Futures Rise Led By Tech Before Key CPI Report

US: Futures are higher, led by Tech as AI infra earnings boost the theme while the Semis trade was bid overnight led by a surge in Korea’s Kospi. As of 7:45am ET, S&P futures are up 0.2% ahead of today’s CPI report, while Nasdaq futures gain 0.7% as investors react positively to updates from US technology firms. Semis / Memory are outpacing broader markets with Mag7 trading higher, too. Software is lower, so watch to see if the +Semi / -Software dynamic returns after a significant reversal. CoreWeave shares are up ~17% in premarket on stronger-than-expected sales growth. Super Micro Computer shares have climbed 9% after their revenue forecast topped estimates. Tech stocks also outperfomed in Asia where the Kospi climbed 3.7%. European stocks are inching higher. The market has seen muted volumes this week into today’s CPI print, with PPI and Retail Sales tomorrow, providing more details on the growth / inflation dynamic. Consensus sees Headline CPI MoM of +0.1% and Core MoM of +0.2%, which is 3.4% YoY for Headline and 2.5% YoY for Core (our preview is here). A dovish print today may remove Sept hike expectations, boosting stocks.Broader risk sentiment has improved as Brent crude futures turned negative and fell back below $89 a barrel after another well-time headline by Pakistan which said the 60-day deadline for a US-Iran MoU may be extended, but the larger peace process has stalled. Earlier, Donald Trump said the US “totally” controls the Strait of Hormuz. Treasuries extend gains ahead of the US CPI report, with US 10-year yields down 2 bps at 4.66%. European government bonds followed suit. The Bloomberg Dollar Spot Index is little changed. Precious metals are advancing, with spot silver up almost 3%. Looking at today’s economic data calendar we get July CPI data at 8:30am and July federal budget balance at 2pm. Fed speaker slate is blank; Cleveland Fed’s Hammack and Richmond Fed’s Barkin have appearances slated Thursday

In premarket movers, Nvidia is the biggest gainer among Mag 7 stocks. The chipmaker’s partner Hon Hai reported a better-than-expected increase in quarterly profit, signaling robust global demand for AI hardware. (Nvidia +1.2%, Alphabet +0.8%, Meta +0.7%, Tesla +0.5%, Amazon +0.4%, Apple little changed, Microsoft -0.8%)

• Cava (CAVA) jumps 13% after the restaurant chain operator reported store comp sales for the second quarter that beat the average analyst estimate. Analysts again note positive trends for its pomegranate glazed salmon.
• CoreWeave (CRWV) rallies 18% after the cloud-computing provider reported second-quarter results that beat expectations. Analysts are positive about the company’s margins and note that AI demand remains robust.
• ERock (EROC) is up 13% after the power systems firm reported revenue for the second quarter that beat the consensus estimate, and said Anthropic has agreed to buy 470 megawatts of onsite power equipment.
• H&R Block (HRB) is up 15% after the tax preparation company gave a full-year forecast that was stronger than expected. It also reported fourth-quarter results that beat expectations.
• Hyliion Holdings (HYLN) is up 23% after the company boosted its full-year revenue forecast from $10 million to $15 million.
• Lumentum (LITE) gains 8%. Analysts are positive on the maker of optical equipment after it reported fourth-quarter results that beat expectations and gave an outlook above analyst consensus.
• Super Micro Computer Inc. (SMCI) jumps 9% after giving a revenue forecast for the current quarter that topped analysts’ estimates, a sign the booming artificial intelligence market continues to bolster sales of the company’s servers.
• US Antimony Corp. (UAMY) falls 14% after the natural resource company cut its full-year outlook for gross revenue.

Tech stocks are trading higher as CoreWeave Inc. surged 18% in premarket trading on stronger-than-expected sales, while Super Micro Computer Inc. gained 8.6% after its revenue forecast topped estimates. The latest slew of results was welcomed by investors looking for evidence AI infrastructure companies can deliver the earnings needed to propel the tech rally further.   

“The reports from CoreWeave and Super Micro are further evidence that AI infrastructure demand remains strong,” said Florian Ielpo, head of macro at Lombard Odier Investment Managers. However, he cautioned that strong earnings don’t automatically translate into higher valuations, especially given elevated financing costs.

Eslewhere, oil pared earlier gains after a Pakistan Foreign Ministry spokesperson said the deadline for a memorandum of understanding between the US and Iran can be extended. But with oil trading near $89 a barrel and no peace deal in sight, concerns remain that elevated energy prices could prompt a more hawkish response from the Federal Reserve. 

“A higher inflation reading would likely boost expectations of a hike in September and December and thereby putting pressure on equity and bond prices,” said Stephan Kemper, chief investment officer at BNP Paribas Wealth Management Germany.

Wednesday’s headline inflation gauge probably rose 0.1% in July following a 0.4% decline in the prior month (our CPI preview is here). Here is JPM’s CPI Secnario Analysis for today’s CPI print

• Core MoM prints above 0.30%. SPX declines 1.5% – 2.5%, odds: 5.0%
• Core MoM prints between 0.25% – 0.30%. SPX declines 50bp – 1.25%, odds; 25.0%
• Core MoM prints between 0.20% – 0.25%. SPX gains 25bp – 75bp, odds; 40.0%
• Core MoM prints between 0.15% – 0.20%. SPX gains 50bp – 1%, odds: 25.0%
• Core MoM prints below 0.15%. SPX gains 1% – 2%, odds: 5.0%

Both PIMCO’s Marc Seidner and Goldman’s Matheus Dibo say inflation will continue to moderate, allowing the Fed to hold policy steady in the foreseeable future. Dibo told Bloomberg TV he doesn’t see signs inflationary pressure is broadening, while Seidner pointed to a lack of growth in real incomes keeping prices suppressed.  

Strong earnings growth and a solid economy should help the S&P 500 withstand a modest increase in interest rates, according to RBC Capital strategists, who maintained their positive view on the benchmark over the next year.

European stocks are inching higher. Energy stocks rose with oil prices for a third day while healthcare was the worst performing sector. Here are the biggest movers Wednesday:

• Vestas shares rose as much as 19%, the steepest gain since July 2022, after the Danish turbine maker raised its guidance for this year’s adjusted Ebit margin and announced a new €400m share buyback program
• Balfour Beatty shares surged as much as 12%, hitting a new all-time high, after the engineering and construction group posted strong growth in first half revenue and adjusted pretax profit and raised its full-year guidance for profit from operations and net cash
• Kingspan shares rose as much as 8.3%, to the highest since January 2022, after announcing the acquisition of BMC Manufacturing Group for an initial consideration of €850m
• TKMS rose more than 15% after beating analyst expectations in the third quarter and lifting its guidance for the full year
• ABN Amro gained as much as 6.3%, the most since May and to a record high, after its latest quarterly earnings
• Zehnder climbed as much as 7.8%, to the highest since April 22, after Kepler Cheuvreux upgraded the stock to buy from hold
• Shurgard shares fell as much as 10%, the most since March 2020, after the self-storage company cut its FY26 guidance and said it isn’t reaffirming its medium-term outlook
• European luxury stocks dropped as Deutsche Bank lowers its price targets for heavyweights Hermes and LVMH, citing limited improvements during the second-quarter earnings season and a lack of catalysts for existing headwinds to ease
• Atalaya Mining Copper shares fell as much as 6.9% to 925.5 pence apiece on Wednesday after the offering of about 16.8 million shares by holder Trafigura prices at 915 pence per share
• Bilfinger shares fell as much as 9.3% to the lowest level in over a year after the industrial plant group posted weaker margins and orders in its second quarter results
• Raspberry Pi shares fell as much as 6.5% after being initiated at hold by Berenberg, which sees a fragmented customer base, a memory price surge and required capital spending capping upside for the stock
• TUI shares fell as much as 3.7%, the most in six weeks, after the travel and tourism group reported a miss on third-quarter Ebit as the Middle East conflict inflicted a €20 million hit to the group’s Cruise division

Asian stocks climbed, driven by gains in chipmakers, as earnings from US technology companies bolstered sentiment toward the region’s AI infrastructure firms. The MSCI Asia Pacific Index rose 0.8%, with Samsung Electronics, SK Hynix and TSMC the three biggest contributors. South Korea’s Kospi advanced for a third day, gaining 3.7%, as optimism over chipmakers’ shareholder returns and possible investment by Singapore’s Temasek added to momentum. Shares also rallied in Taiwan, Japan and mainland China. The AI trade got a boost after Super Micro Computer and CoreWeave jumped in late US trading following their earnings reports. Asia’s tech hardware stocks have recovered part of July’s big losses as investors refocus on the AI theme and overlook ongoing geopolitical uncertainty.  Equities also gained in Vietnam and Indonesia. Hong Kong’s benchmark Hang Seng Index declined 0.8% before heavyweight Tencent announced its results after the market closed. The firm’s net income of 56 billion yuan fell shy of analysts’ estimates, though revenue of 204.8 billion yuan was a slight beat. Here are the most notable movers:

• Situational Awareness bought shares in Japanese server components maker Taiyo Yuden Co. in late June and built up its stake to as much as 16.61% before cutting it back down, according to multiple filings by the artificial-intelligence hedge fund.
• South Korean chipmakers rallied as risk appetite returned after last month’s rout and traders weighed a local media report that Singapore’s Temasek Holdings Pte plans to invest in Samsung Electronics Co. and SK Hynix Inc.
• Sanrio shares dropped the most since 1985 after the Hello Kitty owner’s quarterly profit missed estimates.
• Rakuten Group Inc.’s shares sank the most in over two years after the Japanese e-commerce pioneer failed to erase persisting losses at its mobile unit.
• Chinese aluminum stocks, including Shandong Hongqiao Aluminum, advance as the metal extends rally after a key producer said it was slashing production. Tencent Music’s shares fall in Hong Kong after 2Q results.
• Tingyi shares rise as much as 5.5% in Hong Kong after the foodmaker reported first half earnings that Jefferies said beat market estimates.
• FleetPartners shares rise as much as 6.7% in Sydney to their highest since 2017, after the Australian fleet management company said it received multiple acquisition bids, including an offer raised from an earlier proposal.
• Sanrio Co. shares tumbled as much as 20%, the most in more than 12 years, after the company’s first quarter operating income missed market estimates.
• Tencent Music’s shares fall 11% in Hong Kong after 2Q results, while Citi cut the company’s target price citing challenging outlook for the second half due to decelerating growth in ad revenues and margin pressure.
• Rakuten Group’s shares plunge as much as 10%, the most since February, after the Japanese e-commerce and fintech company reported a smaller-than-expected second-quarter operating income.

In FX,the Bloomberg Dollar Index was little changed, while Treasury yields slipped 1-2bps; Swaps continued to imply 13bps of Fed rate increases at the September meeting. The yen was little changed around 159.17 per dollar. Investors are watching the currency as it approaches the key level of 160, which may trigger Japanese authorities to intervene again.  NZD/USD fell as much as 0.4% to 0.5856, leading G-10 losses against the dollar; New Zealand Prime Minister Christopher Luxon survived a leadership challenge, quelling for now a messy bout of infighting less than three months before a general election. USD/JPY dropped 0.1% to 159.16. GBP/USD rose 0.1% to 1.3520. EUR/USD steadied at 1.1538

In rates, treasuries are extending gains ahead of the US CPI report, with US 10-year yields down 2 bps at 4.66%. Yields are about 2bp-3bp lower with curve spreads little changed, off session lows reached concurrently with oil prices during European morning in response to signals about the ongoing Middle East war that has disrupted supply. European government bonds followed suit. $42b 10-year note auction at 1pm New York time has WI yield near 4.68%, which would match highest level in recent years Tuesday’s 3-year note auction stopped through by less than 1bp and has richened about 2bp from its 4.291% result; this week’s cycle concludes Thursday with $25 billion 30-year new issue. Ahead of July CPI data, Fed-dated OIS swap rates price in about 50% of a quarter-point rate hike at the September policy meeting, fully price in a move by year-end and mostly price in a second hike by mid-2027. IG credit new-issue calendar is bare so far and expected to remain muted by the risk CPI data move the market; 29 offerings priced over the past two days made for the market’s most active period since January. Focal points of US session include July CPI report and 10-year note new-issue auction. 

In commodities, Brent crude futures turned negative and fell back below $89 a barrel after Pakistan said the 60-day deadline for a US-Iran MoU may be extended, but the larger peace process has stalled. Earlier, Donald Trump said the US “totally” controls the Strait of Hormuz. Oil wavered. Precious metals are advancing, with spot silver up almost 3%.

Looking at today’s economic data calendar we get July CPI data at 8:30am and July federal budget balance at 2pm. Fed speaker slate is blank; Cleveland Fed’s Hammack and Richmond Fed’s Barkin have appearances slated Thursday

Market Snapshot

Top Overnight News

• Iran-backed Houthi rebels killed six people aboard a cargo ship in the Bab el-Mandeb Strait on Tuesday, the first reported fatalities from attacks targeting Red Sea shipping in more than a year. CNBC
• Pakistan said the 60-day deadline for a US-Iran MoU may be extended, but the larger peace process has stalled. Earlier, Donald Trump said the US “totally” controls the Strait of Hormuz. Oil wavered. BBG
• President Trump is betting the pressure of sanctions and a naval blockade will force Iran to bend. But the country’s rulers are taking time-tested steps to keep their chronically battered economy functioning just enough to resist a drawn-out campaign. WSJ
• The oil market faces a severe supply deficit of 1.8 million b/d this quarter due to renewed Middle East conflict, despite high prices cutting demand by half to 1.6 million b/d, the IEA said. BBG
• US-Japan efforts to support the yen risk being undermined by tensions between Scott Bessent’s calls for BOJ tightening and Sanae Takaichi’s preference for accommodative policy, investors said. BBG
• CPI Preview: We expect a 0.19% increase in July core CPI (vs. +0.2% consensus), corresponding to a year-over-year rate of +2.47% (vs. +2.5% consensus). We expect a 0.05% increase in headline CPI (vs. +0.1% consensus), reflecting lower energy prices. Our forecast is consistent with a larger 0.26% increase in core PCE in July, reflecting a large increase in its portfolio management component.  GIR
• Democratic socialist Francesca Hong’s loss in Wisconsin’s Democratic gubernatorial primary Tuesday night revealed limits to the far left’s power — and is undercutting the narrative of an emerging insurgency. Politico
• President Donald Trump is looking for new policy pledges he can present to voters ahead of the midterm election, according to a top economic aide and a former administration official, including potentially calling on Congress to cut capital gains taxes and create an exemption for certain home sales. BBG
• Oracle has drawn up plans for a new round of job cuts to reduce payroll as it racks up billions in debt to fund AI infrastructure, according to people familiar with plans. Business Insider

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded mixed amid geopolitical uncertainty, earnings releases and as participants await US CPI data. ASX 200 retreated as attention turned to earnings and with the top-weighted financial sector in the red after CBA posted full-year results, which mildly beat estimates and showed a 7% increase in cash profit, although its CEO warned that economic growth is slowing. Nikkei 225 was choppy on return from the holiday closure and amid a lack of tier-1 data, while participants continued to reflect on recent currency moves and increased BoJ rate hike expectations. KOSPI rallied on tech momentum and futures triggered a sidecar, with firm gains seen in both Samsung Electronics and SK Hynix propelling the index higher. Hang Seng and Shanghai Comp were mixed, with the Hong Kong benchmark pressured as markets await earnings results, including Tencent kicking off Chinese tech earnings, while sentiment was also contained after the PBoC skipped its 7-day Reverse Repo operations for a second consecutive day.

Top Asian News

• Japanese PM Takaichi may reshuffle the cabinet during mid-September at the earliest, according to Japan Times.

European bourses initially opened entirely in the green but has since pared back the earlier gains, now trading with slight losses. Similar price action was seen in Asia, with equities ending mixed. KOSPI was the clear outperformer, driven by gains in SK Hynix and Samsung Electronics (+5.5% and +6.7% respectively) after Asia Business Daily reported that Singapore’s Temasek is planning to invest directly into the two Cos through its internal investment team. Newsflow has been light, with focus on the US CPI report at 13:30BST. Markets are expecting core CPI to tick lower to 2.5%, its lowest level since early 2021. After the close in Taiwan and Hong Kong, Foxconn and Tencent reported earnings. For Foxconn, its Q2 net income, revenue and operating profit beat consensus and guided Q3 revenue to rise strongly. For the latter, Tencent’s revenue and capex topped forecasts however operating profit missed. Sectors point to a mixed picture. Basic Resources outperforms, followed by Construction and Telecoms. To the downside is Health Care, given the broker downgrade for Novo Nordisk (-2.8%), with Consumer Products & Services and Optimised Personal Care rounding out the sector laggards.

Top European News

• German HICP Final (Jul YY) 2.8% vs. Exp. 2.8% (Prev. 2.4%).
• German HICP Final (Jul MM) 0.9% vs. Exp. 0.9% (Prev. -0.2%).
• Italian HICP Final (Jul YY) 2.9% vs. Exp. 2.9% (Prev. 3%).
• Italian HICP Final (Jul MM) -1.0% vs. Exp. -1% (Prev. 0.0%).

FX

• G10s are mostly flat against the Buck, low-yielders CHF and SEK underperform despite a lack of specific catalysts.
• DXY is flat heading into the US CPI print. More weight on the CPI print today after those FT sources suggested Warsh was more attentive to the inflation side of the mandate, in the weeks ahead at least. Despite the recent USD action, the market is primed for a soft 0.2% M/M core print; a figure which could see some reduction of tightening bets. As it stands, the market sees September as a coin-flip between hold and hike. In terms of levels into CPI, the DXY’s NFP low was 99.40 to the downside, 99.18 is the 200DMA. To the upside is 100.00, thereafter the 21/50DMAs are around 100.50, which could come into play on a hot print.
• No EUR move to unrevised Italian and German CPI; EUR likely to trade at the whim of the Buck on US CPI; the single currency currently flat at 1.1540 with catalysts absent, also flat against CEE, where focus remains on the implications of the European heatwave for energy supply.
• The same story for GBP, which is flat, but more resilient than others to the modest USD strength. For the moment eyes are on UK data with GDP scheduled tomorrow following yesterday’s BRC report, which showed sales growth below expectations. Cable is within a c. 30 pip range.
• SEK and CHF are among the worst performers vs the USD. Despite headline specific newsflow being light, action is potentially a function of carry funding amid the recent unwinding of JPY shorts.

Fixed Income

• USTs are slightly firmer heading into US CPI for July. Currently, in a 108-13+ to 108-22 band. Today’s data is of note after the particularly weak NFP report last week, which saw a pullback in near-term tightening expectations leaving September essentially a coin-flip, as it stands. However, before the September Fed we get PPI, PCE, Jackson Hole, August NFP and then the August CPI series.
• Currently, CME pricing has September evenly split between a hold and hike; a 37% chance of a hold in October, 50% to a 25bps hike and just over 12% implied probability for a 50bps move. By end-2026 (i.e. December’s meeting) there is a 21% chance of the Target Rate still being at 3.50-3.75%, 45% probability of one 25bps hike, 28% chance to two and around a 5% likelihood of 75bps worth of tightening.
• EGBs devoid of specific catalysts in conditions more typical of summer markets. Bunds in a narrow 124.63-95 band, and unchanged in that. Gilts started with a little more pressure, opened lower by 24 ticks at 87.00 before paring around half of that and now trading in-line with EGBs.
• Aside from CPI, the docket also features US supply. As a reminder, Tuesday’s 3yr auction was strong, though not as well received as the last outing.
• Germany sells EUR 1.95bln vs exp. EUR 2.5bln 2038 and 2053 Bund.
• The UK sells GBP 1.5bln 1.125% 2035 I/L Gilt: b/c 3.37x (prev. 3.35x), real yield 1.725% (prev. 1.515%).
• Japan sells JPY 250bln 10-year I/L JGBs: b/c 3.27x (prev. 3.40x), Yield at the Lowest Accepted Price 0.860% (prev. 0.578%), Lowest Accepted Price 97.70 (prev. 100.20).
• Australia sells AUD 1bln 4.25% March 2036 bonds, b/c 4.73, avg. yield 4.9923%.

Commodities

• There has been little in terms of notable geopolitical updates throughout the European morning. The main recent development is that Iran’s Secretary of the Supreme National Security Council said the Strait of Hormuz would not open until the US accepts Iran’s conditions, conditions that prove unfavourable for Washington. Elsewhere, Pakistan said it continues to activate direct and indirect diplomatic channels between the US and Iran and are working to bring both sides to the negotiating table in Islamabad, whilst Pakistan remains optimistic as a mediator.
• WTI Sept and Brent Oct futures initially held onto mild gains amid a lack of constructive updates to resume oil flows. This morning, the IEA OMR forecasted an oil market deficit of some 1.8mln BPD in Q3, more than double the prior month’s forecast of 800k BPD. IEA also noted that although the market is projected to return to surplus towards the end of this year, risks remain substantial and the urgency of reopening the Strait has increased, as previously available inventory buffers are rapidly depleting. Note, OPEC will be releasing its oil market report at 13:00 BST, albeit the report is backwards looking. The space gradually dipped into flat territory throughout the morning. WTI resides the bottom end of a 82.57-84.35/bbl range (vs yesterday’s USD 84.61 high), while Brent trades in a USD 88.27-90.07/bbl range (vs yesterday’s USD 90.03/bbl peak).
• Precious metals are firmer despite a lack of newsflow in the runup to the US CPI report. The data will be key in shaping expectations for the September FOMC meeting; the weak July NFP report prompted participants to pare rate hike expectations, although the subsequent rebound in crude prices has helped push September pricing back towards a coin flip (full preview on the headline feed). Spot gold trades in a USD 4,363-4,424/oz range, within yesterday’s 4,356-4,435/oz range.
• Base metals are also firmer across the board but gains capped ahead of US CPI, whilst ongoing hopes of Chinese stimulus keep the complex underpinned. 3M LME copper resides in a USD 14,134.03-14,237.97/t range.
• IEA OMR: Oil Market in a 1.8mln bpd deficit in Q3 (prev. forecast 800k bpd), Sees World Oil Supply 1.27mln bpd lower than demand in 2026 (prev. 860k bpd), 2026 world oil supply to fall by 4.3mln BPD (prev. 3.7mln fall). Says that although the market is projected to return to surplus towards the end of this year, risks remain substantial and the urgency of reopening the Strait has increased, as previously available inventory buffers are rapidly depleting.
• US Private Inventory Data: Crude Oil Stock Change (Aug/07)(bbls) +9.1mln vs. Exp. -0.5mln (Prev. +2.7mln), Gasoline -1.5mln (exp. -1.6mln), Distillate -0.6mln (exp. -1.6mln), Cushing +1.6mln
• Kuwait set September export crude to Asia at a USD 3.75/bbl discount.
• ADNOC sets the September Murban crude OSP to USD 79.07/bbl.

Central Banks

• Fed’s Collins (2028 voter) told the FT that poor Americans are struggling to make ends meet, and warned that the central bank may need to raise rates to cool inflation. She added that she would be open to backing an increase as soon as September if the data dictated it.

Geopolitics: Iran

• US President Trump said they totally control the Strait of Hormuz, while he said regarding the flight change during the return trip from Turkey in early July that he was following what the Secret Service said and the plane he flew on was at greater risk. Furthermore, Trump said that he doesn’t trust Iran.
• Pakistan’s Foreign Ministry said it continues to activate direct and indirect diplomatic channels between the US and Iran and that they are working to bring both sides to the negotiating table in Islamabad. The Ministry added that they remain optimistic and not discouraged by escalations. Furthermore, the Ministry added that with the 60-day MoU deadline approaching, the deadline can be extended.
• Pakistani Interior Minister is said to have given an important message to Iran.
• Iranian Army official said Iran intends to maintain control and oversight of the Strait of Hormuz as a key source of its geopolitical power, Mehr News reported.
• Iran’s IRGC said that if a threat against Iran occurs again, “hundreds of thousands of miles of energy transmission lines, thousands of power plants, all US and non-US systems, and even global infrastructure connected to the Internet are at risk,” Sepah reported.
• Japanese PM Takaichi held a phone call with the Iranian President, on de-escalation of tensions in the Middle East and the security of maritime transit, Kyodo reported, citing sources.
• Yemeni Deputy Foreign Minister said there has been no direct or indirect negotiations with the Houthis, Al ArabyTV reported.
• Israel conducted airstrikes in southern Lebanon, according to IRIB.

Geopolitics: Ukraine and NKorea

• White House official told Al Jazeera that President Trump remains optimistic about the possibility of reaching a peace agreement between Russia and Ukraine.
• Ukraine Air Force said guided bombs were fired at southern Dnipropetrovsk and drones are heading to Sumy from the North.
• Russia said they targeted a Ukrainian forces fuel depot in Odessa.
• Russia’s Novorossiysk grain terminal has halted operations after being hit by an attack and damaged, according to sources.
• Russia’s Orsk refinery suspended processing on August 11th following a drone attack, according to sources
• North Korea fired an unidentified projectile. In response, the South Korean Presidential Office held a meeting regarding North Korea’s missile launch and will call for a stop to provocations.

US Event Calendar

• 7:00 am: Aug 7 MBA Mortgage Applications, prior -2.9%
• 8:30 am: Jul CPI MoM, est. 0.1%, prior -0.4%
• 8:30 am: Jul Core CPI MoM, est. 0.2%, prior 0%
• 8:30 am: Jul CPI YoY, est. 3.4%, prior 3.5%
• 8:30 am: Jul Core CPI YoY, est. 2.5%, prior 2.6%
• 2:00 pm: Jul Federal Budget Balance, est. -346b, prior -291.14b

DB’s Jim Reid concludes the overnight wrap

As we go to press this morning, markets have put in a pretty mixed performance across different asset classes. On the positive side, we’ve seen fresh equity gains overnight, as the latest earnings from CoreWeave and Super Micro Computer led to renewed optimism on the AI trade, with US equity futures pushing higher as well. Indeed, in South Korea this morning, the KOSPI is currently up +3.79%, which as it stands would be its best daily performance so far this month. However, the geopolitical news continued to raise concerns, with the Strait of Hormuz still blocked and there’s still no sign of a deal to reopen it yet. In turn, that’s led to further gains for oil, and this morning Brent crude is on track for a 6th consecutive increase, having risen another +0.93% to $89.74/bbl. So concerns about inflation remain top of the agenda, and investor attention is now shifting towards today’s US CPI report, particularly with market pricing for the Fed’s next decision still in the balance.

In terms of those geopolitical developments, we’ve seen competing headlines over the last 24 hours that have pushed oil prices in both directions. Initially, there was more optimism about some kind of deal that sent oil prices lower. For instance, Al Jazeera cited a spokesman from Qatar’s Foreign Ministry, who said that talks between Oman and Iran had reached an advanced stage. Then soon afterwards, oil prices saw an even bigger move lower after Pakistan’s defence minister said the US and Iran were “close to some sort of arrangement”, and that “things are shaping up in favor of peace”. So at the intraday low, Brent crude was down to $86.60/bbl.

However, oil prices then started to pick up from yesterday afternoon, and they’ve moved steadily higher since then, and are currently at $89.74/bbl. In part, that followed more hawkish Iranian comments reported by Iran’s state-run IRIB news. They reported an adviser to Iran’s supreme leader saying that “the Strait of Hormuz will not be reopened until Iran’s conditions are met”. And they also cited the recently-appointed Secretary of the Supreme National Security Council, who said that a deal between Iran and Oman on control of the Strait “will remain a separate issue from the Strait’s closure”. He also said that “The US must end the war, unfreeze Iran’s blocked assets, and the war must cease across the entire region, including Lebanon and Gaza”. So even as the mediating countries were suggesting a deal might be moving closer, there was little signal of that from either the US or Iran yesterday. Meanwhile, President Trump himself said that “We totally control the Strait of Hormuz” and that “Right now, we’re in a very good position”.

So after all those intra-day swings, Brent crude was ultimately up +1.36% to $88.91/bbl by the close, and this morning it’s up another +0.93% to $89.74/bbl. Moreover, there were signs of investors pricing in more protracted disruption, with prices moving up across the oil futures curve. For instance, the 12-month Brent future was up +0.33% yesterday to $76.53/bbl, and is up another +0.47% this morning to $76.89/bbl.

With concern about inflation mounting again, this makes it an interesting point to get the US CPI print for July, which is out at 13:30 London time. This is set to get particular attention, in part because of the quieter summer newsflow, but also because Fed pricing for the next meeting is completely in the balance. Indeed, futures this morning are pointing to a 51% chance of a September hike, so if we do get an upside or downside surprise today, that could help shift the balance one way or the other. In some respects, the recent newsflow has been more dovish, with the last CPI print surprising on the downside, and payrolls unexpectedly contracted in the latest jobs report. But there’s been plenty of hawkish arguments too, with oil prices picking up again, whilst the unemployment rate hit a 13-month low as well, so the CPI print today will really help set the narrative for the decision, particularly as we approach the Jackson Hole Symposium towards month-end.
In terms of what to expect, our US economists think that headline CPI will come in at a monthly +0.15% pace, which would bring the year-on-year rate down to +3.45%, with a decline in gas prices weighing on that headline number. Meanwhile, they see core CPI coming in a bit stronger at +0.26% on the month, which would leave the year-on-year reading at +2.51%. Remember as ever that the Fed’s official target is for the PCE measure of inflation rather than CPI, which isn’t out for another couple of weeks. But today’s CPI and tomorrow’s PPI (where a few components feed into the PCE) will offer us an initial steer on prices in July and will help to shape the upcoming market narrative. For more details, you can see our US economists’ full preview here.

Ahead of that, yesterday was a pretty mixed session for equities, with the S&P 500 down -0.32% amidst weakness from the Magnificent 7 (-0.90%). However, we’ve since had some more positive tech news after the US close, with results from CoreWeave and Super Micro Computer. CoreWeave shares surged by about +15% in extended trading after the AI cloud computing specialist reported a stronger sales outlook and a smaller-than-expected net loss. Meanwhile, SMC rose by more than +7% after-hours as its sales guidance for Q3 came in well ahead of estimates. So that’s boosted investor sentiment this morning, with S&P 500 futures up +0.10%, and NASDAQ 100 futures up +0.21%.

That trend has been clear in Asia overnight as well, where most of the major indices have moved higher this morning. That includes the KOSPI (+3.79%), which at current levels would be its strongest daily performance so far in August. Moreover, the Nikkei (+0.67%), the CSI 300 (+0.65%) and the Shanghai Comp (+0.32%) have all moved higher as well, although the Hang Seng (-1.17%) has lost ground.
Before those earnings however, there was a more subdued performance, with no huge moves on either side of the Atlantic. As mentioned, the main underperformer was the Magnificent 7 (-0.90%) which dragged on the S&P 500 (-0.32%). But otherwise, the rest of the index put in a steady performance, and the equal-weighted S&P 500 (+0.21%) hit another record high. There was also some optimism in Europe, where the STOXX 600 (+0.01%) just about posted a 7th consecutive gain for the first time in over a year, inching up to a new record. That included records for the DAX (+0.26%) and the IBEX 35 (+0.20%) as well, but the FTSE 100 (-0.17%) and the CAC 40 (-0.13%) both fell back.

Otherwise, sovereign bonds recovered on both sides of the Atlantic yesterday, with a small but clear fall in yields across the board. So in the US, the 2yr Treasury yield (-2.7bps) fell to 4.22%, the 10yr yield (-1.8bps) fell to 4.69%, and the 30yr yield (-1.1bps) fell to 5.24%. The outperformance in front-end Treasuries was helped by a solid 3-year auction that saw $58bn of notes issued -0.5bps below the when-issued yield. Meanwhile, over in Europe, yields on 10yr bunds (-2.1bps), OATs (-0.2bps) and BTPs (-1.4bps) all fell back as well. And overnight, we’ve seen the 10yr Treasury yield fall another -0.6bps to 4.68%.

Finally, we got a bit of US data yesterday for July, which generally came in on the positive side. That included the NFIB’s small business optimism index, which rose more than expected to an 11-month high of 99.8 in July (vs. 97.5 expected). Meanwhile, existing home sales came in at an annualised pace of 4.06m in July (vs. 4.05m expected), which was a 3-month low but slightly better than expected. That said, in another sign of a subdued US housing market, the New York Fed’s household debt report for Q2 showed the biggest quarterly decline in mortgage debt since 2013.

Looking at the day ahead, the main data highlight will be the US CPI print for July. Otherwise, today’s earnings releases include Cisco Systems.