Dow rose 187, advancers over decliners 3-2 & NAZ crawled up 13. The MLP index was fractionally higher in the 116s & the REIT index fluctuated in the 352s. Junk bond funds hardly budged in price & Treasuries were in demand. Oil went up in the 37s & gold fell 6 to 1958.
| CL=F | Crude Oil | 37.28 | -0.02 | -0.1% |
| GC=F | Gold | 1,958.10 | | -6.20 | -0.3% |
The cost of US goods & services rose sharply in Aug for the 3rd month in a row, but the increase mostly stemmed from a rebound in prices after a steep decline early in the coronavirus pandemic. Overall inflation is still quite low. The consumer price index (CPI), a measure of the cost of living, rose 0.4% last month, the gov said. The biggest spike in the cost of used cars & trucks in more than a ½-century accounted for more than 40% of the increase in the index. The forecast called for a 0.3% advance in the CPI & the increase in Aug followed back-to-back 0.6% advances in Jul & Jun. Yet the cost of most goods & services had declined in the first 3 months of the pandemic aside from certain items such as toilet paper or meat that were in either high demand or short supply. Even after 3 straight monthly increases in the CPI, inflation remains low. The increase in consumer prices over the past 12 months moved up to 1.3% from 1%. By contrast, the yearly pace of inflation was much higher at 2.5% at the start of 2020. Another closely watched measure of inflation that strips out food & energy also rose 0.4% last month. The yearly increase in the core rate edged up to 1.7% from 1.6%. A sharp increase in the cost of used cars & trucks was the biggest contributor to the rise in consumer prices last month. They jumped 5.4% to mark the largest gain in 51 years, an exaggerated increase that should fade soon. Over the past year used-vehicle prices have risen less than 1%. The cost of gasoline, meanwhile, rose a smaller 2% in Aug after bigger gains earlier in the summer. Gasoline is much cheaper now than it was a year earlier, however. Notably, grocery prices fell. They surged in the first few months of the pandemic as Americans stocked up, but prices have since leveled off. Even after these recent increases, consumer prices are little changed from earlier in the year. Companies don't have the ability to raise prices much with the economy still recovering from the shutdowns earlier in the year & Ms of Americans still out of work. Inflation is still running well below the Federal Reserve's 2% target & is not expected to pose a problem to the economy until the pandemic subsides. The Fed plans to keep interest rates extremely low for at least the next year or 2, a strategy it can afford to pursue given the low rate of inflation.
The British gov has opted to press on with a controversial bill that could ultimately undermine a Brexit divorce deal it signed last year, despite an ultimatum & the threat of legal action from the EU. The stakes are getting higher between both sides after the UK gov published plans that, if legislated, could alter legally-binding Brexit agreements with Brussels. The UK's Internal Market Bill would grant the British gov powers to not consult the EU in state aid cases involving the trade of goods between Northern Ireland & the rest of the EU. The UK had agreed to do the opposite when signing its divorce deal with the EU in Jan. The bill would also potentially change requirements that Northern Irish firms complete export summary declarations when shipping goods to the mainland. The shock move from Westminster could break intl law & jeopardize not only a trade deal with the EU, but also with the US. In an emergency meeting yesterday, European officials told the UK gov to amend its plans “in the shortest time possible and in any case by the end of the month.” “By putting forward this Bill, the UK has seriously damaged trust between the EU & the UK. It is now up to the UK gov to re-establish that trust,” the EU said. It is a precondition for the EU that the UK. respects previously legislated deals before concluding any trade agreement with the UK. Michael Gove, who represented the UK gov in that meeting, said the British Cabinet “would not be withdrawing” the new legislation plans. He added that the Internal Markel Bill does not override previous commitments. The EU disagrees & said it “will not be shy in using” all the available legal means if the U.K. goes ahead with the bill in its current form.
Brexit trade talks in doubt as Britain brushes off ultimatum from Brussels
The UK economy grew 6.6% in Jul on a monthly
basis, according to initial estimates, as the economy
seeks to recover from the sharp downturn caused by coronavirus-induced
lockdown measures. Jul's estimated growth in GDP was broadly in line with expectations, with the forecast calling for a monthly expansion of 6.7%, & follows growth of
8.7% in Jun & 2.4% in May, following a record 20% plunge in Apr. The
data from the Office for National Statistics (ONS) showed a decline of
11.7% compared to the same period last year, slightly below expectations
of an 11.4% contraction. “While it has continued steadily on the
path towards recovery, the UK economy still has to make up nearly half
of the GDP lost since the start of the pandemic,” ONS Director of
Economic Statistics Darren Morgan said. UK GDP in Jul was 18.6% higher than its Apr 2020 low, but remained 11.7% below the pre-pandemic levels seen in Feb. The country's emergence from lockdown measures & reopening of pubs &
restaurants in recent months meant that activity in the accommodation & food services sector surged 140.8% month-on-month in Jul, helping
total services output to a 6.1% expansion.
UK economy grew 6.6% in July as gradual recovery continues
Stocks opened higher but buyers remain cautious. Without dramatic news they are pretty much staying on the sidelines. A rally for the Dow in the first hour faded & tech stocks on NAZ are not finding many friends. The NAZ is down about 10% from its record high of 12K in early Sep.
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