July 15: Soft Inflation, Lower Yields

Research evidence excerpt

July 15: Soft Inflation, Lower Yields

UpdateMand sector dispersion stayed elevated (S&P 500: +0.4%; NASDAQ: +0.6%;

VIX: -5.0%). Communication Services led with a 2.8% advance, followed by

Consumer Discretionary at +1.4% and Financials at +0.7%, while Utilities and

Energy declined 1.0% and 0.8%, respectively. Large-cap technology

supported the benchmarks, though semiconductor shares remained under

pressure amid concerns that additional Chinese memory capacity could

weaken pricing power in parts of the AI supply chain. Strong earnings from a

major US bank added support to financial shares, with equity trading and

underwriting revenues exceeding expectations. Brent and WTI both gained

1.2% to $85.74/bbl and $80.27/bbl as markets weighed renewed US-Iran

tensions and constrained product supply. Gold edged 0.2% higher to

$4,060.55/oz, while silver declined 1.5%.

• The dollar weakened after the PPI release as lower Treasury yields

reduced near-term Fed tightening expectations (DXY: -0.4%). GBP led G10

gains (GBP/USD: +1.1%) and EUR/GBP declined 0.7% after reports that

incoming UK Prime Minister Andy Burnham was expected to appoint

Shabana Mahmood as chancellor rather than a candidate perceived as less

fiscally conservative. EUR/USD gained 0.4%, while AUD/USD and NZD/USD

strengthened 0.4% and 0.6%, respectively, in line with the broader

improvement in risk sentiment. JPY was little changed against USD (USD/JPY:

-0.0%) even as Japanese yields declined through most of the curve,

reflecting persistent carry demand and continued debate over the pace of

BoJ normalization. CHF strengthened 0.5% against USD, while CAD gained

only 0.1% after the Bank of Canada left its policy rate unchanged at 2.25%

and delivered a somewhat dovish assessment of remaining economic slack.