U.S. Equity Markets largely shrugged off inflation fears before declining into the close, led by the S&P which closed with a small loss of 0.35%. This small decline in stocks saw the VIX close 5.88% higher at 17.12. Inflation data were the big catalyst yesterday. Consumer Price Index (“CPI”) came in above estimates, and above the Federal Reserve’s inflation target, for the second straight month. This could stoke fears of inflation (and the Fed removing support from the economy), and cause the bears to press their short bets. St. Louis Federal Reserve President James Bullard said that now was the time for the central bank to begin tapering its Asset Purchases. Again, this could stoke fears of a lack of stimulus from the central bank. The other big catalyst today was the start of earnings season – with reports from banking giants JPMorgan Chase (JPM) and Goldman Sachs (GS). The reports were positive, with JPMorgan releasing another $3 billion from its provisions for bad loans and making positive commentary on the rebound in consumer spending. Investors will continue to watch earnings reports for the market’s next big move. European Markets closed mixed. European Central Bank Supervisory Board Member Margarita Delgado said it will most likely lift dividend limits later this year, but would halt excessive payouts. The Bank of England removed restrictions on bank dividends and share buybacks as the economy continues to recover. German Health Minister Jens Spahn said the incidence of coronavirus infections is increasingly losing its significance with regards to social-distancing measures. In Asia, Japan’s Defense Ministry said Taiwan’s stability was important for the defense of its country, potentially stoking regional political tensions. China’s export data for June were stronger than expected, rising versus May, and indicating global economic demand remains strong. The Bank of Japan was said to consider offering to pay interest to banks lending to businesses supporting climate change, in an attempt to support economic growth. South Korea’s Disease Control and Prevention Agency said daily coronavirus infections exceeded 1,000 for the seventh straight day, but eased versus the recent high of 1,378. Elsewhere, Oil closed 1.61% higher while Bitcoin sold off overnight and is currently trading 3% lower at $31,800.
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