Key Takeaways
- U.S. Core PCE Price Index rose to 2.8% year-over-year in June, exceeding expectations and indicating persistent inflationary pressures above the Federal Reserve's 2% target.
- China has paused new investments in U.S.-focused companies amid ongoing trade tensions, as reported by Nikkei, signaling a potential escalation in the economic conflict.
- Iran has warned European powers it may withdraw from the Nuclear Non-Proliferation Treaty (NPT) if UN sanctions are reimposed, raising significant geopolitical concerns.
- Comcast (CMCSA) projects approximately $1 billion annually in cash tax benefits from a new tax provision for several years.
- Canada's GDP contracted by 0.1% month-over-month in May, marking the second consecutive monthly decline, though a rebound is anticipated for June.
The financial news landscape on Thursday is dominated by a mix of key economic data releases and escalating geopolitical tensions. Inflation remains a central concern for the U.S. economy, while trade relations between the U.S. and China continue to sour. Meanwhile, Iran's nuclear program and the ongoing conflict in the Middle East are adding to global instability.
U.S. Inflationary Pressures Persist
The U.S. Core Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve's preferred inflation gauge, increased by 0.3% month-over-month in June, aligning with expectations. On a year-over-year basis, core PCE rose to 2.8%, surpassing the estimated 2.7% and the previous month's revised 2.8% (initially 2.7%). The broader PCE Price Index also saw a 0.3% monthly increase and a 2.6% year-over-year rise, exceeding the 2.5% estimate. These figures suggest that inflation remains elevated, potentially influencing the Federal Reserve's monetary policy decisions. Some analysts indicate that tariffs are beginning to be passed on to consumers, contributing to rising goods inflation.
In related economic news, U.S. Personal Income and Spending both increased by 0.3% month-over-month in June, with personal income reaching $71.4 billion and personal consumption expenditures increasing by $69.9 billion. The Employment Cost Index (ECI) for Q2 rose by 0.9%, slightly above the 0.8% estimate. Initial jobless claims for the week ending July 26 saw a slight increase to 218,000, up from the previous week's 217,000, but still below expectations of 224,000, indicating a relatively robust labor market. Continuing claims were reported at 1.946 million, slightly lower than the estimated 1.953 million.
Escalating U.S.-China Trade Tensions
Reports from Nikkei indicate that China has halted approvals for outbound investments by companies seeking to establish or expand operations in the United States. This move comes amidst an ongoing trade war and suggests a deepening of economic friction between the two global powers. The pause in investment could have significant implications for businesses operating in both countries and for global supply chains. Previous reports indicated that U.S. companies have already cut investments in China to record lows due to tariffs and trade tensions.
Geopolitical Instability in the Middle East
Iran has issued a stark warning to European powers, stating it may withdraw from the Nuclear Non-Proliferation Treaty (NPT) if UN sanctions are reimposed. This threat follows recent talks in Istanbul and comes as European nations consider triggering a "snapback" mechanism that would reinstate international sanctions. Such a withdrawal would significantly escalate tensions surrounding Iran's nuclear program and could have far-reaching implications for global security.
In other regional developments, the Portuguese government is considering recognizing the State of Palestine in September. This potential move aligns with a broader trend among some European nations to acknowledge Palestinian statehood.
Oil Market and Corporate News
BP (BP) has confirmed that Azeri BTC crude oil arriving at the BTC Ceyhan terminal is returning to normal specifications. This follows earlier reports of contaminated oil at the terminal, which had raised concerns in the energy markets. BP is collaborating with Azerbaijan's SOCAR to manage any remaining off-specification oil.
In corporate news, Comcast (CMCSA) anticipates approximately $1 billion in annual cash tax benefits stemming from a new tax provision, which is expected to last for several years. Separately, HSBC has raised its target price for Meta Platforms (META) to $900 from $610, signaling a strong vote of confidence in the social media giant.
Canadian Economic Performance
Canada's Gross Domestic Product (GDP) declined by 0.1% month-over-month in May, matching expectations and marking the second consecutive monthly contraction. This slowdown was primarily driven by a decline in goods-producing industries. However, preliminary data suggests a 0.1% month-over-month increase in GDP for June, indicating a potential rebound. Additionally, Canada's payroll employment saw an increase of 15.3K in May, a positive shift from the previous month's decline of 6.2K.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.