By Mike Dolan
LONDON (Reuters) – What matters in U.S. and global markets today
By Mike Dolan, Editor-At-Large, Finance and Markets
Despite the edgy political and policy backdrop, world markets seem to be doing just fine, eking out new records for stocks as bonds are being bought to boot.
I’ll discuss all the market news below, and then I’ll explore how the Trump administration’s push to reform the Fed might have deeper and longer-lasting impacts than the removal of Jerome Powell.
Today’s Market Minute
* Japan’s election outcome may put the central bank in a double bind as prospects of big spending could keep inflation elevated while potentially prolonged political paralysis and a global trade war provide compelling reasons to go slow on rate hikes.
* A growing number of European Union member states, including Germany, are considering using wide-ranging “anti-coercion” measures targeting U.S. services if the EU cannot reach a trade deal with U.S. President Donald Trump, EU diplomats say.
* If U.S. President Donald Trump’s public attacks on Federal Reserve Chair Jerome Powell have achieved one thing, it has been to thrust the issue of central bank independence firmly into the spotlight. But this raises the question, what does ‘independence’ really mean? Read the latest from ROI markets columnist Jamie McGeever.
* The European Union’s latest effort to restrict Russia’s oil revenue is unlikely to hurt Moscow’s war effort severely, leaving U.S. President Donald Trump’s threat of secondary sanctions one of the few remaining economic levers to pressure the Kremlin, writes ROI energy columnist Ron Bousso.
* A key difference in crude oil demand forecasts between this year and 2024 is that both OPEC and the International Energy Agency are being far more cautious in their growth expectations. ROI Asia Commodities columnist Clyde Russell explains why this matters.
Markets oddly serene
U.S. tariff hikes are likely coming next week, public debt is rising and Federal Reserve independence is being questioned – but the U.S. and world economies seem to be chugging on regardless, well through the northern summer.
Annualized U.S. economic growth is running about 2.4% at midyear and U.S. economic surprise indexes are more positive than they have been for a couple of months, with global equivalents at their most positive in more than a year. U.S. financial conditions indexes are the loosest in three years.
With big-tech megacaps due to start reporting Wednesday with Alphabet and Tesla updates, the earnings season just unfolding is already ahead of low-bar expectations. With about 12% of S&P500 firms now reported, the blended estimate of annual profit growth is running at 6.7% – about a point faster than was seen at the start of July.