Waiting for July US inflation data, investors are watching other indicators. During July producer price index (PPI) increased by 0.1 percent. (market expectations 0.2 percent), and the annual growth reached 2.2 percent. (expectations 2.3 percent). Slightly more favorable PPI data was enough for the markets – the S&P 500 index increased by 1.7 percent, and the NASDAQ index increased by as much as 2.5 percent.
As debt prices rose, yields on the 2-year US government bond fell 8 basis points yesterday, and the 10-year fell 6 basis points. The US dollar also weakened, the EUR/USD rate rose by about 0.6 percent. and reached a level of 1.1. While fears about the US economy have eased after poor US labor market data earlier in the month, today's inflation data could cause volatility. Markets expect inflation to remain unchanged at 3%, SEB Group's forecast is slightly more aggressive, expecting 2.9%. inflation.
The mood in Asia is worse than in the west. Chinese stocks were the biggest losers this morning, with the CSI 300 and HANG SENG indexes down around 0.6 percent. It is reported that Chinese bank loans to consumers and businesses have decreased for the first time in 19 years. Although interest rates are falling in the country, extremely low inflation is increasing the real cost of borrowing, so consumers are more inclined to repay existing loans than borrow more. This adds to fears that China's domestic consumption remains sluggish and that no action by the central government has yet stirred demand. Japan's NIKKEI 225 was unchanged this morning, but the yen remains volatile. The country's prime minister has announced that he will end his term in September, which has been marked by rising prices and political scandals. New Zealand's central bank surprised markets earlier than expected by cutting interest rates by 0.25 percent. point. As recently as May, the central bank threatened with possible further interest rate hikes, but now "as the facts change, we change our opinion", bank officials are changing the direction of interest rates.
