US producer prices miss mark, markets cheer

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

1.

PPI drag: US producer prices increased by a weaker than expected 0.1% in July, falling short of the expected 0.2% rise as cheaper services tempered the impact of higher energy prices in the cost of goods. The Bureau of Labor Statistics said the PPI for final demand rose 0.1% in July, lower than the 0.2% increase in June. Services costs decreased 0.2%, offsetting a rebound in the prices of goods, which climbed 0.6%, the most since February, driven by a 1.9% increase in energy costs and a pickup in food costs. Over the past year, the Producer Price Index (PPI) rose 2.2%, down from June’s 2.7%. Economists saw the data as supportive of a rate cut by the Fed, although the wholesale inflation figures come ahead of the more closely monitored consumer price index, which is expected to show a modest 0.2% rise on Wednesday’s data. (Capital Brief)( US Bureau of Labor Statistics)(Reuters)

2.

Markets cheer: The stock market surged, and bond yields fell after producer price index (PPI) data for July showed slower-than-expected growth in factory-gate inflation. All three major US stock indices rose as the data reinforced expectations of an interest rate cut by the Fed in September, even as investors await tomorrow’s consumer price data for further signs of easing inflation. The S&P 500 rose 1.5% and the Nasdaq Composite was up more than 2.3%, driven by gains in tech stocks like Nvidia and Super Micro Computer. The bond market rallied, pushing yields lower, including the US 10-year Treasury benchmark down 5 basis points to 3.85%, according to Bloomberg. Markets, however, remained on tenterhooks with mixed economic signals, including higher recession odds being priced in by Wall Street banks and rising oil prices due to Middle East tensions. (Bloomberg)(The Wall Street Journal)

3.

Pivotal meetings: Treasurer Jim Chalmers’ calendar from 1 February to 31 May 2024 reveals discussions the nation’s top economic policymaker had with prominent CEOs, lobby groups, regulators and unions in the lead-up to Labor’s flagship announcements on manufacturing and gas policy. The digital calendar, obtained by Capital Brief under freedom of information laws, shows that among a string of typical parliamentary business and Chalmers’ regularly scheduled meetings with Treasury Secretary Steven Kennedy and RBA Governor Michele Bullock, there was a flurry of meetings with union bosses and some of corporate Australia’s top leaders. The meetings were ahead of the government’s announcements of the Future Made in Australia program, its gas strategy and the May budget. He met with Virgin’s then-CEO Jayne Hrdlicka shortly before her resignation announcement and had dinner with Nine Entertainment journalist James Massola in the lead-up to the budget. The schedule includes sessions with, among others, NAB CEO and Australian Banking Association chair Andrew Irvine, BHP CEO Mike Henry, Seven Group CEO Ryan Stokes and Business Council of Australia President Geoff Culbert. (Capital Brief)

4.

Crossbench leverage: Labor shelved plans to double the number of NT and ACT senators until after the election, despite having enough crossbench support to pass the proposal, Capital Brief reported. Sixteen of the 20 crossbench senators back the increase, but the government is delaying action due to lack of Coalition support. ACT Independent Senator David Pocock is urging the government to proceed while it has a favourable Senate, arguing the proposal, which requires only legislation, should be prioritised now. But Labour is thinking ahead, as Special Minister for State Don Farrell prepares to bring the government’s electoral reform package to Parliament next month. The government wants bipartisan backing for the bill, but the Coalition opposes truth-in-political-advertising laws and is sceptical of changes to donation disclosure requirements. Labor could then use the Senate representation increase as leverage with the crossbench, some of whom object to electoral spending caps. Finance Minister Katy Gallagher said the government’s focus is on transparency and donation limits. (Capital Brief)

5.

Google’s race: Alphabet’s Google unveiled new Pixel smartphones at its Mountain View campus on Tuesday in a shift from its usual October launch schedule, Reuters reported. The earlier release is Google's latest effort to stay competitive integrating AI features into its products and particularly, ahead of Apple’s planned launch of a new AI-powered phone in September. AI integrations will include a Pixel-exclusive feature for searching screenshots and the Gemini chatbot, which currently functions as an app overlay. Pixel 9 models, starting at USD799 ($1,204) will ship later in August, with the Pixel 9 Pro and Pro Fold arriving in September, Reuters reported. The company also announced new versions of its smartwatch, the Pixel Watch 3, and a new partnership with Peloton that will offer Fitbit Premium users access to Peloton’s training classes. (Reuters)

6.

Labour wrath: The United Auto Workers (UAW) union, one of the largest in the US, filed federal labour charges against former President Donald Trump and Tesla CEO Elon Musk, alleging they intimidated workers on Musk’s platform X. US media reported that the UAW, which has backed Kamala Harris, Trump’s presidential rival, for the presidency, claims Trump and Musk threatened employees involved in protected labour activities, such as strikes, during Monday’s live conversation on Musk’s X. “I look at what you do, you walk in and you just say, ‘You want to quit?’ They go on strike – I won’t mention the name of the company – but they go on strike, and you say, ‘That’s okay, you’re all gone. You’re all gone. Every one of you is gone,” Trump said. Musk is then heard laughing and responding “yeah.” The union is accusing both men of undermining workers' rights to strike and gain protections under federal labour laws. A Trump campaign official said the was a “political stunt intended to erode President Trump’s overwhelming support among America’s workers.” (CNN)(The Wall Street Journal)

7.

Outlook cut: Home Depot lowered its 2024 sales outlook, predicting a 3% to 4% decline in comparable sales, worse than the previously expected 1% decline for the year. The warning comes amid weak discretionary spending with consumers reluctant to spend on major home projects amid high interest rates and inflation. Home Depot’s second quarter comparable sales were 3.3% lower, the seventh straight quarter of declines, and a worse than the 2.7% decline expected by Wall Street’s expectations. Adjusted earnings per share were better than expected at USD4.67. “It’s simply a story of a deferral mindset among our customers who have the means to spend” but are just waiting for interest rates to come down before they do, Chief Financial Officer Richard McPhail told Bloomberg in an interview. Shares closed 1.23% higher, cheered by economic data. The fundamentals of the business remain strong, McPhail said, and the company will continue to invest in its professional business, supply chain and digital capabilities. (Bloomberg)(Home Depot)

8.

Latte leader: Starbucks taped the CEO of Chipotle Mexican Grill, Brian Niccol, as its new chief executive officer, taking over from Laxman Narasimhan, who stepped down after only 16 months, in a period marked by falling sales and mounting pressure from activist investors. The coffee chain's shares closed 24.5% higher after the announcement. Shares had fallen 20% this year amid sales declines. In April, Starbucks cut its financial outlook for the second time this year, due to slowed traffic at its cafes, competition, particularly in China, and rising coffee prices. Niccol, who led Chipotle since 2018, starts as CEO and executive chairman of the board on 9 September, the company said in a statement. He is credited with strong performance at the Mexican chain, despite a series of price increases. Chipotle's COO Scott Boatwright will act as interim CEO. The abrupt leadership shakeup comes after activist investors Elliott Investment Management and Starboard Value reportedly amassed stakes in the company. (Capital Brief)(Starbucks)