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Powell returns, Microsoft’s board seat, Chinese inflation – what’s moving markets

Revised Article:

Fed Chair Jerome Powell is set to make another appearance on Capitol Hill Wednesday, with Wall Street trading remaining largely range-bound in anticipation. Meanwhile, Microsoft has decided to relinquish its seat on the OpenAI board, and weak inflation data from China suggests a slowing recovery in this crucial economy.

1. Powell Returns to Capitol Hill Federal Reserve Chair Jerome Powell will testify before the House of Representatives later today for the second day of his semi-annual Congressional testimony. On Tuesday, Powell addressed the Senate Banking Committee, highlighting the recent cooling of the labor market as a significant factor in determining when the U.S. central bank might begin cutting interest rates.

“Elevated inflation is not the only risk we face,” Powell stated, noting that the labor market has cooled significantly across various measures. He cautioned against reducing policy restraint too late or too little, which could unduly weaken economic activity and employment. These comments suggest Powell is laying the groundwork for a potential rate cut in September, acknowledging that factors beyond inflation, such as the labor market, will influence monetary policy.

2. Futures Little Changed; Powell Speaks Again U.S. stock futures showed little movement on Wednesday as investors awaited Powell’s second round of testimony. By 04:00 ET (08:00 GMT), Dow futures were down 20 points (0.1%), S&P 500 futures were up 4 points (0.1%), and Nasdaq 100 futures rose by 35 points (0.2%).

On Tuesday, the S&P 500 and Nasdaq Composite closed at record highs following Powell’s hints at possible monetary easing, while the Dow Jones Industrial Average underperformed. Powell’s upcoming testimony before the House Financial Services Committee, along with Thursday’s consumer price index data, will be closely watched for further market guidance.

3. Microsoft Relinquishes OpenAI Board Seat Microsoft (NASDAQ

 

) has stepped down from its observer seat on the board of OpenAI amid regulatory scrutiny of generative artificial intelligence in the U.S. and Europe. The tech giant cited improvements in OpenAI’s governance as the reason for this decision.

In a letter dated July 9, Microsoft noted significant progress by OpenAI’s newly formed board over the past eight months, making its limited observer role unnecessary. An OpenAI spokesperson indicated plans to establish a new engagement approach with strategic partners, including regular stakeholder meetings.

Microsoft’s non-voting observer position, initiated in November last year following a $10 billion investment in OpenAI, had raised concerns among antitrust regulators in Europe, Britain, and the U.S. regarding Microsoft’s influence over the AI company.

4. Chinese Consumer Deflation China’s consumer inflation fell on a monthly basis in June, with producer inflation contracting for the 20th consecutive month, indicating a slow recovery for the world’s second-largest economy. Month-on-month CPI inflation shrank 0.2%, while annual inflation grew by 0.2%, both figures falling short of expectations.

Weak consumer spending, driven by high unemployment and concerns over the property market, suggests more near-term challenges for China and increases the likelihood of additional stimulus measures by the government. Producer price index inflation contracted by 0.8% in June, an improvement from the 1.4% decline in the previous month.

5. Crude Falls on Weak Chinese Inflation Data Crude oil prices declined on Wednesday, extending losses from the previous session due to concerns over weak Chinese inflation data. By 04:00 ET, U.S. crude futures (WTI) were down 0.4% at $81.12 per barrel, and Brent crude futures fell 0.4% to $84.33 per barrel.

Fears of deflation in China, the world’s largest crude importer, weighed on the oil market. However, a larger-than-expected draw in U.S. inventories, as reported by the American Petroleum Institute, helped limit the losses. U.S. oil inventories fell by 1.9 million barrels last week amid the summer driving season. Despite this, both crude benchmarks have lost about 3% over the past three sessions due to minimal impact on the Texas energy industry from Hurricane Beryl.

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