US PCE inflation was steady in July at a 2.6% year-over-year pace as core PCE ticked up to 2.9%, the highest since February. “The Fed opened the door to rate cuts, but the size of that opening is going to depend on whether labor-market weakness continues to look like a bigger risk than rising inflation,” said Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management. “Today’s in-line PCE Price Index will keep the focus on the jobs market. For now, the odds still favor a September cut.”

Government shutdown risk lurks as Congress prepares to return from recess. Legislators have to act to fund the government before Oct. 1 to prevent a shut down. Doing so will require a high degree of bipartisan cooperations, which has been in short supply.

Gold trades above $3500 an ounce, a record high, on rate-cut bets. The rally is fueled by expectations that the Federal Reserve will cut rates later this month, an act that would reduce the competitive allure of fixed-income securities vs. gold’s zero-yielding status.

The challenges for the commercial real estate industry from Covid-19 and high interest rates appears to be easing, reports The Economist: “After half a decade of turmoil, commercial-property investors may have at last hit rock bottom. A fragile, slow recovery appears to be taking place.”

China manufacturing activity contracted in August, despite the extension of a trade truce with the US. China’s purchasing managers index in the manufacturing sector rose from 49.3 in July to 49.4 in August, indicating the decline slowed from the previous month, the National Bureau of Statistics said.

US consumer spending rose 0.5% in July, picking up from the previous month and posting the strongest monthly gain since March. The rise was led by purchases of motor vehicles and parts. Yet some economists predict that rising pressure from tariffs will weigh on spending in the months ahead. “The data supports a picture of the US economy that is moving in a more stagflationary direction, albeit slowly,” said Preston Caldwell, chief US economist at Morningstar.

More By This Author: