Bloomberg
“Highest Core Inflation in Decade Flattens Real U.S. Wage Growth.”
A gauge of U.S. consumer prices jumped by the most in a decade in July, eating into wage gains that have barely budged in the past four months and strengthening the case for the Federal Reserve to keep raising interest rates gradually.
The core measure of the Consumer Price Index, which excludes food and fuel, rose 2.4 percent from a year earlier, the biggest advance since September 2008, a Labor Department report showed Friday. From the prior month, both the main CPI index and core rate rose 0.2 percent — matching expectations.
While shelter costs gave a big boost to the results, steady consumer demand is underpinning inflation just as a trade war threatens to lift costs on a range of goods. Sustained progress toward the Fed’s goal keeps the central bank on track for one or two more rate hikes this year even as price pressures are a blow to already weak increases in paychecks.
A separate Labor Department report on Friday showed inflation-adjusted wages were unchanged in July from the previous month and dropped 0.2 percent from a year earlier. The lack of much real wage growth has become a contentious issue for Republicans and Democrats heading into midterm congressional elections in November.
The overall CPI gauge rose 2.9 percent in the 12 months through July, matching the survey median, the report showed. Core CPI was projected to advance 2.3 percent on an annual basis.
A 0.3 percent jump in shelter costs accounted for about 60 percent of the increase in the overall CPI last month, the Labor Department said.
Some items that posted big declines in June reversed course in July. Among them were hotel and motel rates, which rose 0.4 percent after a record decline of 4.1 percent in June. Airfares jumped 2.7 percent, the most since July 2013, following a 0.9 percent drop in June.
Apparel decreased again, dropping 0.3 percent after falling 0.9 percent the prior month.
The core CPI reading brought the three-month annualized gain to 2.3 percent, after rising 1.7 percent in June.
The Fed’s preferred gauge of inflation — a consumption-based figure that tends to run slightly below the Labor Department’s CPI — has been at or above the central bank’s 2 percent goal since March, though the related core index was still shy of the target. Fed officials see core inflation as a more reliable gauge of underlying price pressures.
Reuters
“Turkey turmoil spills over to Wall St., shaves 200 points off Dow.”
The Dow Jones Industrial Average fell more than 200 points on Friday amid a widespread selloff in global stocks as the Turkish lira tumbled due to concerns over the country’s economy and a deepening rift with the United States.
President Donald Trump doubled tariffs on aluminum and steel imports from Turkey, deepening the currency’s losses and raising concerns that the crisis could weigh on other economies.
Investors fled to safe-haven assets, with the dollar rising to a 13-month high and U.S. bond yields slipping to a three-week low.
Ten of the 11 major S&P sectors were lower, with bank stocks .SPX taking the biggest hit.
“Banks are leverage plays on the global economy. Anytime there’s a sniff of contagion they will be weak,” said Michael Antonelli, managing director, institutional sales trading at Robert W. Baird in Milwaukee.
JPMorgan (JPM.N), Wells Fargo (WFC.N) and Bank of America (BAC.N) fell more than 1 percent, weighing the most on the benchmark S&P 500.
At 9:48 a.m. EDT the Dow Jones Industrial Average .DJI was down 158.88 points, or 0.62 percent, at 25,350.35, the S&P 500 .SPX was down 13.35 points, or 0.47 percent, at 2,840.23 and the Nasdaq Composite .IXIC was down 31.69 points, or 0.40 percent, at 7,860.09.
BBC News
“North Korea lashes out at US diplomats over sanctions.”
North Korea’s foreign ministry has lashed out at the US for not lifting sanctions against the country. It said it had made various goodwill gestures but the US was still following an «outdated acting script» and jeopardising any progress.
North Korea remains under a range of international and US sanctions over its nuclear programme and missile tests. South Korea says it has caught three companies importing coal and iron from North Korea in breach of UN sanctions.
The US wants full nuclear disarmament before sanctions on the North can be lifted. President Donald Trump and North Korean leader Kim Jong-un agreed in June to work towards denuclearising the Korean peninsula.
But the details of that process remain vague – North Korea did not commit to unilaterally giving up its nuclear weapons. Last week, a leaked UN report said the country had not stopped building weapons – which prompted the US to call on the international community to keep enforcing sanctions.
North Korea’s foreign ministry cited various conciliatory moves it said the country had made: halting missile tests, the return of the remains of US soldiers killed in the 1950-53 Korean War and the dismantling of a nuclear site.
Bloomberg
“Pound Hits One-Year Low as U.K. Growth Pickup Offset by Brexit.”
The pound stayed close to a more than one-year low against the dollar after data showing accelerating economic growth were offset by concerns about a no-deal Brexit.
Sterling was set for its fifth week of declines — its longest losing streak since January 2015 — amid continued fears that the divorce negotiations between the U.K. and the European Union may end without agreement. The U.K. economy grew 1.3 percent in the second quarter from a year earlier, matching the median economist forecast, while manufacturing expanded more than expected.
While the gross-domestic-product figures show an economy bouncing back from a weak start to the year, concerns that Prime Minister Theresa May’s government will have to fall back on to World Trade Organization rules with the EU have grown in recent weeks. International Trade Secretary Liam Fox has said the odds of leaving without a deal were 60 percent.
“It’s not a bad number from the GDP, but the pound is not going to care much as there is a lot more going on to cause its decline,” said Jordan Rochester, a currency strategist at Nomura International Plc. “The odds of a hard Brexit in market pricing remain high.”
The pound dropped as much as 0.7 percent to $1.2736, the lowest level since June 2017. Ten-year gilt yields fell as much as five basis points to 1.25 percent, the lowest level in almost three weeks.