GLOBAL CAPITAL MARKETS OVERVIEW:  

U.S. stocks rebounded on Wednesday, with the Dow up 510 points, the S&P 500 up 2.1% to its highest since early May, and the Nasdaq up 2.8% as investors cheered weaker-than-expected inflation data, raising concerns about the Federal Reserve Expectations that the pace of monetary tightening may start to slow. Annual U.S. inflation fell to 8.5% in July 2022 from 9.1%, the highest in more than 40 years, as gasoline prices fell sharply. Core inflation, which smoothed out volatility in food and energy prices, also rose less than expected. Last week, a better-than-expected jobs report eased fears that the world's largest economy is about to fall into recession. Before then, there were signs that inflation could peak. On the corporate side, Disney's quarterly results are expected after the close. The S&P/TSX Composite rose 308 points, or 1.6%, to 19,886 on Wednesday, its highest since June 10, as investors assessed the latest U.S. CPI data and its implications for major central bank monetary policy decisions Impact. Annual U.S. inflation was well below expectations, easing concerns that the Federal Reserve was raising interest rates too much and supporting stocks in the Toronto heavyweight energy sector. Slowing demand for the U.S. dollar also boosted demand for gold, sending Canadian miners up more than 1% on average. Meanwhile, tech stocks followed the neighboring Nasdaq, leading gains with Shopify's gains of nearly 10%. The ruble-based MOEX-Russia index offset early losses on Wednesday, rising 0.7 percent to close at 2,150, opening a third session on the back of energy and tech stocks as investors waited for the closing bell to be announced soon after Domestic inflation data. Tatneft shares rose more than 3%, leading the oil sector higher as flows through the Druzhba pipeline to Central Europe resumed after Hungary's MOL settled shipping charges. Another reason to support the company was the announcement that its board of directors would meet next week to decide on the dividend. On the other hand, steel production giants Severstal, NLMK, and Mechel fell by more than 1%. Since Friday's slump, the MOEX index rose nearly 100 points on the delayed announcement that foreign investors would be allowed to re-enter Russian stocks. European stocks rebounded sharply on Wednesday, with the regional Stoxx 600 and the domestic DAX 40 up 1% and 1.1%, respectively, to their highest levels in two months. Real estate and consumer-related stocks rose strongly after data showed U.S. inflation slowed more than expected in July, easing expectations for a sharp interest rate hike by the Federal Reserve next month. Markets also reduced bets on the European Central Bank, raising interest rates at the end of the year following the news. Regarding individual share price movements, Aviva shares rose more than 10% to lead the Stoxx 600 higher after the company reported a 14% increase in operating profit for the first half of 2022. The FTSE MIB index rose 1% to close at 22,700 on Wednesday, erasing losses from the previous session and nearing a two-month high hit this week, as weaker-than-expected U.S. inflation data eased concerns over the Fed. Limit monetary policy expectations. Domestically, inflation was confirmed at 7.9%, down from a 36-year high in June, and may have peaked as energy prices fell. Technology and auto stocks surged on expectations of easing monetary tightening, with STMicroelectronics up 3.4% and Iveco Group up 4%. Milan's banking sector also posted sharp gains, with BPER Banca up 2.3%, as strong earnings results and the prospect of a merger with Banca Carige continued to support the stock. On Wednesday, the CAC 40 rose 0.5% above 6,500 points, its highest since early June, in line with European peers, after a weaker-than-expected U.S. inflation index weighed on expectations the Fed will raise rates by another 75 basis points in September. . Tech stocks in Paris benefited from gains on the Nasdaq overseas, with STMicroelectronics, World Line, Dassault Systèmes and Capgemini all gaining. On the other hand, Sanofi extended losses on Wednesday, closing down 8% after being downgraded by UBS and deciding to suspend its global hiring for late-stage studies on its multiple sclerosis drug. The FTSE 100 rose 19 points, or 0.3%, to 7,507, its highest since June 8. U.S. inflation came in below expectations, sparking a broad market rally. Meanwhile, insurer Aviva rallied on a new buyback program. The U.S. consumer price index rose 8.5% in July from a year earlier, below expectations for an 8.7% increase, easing the prospect of a sharp rate hike by the Federal Reserve in September. Aviva shares rose more than 10% on the corporate front, leading the index higher after the company said it planned to return more money to shareholders and reported a 14% increase in operating profit in the first half of 2022. Admiral Group was also up more than 10% after reporting results. Delivero was up 7%, with the food delivery company's chief executive saying its total order volume had recovered since the second quarter. China Shanghai Composite fell 0.54 percent to close at 3,230, while the Shenzhen stock market fell 0.87 percent to close at 12,224, its first decline in five sessions, as investors focused on the market's reaction to China's inflation data. China's consumer prices rose 2.7% in July from a year earlier, the fastest pace in two years, but below expectations for a 2.9% rise. Producer prices rose 4.2% to their lowest level in 17 months, missing analysts' forecast of 4.8%. Relatively tame inflationary pressures in mainland China supported the central bank's stance to keep policy accommodative as authorities try to support economic recovery in the face of rising global interest rates. Healthcare and consumer-related stocks led losses, with Wuxi Aptech (down 2.8%), Changchun High School (down 3.4%), BYD Corporation (down 3.6%), and Kweichow Moutai (down 1.8%) and Yibin Wuliangye (down 1.7%) Significant decline. Japan Nikkei 225 lost 0.65% to end at 27,819, while the broader Topix index fell 0.17% to close at 1,934 on Wednesday, falling for a second straight session, as Japanese tech stocks posted a disappointing update from major U.S. tech companies. Tracking Wall Street fell overnight after denting the sector's outlook. Investors are also bracing for U.S. inflation data that could shed light on how aggressively the Fed will tighten ahead. Losses in the tech sector were led by Tokyo Electron (-2.6%), Advantest (-3.6%), Lasertec (-3.5%), Keyence (-2%) and Sumco Corp (-3.4%). Other index heavyweights also fell, including Fast Retailing (down 2.7%), Kawasaki Kisen (down 1.2%), and Sony Group (down 2%). Meanwhile, Toyota Motor Corp rose 0.6% even as the automaker announced it would suspend some production operations due to the coronavirus in the workplace. Australia S&P/ASX 200 fell 0.53% to close at 6993 on Wednesday, retreating from a two-month high buoyed by tech shares and a2 milk after the FDA delayed imports of infant formula products to the US the impact of a sharp decline. Shares in the dairy producer fell 6.9% and 7.5% on the Australia and New Zealand exchanges, respectively. Australian tech companies also trailed their Wall Street counterparts, with Computershare (down 4.8%), Block Inc (down 6%), and Xero (down 3.8%) falling sharply. Mining, energy, and clean energy-related stocks also mostly fell on weaker commodity prices. Elsewhere, Commonwealth Bank of Australia fell 0.3 percent despite reporting strong annual earnings, as the bank warned that consumer demand would ease as borrowing costs rise. New Zealand NZX 50 fell 45.61 points, or 0.39%, to settle at 11,707.87 on Wednesday, after hitting a more than three-month high in the previous session, reflecting Tuesday as chip stocks fell and traders awaited U.S. inflation data later in the day. There was a pullback on Wall Street. Locally, data on Tuesday showed electronic card transactions in New Zealand fell 0.5% year on year, the first drop in nine months. Meanwhile, the latest data showed that the country's annual inflation surged 7.3 percent in the second quarter, the highest level in 32 years. The Reserve Bank of New Zealand is widely expected to raise rates by another 50 basis points at its Aug. 17 meeting. In China, annual inflation hit its highest level in two years in July, driven by soaring food prices. Chatham Rock Phosphate (-8.6%), General Capital Ltd (-8.3%) and Cannasouth Ltd (-4.9%) fell notably. Shares of a2 Milk Corp fell 7.5% after the U.S. Food and Drug Administration rejected the company's request to import infant formula products into the United States.

REVIEWING ECONOMIC DATA: 

Looking at the last economic data:

- US: The U.S. government budget deficit shrank 30 percent to $211 billion in July 2022 from $302 billion a year earlier, compared with the market’s expected $194 billion shortfall. Revenue rose 3% to $269 billion, while expenses fell 15% to $480 billion due to COVID-19 relief spending. As a result, the U.S. federal deficit is $726 billion in the ten months of fiscal 2022, 71% lower than the $2.54 billion in the same period in 2021.

- US: U.S. mortgage applications rose 0.2% in the first week of August, refinances rose 3.5%, while home purchase applications fell 1.4%. Meanwhile, the average rate on a 30-year fixed-rate mortgage rose four basis points to 5.47%. However, refinancings were down 82%, and home purchase applications were down 19% compared to the previous year. "Despite the strong job market, the homebuying market is slowing. Activity has declined in five of the past six weeks as homebuyers remain on the sidelines due to their ability to pay," said Joel Kan, MBA vice president. It's grim and skeptical about the strength of the economy."

- US: Annual U.S. inflation slowed to 8.5% in July 2022 from a 9.1% set in June, below consensus forecasts of 8.7%. After hitting a 42-year high of 41.6% in June, CPI rose 32.9%, mainly due to gasoline costs (44% vs. 59.9%), fuel oil (75.6% vs. 98.5%), and natural gas (3.5%). In addition, new car costs and airfare prices fell, but food price inflation increased, the largest increase since May 1979, vs. 10.

- US: U.S. wholesale inventories rose 1.8% from the previous month to $895.4 billion in June 2022, slightly slower than the 1.9% increase initially estimated after rising 1.9% the last month. It was the 23rd straight month of gains, with stocks of durable goods (2% and 2.1% in May) and nondurable goods (1.4% and 1.7%, respectively) gaining. Wholesale inventories rose 25.5% year over year in June, also slightly slower than the 25.6% increase earlier.

- RU: In July 2022, annual inflation in Russia fell to 15.1% from 15.9% the previous month, below market expectations of 15.3%. It was the lowest inflation rate since entering double-digit territory in March. However, food prices continued to rise sharply (16.8%), followed by non-food products (16.5%) and finally, services (10.8%). On a month-on-month basis, consumer prices fell 0.39%, extending the 0.35% drop in June and beating expectations for a 0.2% decline. On the other hand, core consumer prices continued to soar faster than headline inflation, up 18.4% from July 2021.

- SW: In June 2022, Swedish household consumption fell by 0.4% month-on-month, the first decline in five months. Compared to the previous year, consumption rose 3.9% after increasing 6.4% in May, with spending on entertainment and culture (18.4%) contributing the most, while expenditures for furniture, furniture, household equipment, and consumables fell 10%.

- SW: In June 2022, Swedish industrial output fell by 0.5% year-on-year, in contrast to the 0.3% rise in the previous month. The second drop in industrial output in the past six months was when manufacturing production fell (0.5% vs. 0.9%). Meanwhile, mining and quarrying production rebounded sharply (5.6% in April and -9.3% in April). As a result, industrial production rose 0.5% on a seasonally adjusted monthly basis, down from an upwardly revised 0.7% in May.

- IT: In July 2022, annual inflation in Italy fell to 7.9% year-on-year, down from a 36-year high of 8% the previous month and in line with preliminary estimates, suggesting inflation may have peaked. Energy prices fell (42.9% vs. 48.7% in June), mainly due to lower costs for regulated energy (47.9% vs. 64.3%) and recreational and cultural services (4.5% vs. 5%). On the other hand, the cost of processed food (9.5% vs. 8.1%) and transportation services (8.9% vs. 7.2%) continued to rise rapidly. As a result, core inflation, which excludes energy and unprocessed food, rose to 4.1% from 3.8% the previous month, while inflation excluding fuel jumped to 4.7% from 4.2%. In terms of monthly prices, consumer prices rose 0.4%, in line with previous estimates.

- GE: Annual inflation in Germany was confirmed at 7.5% in July 2022, slowing for the second month from 7.6% in June, as fuel relief programs have had a slight downward impact on headline inflation since June. The figure remains near a 40-year high, largely due to higher energy prices reflecting the impact of Russia's invasion of Ukraine. Energy costs (35.5% vs. 38%) and service costs (2% vs. 2.1%) fell, but food prices (14.8% vs. 12.7%) and rent (1.7% vs. 1.7%) rose faster. Prices of energy products rose sharply, especially heating oil (102.6%), motor fuel (23.0%), and natural gas (75.1%). Monthly consumer prices rose 0.9%, up from 0.1% in June. Compared with other European countries, the CPI rose 8.5% yearly and 0.8% month-on-month.

- CN: In July 2022, China's annual inflation rate rose to 2.7% from 2.5% in the previous month but was below market forecasts of 2.9%. This was the highest level since July 2020, with food prices rising at their highest level in 22 months as consumption strengthened further as Covid-19 conditions improved (6.3% versus 2.9% in June). Meanwhile, non-food inflation continued to rise (1.9% vs. 2.5%). Transportation and Communications (6.1% vs. 8.5%), Housing (0.7% vs. 0.8%), Education, Culture (1.5% vs. 2.1%), Clothing (0.7 vs. 0.6%), Household Goods and Services (1.4 vs. 1.5%) ) and healthcare (0.07 to 0.7%). China has set its CPI target for this year at around 3 percent, the same as in 2021. Consumer prices rose 0.5% month-on-month in July, the highest in five months, in line with market consensus, and were flat in June.

- CN: Producer price inflation in China fell to a 17-month low of 4.2% in July 2022 from 6.1% the previous month, below the market consensus of 4.8%. The latest data showed producer prices slowed for the 19th month, mainly due to extraction and raw materials. The cost of production fell further (5.9% vs. 7.5% in June), mainly due to extraction and raw materials. Consumer goods inflation stabilized at 1.7%, with further increases in food prices, consumer staples, and apparel. The producer price index fell 1.1% in July after remaining unchanged in June.

- JP: Producer prices in Japan rose 8.6% year-on-year in July 2022, compared with a market forecast of 8.4%, after rising 9.4% the previous month. While it was the 17th straight month of producer inflation, the latest data was the weakest since December amid signs that inflationary pressures from higher material costs are easing. Chemicals (10.9% vs. 11.0% in June), Oil & Coal (14.7% vs. 21.8%), Electric Motors (2.4% vs. 2.6%), Non-Ferrous Metals (9.8% vs. 16.2%), and Business-Oriented Machinery (flat reading) than 0.4%) prices softened. At the same time, the cost of steel rose by 27.2%, unchanged from June; while the prices of beverages and food increased faster (5.5% vs. 4.6%), transportation equipment (3.4% vs. 3.3%), metal products (11.1% vs. 10.9%) ), other manufacturing (3.9% vs. 3.7%) and general machinery (2.1% vs. 1.7%). The producer price index rose 0.4% month-on-month in July, down from an upwardly revised 0.9% in June.

LOOKING AHEAD:   

Today, investors will receive:

- USD: PPI m/m, Core PPI m/m, Unemployment Claims, Mortgage Delinquencies, Natural Gas Storage, and 30-y Bond Auction.

- CNY: M2 Money Supply y/y, and New Loans.

- NZD: Visitor Arrivals m/m

- GBP: RICS House Price Balance.
- AUD: MI Inflation Expectations.

KEY EQUITY & BOND MARKET DRIVERS:

- CA: Canadian 10-year government bond yields hovered around 2.7, near levels not seen in four months, as investors pared bets on rate hikes after data showed U.S. inflation slowed more than expected. In Canada, headline inflation rose to a 40-year high of 8.1% in June but fell short of market expectations and slowed more than expected on a monthly basis. The Bank of Canada surprised markets by raising its benchmark interest rate by 100 basis points in July while signaling further tightening to curb sky-high inflation. The Bank of Canada is expected to continue the tightening cycle, with further rate hikes likely before the end of the year.

- US: The 10-year U.S. Treasury yield fell sharply to 2.7%, near a four-month low of 2.5% hit earlier this month, as weaker-than-expected inflation data eased concerns that the Federal Reserve would extend its aggressive pace of tightening. U.S. consumer prices rose 8.5% annually in July, below expectations for an 8.7% increase, while core inflation surprisingly stagnated. Nevertheless, hopes of rising consumer prices have been glimpsed, prompting investors to reconsider the Fed's dovish pivot, backtracking on hawkish bets after last week's hot wage data.

- US: Stock futures contracts linked to the three major indexes rose about 2 percent on Wednesday as investors reacted to lower-than-expected inflation data, fueling speculation that the Federal Reserve may ease interest rates. Annual U.S. inflation fell to 8.5% in July 2022 from 9.1%, the highest in more than 40 years, as gasoline prices fell sharply. Core inflation, which smoothed out volatility in food and energy prices, also rose less than expected. Last week, a better-than-expected jobs report eased fears that the world's largest economy is about to fall into recession. But, before then, there were signs that inflation could peak. In regular trading on Tuesday, the Dow fell 0.2%, the S&P 500 lost 0.4%, and the tech-heavy Nasdaq lost 1.2%.

- AU: Australia's 10-year government bond yield was near 3.3% in August, rebounding from a near four-month low earlier this month, as investors weighed the prospect of a global slowdown, persistent inflationary pressures, and bets the central bank will continue to Raise the cost of borrowing. On August 2, the RBA raised the cash rate by 50 basis points to 1.85 percent and said the key rate would continue to rise to 3 percent in December. Still, there are concerns that a sharp rise in borrowing costs will hurt the economy. In April, the cash rate was much lower at 0.1%.

- EU: European futures posted losses on Wednesday, following their overseas counterparts. Investors remained cautious ahead of U.S. inflation data in the late afternoon that could provide further clarity on the size of the Fed's rate hikes next month. On the economic data front, the final estimate confirms that German inflation has slowed for the second month. The final assessment of Italian CPI is also due today. Meanwhile, earnings season remains in the spotlight, with reports from Ahold Delhaize, ABN Amro, E.On, TUI Group, and Delivero today.

STOCK MARKET SECTORS:

- High: Communication Services, Materials, Consumer Discretionary, Information Technology, Financials.

- Low: n/a

TOP CURRENCY & COMMODITIES MARKET DRIVERS: 

- CAD: The Canadian dollar was boosted by a weaker U.S. dollar after lower-than-expected U.S. inflation data reduced bets on a sharp rate hike by the Federal Reserve next month, breaking above the $1.28 mark, a 2-month high. Domestically, the central bank is expected to continue its tightening cycle and may raise interest rates further by the end of the year. The Bank of Canada surprised markets by raising its benchmark interest rate by 100 basis points in July while signaling further tightening to curb sky-high inflation. In June, annual inflation topped a 39-year high but rose less than market expectations.

- OIL: U.S. crude inventories rose by 5.458 million barrels in the week ended Aug. 5 to 432 million barrels, the highest level since December 2021, while the market expected a slight increase of 073,000 barrels. Crude inventories at Cushing, Oklahoma, rose by 723,000 barrels after an injection of 926,000 barrels in the previous period. Distillate stockpiles, which include diesel and heating oil, rose by 2.116 million barrels to 111.5 million barrels, compared with expectations for a decrease of 667,000 barrels. Meanwhile, gasoline inventories fell by 4.978 million barrels to 220.3 million barrels, compared with expectations for a decline of 633,000 barrels.

- USD: The dollar index fell below the 105-point mark for the first time in more than a month after a weaker-than-expected reading of U.S. inflation could lead the Federal Reserve to slow its aggressive policy tightening plans. Annual U.S. inflation fell to 8.5% in July 2022 from 9.1%, the highest in more than 40 years, as gasoline prices fell sharply. Core inflation, which smoothed out volatility in food and energy prices, also rose less than expected. At the U.S. central bank's next policy meeting in September, markets are now pricing in a 50-basis point upward revision.

- EUR: The euro jumped to $1.03 in mid-August, a level not seen in a month, as the dollar weakened slightly after U.S. inflation fell below expectations in July, easing concerns about a sharp Fed rate hike next month. Expected. Bets on a rate hike by the European Central Bank at the end of the year also eased. Reuters reported that December is now expected to rise by 105 basis points, compared with 111 basis points. The ECB is still set to raise borrowing costs by another 50 basis points in September. Despite these advances, the common currency has held up as inflation shows no signs of peaking, and the energy crisis is far from over. High energy prices have led to a broad rebound in consumer and producer costs, and fears of an impending economic crisis in Europe persist. Close to par.

- JPY: The yield on benchmark 10-year Japanese government bonds held below 0.2 percent in August, close to levels not seen since early March, as global recession fears and the Bank of Japan's ultra-prudent monetary stance helped boost demand for Japanese assets. The central bank has a yield-curve control policy under which it buys unlimited amounts of JGBs to defend the 0.25% cap and was forced to buy heavily in June when yields topped 0.25%.

- CNY: The offshore yuan fell to 6.77 against the dollar, weighed down by weaker-than-expected Chinese inflation data. China's consumer prices rose 2.7% in July from a year earlier, the fastest pace in two years, but below expectations for a 2.9% rise. Producer prices rose 4.2% to their lowest level in 17 months, missing analysts' forecast of 4.8%. Relatively tame inflationary pressures in mainland China supported the central bank's stance to keep policy accommodative as authorities try to support economic recovery in the face of rising global interest rates. However, the yuan remains vulnerable to wild swings amid a resurgence of the domestic coronavirus outbreak, risks to the real estate sector, and increasing tensions with the U.S. over Taiwan.

CHART OF THE DAY:

New Zealand NZX 50 fell 45.61 points, or 0.39%, to settle at 11,707.87 on Wednesday, after hitting a more than three-month high in the previous session, reflecting Tuesday as chip stocks fell and traders awaited U.S. inflation data later in the day. There was a pullback on Wall Street. Locally, data on Tuesday showed electronic card transactions in New Zealand fell 0.5% year on year, the first drop in nine months. Meanwhile, the latest data showed that the country's annual inflation surged 7.3 percent in the second quarter, the highest level in 32 years. The Reserve Bank of New Zealand is widely expected to raise rates by another 50 basis points at its Aug. 17 meeting. In China, annual inflation hit its highest level in two years in July, driven by soaring food prices. Chatham Rock Phosphate (-8.6%), General Capital Ltd (-8.3%) and Cannasouth Ltd (-4.9%) fell notably. Shares of a2 Milk Corp fell 7.5% after the U.S. Food and Drug Administration rejected the company's request to import infant formula products into the United States.

 

- New Zealand NZX 50  index - D1, Resistance (target zone) around ~ 12 410,  Support (consolidation) around  ~ 11 217

GLOBAL CAPITAL MARKETS OVERVIEW:   U.S. stocks rebounded on Wednesday, with the Dow up 510 points, the S&P 500 up 2.1% to its highest since early May, and the Nasdaq up 2.8% as investors cheered weaker-than-expected inflation data, raising concerns about the Federal Reserve Expectations that the pace of monetary tightening may start to slow. Annual U.S. inflation fell to 8.5% in July 2022 from 9.1%, the highest in more than 40 years, as gasoline prices fell sharply. Core inflation, which smoothed out volatility in food and energy prices, also rose less than expected. Last week, a better-than-expected jobs report eased fears that the world's largest economy is about to fall into recession. Before then, there were signs that inflation could peak. On the corporate side, Disney's quarterly results are expected after the close. The S&P/TSX Composite rose 308 points, or 1.6%, to 19,886 on Wednesday, its highest since June 10, as investors assessed the latest U.S. CPI data and its implications for major central bank monetary policy decisions Impact. Annual U.S. inflation was well below expectations, easing concerns that the Federal Reserve was raising interest rates too much and supporting stocks in the Toronto heavyweight energy sector. Slowing demand for the U.S. dollar also boosted demand for gold, sending Canadian miners up more than 1% on average. Meanwhile, tech stocks followed the neighboring Nasdaq, leading gains with Shopify's gains of nearly 10%. The ruble-based MOEX-Russia index offset early losses on Wednesday, rising 0.7 percent to close at 2,150, opening a third session on the back of energy and tech stocks as investors waited for the closing bell to be announced soon after Domestic inflation data. Tatneft shares rose more than 3%, leading the oil sector higher as flows through the Druzhba pipeline to Central Europe resumed after Hungary's MOL settled shipping charges. Another reason to support the company was the announcement that its board of directors would meet next week to decide on the dividend. On the other hand, steel production giants Severstal, NLMK, and Mechel fell by more than 1%. Since Friday's slump, the MOEX index rose nearly 100 points on the delayed announcement that foreign investors would be allowed to re-enter Russian stocks. European stocks rebounded sharply on Wednesday, with the regional Stoxx 600 and the domestic DAX 40 up 1% and 1.1%, respectively, to their highest levels in two months. Real estate and consumer-related stocks rose strongly after data showed U.S. inflation slowed more than expected in July, easing expectations for a sharp interest rate hike by the Federal Reserve next month. Markets also reduced bets on the European Central Bank, raising interest rates at the end of the year following the news. Regarding individual share price movements, Aviva shares rose more than 10% to lead the Stoxx 600 higher after the company reported a 14% increase in operating profit for the first half of 2022. The FTSE MIB index rose 1% to close at 22,700 on Wednesday, erasing losses from the previous session and nearing a two-month high hit this week, as weaker-than-expected U.S. inflation data eased concerns over the Fed. Limit monetary policy expectations. Domestically, inflation was confirmed at 7.9%, down from a 36-year high in June, and may have peaked as energy prices fell. Technology and auto stocks surged on expectations of easing monetary tightening, with STMicroelectronics up 3.4% and Iveco Group up 4%. Milan's banking sector also posted sharp gains, with BPER Banca up 2.3%, as strong earnings results and the prospect of a merger with Banca Carige continued to support the stock. On Wednesday, the CAC 40 rose 0.5% above 6,500 points, its highest since early June, in line with European peers, after a weaker-than-expected U.S. inflation index weighed on expectations the Fed will raise rates by another 75 basis points in September. . Tech stocks in Paris benefited from gains on the Nasdaq overseas, with STMicroelectronics, World Line, Dassault Systèmes and Capgemini all gaining. On the other hand, Sanofi extended losses on Wednesday, closing down 8% after being downgraded by UBS and deciding to suspend its global hiring for late-stage studies on its multiple sclerosis drug. The FTSE 100 rose 19 points, or 0.3%, to 7,507, its highest since June 8. U.S. inflation came in below expectations, sparking a broad market rally. Meanwhile, insurer Aviva rallied on a new buyback program. The U.S. consumer price index rose 8.5% in July from a year earlier, below expectations for an 8.7% increase, easing the prospect of a sharp rate hike by the Federal Reserve in September. Aviva shares rose more than 10% on the corporate front, leading the index higher after the company said it planned to return more money to shareholders and reported a 14% increase in operating profit in the first half of 2022. Admiral Group was also up more than 10% after reporting results. Delivero was up 7%, with the food delivery company's chief executive saying its total order volume had recovered since the second quarter. China Shanghai Composite fell 0.54 percent to close at 3,230, while the Shenzhen stock market fell 0.87 percent to close at 12,224, its first decline in five sessions, as investors focused on the market's reaction to China's inflation data. China's consumer prices rose 2.7% in July from a year earlier, the fastest pace in two years, but below expectations for a 2.9% rise. Producer prices rose 4.2% to their lowest level in 17 months, missing analysts' forecast of 4.8%. Relatively tame inflationary pressures in mainland China supported the central bank's stance to keep policy accommodative as authorities try to support economic recovery in the face of rising global interest rates. Healthcare and consumer-related stocks led losses, with Wuxi Aptech (down 2.8%), Changchun High School (down 3.4%), BYD Corporation (down 3.6%), and Kweichow Moutai (down 1.8%) and Yibin Wuliangye (down 1.7%) Significant decline. Japan Nikkei 225 lost 0.65% to end at 27,819, while the broader Topix index fell 0.17% to close at 1,934 on Wednesday, falling for a second straight session, as Japanese tech stocks posted a disappointing update from major U.S. tech companies. Tracking Wall Street fell overnight after denting the sector's outlook. Investors are also bracing for U.S. inflation data that could shed light on how aggressively the Fed will tighten ahead. Losses in the tech sector were led by Tokyo Electron (-2.6%), Advantest (-3.6%), Lasertec (-3.5%), Keyence (-2%) and Sumco Corp (-3.4%). Other index heavyweights also fell, including Fast Retailing (down 2.7%), Kawasaki Kisen (down 1.2%), and Sony Group (down 2%). Meanwhile, Toyota Motor Corp rose 0.6% even as the automaker announced it would suspend some production operations due to the coronavirus in the workplace. Australia S&P/ASX 200 fell 0.53% to close at 6993 on Wednesday, retreating from a two-month high buoyed by tech shares and a2 milk after the FDA delayed imports of infant formula products to the US the impact of a sharp decline. Shares in the dairy producer fell 6.9% and 7.5% on the Australia and New Zealand exchanges, respectively. Australian tech companies also trailed their Wall Street counterparts, with Computershare (down 4.8%), Block Inc (down 6%), and Xero (down 3.8%) falling sharply. Mining, energy, and clean energy-related stocks also mostly fell on weaker commodity prices. Elsewhere, Commonwealth Bank of Australia fell 0.3 percent despite reporting strong annual earnings, as the bank warned that consumer demand would ease as borrowing costs rise. New Zealand NZX 50 fell 45.61 points, or 0.39%, to settle at 11,707.87 on Wednesday, after hitting a more than three-month high in the previous session, reflecting Tuesday as chip stocks fell and traders awaited U.S. inflation data later in the day. There was a pullback on Wall Street. Locally, data on Tuesday showed electronic card transactions in New Zealand fell 0.5% year on year, the first drop in nine months. Meanwhile, the latest data showed that the country's annual inflation surged 7.3 percent in the second quarter, the highest level in 32 years. The Reserve Bank of New Zealand is widely expected to raise rates by another 50 basis points at its Aug. 17 meeting. In China, annual inflation hit its highest level in two years in July, driven by soaring food prices. Chatham Rock Phosphate (-8.6%), General Capital Ltd (-8.3%) and Cannasouth Ltd (-4.9%) fell notably. Shares of a2 Milk Corp fell 7.5% after the U.S. Food and Drug Administration rejected the company's request to import infant formula products into the United States. REVIEWING ECONOMIC DATA:  Looking at the last economic data: - US: The U.S. government budget deficit shrank 30 percent to $211 billion in July 2022 from $302 billion a year earlier, compared with the market’s expected $194 billion shortfall. Revenue rose 3% to $269 billion, while expenses fell 15% to $480 billion due to COVID-19 relief spending. As a result, the U.S. federal deficit is $726 billion in the ten months of fiscal 2022, 71% lower than the $2.54 billion in the same period in 2021. - US: U.S. mortgage applications rose 0.2% in the first week of August, refinances rose 3.5%, while home purchase applications fell 1.4%. Meanwhile, the average rate on a 30-year fixed-rate mortgage rose four basis points to 5.47%. However, refinancings were down 82%, and home purchase applications were down 19% compared to the previous year. "Despite the strong job market, the homebuying market is slowing. Activity has declined in five of the past six weeks as homebuyers remain on the sidelines due to their ability to pay," said Joel Kan, MBA vice president. It's grim and skeptical about the strength of the economy." - US: Annual U.S. inflation slowed to 8.5% in July 2022 from a 9.1% set in June, below consensus forecasts of 8.7%. After hitting a 42-year high of 41.6% in June, CPI rose 32.9%, mainly due to gasoline costs (44% vs. 59.9%), fuel oil (75.6% vs. 98.5%), and natural gas (3.5%). In addition, new car costs and airfare prices fell, but food price inflation increased, the largest increase since May 1979, vs. 10. - US: U.S. wholesale inventories rose 1.8% from the previous month to $895.4 billion in June 2022, slightly slower than the 1.9% increase initially estimated after rising 1.9% the last month. It was the 23rd straight month of gains, with stocks of durable goods (2% and 2.1% in May) and nondurable goods (1.4% and 1.7%, respectively) gaining. Wholesale inventories rose 25.5% year over year in June, also slightly slower than the 25.6% increase earlier. - RU: In July 2022, annual inflation in Russia fell to 15.1% from 15.9% the previous month, below market expectations of 15.3%. It was the lowest inflation rate since entering double-digit territory in March. However, food prices continued to rise sharply (16.8%), followed by non-food products (16.5%) and finally, services (10.8%). On a month-on-month basis, consumer prices fell 0.39%, extending the 0.35% drop in June and beating expectations for a 0.2% decline. On the other hand, core consumer prices continued to soar faster than headline inflation, up 18.4% from July 2021. - SW: In June 2022, Swedish household consumption fell by 0.4% month-on-month, the first decline in five months. Compared to the previous year, consumption rose 3.9% after increasing 6.4% in May, with spending on entertainment and culture (18.4%) contributing the most, while expenditures for furniture, furniture, household equipment, and consumables fell 10%. - SW: In June 2022, Swedish industrial output fell by 0.5% year-on-year, in contrast to the 0.3% rise in the previous month. The second drop in industrial output in the past six months was when manufacturing production fell (0.5% vs. 0.9%). Meanwhile, mining and quarrying production rebounded sharply (5.6% in April and -9.3% in April). As a result, industrial production rose 0.5% on a seasonally adjusted monthly basis, down from an upwardly revised 0.7% in May. - IT: In July 2022, annual inflation in Italy fell to 7.9% year-on-year, down from a 36-year high of 8% the previous month and in line with preliminary estimates, suggesting inflation may have peaked. Energy prices fell (42.9% vs. 48.7% in June), mainly due to lower costs for regulated energy (47.9% vs. 64.3%) and recreational and cultural services (4.5% vs. 5%). On the other hand, the cost of processed food (9.5% vs. 8.1%) and transportation services (8.9% vs. 7.2%) continued to rise rapidly. As a result, core inflation, which excludes energy and unprocessed food, rose to 4.1% from 3.8% the previous month, while inflation excluding fuel jumped to 4.7% from 4.2%. In terms of monthly prices, consumer prices rose 0.4%, in line with previous estimates. - GE: Annual inflation in Germany was confirmed at 7.5% in July 2022, slowing for the second month from 7.6% in June, as fuel relief programs have had a slight downward impact on headline inflation since June. The figure remains near a 40-year high, largely due to higher energy prices reflecting the impact of Russia's invasion of Ukraine. Energy costs (35.5% vs. 38%) and service costs (2% vs. 2.1%) fell, but food prices (14.8% vs. 12.7%) and rent (1.7% vs. 1.7%) rose faster. Prices of energy products rose sharply, especially heating oil (102.6%), motor fuel (23.0%), and natural gas (75.1%). Monthly consumer prices rose 0.9%, up from 0.1% in June. Compared with other European countries, the CPI rose 8.5% yearly and 0.8% month-on-month. - CN: In July 2022, China's annual inflation rate rose to 2.7% from 2.5% in the previous month but was below market forecasts of 2.9%. This was the highest level since July 2020, with food prices rising at their highest level in 22 months as consumption strengthened further as Covid-19 conditions improved (6.3% versus 2.9% in June). Meanwhile, non-food inflation continued to rise (1.9% vs. 2.5%). Transportation and Communications (6.1% vs. 8.5%), Housing (0.7% vs. 0.8%), Education, Culture (1.5% vs. 2.1%), Clothing (0.7 vs. 0.6%), Household Goods and Services (1.4 vs. 1.5%) ) and healthcare (0.07 to 0.7%). China has set its CPI target for this year at around 3 percent, the same as in 2021. Consumer prices rose 0.5% month-on-month in July, the highest in five months, in line with market consensus, and were flat in June. - CN: Producer price inflation in China fell to a 17-month low of 4.2% in July 2022 from 6.1% the previous month, below the market consensus of 4.8%. The latest data showed producer prices slowed for the 19th month, mainly due to extraction and raw materials. The cost of production fell further (5.9% vs. 7.5% in June), mainly due to extraction and raw materials. Consumer goods inflation stabilized at 1.7%, with further increases in food prices, consumer staples, and apparel. The producer price index fell 1.1% in July after remaining unchanged in June. - JP: Producer prices in Japan rose 8.6% year-on-year in July 2022, compared with a market forecast of 8.4%, after rising 9.4% the previous month. While it was the 17th straight month of producer inflation, the latest data was the weakest since December amid signs that inflationary pressures from higher material costs are easing. Chemicals (10.9% vs. 11.0% in June), Oil & Coal (14.7% vs. 21.8%), Electric Motors (2.4% vs. 2.6%), Non-Ferrous Metals (9.8% vs. 16.2%), and Business-Oriented Machinery (flat reading) than 0.4%) prices softened. At the same time, the cost of steel rose by 27.2%, unchanged from June; while the prices of beverages and food increased faster (5.5% vs. 4.6%), transportation equipment (3.4% vs. 3.3%), metal products (11.1% vs. 10.9%) ), other manufacturing (3.9% vs. 3.7%) and general machinery (2.1% vs. 1.7%). The producer price index rose 0.4% month-on-month in July, down from an upwardly revised 0.9% in June. LOOKING AHEAD:    Today, investors will receive: - USD: PPI m/m, Core PPI m/m, Unemployment Claims, Mortgage Delinquencies, Natural Gas Storage, and 30-y Bond Auction. - CNY: M2 Money Supply y/y, and New Loans. - NZD: Visitor Arrivals m/m - GBP: RICS House Price Balance. - AUD: MI Inflation Expectations. KEY EQUITY & BOND MARKET DRIVERS: - CA: Canadian 10-year government bond yields hovered around 2.7, near levels not seen in four months, as investors pared bets on rate hikes after data showed U.S. inflation slowed more than expected. In Canada, headline inflation rose to a 40-year high of 8.1% in June but fell short of market expectations and slowed more than expected on a monthly basis. The Bank of Canada surprised markets by raising its benchmark interest rate by 100 basis points in July while signaling further tightening to curb sky-high inflation. The Bank of Canada is expected to continue the tightening cycle, with further rate hikes likely before the end of the year. - US: The 10-year U.S. Treasury yield fell sharply to 2.7%, near a four-month low of 2.5% hit earlier this month, as weaker-than-expected inflation data eased concerns that the Federal Reserve would extend its aggressive pace of tightening. U.S. consumer prices rose 8.5% annually in July, below expectations for an 8.7% increase, while core inflation surprisingly stagnated. Nevertheless, hopes of rising consumer prices have been glimpsed, prompting investors to reconsider the Fed's dovish pivot, backtracking on hawkish bets after last week's hot wage data. - US: Stock futures contracts linked to the three major indexes rose about 2 percent on Wednesday as investors reacted to lower-than-expected inflation data, fueling speculation that the Federal Reserve may ease interest rates. Annual U.S. inflation fell to 8.5% in July 2022 from 9.1%, the highest in more than 40 years, as gasoline prices fell sharply. Core inflation, which smoothed out volatility in food and energy prices, also rose less than expected. Last week, a better-than-expected jobs report eased fears that the world's largest economy is about to fall into recession. But, before then, there were signs that inflation could peak. In regular trading on Tuesday, the Dow fell 0.2%, the S&P 500 lost 0.4%, and the tech-heavy Nasdaq lost 1.2%. - AU: Australia's 10-year government bond yield was near 3.3% in August, rebounding from a near four-month low earlier this month, as investors weighed the prospect of a global slowdown, persistent inflationary pressures, and bets the central bank will continue to Raise the cost of borrowing. On August 2, the RBA raised the cash rate by 50 basis points to 1.85 percent and said the key rate would continue to rise to 3 percent in December. Still, there are concerns that a sharp rise in borrowing costs will hurt the economy. In April, the cash rate was much lower at 0.1%. - EU: European futures posted losses on Wednesday, following their overseas counterparts. Investors remained cautious ahead of U.S. inflation data in the late afternoon that could provide further clarity on the size of the Fed's rate hikes next month. On the economic data front, the final estimate confirms that German inflation has slowed for the second month. The final assessment of Italian CPI is also due today. Meanwhile, earnings season remains in the spotlight, with reports from Ahold Delhaize, ABN Amro, E.On, TUI Group, and Delivero today. STOCK MARKET SECTORS: - High: Communication Services, Materials, Consumer Discretionary, Information Technology, Financials. - Low: n/a TOP CURRENCY & COMMODITIES MARKET DRIVERS:  - CAD: The Canadian dollar was boosted by a weaker U.S. dollar after lower-than-expected U.S. inflation data reduced bets on a sharp rate hike by the Federal Reserve next month, breaking above the $1.28 mark, a 2-month high. Domestically, the central bank is expected to continue its tightening cycle and may raise interest rates further by the end of the year. The Bank of Canada surprised markets by raising its benchmark interest rate by 100 basis points in July while signaling further tightening to curb sky-high inflation. In June, annual inflation topped a 39-year high but rose less than market expectations. - OIL: U.S. crude inventories rose by 5.458 million barrels in the week ended Aug. 5 to 432 million barrels, the highest level since December 2021, while the market expected a slight increase of 073,000 barrels. Crude inventories at Cushing, Oklahoma, rose by 723,000 barrels after an injection of 926,000 barrels in the previous period. Distillate stockpiles, which include diesel and heating oil, rose by 2.116 million barrels to 111.5 million barrels, compared with expectations for a decrease of 667,000 barrels. Meanwhile, gasoline inventories fell by 4.978 million barrels to 220.3 million barrels, compared with expectations for a decline of 633,000 barrels. - USD: The dollar index fell below the 105-point mark for the first time in more than a month after a weaker-than-expected reading of U.S. inflation could lead the Federal Reserve to slow its aggressive policy tightening plans. Annual U.S. inflation fell to 8.5% in July 2022 from 9.1%, the highest in more than 40 years, as gasoline prices fell sharply. Core inflation, which smoothed out volatility in food and energy prices, also rose less than expected. At the U.S. central bank's next policy meeting in September, markets are now pricing in a 50-basis point upward revision. - EUR: The euro jumped to $1.03 in mid-August, a level not seen in a month, as the dollar weakened slightly after U.S. inflation fell below expectations in July, easing concerns about a sharp Fed rate hike next month. Expected. Bets on a rate hike by the European Central Bank at the end of the year also eased. Reuters reported that December is now expected to rise by 105 basis points, compared with 111 basis points. The ECB is still set to raise borrowing costs by another 50 basis points in September. Despite these advances, the common currency has held up as inflation shows no signs of peaking, and the energy crisis is far from over. High energy prices have led to a broad rebound in consumer and producer costs, and fears of an impending economic crisis in Europe persist. Close to par. - JPY: The yield on benchmark 10-year Japanese government bonds held below 0.2 percent in August, close to levels not seen since early March, as global recession fears and the Bank of Japan's ultra-prudent monetary stance helped boost demand for Japanese assets. The central bank has a yield-curve control policy under which it buys unlimited amounts of JGBs to defend the 0.25% cap and was forced to buy heavily in June when yields topped 0.25%. - CNY: The offshore yuan fell to 6.77 against the dollar, weighed down by weaker-than-expected Chinese inflation data. China's consumer prices rose 2.7% in July from a year earlier, the fastest pace in two years, but below expectations for a 2.9% rise. Producer prices rose 4.2% to their lowest level in 17 months, missing analysts' forecast of 4.8%. Relatively tame inflationary pressures in mainland China supported the central bank's stance to keep policy accommodative as authorities try to support economic recovery in the face of rising global interest rates. However, the yuan remains vulnerable to wild swings amid a resurgence of the domestic coronavirus outbreak, risks to the real estate sector, and increasing tensions with the U.S. over Taiwan. CHART OF THE DAY: New Zealand NZX 50 fell 45.61 points, or 0.39%, to settle at 11,707.87 on Wednesday, after hitting a more than three-month high in the previous session, reflecting Tuesday as chip stocks fell and traders awaited U.S. inflation data later in the day. There was a pullback on Wall Street. Locally, data on Tuesday showed electronic card transactions in New Zealand fell 0.5% year on year, the first drop in nine months. Meanwhile, the latest data showed that the country's annual inflation surged 7.3 percent in the second quarter, the highest level in 32 years. The Reserve Bank of New Zealand is widely expected to raise rates by another 50 basis points at its Aug. 17 meeting. In China, annual inflation hit its highest level in two years in July, driven by soaring food prices. Chatham Rock Phosphate (-8.6%), General Capital Ltd (-8.3%) and Cannasouth Ltd (-4.9%) fell notably. Shares of a2 Milk Corp fell 7.5% after the U.S. Food and Drug Administration rejected the company's request to import infant formula products into the United States.   - New Zealand NZX 50  index - D1, Resistance (target zone) around ~ 12 410,  Support (consolidation) around  ~ 11 217