Morning Brief: U.S. June CPI cooled sharply, slashing market odds of a July Fed rate hike

Core Snapshot

📊 U.S. June CPI rose 3.5% YoY, logging its first month-on-month decline since 2020. Markets priced the chance of a July rate hike down from 41.7% to just 12.3%.

🏛️ Fed Chair Walsh maintained a zero-tolerance stance on sticky high inflation, yet offered zero forward guidance on the interest rate path.

📈 U.S. tech names rallied to lift the Nasdaq 0.90%. SK Hynix’s U.S. ADR surged 27.29%, recouping nearly all of its prior session losses.

I. Market Outlook

Key Catalysts

U.S. inflation printed far cooler than consensus estimates, triggering a sharp repricing of Fed policy. Treasury yields and the U.S. dollar retreated broadly as traders bet the Fed would stand pat in July.

Washington scrapped the proposed 20% transit tariff for the Strait of Hormuz, but kept full maritime blockades on Iranian ports intact. Persistent geopolitical risk premiums kept crude oil supported for a modest bounce.

Exclusive Insight

The latest cooling in inflation stems almost entirely from temporary declines in energy costs and lacks lasting momentum. Near-term hawkish pressure has faded, yet rebounding oil prices could reignite inflation worries and revive September rate hike bets in the second half of the year.

II. Overnight Market Performance

— US Stocks: Dow Jones +0.02%, S&P 500 +0.38%, Nasdaq Composite +0.90%. The chip sector led the broad rally. SK Hynix ADR +27.29%, with Micron, SanDisk and Nvidia all posting robust gains.

— European Stocks: STOXX Europe 600 +0.2%. Major European benchmarks recovered after intraday downside pressure.

— Fixed Income: The 10-year U.S. Treasury yield fell 3.1 bps to 4.579%, driven by softer inflation prints.

— Commodities: WTI August crude +1.54%, Brent September crude +1.72%. Gold and silver climbed on a weaker U.S. dollar.

— Forex: DXY Index -0.35%. Most non-U.S. currencies edged higher against the greenback.

— Crypto Assets: Bitcoin broke above $64,000; Ethereum rallied more than 6%.

III. Macro Headlines

🏛️ Walsh stands firm on inflation fight, skips rate outlook clues

Walsh unveiled a sweeping overhaul of the Fed’s policy framework and reiterated his tough stance on elevated inflation, while deliberately avoiding any hawkish or dovish signals. Monetary policy will remain purely data-dependent moving forward.

🛢️ U.S. reshapes Hormuz policy, retains Iran maritime blockades

The U.S. replaced the planned transit tariff with large-scale investment pledges from Gulf Cooperation Council states, while sustaining full maritime pressure on Iranian coastal ports. Embedded geopolitical risk premiums continue to underpin oil prices.

📊 June CPI cools dramatically, July hike odds collapse

Plunging gasoline prices were the primary drag pulling headline inflation lower. While a July tightening move is effectively off the table, sticky core inflation and rebounding crude leave a meaningful probability of a September rate hike intact.

💰 Top Wall Street banks beat Q2 earnings consensus

Major U.S. lenders delivered outsized profit growth fueled by elevated market volatility and surging trading activity. Bank executives flagged lingering headwinds including geopolitical flashpoints and persistent inflation risks.

IV. Global Corporate News

💾 SK Hynix ADR stages a massive rebound: The semiconductor sector bounced back as Fed hike fears faded, fully reversing the prior session’s panic sell-off.

🤖 Walsh outlines AI’s long-term disinflationary impact: AI-focused capital expenditure will become mainstream, lifting productivity growth to ease inflation pressures over the long run.

📱 OpenAI readies consumer hardware launch: The firm plans to roll out a new smart speaker next year, with Apple’s intellectual property lawsuit posing a material launch risk.

V. Key Focus Today

· U.S. June PPI: Gauge whether disinflationary momentum extends through the production side of the economy.

· Fed Beige Book: Review on-the-ground economic conditions across all 12 Fed districts ahead of the July FOMC meeting.

· Bank of Canada Policy Rate Decision: Markets expect no change, though the oil price rebound will shape forward policy guidance.

· ASML Q2 Earnings: Validate whether demand for AI chip manufacturing equipment remains in an uptrend.