Tuesday’s inflation report delivered welcome news to global markets: U.S. consumer prices rose 2.7% year-over-year in July—a touch below economists’ 2.8% estimate—easing investor fears that tariffs were already exerting upward pressure on prices. As a result, stock futures for both the S&P 500 and the Nasdaq 100 pointed to a strong upward open—around 0.7% gain for each—calming nerves that had been frayed by concerns over escalating inflation and weak labor data.Fixed-income investors also breathed easier. Benchmark Treasury yields retreated, with the 10-year government bond falling roughly 4 basis points to 4.269%, while the two-year note slipped 2 bps to 3.73%. These moves underscore growing confidence in the possibility that the Federal Reserve may ease rates before year-end.The inflation data arrives after a weak jobs report in early August, which had fueled discussions of U.S. stagflation. But the milder-than-expected CPI numbers appear to have helped markets refocus on easing monetary policy rather than recession fears.Trade tensions also cooled. The U.S. and China extended their current tariff pause by 90 days—a development that eliminated the threat of overnight tariff hikes and buoyed investor sentiment across the board.Money markets are now pricing in about 57 basis points of Fed rate cuts by the end of the year, signaling that a shift in monetary policy could be on the horizon.Beyond U.S. land, the market impact spread globally: futures linked to small-cap stocks, especially the Russell 2000, gained ground. International markets were also buoyed—Asia’s equity benchmarks rose and Europe followed suit, while Japan’s Nikkei hit fresh highs.Currency markets reflected the dovish mood, with the U.S. dollar giving back some gains amid renewed enthusiasm for risk assets.In sum, today’s data-calibrated rally across stocks and bonds illustrates a shift in investor sentiment—from anxiety over inflation and trade to guarded optimism about Fed easing and sustained economic resilience.
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