Even though the Fed seems to have pivoted clearly toward the employment side of its dual mandate rather than the inflation one, the August CPI inflation report on Wednesday will be important to assess the degree of ongoing disinflation.
On that score the deflationary pressures from overseas remain powerful, with China recording deep annual producer price deflation of 1.8% once again last month and a meagre consumer price inflation rate of just 0.6% that also missed forecasts.
Commodity markets are doubling down on that disinflation. Even though oil prices had a toehold on Monday, U.S. crude remains below $70 per barrel after hitting a 15-month low on Friday and is still recording year-on-year declines of more than 20%.
U.S. market inflation expectations are falling fast.
The 10-year ‘breakeven’ inflation view embedded in inflation-protected Treasuries is now at just 2.04% – its lowest since January 2021. The two-year equivalent is just 1.87% – well below the Fed’s 2% target and raising the risk that significant undershoot of that goal may be in store.
The New York Fed publishes its August survey of household inflation expectations later on Monday.
Back in politics, the U.S. election race heats up again this week with Tuesday’s first televised debate between U.S. Democratic presidential candidate Kamala Harris and Republican challenger Donald Trump.
The stakes remain high as national opinion polls show the two neck and neck again after a brief period in which Harris gained the ascendancy following her nomination.
A poll conducted by The New York Times and Siena College released on Sunday showed the two effectively tied, with Trump up one percentage point – 48%-47% – over Harris.
The PredictIt betting site has them in a dead heat again too.
In Europe, former ECB chief and Italian Prime Minister Mario Draghi delivered his long-awaited report into reforming Europe’s economy, urging the European Union to adopt a more coordinated industrial policy, more rapid decisions and massive investment if it’s to keep pace with the United States and China.
In company news, all eyes will be on Apple’s new iPhone series later on Monday. Its stock was indicated up 1.6% ahead of the bell, alongside most of the other Big Tech megacaps.
The Financial Times newspaper reported on Saturday that the latest iPhone’s A18 chip, which is set to be unveiled at Monday’s event, has been developed using Arm’s newest V9 chip design.
And Boeing shares rose 3% in U.S. premarket trading after the planemaker reached a tentative deal with a union in the U.S. Pacific Northwest that could avoid a possible crippling strike later this week.
