Global news you can trust.

Download the Reuters App.

Morning Bid U.S.

What matters in U.S. and global markets today

By Mike Dolan, Editor-At-Large, Financial Industry and Financial Markets, Reuters Open Interest

U.S. July inflation data didn't sound the all clear on tariffs but also didn’t send an unequivocal signal about the longer-term impacts either – and that seemed to be enough to goose Fed easing expectations, spur Wall St stocks to new records and sink volatility gauges.

Futures markets are now fully convinced another quarter point rate cut is coming next month and they're almost halfway priced to three cuts by the end of the year. The S&P 500 and Nasdaq raced more than 1% higher on Tuesday, the VIX "fear index" sank to the lowest of the year and futures are up again ahead of today's bell.

Bond market volatility cratered to its lowest in more than 3-1/2 years, even as "core" inflation rose back above 3% for the first time in five months, as Treasury yields fell across the curve and the dollar index ebbed to its weakest in more than a fortnight. President Trump again lambasted Fed chair Jerome Powell for not cutting rates more quickly and threatened a "major lawsuit" against him, while also hitting out at Goldman Sachs boss David Solomon and its chief U.S. economist Jan Hatzius for the bank's research on tariffs and forecasts.
Treasury Secretary Scott Bessent talked about the Fed possibly cutting rates 50 basis points next month "to make up for the delay" and was hopeful the latest Trump appointee to the Fed board, White House advisor Stephen Miran, could be confirmed by the Fed's September meeting. Meantime, the White House said the plan was to continue publishing monthly employment statistics even though Trump's pick to head the embattled Bureau of Labor Statistics, E.J. Antoni, said this month that the BLS should suspend monthly payrolls releases until data problems were fixed - and rely instead on quarterly reports.
Once again, tech stocks led the charge higher on Wall Street on Tuesday. Alphabet shares rose 1.2% as Perplexity made a $34.5 billion cash offer to buy the company's Chrome browser and Intel climbed 5% after Trump met CEO Lip-Bu Tan and praised him, after claiming only last week that Tan was compromised due to Chinese links. European and Asia shares were higher, with Japan's Nikkei hitting a record high, and eyes are now shifting to the U.S.-Russia summit in Alaska on Friday for clues about a possible Ukraine ceasefire.

In today’s deep dive, I consider whether the now government-blessed "stablecoin" explosion will juice or destabilise the economy.

I’d love to hear from you, so please reach out to me at mike.dolan@thomsonreuters.com.

Data refreshes every time you open this email. For more U.S. market news, click here. Please send any feedback to morningbid@thomsonreuters.com.

Today's Market Minute

U.S. authorities have secretly placed location tracking devices in targeted shipments of advanced chips they see as being at high risk of illegal diversion to China, according to two people with direct knowledge.
Perplexity AI made a $34.5 billion unsolicited all-cash offer for Alphabet's Chrome browser on Tuesday, a bid far above its own valuation as the startup reaches for the browser's billions of users pivotal to the AI search race.
Investors have faced several counterintuitive swings this year, including the dollar's plunge and record highs in bitcoin and U.S. stocks. Now, writes ROI columnist Jamie McGeever, we can add another to that list: the stellar outperformance of Latin American currencies against the dollar.
Overcapacity has made its way into China’s domestic market, with price wars leading to collapsing profitability and accelerating deflation. The government has responded by launching a so-called “anti-involution” program. It’s had some early wins, but this could be a lengthy battle, claims Emmer Capital Partners Ltd founder Manishi Raychaudhuri.
The pace of new capacity of U.S. solar, wind and battery systems has slowed nationally and in key states this year, weighing on sentiment surrounding clean energy. But, writes ROI columnist Gavin Maguire, climate trackers can take heart from the continued growth outside Texas and California.

Stablecoins fuel liquidity, not yet money

Treasury market bulwark or catalyst for a liquidity bubble? No one's sure whether the now government-blessed "stablecoin" explosion will juice or destabilise the economy.

When Congress passed the so-called "Genius Act" on stablecoin legislation last month with bipartisan support, it triggered another wave of speculation about just how much havoc these dollar-pegged crypto tokens might wreak, including fears of fraud, tax evasion and instability.

Those pushing back on the crypto-Cassandras have put forward much more benign forecasts, arguing that stablecoins, given their limited retail use, will remain firmly encased in the esoteric financial world, muffling any potential negative impact on the wider economy.

But these instruments are connected with arguably the most important part of the financial system: the U.S. Treasury market.

Key to the new legislation is a requirement that stablecoins - so far mostly used by crypto traders to move funds between tokens - are fully backed by liquid assets such as cash or short-term Treasury bills. Issuers are also required to disclose the composition of those reserves monthly.

Graphics are produced by Reuters.

And with a market cap in excess of $250 billion that could explode to some $2 trillion within three years based on some estimates, stablecoins have the potential to pack a serious systemic punch.

Perhaps ironically, the link to Treasuries actually offers one of the more positive takes on the stablecoin phenomenon.

Read the full column