Stats Indicate Significant Uptrend Post Inflation Report

Stats Indicate Significant Uptrend Post Inflation Report

U.S. Consumer Price Inflation Report Shows Modest Increase

The July 2025 U.S. consumer price inflation report was released, revealing an annual CPI increase of 2.7%, slightly cooler than the expected 2.8%. The core inflation, which excludes food and energy, rose 3.1% annually, marking its highest level in five months [1][3][5].

The report's impact on the U.S. stock market and interest rates can be inferred from Federal Reserve reactions and market dynamics.

Interest Rates

The Federal Reserve kept the benchmark federal funds rate unchanged in July at 4.25% to 4.5%, despite inflation concerns. Most policymakers viewed inflation risks as a greater threat than employment risks. Fed minutes revealed tariff-driven inflation fears influenced their decision to hold rates steady rather than cut them [2]. The modest increase in inflation likely maintains pressure on the Fed to remain cautious on rate cuts in the near term.

Stock Market

A moderate rise in inflation, combined with the Fed maintaining rates steady, may temper stock market gains due to concerns about future tightening or less accommodative monetary policy. However, since the inflation rise was slightly cooler than forecast, markets could react positively if they believe inflation is stabilizing.

Key Market Developments

• The annual rate of growth by consumer prices in July remained unchanged at 2.7 percent.
• The U.S. dollar is trading at 148.02 yen and $1.1650 against the euro.
• Following the release of the report, CME Group's FedWatch Tool indicates a 90.1 percent chance the Fed will cut rates by a quarter point in September.
• Ladbrokes owner Entain fell nearly 3 percent despite reporting strong first-half results and lifting its full-year expectations.
• Swiss generics and biosimilar specialist Sandoz rose over 1 percent after partnering with Elawan Energy for 150MW solar projects in Spain.

Elsewhere, global markets saw mixed performances. European stocks are mixed, with the German DAX Index down, the U.K.'s FTSE 100 Index unchanged, and the French CAC 40 Index up. In Asia, China's Shanghai Composite Index rose half a percent, as the United States and China confirmed a 90-day extension of their trade truce. Australian markets eked out modest gains following a rate cut by the Reserve Bank of Australia. Japanese markets saw gains in tech stocks such as Advantest, Lasertec, and Tokyo Electron, while Seoul stocks ended lower for a third straight session.

In currency markets, the British pound gained against the euro and dollar after the release of labor market data. New Zealand's benchmark S&P/NZX-50 Index had its biggest single-day drop since late May, while U.S. index futures are pointing to a higher open on Tuesday. Gold futures are edging down $3.90 to $3,400.80 an ounce, and crude oil futures are falling $0.41 to $63.55 a barrel.

Reinsurer Hannover Re declined 1.3 percent despite reporting higher net income and reinsurance revenue in the first half of the year. Property investor and developer Derwent London tumbled 4.2 percent after announcing the retirement of Executive Director Nigel George. Valneva soared 8.2 percent in Paris after announcing a 37.8 percent increase in revenue for the first six months of the year. Spirax Group shares surged 13 percent after posting first-half 2025 earnings that beat expectations, while Recruiter Page Group declined 1.3 percent on reporting a 99 percent fall in first-half pre-tax profit.

Richmond Federal Reserve President Thomas Barkin is scheduled to speak on "Why the Consumer Matters," and Kansas City Federal Reserve President Jeffrey Schmid is due to speak on monetary policy and the economic outlook. Tech stock SoftBank Group surged nearly 7 percent to a record high following reports of a U.S. listing for its payments app operator PayPay. Retail sales in the U.K. rose by 2.5 percent year on year in July.

• The Federal Reserve's decision to maintain the benchmark federal funds rate could influence the stock market, as a steady rate may temper gains due to concerns about future tightening or less accommodative monetary policy.
• The moderate rise in inflation and the Fed's decision to maintain rates could potentially lead to a positive market reaction if investors believe inflation is stabilizing, as indicated by the slightly cooler than forecasted increase.

Read also: