10.09.25 - Inflation print in favor of investors

The producer price index (PPI) for August surprised to the downside, with wholesale prices falling 0.1%, while economists had expected a 0.3% increase. Core PPI, which excludes food and energy, also slipped 0.1% versus forecasts for a 0.3% gain.

Markets: US markets are pushing into record territory, supported by easing inflation signals and renewed AI momentum after the Oracle news flow - European equities continue to lag, weighed down by sluggish growth dynamics and lingering political and fiscal uncertainties.

• S&P 500: trading at record highs

• US 10-year yield: 4.06%

• Gold: higher

• US dollar: weaker

• Cryptos: up

My View: Speculation over a September rate cut is intensifying. With PPI surprising to the downside, bets are increasingly shifting toward the possibility of a 50bps cut.

All eyes now turn to tomorrow’s CPI release. Economists expect a 0.3% monthly increase in both the headline and the core index. If confirmed, annual headline CPI would edge up to 2.9%, while core CPI would remain steady at 3.1%. A result in line with expectations, combined with the recent signs of a cooling labor market, would give the Federal Reserve additional justification to move ahead with a cut in September.

Investors should be prepared for volatility around the release. Even modest deviations from consensus could trigger sharp swings in the market.

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