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Morning Bid: Eyes switch to inflation vs elections, Powell up

A look at the day ahead in U.S. and global markets from Mike Dolan

After an intense month focused on election risk around the world, markets quickly switched back to the more prosaic matter of the cost of money - and whether disinflation is resuming to the extent it allows borrowing costs to finally fall.

Thursday's U.S. consumer price update for June is the key moment of the week for many investors - with the headline rate expected to have fallen two tenths of a percentage point to 3.1% but with 'core' rates still stuck at 3.4%.

With Federal Reserve chair Jerome Powell starting his two-pronged semi-annual congressional testimony later on Tuesday, the consensus CPI forecast probably reflects what the central bank thinks of the situation right now - encouraging but not there yet.

But as the U.S. unemployment rate is now back above 4.0% for the first time since late 2021, markets may look for a more nuanced approach from the Fed chair that sees it increasingly wary of a sudden weakening of the labor market as real time quarterly GDP estimates ebb again to about 1.5%.

There were some other reasons for Fed optimism in the lead up to the testimony.

The path U.S. inflation is expected to follow over coming years generally softened in June, amid retreating projections of price increases for a wide array of consumer goods and services, a New York Fed survey showed on Monday.

Inflation a year from now was seen at 3% as of June - down from the expected rise of 3.2% in May - and five-year expectations fell to 2.8% from 3%.

Crude oil prices are better behaved this week, too, falling more than 3% from the 10-week highs hit late last week and halving the annual oil price gain to 10%.

The losses on Tuesday came after a hurricane that hit a key U.S. oil-producing hub in Texas caused less damage than many in markets had expected - easing concerns over supply disruption.

Before Powell starts speaking later, there will also be an update on U.S. small business confidence for last month.

Zuckerberg surfed and drank beer on vacation, Musk: I prefer to work
After Meta CEO Mark Zuckerberg posted a video on his Facebook and Instagram accounts of his free time during the Independence Day holiday on the X platform, Musk said, "I prefer to work." Zuckerberg posted a video of himself surfing on a hydrofoil in a tuxedo, waving an American flag and drinking a beer, and wrote: "Happy birthday America." The video quickly went viral, and after greg shared it on the X platform, Musk replied: "I hope he continues to have fun on the yacht." I prefer to work." Musk, a workaholic, attended the 29th annual Barron Investment Conference in November 2022, where he said: "My workload went from 78 hours a week to 120 hours a week..." In 2018, he slept on the floor of the Gigafactory in Fremont in an effort to ramp up production of the Tesla Model 3.
Workers warn of additional walkouts unless demands are met
Members of the National Samsung Electronics Union stage a rally near the company's Hwaseong Campus in Gyeonggi Province, Monday, beginning a three-day strike. Korea Times photo by Shim Hyun-chul By Nam Hyun-woo The biggest labor union at Samsung Electronics initiated a three-day strike on Monday, threatening to disrupt the company's chip manufacturing lines unless management agrees to a wage hike and higher incentives. This marks the first strike by unionized workers in the tech giant's 55-year history. The National Samsung Electronics Union (NSEU) claimed that about 4,000 unionized workers from Samsung's plants nationwide participated in a rally at the company's Hwaseong Campus in Gyeonggi Province. Police estimated that approximately 3,000 union members were present at the rally. According to its own survey, the union reported that a total of 6,540 members expressed their intention to participate in the strike. They emphasized that disruptions in manufacturing are anticipated, with over 5,000 members from facility, manufacturing, and development divisions joining the strike. The comments seem to address market expectations that the walkout is unlikely to cause significant disruptions in the chipmaker's operations, largely because most manufacturing lines are automated. The union said that it may launch another strike for an undetermined period, unless management responds to the union’s demand. Since January, the union has been pressing management for a higher wage increase rate for all members, fulfillment of promises regarding paid leave, and improvements to incentive criteria. With negotiations at an impasse, the union announced on May 29 that it would launch a strike. The NSEU has some 30,000 members, accounting for 24 percent of all Samsung employees. Among the union members, about 80 percent work at the device solutions division, which manufactures semiconductors.
China's generative AI patents are far ahead of the US!
The World Intellectual Property Organization (WIPO) recently said that China filed 38,000 artificial intelligtion-related generative AI patents from 2014-23, while the United States filed 6,276 of the 50,000 patents filed by all countries. Of the 50,000 applications, 25 percent were filed last year.The top five inventor regions are: China (38,210 inventions), the United States (6,276 inventions), the Republic of Korea (4,155 inventions), Japan (3,409 inventions) and India (1,350 inventions).
Clear Check | Russian satellite disintegrated and hit GPS and Starlink satellites?
On June 27, the U.S. Space Command announced that a retired Russian satellite disintegrated in low Earth orbit on June 26, generating more than 100 pieces of debris, forcing astronauts on the International Space Station to hide for about an hour. The X-platform account of the International Space Station showed that shortly after 9 p.m. Eastern Time on June 26, NASA instructed the crew on the space station to hide in their respective spacecraft for safety because NASA learned in the morning of the 26th that a satellite disintegrated near the space station. About an hour later, the crew was allowed to leave the spacecraft and the space station resumed normal operation. There are rumors on social platforms that the satellite hit six U.S. GPS satellites after the disintegration and damaged 20 Starlink satellites developed by Space Exploration Technologies Corporation (SpaceX) led by Musk, triggering speculation that the relevant satellites were deliberately disintegrated.
The US and Australia will work to improve financial links in the Pacific region to counter China's influence
U.S. and Australian officials said on Monday (July 8) that both countries are committed to improving financial connectivity in the Pacific and strengthening banking services in the region to resist China's growing covetousness. According to Reuters, at the two-day Pacific Banking Forum co-hosted by the United States and Australia, Australian Assistant Treasurer Stephen Jones said that Canberra hopes to be the partner of choice in the Pacific region, both in banking and defense. "If there are countries acting in this region whose main goal is to promote their own national interests rather than the interests of Pacific island countries, we will be very concerned," Jones said at the first day of the forum in Brisbane. He made this comment when asked about Chinese banks filling the vacuum in the Pacific region. The report said that as some Western banks have interrupted their long-standing business relationships with banks in small Pacific island countries, while others are preparing to close their businesses, these Pacific island countries face many challenges and their ability to obtain US dollar-dominated banking business is limited. The report said that experts said that Western banks are taking de-risking actions to meet financial regulations, which makes it more difficult to do business in Pacific island countries. This in turn weakens the financial resilience of these island nations. At the same time, Washington is also stepping up efforts to support Pacific island nations in limiting China's influence. Brian Nelson, U.S. Treasury Undersecretary for Counterterrorism and Financial Intelligence, said, "We recognize the economic and strategic importance of the Pacific region, and we are committed to deepening engagement and cooperation with our allies and partners to enhance financial connectivity, investment and integration." The report said that neither the United States nor Australia has yet announced detailed plans at the forum, but comments from officials from both countries reflect the growing unease among Western countries that have traditionally had influence in the Pacific region about China's growing influence in the region.