US inflation eases as bank earnings lift Wall Street

Market Commentary

US equities advanced on Tuesday after softer-than-expected inflation data reduced expectations of a Federal Reserve interest rate hike this month, while markets also responded to developments in the Middle East after US President Donald Trump withdrew plans to impose a 20% fee on cargo transiting the Strait of Hormuz under US military protection.

The S&P 500 and Nasdaq 100 gained up to 0.50%, while the Dow Jones Industrial Average recovered from earlier losses to trade slightly higher. US annual inflation slowed to 3.50% in June from 4.20% in May, below market expectations of 3.80%, while core inflation eased to 2.60%. Consumer prices declined 0.40% month-on-month, marking the largest monthly decline since April 2020.

Financial shares led gains following the start of the US earnings season. JPMorgan climbed 3% after reporting its strongest profit on record, while Bank of America and Citi each gained more than 2%. Goldman Sachs surged more than 7% after exceeding earnings expectations. Technology shares also recovered, with Micron and Sandisk rising 4% each and Nvidia adding 1%. IBM, however, tumbled 25% after missing earnings expectations and warning of weaker client spending as investment shifted towards artificial intelligence chips and memory.

European markets also finished higher after the US inflation data eased concerns about further monetary tightening. The Euro STOXX 50 gained 0.20% and the STOXX Europe 600 rose 0.10%, with banks benefiting from improved credit conditions following lower sovereign bond yields. Schneider Electric advanced 1.70%, Siemens Energy gained 3%, while ASML rose 0.70% ahead of its earnings release. Germany's DAX 40 ended 0.19% higher, supported by utilities, banks, retailers and technology stocks, while France's CAC 40 added 0.09%. The UK's FTSE 100 edged higher. Energy, financial, and mining shares outperformed.

Asian markets ended mostly firmer, supported by stronger-than-expected Chinese trade data and a rebound in technology shares. The Shanghai Composite climbed 1.36% after China's June exports and imports both exceeded expectations, while the Hang Seng gained 0.50% on optimism surrounding trade and the Hong Kong IPO market. Japan's Nikkei 225 rose 0.74% as semiconductor shares rebounded, led by SoftBank Group, Advantest and SCREEN Holdings.

South African equities closed higher on Tuesday, with the FTSE/JSE All Share Index rising 0.52% and the Top 40 gaining 0.63%. Resource shares outperformed, with the Resource 10 Index advancing 1.57% and the Metals and Mining Index adding 1.45%, while the Financial 15 Index rose 0.23%. By 20h51 SAST, the rand had strengthened against the major currencies, trading at R16.38 against the US dollar, R21.91 against the British pound and R18.71 against the euro.

Commodity markets remained firm. By 20h09 SAST, Brent crude traded at $84.27 per barrel after earlier gains moderated due to the US abandoning its plans to impose a fee on cargo transiting the Strait of Hormuz. Oil prices were further supported as tensions in the Middle East persisted following further US strikes on Iranian military targets and reports that two oil tankers were attacked while transiting the Strait of Hormuz. Precious metals also advanced by 20h51 SAST, with gold rising to $4 049.97 per ounce, while silver and platinum both posted gains.