Stock markets accelerate increases after a drop in the IPC higher than expected. The underlying rate, which excludes gasoline prices, also fell to 5.9% year-on-year compared to the estimated 6.1%
The European stock markets reacted with increases to the inflation data in the US, which finally ended July at 8.5% year-on-year, from 9.1% the previous month and even below the expected 8.7%, thanks mainly to the moderation of the rise in energy prices to 32.9% from 41.6% in June, while in the case of food, the rise in prices accelerated to 10.9% from 10.4% in June, the largest increase since May 1979.
The big surprise has come from the core CPI (which excludes gasoline and food). Market consensus expected the benchmark to remain higher at 6.1%. However, it finally remained at 5.9% year-on-year, in line with the previous month.
"The reading of this variable will provide greater clarity to investors, both about the current situation of the global economy, and the path that the Fed will follow in terms of interest rates," the analysts at Link Securities indicate.
The reaction in the market has not been long in coming and the European Stock Exchanges accelerated in the rises after knowing the data. The Ibex-35 rises 0.6% to consolidate its graph above 8,300 points, given the prospect that prices could have peaked in the main world power, which would leave the door open to the Federal Reserve (Fed ) to reduce the pace of monetary policy tightening if necessary to avoid a prolonged recession.
With the prospect that despite the moderation in inflation, the body will continue to raise interest rates in its next meetings as it remains high, the yield on bonds (which moves inversely to the price) had been rising for several sessions . But this Wednesday the increases moderated and the interest of the US bond to 10 years yields to 2.77%. In Europe, the German benchmark (bund) fell more strongly, to 0.88%, still far from the 1% that it comfortably exceeded just a few weeks ago.
Paolo Zangheri, Senior Economist at Generali Investments, comments that "although the Fed unanimously decided on a further 75 basis point hike in July, it signaled that going forward the pace of tightening could be slower if inflation does not surprise on the upside, as the slowdown in the economy will gradually restore the imbalances between supply and demand”.
As he recalls, the president of the organization, Jerome Powell, pointed out that the rate path indicated in June, with the Fed funds rate reaching a maximum of 3.8% and remaining at that level throughout 2023, continues being relevant. “This carries two messages: firstly, rate hikes will continue. Second, and more importantly, the price the market has already put on rate cuts in 2023 is too extreme,” he says.
In the commodity market, the price of oil remains stable with a barrel of Brent above 96 dollars for the third consecutive session. For its part, the American West Texas is around 90 dollars.