US inflation shows first signs of tariff impact

Good morning. Here's what happened overnight and what you need to know today.

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1.

Tariff inflation?: US consumer prices increased by the most in five months in June, with the Consumer Price Index rising 0.3% from May and 2.7% from a year earlier, according to the Bureau of Labor Statistics. Core CPI, which excludes food and energy, rose 0.2% in June and 2.9% from a year earlier, in line with economists’ forecasts. The data showed inflation is beginning to pick up as prices for tariff-exposed goods such as appliances, furniture, toys and apparel posted some of the biggest gains in years. "Inflation has begun to show the first signs of tariff pass-through," said Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management. "While services inflation continues to moderate, the acceleration in tariff-exposed goods in June is likely the first of greater price pressures to come. The Fed will want to hold steady as it awaits more data." Traders now see only a slightly higher than 50% chance of a Fed rate cut in September. That pushed the 30-year Treasury yield to 5%, the highest since early June. (Capital Brief)(US BLS)(Reuters)(Bloomberg)

2.

Earnings day: Executives from some of America’s biggest banks said the US economy showed signs of resilience in the second quarter, with JPMorgan, Citigroup and Wells Fargo all reporting better-than-expected profits. JPMorgan’s investment banking fees rose 7% to USD2.5 billion, Citigroup’s climbed 15% to USD981 million and Wells Fargo’s increased 8%. Citi’s markets revenue jumped 16% to USD5.9 billion, its best performance since 2020. JPMorgan also posted record second-quarter equity trading revenue. Card spending rose 7% at JPMorgan and 4% at Citi. Wells Fargo, however, cut its full-year net interest income forecast after falling short of Q2 estimates. Executives cited a rebound in dealmaking and trading as tariff fears calmed, but warned of continued risks from trade uncertainty, high fiscal deficits and inflation. Meanwhile, BlackRock topped USD12 trillion in assets but shares plunged in their worst earnings day in over a decade, despite reporting stronger-than-expected earnings. The fall was largely driven by weaker-than-expected client inflows after a USD52 billion withdrawal from a single institutional investor. (Capital Brief)(Bloomberg)(Reuters)

3.

Chip pivot: The Nasdaq hit a fresh record high after Nvidia shares rose over 4% on news the Trump administration will allow it to resume sales of H20 AI chips to China. Nvidia said it received assurances from the US government that export licences would be granted, reversing a block imposed in April. AMD also announced similar approval, with its shares closing 6.4% higher. The move came after CEO Jensen Huang met President Trump in Washington last week and amid broader US-China trade talks. Bitcoin and crypto stocks fell after House Republicans failed to advance three crypto bills due to internal revolt over stablecoin legislation. Meanwhile, Citigroup CEO Jane Fraser said the bank “may issue its own stablecoin” to enhance digital payments, with a particular focus on the tokenised deposit space. (Capital Brief)(Bloomberg)(WSJ)(Reuters)

4.

Trump’s power: President Trump appeared at the Energy and Innovation Summit in Pittsburgh, as American companies announced major AI and energy investments. The event is expected to include USD90 billion in investments in and around Pennsylvania. Google will reportedly pledge investments of USD25 billion in data centres across Pennsylvania and neighbouring states and sign a USD3 billion hydropower deal with Brookfield. Blackstone pledged USD25 billion for data centres and energy infrastructure in Pennsylvania and announced a joint venture with PPL Corp. Other expected pledges include USD15 billion from First Energy, USD6 billion from CoreWeave, USD5 billion from Energy Capital Partners and USD2.4 billion from Constellation Energy. Trump also announced a trade deal with Indonesia that includes a 19% US tariff on Indonesian goods and no tariffs on US exports. Trump said Indonesia also agreed to purchase USD15 billion in US energy, USD4.5 billion in agricultural products and 50 Boeing jets. (Reuters)(Capital Brief)

5.

Powell push: US Treasury Secretary Scott Bessent suggested Fed Chair Jerome Powell should step down from the central bank’s board when his term as chair ends in May 2026. Powell’s term as governor runs to January 2028. Bessent told Bloomberg it would be “very confusing for the market” for a former Fed chair to remain on the board. He said, “traditionally, the Fed chair also steps down as a governor.” Powell has not said whether he plans to stay on as governor, complicating the administration’s planning to revamp the central bank next year. Bessent also confirmed “there’s a formal process that’s already starting” to identify a successor. Last month Bessent said a potential timeline could see a nominee named by October or November. President Trump has repeatedly criticised Powell over interest rates and he and his allies are using a USD2.5 billion HQ renovation to call for Powell’s resignation. Amid reports Trump’s calls is prompting investors to protect portfolios against the risk of higher inflation, JP Morgan CEO Jamie Dimon became the first head of a major US financial institution to address Trump attacks on Powell, describing the central bank’s independence as “incredibly important.” (Bloomberg)(Capital Brief)

6.

On the Block: Block Earner says it will become the first company in Australia to offer Bitcoin-backed property purchases when it opens an offering for home deposit loans as early as October. Co-founder and CEO Charlie Karaboga says the startup will offer deposit loans up to 60% of the Bitcoin's value, meaning a deposit loan of $200,000 will require about $330,000 worth of Bitcoin — about 1.85 tokens at this week's all-time-high price. The deposit loan service will formally launch in the fourth quarter, Karaboga said. But the company has already soft-launched the offering, supplying deposit loans and referring customers to a broker, Mortgage Direct, which connects them with a bank that provides the remaining mortgage. Come Q4, Karaboga says, Block Earner will finalise a partnership with a bank that will enable it to cut the middleman broker out. That will allow customers to apply for mortgages within Block Earner's app and track their property portfolio alongside their crypto. (Capital Brief)

7.

Iron’s hot: Google has quietly struck new deals with a string of digital and independent publishers, in some cases on significantly reduced terms, as Labor prepares to resume work on fresh laws aimed at forcing tech firms to pay for news. The Alphabet-owned advertising, search and artificial intelligence giant has squared away a series of one-year deals with news publishers, according to sources familiar with the agreements, amid ongoing delays to Labor’s proposed news bargaining incentive. The one-year terms represent a significant reduction on Google’s previous publisher deals, many of which were struck over three- or five-year periods. Google has reached agreements this year with Schwartz Media, publisher of The Saturday Paper and The Monthly, and Mamamia, as well as with Yahoo, Australian Community Media, Crikey publisher Private Media, and youth publisher Junkee. (Capital Brief)

8.

Afghan files: The UK government set up a secret multibillion-pound scheme to relocate thousands of Afghans to Britain after a data leak put them at risk of reprisals from the Taliban — and gagged the media with a super-injunction, the Financial Times reports. The database was inadvertently leaked in February 2022, but the breach was only discovered 18 months later in August 2023. It is unknown whether the Taliban has obtained the potentially deadly data. A London court lifted the super-injunction shortly after 12pm on Tuesday UK time, allowing the FT and other media groups to report on the affair. Officials were estimating that they would have to relocate 25,000 victims of the breach at a cost of £7 billion ($14.4 billion) according to court records. This week, the Ministry of Defence insisted that the real estimate had only ever been £2 billion. (FT)