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US inflation slams bonds, lifts shares

US inflation slams bonds, lifts shares

US CPI data released overnight shows core inflation crept over the US Federal Reserve’s 2% target in June. The higher than expected reading pushed bond yields higher again, and saw short-term interest rate markets back away from a 0.5% cut later this month. A positive statement on trade negotiations from Beijing helped lift US shares into the close, after earlier setting a new all-time high.

A spokesman from the Chinese Ministry of Commerce told reporters that trade negotiations will re-start on “a basis of equality and mutual respect”. There was no timetable announced. Commodity markets gave a muted response to the positive step, possibly reflecting the many obstacles to full agreement.

Despite the growth-positive news futures markets indicate a negative start to Asia Pacific share trading. China trade data may provide impetus today. Both imports and exports are forecast to decline, by 4.6% and 1.4% respectively. The negative expectations may mean regional markets are more likely to react to a positive surprise.

Currency markets remain calm. The imminent quarterly and half-yearly company reporting seasons around the globe could see this calm spread over other asset classes today.

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