
US stocks finish higher as markets gyrate on Powell firing fears
Major equity indices had moved suddenly negative following reports that a dismissal could be imminent, but they recovered quickly once Trump ruled out firing Powell – for now.
Trump, who has bitterly attacked the Fed chair for months, said such a move was "highly unlikely" and that "I'm not talking about that" when asked if he would fire Powell.
All three major US indices finished the rollercoaster day higher, with the tech-focused Nasdaq ending at a third straight record.
"It's very clear that the market wants to go higher," said Adam Sarhan of 50 Park Investments, who described investor reaction to Trump's mixed messaging on Powell as typical of a bullish tilt.
"Every time we get bad news thrown at it, the market shrugs it off and continues to rally, including today," Sarhan said.
The Powell drama also jolted the Treasury and currency markets. The dollar retreated against the euro and other major currencies, although it recovered some of its losses after Trump denied he would fire Powell.
Besides the Fed drama, markets have also weighed Trump's myriad tariff actions amid worries about inflation. The US president has vowed numerous tariff increases on August 1 if trading partners fail to secure deals.
After the June consumer price index showed increased pricing pressure following US tariffs on Tuesday, the producer price index was unchanged on a month-on-month basis, cooling from growing 0.30 per cent in May.
But the Fed's "Beige Book" survey of economic conditions, however, pointed to increasing impacts from Trump's various tariffs.
Many firms said they passed along "at least a portion of cost increases" to consumers due to tariffs, while also expressing expectations that costs will remain elevated.
Among individual companies, Goldman Sachs jumped 0.90 per cent after quarterly earnings easily topped analyst estimates. CEO David Solomon predicted an uptick in dealmaking, pointing to greater "confidence level on the part of CEOs, that significant scaled industry consolidation is possible."
Ford slumped 2.90 per cent after disclosing that it would account for US$570 million in costs connected to fuel injectors in several models from recent years, including Bronco Sport vehicles from 2021 to 2024.
But Johnson & Johnson surged 6.20 per cent as it lifted its full-year forecast after quarterly earnings topped estimates. Analysts noted that the health care company also lowered its estimate for the cost hit from tariffs.
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Free Malaysia Today
3 minutes ago
- Free Malaysia Today
Pressure mounts on Fed chief Powell in tee up to GDP, jobs data
US Federal Reserve chair Jerome Powell and other central bankers have stressed patience as Donald Trump's tariffs risk a re-acceleration of inflation. (AFP pic) WASHINGTON : Federal Reserve (Fed) chair Jerome Powell and his colleagues will step into the central bank's boardroom tomorrow to deliberate on interest rates at a time of immense political pressure, evolving trade policy, and economic cross-currents. In a rare occurrence, policymakers will convene in the same week that the government issues reports on gross domestic product (GDP), employment and the Fed's preferred price metrics. Fed officials meet tomorrow and Wednesday, and are widely expected to keep rates unchanged again. Forecasters anticipate the heavy dose of data will show economic activity rebounded in the second quarter (Q2), largely due to a sharp narrowing of the trade deficit, while job growth moderated in July. The third marquee report may show underlying inflation picked up slightly in June from a month earlier. While the government's advance estimate of GDP for the quarter is projected to show an annualised 2.4% increase – after the economy shrank 0.5% in January-March – Wednesday's report will probably reveal only modest household demand and business investment. The median forecast in a Bloomberg survey calls for a 1.5% gain in consumer spending to mark the weakest back-to-back quarters since the onset of the pandemic in early 2020. A shaky housing market also weighed on Q2 activity. At the end of the week, the July jobs report is forecast to show companies are becoming more deliberate in their hiring. Employment likely moderated after a June increase that was boosted by a jump in education payrolls, while the unemployment rate is seen ticking up to 4.2%. Private payrolls are projected to rise by 100,000 after the smallest advance in eight months. Through the first half of the year, the pace of hiring by companies has eased compared with the 2024 average. The breadth of job growth has been relatively narrow as well. Separate figures out tomorrow are forecast to show job openings declined in June. A few Fed officials have started to raise concerns about what they see as a fragile job market, including two who've said they see merit in considering a rate cut now. Pressure is also mounting from outside the boardroom. President Donald Trump has been vocal about his desire to see Powell & Co lower borrowing costs for consumers and businesses. What Bloomberg Economics says: 'We think a consumer-led slowdown poses a risk to the outlook. While June retail sales beat expectations, that was likely a reflection of tariff-driven price increases in certain goods categories. 'Ultimately, the labour market – which we expect to continue weakening this year – will define the path of consumption,' said economists Anna Wong, Stuart Paul, Eliza Winger, Estelle Ou & Chris G Collins. The president has frequently chastised Powell for moving too slowly, while at the same time taking aim at his stewardship over construction cost overruns related to renovation of the Fed's Eccles Building headquarters in Washington. Powell and other central bankers have stressed the need for patience as the Trump administration's tariffs risk a re-acceleration of inflation. So far this year, since a variety of US duties on imports were imposed, price pressures have been modest. The government's personal income and spending report for June, due on Friday, is projected to show the Fed's preferred core inflation gauge accelerated slightly from a month earlier, indicating tariffs are only gradually being passed through to consumers. Further north, the Bank of Canada is also set to hold, keeping borrowing costs steady at 2.75% for a third consecutive meeting amid trade uncertainty, sticky core inflation, and an economy that seems to be handling tariffs better than many economists expected. Officials will release a monetary policy report, but it's not yet known whether they'll return to point forecasts or release multiple scenarios, as they did in April amid volatile US trade policy. Industry-based GDP data for May and a flash estimate for June are expected to point to a contraction in Q2. Prime Minister Mark Carney is pushing to get a trade deal done with Trump by Aug 1, but he and the country's provincial leaders have downplayed expectations, saying they're focused above all on getting a good agreement. On a global level, Trump's Friday deadline also takes centre stage, with several economies – including South Korea and Switzerland – still hoping to clinch trade agreements. Following talks between the US president and European Commission chief Ursula von der Leyen yesterday, the US and EU agreed to an understanding that will see the bloc face 15% tariffs on most of its exports. Meanwhile, US treasury secretary Scott Bessent and Chinese vice premier He Lifeng scheduled to start trade talks today in Stockholm. The two countries are expected to extend their tariff truce by another three months, the South China Morning Post reported, citing unnamed sources. Elsewhere, central bankers in Japan and Brazil are also likely to keep rates unchanged, while cuts are anticipated in South Africa, Chile, Ghana, Pakistan and Colombia. Investors will also watch for new International Monetary Fund's forecasts, global purchasing manager index readings, and a barrage of GDP and inflation data in Europe. Asia Asia's central bank highlight comes Thursday, with the Bank of Japan expected to hold its benchmark rate steady at 0.5%. Governor Kazuo Ueda's reaction to the US trade deal will be a focus after his deputy said the agreement boosted the likelihood of economic forecasts being met – a key condition for another rate hike. A slew of data will reflect the impact of Trump's tariff campaign. Trade figures are due from the Philippines, Hong Kong, Sri Lanka, Thailand, South Korea and Indonesia, while manufacturing PMI figures are due across the region. China gets two sets of July PMI data at the end of the week, with attention on whether the official gauge can edge higher for a third month and S&P Global's index can stay in the expansion zone. Industrial earnings – published yesterday – revealed a second straight month of declines, with authorities set to intensify their drive to rein in excessive competition that's dragging down prices and compounding the pain from US tariffs. Others releasing PMI statistics include Indonesia, South Korea, Malaysia, the Philippines, Thailand, Taiwan and Vietnam, all on Friday. Meantime, Australia gets Q2 data that's expected to show consumer inflation cooled a tad, which could give the Reserve Bank room to resume its rate cutting cycle when it next sets policy on Aug. 12. Pakistan's central bank may cut rates on Wednesday, two days before the country – and Indonesia – gets new inflation readings. Europe, Middle East, Africa Output and inflation data across Europe take centre stage. Economists in a Bloomberg poll expect Wednesday's figures to show euro-area GDP remained flat in the three months through June, after a 0.6% expansion in the first quarter. That performance was lifted by a frontloading in trade before Trump's expected announcement of global import duties. Among the bloc's biggest economies, Germany is forecast to see the worst performance, with output slipping 0.1% from the previous quarter. Spain is expected to keep growing by 0.6%, with France and Italy expanding just slightly. Smaller economies publish their numbers throughout the week, with Ireland – so often a wild card for the bloc's economy – kicking things off today. Meanwhile, inflation data for the euro area on Friday are set to confirm the European Central Bank's (ECB) confidence that it's been brought under control. Consumer prices are forecast to have risen 1.9% in July, less than the previous month's 2% and just below the central bank's goal. A measure of underlying inflation probably remained steady, at 2.3%. With most of Europe in vacation mode, only a single ECB speaker has a scheduled appearance – Spain's José Luis Escrivá, today – while results from the central bank's monthly survey of consumers' inflation expectations are due a day later, and its wage tracker comes on Wednesday. The Bank of England goes into a quiet period ahead of its Aug 7 rate decision, with economic releases on the UK agenda primarily linked to housing. Rate decisions are scheduled across Africa: A steep slowdown in inflation will likely see officials in Ghana lower borrowing costs by 250 basis points to 25.5% on Wednesday. Its real rate is the highest it's been since at least 2005, providing room for the central bank to deliver the biggest reduction in more than two decades. South Africa is set to extend its longest easing cycle since 2019 as inflation is anticipated to remain benign. Economists surveyed by Bloomberg expect the central bank to cut on Thursday by 25 basis points, to 7%. On the same day, Malawi's policymakers are poised to leave their key rate unchanged at 26% due to foreign-exchange constraints and persistent price pressures. A technical recession in Mozambique will probably convince policymakers to opt for further easing on Thursday to stimulate the economy. It has cut by 625 basis points since January 2024. watini, whose currency is pegged to the rand, will probably lower its benchmark by a quarter point on Friday, to 6.5%. Latin America Tomorrow, Chile's central bank is likely to deliver its first rate cut of 2025, opting for a quarter-point reduction to 4.75%. Consumer prices last month cooled more than expected and inflation is once again slowing in line with central bank forecasts, which have the headline reading back to the 3% target in 2026. Mexico's flash Q2 data posted on Wednesday should show Latin America's No 2 economy posting slight quarterly and year-on-year expansions amid the drag from Trump's trade and tariff policies. Most analysts see the second half of the year posing a greater challenge. In the region's second central bank rate decision of the week, Banco Central do Brasil is widely expected to draw a line under a seven-meeting, 450 basis-point tightening campaign and keep the key Selic rate at 15%. Recent inflation prints and near-term expectations are beginning to come down, but policymakers last month signaled that borrowing costs will likely remain steady for a long period. In Colombia, headline inflation is running above the top of BanRep's tolerance range and core readings remain stubbornly elevated, but policymakers probably saw just enough cooling in June's consumer price data to justify a quarter-point cut, to 9%. Peru on Friday kicks off consumer price reports for the region's big inflation targeting economies. The early consensus among economists is that July's annual reading will come in near June's 1.69% print.


The Star
32 minutes ago
- The Star
US-China set to meet with extension of tariff pause on the cards
STOCKHOLM/WASHINGTON: Top economic officials from the United States and China are set to renew negotiations Monday (July 28) -- with an extension of lower tariff levels on the cards -- as President Donald Trump's trade policy enters a critical week. Talks between the world's top two economies are slated to happen over two days in the Swedish capital Stockholm, and they come as other countries are also rushing to finalise deals with Washington. For dozens of trading partners, failing to strike an agreement in the coming days means they could face significant tariff hikes on exports to the United States come Friday, Aug 1. The steeper rates, threatened against partners like Brazil and India, would raise the duties their products face from a "baseline" of 10 per cent now to levels up to 50 per cent. Tariffs imposed by the Trump administration have already effectively raised duties on US imports to levels not seen since the 1930s, according to data from The Budget Lab research centre at Yale University. For now, all eyes are on discussions between Washington and Beijing as a delegation including US Treasury Secretary Scott Bessent meets a Chinese team led by Vice Premier He Lifeng in Sweden. While both countries in April imposed tariffs on each other's products that reached triple-digit levels, US duties this year have temporarily been lowered to 30 per cent and China's countermeasures slashed to 10 per cent. But the 90-day truce, instituted after talks in Geneva in May, is set to expire on Aug 12. Since the Geneva meeting, the two sides have convened in London to iron out disagreements. "There seems to have been a fairly significant shift in (US) administration thinking on China since particularly the London talks," said Emily Benson, head of strategy at Minerva Technology Futures. "The mood now is much more focused on what's possible to achieve, on warming relations where possible and restraining any factors that could increase tensions," she told AFP. Talks with China have not produced a deal but Benson said both countries have made progress, with certain rare earth and semiconductor flows restarting. "Secretary Bessent has also signalled that he thinks a concrete outcome will be to delay the 90-day tariff pause," she said. "That's also promising, because it indicates that something potentially more substantive is on the horizon." The South China Morning Post, citing sources on both sides, reported Sunday that Washington and Beijing are expected to extend their tariff pause by another 90 days. Trump has announced pacts so far with the European Union, Britain, Vietnam, Japan, Indonesia and the Philippines, although details have been sparse. An extension of the US-China deal to keep tariffs at reduced levels "would show that both sides see value in continuing talks", said Thibault Denamiel, a fellow at the Centre for Strategic and International Studies. US-China Business Council President Sean Stein said the market is not anticipating a detailed readout from Stockholm: "What's more important is the atmosphere coming out." "The business community is optimistic that the two presidents will meet later this year, hopefully in Beijing," he told AFP. "It's clear that on both sides, the final decision-maker is going to be the president." Sweden's Prime Minister Ulf Kristersson said both countries' willingness to meet was a "positive development". For others, the prospect of higher US tariffs and few details from fresh trade deals mark "a far cry from the ideal scenario", said Denamiel. But they show some progress, particularly with partners Washington has signalled are on its priority list like the EU, Japan, the Philippines and South Korea. The EU unveiled a pact with Washington on Sunday while Seoul is rushing to strike an agreement, after Japan and the Philippines already reached the outlines of deals. Breakthroughs have been patchy since Washington promised a flurry of agreements after unveiling, and then swiftly postponing, tariff hikes targeting dozens of economies in April. Denamiel warned of overlooking countries that fall outside Washington's priority list. Solid partnerships are needed, he said, if Washington wants to diversify supply chains, enforce advanced technology controls, and tackle excess Chinese capacity. - Reuters


The Sun
32 minutes ago
- The Sun
Europe braces for US troop withdrawals amid NATO uncertainty
BRUSSELS: After securing NATO's defence spending pledge to appease Donald Trump, Europe now awaits a crucial US decision on troop withdrawals. Washington is reviewing global military deployments, with reductions in Europe expected in the coming months. The move has unnerved allies, particularly amid fears that Russia may target a NATO member if the Ukraine war subsides. However, recent talks have eased tensions, with US officials assuring no sudden disruptions. 'We've agreed to no surprises and no gaps in the strategic framework of Europe,' said Matthew Whitaker, US ambassador to NATO. He expects the review to conclude by late summer or early fall. While past US administrations considered scaling back in Europe to focus on China, Trump has pushed harder for the continent to bolster its own defence. Analysts see withdrawals as inevitable but debate the pace. 'There's every reason to expect a withdrawal from Europe,' said Marta Mucznik from the International Crisis Group. 'The question is not whether it's going to happen, but how fast.' The Pentagon reports nearly 85,000 US troops in Europe, fluctuating since Russia's 2022 invasion. Officials anticipate gradual reductions rather than abrupt cuts, though key capabilities like air defences remain irreplaceable for now. Trump may first withdraw residual forces deployed by Biden after Russia's Ukraine invasion. While manageable, deeper cuts or base closures could trigger alarm. 'The kinds of defence investments by Europe may only be felt in real capability terms over many years,' said Ian Lesser from the German Marshall Fund. 'So the question of timing really does matter.' Despite Trump's tougher stance on Russia, analysts question the timing of any drawdown. Previous attempts to pull troops from Germany failed due to logistical and political hurdles. European diplomats remain cautiously optimistic but acknowledge unpredictability. Trade disputes or shifting priorities could still strain transatlantic ties. 'It seems positive for now,' said one diplomat. 'But what if we are all wrong and a force decrease starts in 2026? To be honest, there isn't much to go on at this stage.' - AFP