Morning Brief: Cooler PCE Boosts Rate-Cut Prospects; Microsoft Surges Over 15%

Core Snapshot

📊 Cooling US June Core PCE inflation eases near-term rate hike odds and fuels a broad US stock rally. Microsoft jumped more than 15% post-earnings, pushing the Nasdaq up 2.78%.

🛢️ Attacks hit a port near the Suez Canal, raising fears that the US-Iran conflict could open a new front.

I. Market Outlook

Key Catalyst

Cooler PCE revives rate-cut expectations: US June Core PCE rose 0.2% month-on-month and 2.6% year-on-year. The data reduces pressure on the Fed to hike rates in the short run, prompting markets to reassess odds of a September increase.

Drone strikes target gas vessels at Egypt’s Damietta Port near the Suez Canal. Investors worry US-Iran tensions could spread to the Suez shipping route, one of Saudi Arabia’s last remaining viable oil export corridors.

WTI Crude fell 1.03% to $83.59/bbl; Brent Crude dropped 1.88% to $89.03/bbl. Oil saw brief bounces, yet macro sentiment driven by PCE figures ultimately capped gains.

Exclusive Insight

Divergence among tech stocks intensified sharply. Microsoft rallied over 15% in a single session, while Apple slid 4% after hours. Microsoft’s performance proves AI capex can translate into revenue growth. Meanwhile, Apple’s selloff shows markets are less forgiving on valuations and AI execution even when earnings beat estimates.

Soft PCE data offers a temporary macro reprieve, yet the Suez Canal attack reminds investors geopolitical risks remain present.

II. Overnight Market Performance

— US Stocks: S&P 500 +1.66% to 7437.63; Nasdaq +2.78% to 25122.18; Dow Jones +1.19% to 52208.06. Microsoft surged over 15%, leading tech gains.

— European Stocks: Pan-European STOXX 600 +0.8% to 649.95. DAX +0.6%, CAC 40 +0.92%, FTSE 100 -0.1%.

— Fixed Income: 10-year US Treasury yield briefly climbed to 4.712% before retreating 4.5 bps to 4.667%.

— Commodities: September WTI Crude -1.03% to $83.59/bbl; Brent Crude -1.88% to $89.03/bbl. Spot Gold +0.81% to $4100.34/oz; Silver +2.07% to $58.9336/oz.

— Forex: US Dollar weakened across peers. EUR/USD +0.5% to 1.1532; GBP/USD +0.8% to 1.3476.

— Crypto Assets: Bitcoin rose over 1% to $64,700; Ethereum gained more than 0.6% to $1,920.

III. Macro Headlines

🛢️ Port near Suez Canal attacked, new conflict front feared between US and Iran

Two gas vessels came under drone attack at Egypt’s Damietta Port. Markets fear US-Iran hostilities may spread to the Suez Canal, a vital remaining export route for Saudi oil.

Insight: Conflict risks are extending from the Strait of Hormuz and Bab el-Mandeb toward the Eastern Mediterranean and Suez Canal. Threats to the waterway would sharply lift diversion costs for global energy trade.

💴 Reports: Japan and South Korea step into markets to defend currencies

Both authorities sold US dollars on Thursday to prop up their respective currencies. The South Korean won strengthened to 1418.0 versus USD, hitting the highest level since October. The Bank of Japan’s policy decision looms, with investors watching for potential policy adjustments.

Insight: Intervention arrived during a window of softer oil prices and a weaker dollar to stabilize currency expectations. The lasting impact hinges on US-Japan yield spreads and oil price trends.

📊 US Q2 growth slows to 1.5%, domestic demand stays resilient

A widening trade deficit dragged growth lower, though consumer spending and corporate investment linked to AI infrastructure remained robust. PCE data signals mild inflation pressure.

Insight: The mix of solid domestic demand, subdued inflation and steady rates creates a short-term supportive backdrop for risk assets. Still, strong import demand behind wider trade deficits represents lagging inflation pressure.

🇪🇺 Euro Zone Q2 GDP grows 0.4%, beating 0.2% consensus

Germany and France outperformed forecasts, pointing to a stronger European recovery than anticipated.

Insight: Obstacles for a September ECB rate hike are fading. Better economic fundamentals leave more room for action should energy shocks re-emerge.

📊 World Gold Council: Global gold demand reached 1,268.9 tonnes in Q2, flat YoY; central bank purchases offset lower investment demand

Insight: Structural central bank buying is the key pillar supporting gold above $4,000 despite elevated interest rates.

IV. Global Corporate News

📈 Microsoft jumps over 15% as cloud growth delivers AI returns

Microsoft stands out as a leading example of AI capital expenditure translating into revenue expansion. Easing capacity constraints and higher enterprise AI adoption drive momentum.

📉 Apple beats Q3 revenue estimates but falls 4% after hours

Revenue hit $109.42 billion above consensus, yet the after-hours decline signals stricter market scrutiny on valuations and AI rollout progress. Earnings beats alone can no longer sustain share gains for tech giants.

☁️ Amazon Q2 cloud revenue surges 37% to $42.2 billion, the largest rise in 18 quarters; company lifts full-year capex guidance

AWS posts its strongest growth in 18 quarters. Amazon emerges as another major beneficiary of AI revenue generation after Microsoft. Higher capex forecasts, however, signal near-term pressure on profit margins.

V. Key Focus Today

· US July University of Michigan Consumer Sentiment & Inflation Expectations: Monitor whether household inflation expectations cool following softer PCE data.

· Euro Zone July CPI: Critical data shaping market bets on an ECB September rate hike.

· Japan July Tokyo CPI and BOJ Policy Decision (Ueda Press Conference): Watch for policy signals following currency intervention.