is compounding the pressure to pause new construction projects”. The University of Michigan Preliminary Survey for July impressed, with conditions, expectations, and sentiment all surpassing expectations. The headline rose to 61.8 from 60.7 (exp. 61.5), while conditions and expectations lifted to 66.5 (exp. 63.9, prev. 64.8) and 58.6 (exp. 55.0, prev. 58.1), respectively, with the 1yr ahead inflation expectations falling to 4.4% from 5.0%, and the 5yr dropping to 3.6% from 4.0%. Ahead, Oxford Economics notes, “Nevertheless, sentiment remains depressed compared to pre-election levels, and recent announcements for new tariffs on August 1 could undermine any recovery in sentiment.” Elsewhere, Oil closed flat while Gold was firm, ending Friday’s session with a gain of higher by 0.6%.
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For anyone following my Platinum Service it made 390 points on Friday and is now ahead by 2615 points for July after closing June with a gain of 3530 points, having closed May with a gain of 3606 points, after closing April with a gain of 7685 points after closing March with a gain of 2254 points while closing February with a gain of 4180 points. January ended with a gain of 2768 points while 1997 points were gained in December. October ended with a gain of 2179 points, after closing September with a gain of 4402 points, following a loss of 301 points in August. July gained 1908 points while June saw a gain of 2074 points. The Platinum Service made a record 9619 points in October 2022. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 2300 points. I have a YouTube Channel which contains recent interviews I have given This can be viewed by clicking HERE Please subscribe to this for new interview notification
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