Banks and Microsoft keep the truck rolling along

The pain trade as stocks continue to rise appears to remain. Strong earnings from the banking sector helping to drive US  indexes higher. The turmoil in the banking sector from a few months ago is a faded memory. The disappointment of the slowdown in the Chinese economy was quickly forgotten as Chinese authorities pledge to support growth. Microsoft helped lead the tech sector higher again as they announced their plans to charge for the artificial intelligence platform ChatGPT. The latest US retail sales report from the US continues to paint the picture of a robust consumer as retail sales grew month on month and the previous month’s report was revised higher. Although the headline rise was below expectations.

The Fed must wonder what they have to do to slow the US economy. An economic recession is probably the only way they can be certain that inflation has been truly defeated. On that front there was some good news for the Fed as Industrial and manufacturing production both fell month on month. On Thursday there will be jobs report as jobless claims are expected to rise modestly.

Later today will be a big day for Mr Bailey and his team as the UK economy reports its latest inflation data. UK inflation is forecast to fall to 8.3% from 8.7% the previous month, and the core inflation rate to 7%. It is possible for some good news on that front, sterling has been strengthening most of the year, more as a result of a weakening dollar than any great love of the pound or the UK economy. A stronger currency, in itself, can have a deflationary effect. Exports become less attractive and imports become cheaper basically. There may be room for a pleasant surprise today. Stocks in Europe are expected to largely unchanged. It’s a big day for earnings as Tesla, Netflix, and several major oil service companies along with Alcoa report later in the day.