PPI Explodes, Markets in Disarray
From the US calendar, producer price inflation (PPI) jumped 0.9% month-on-month in July, the largest increase in three years, while initial jobless claims fell to 224,000. This combination dampened expectations for a major Fed rate cut, although the market still sees a slim chance of a cut. The next move will be guided by Retail Sales and U.S. Michigan consumer inflation expectations, released this Friday.
The geopolitical spotlight is on the Trump-Putin summit in Alaska (starting at 11:00 a.m. Alaska time). Trump is said to want to press for a ceasefire in Ukraine and open the door to a second meeting involving Zelenskiy, while Moscow has also put nuclear arms control on the negotiating table. Media and officials are signaling cautious expectations for the outcome, with no guarantee of a signed document.
On the tariff/trade war front, the PPI surge is seen as a sign that higher tariffs are starting to trickle down to inflation, bolstering the Fed's case for caution. On the energy side, the discussion of secondary sanctions on buyers of Russian oil—if peace talks fail to progress—poses a new risk to supply flows, although the realization of sanctions easing/tightening remains politically and time-dependent.
Market Impact: Global sentiment was initially shaky—US yields rose and the DXY strengthened after the PPI, then eased as the market reassessed the possibility of a 25 bps cut in September. Gold weakened (spot at $3,337), silver fell around 1% daily on Thursday, while oil rose ~2% ahead of the summit and then fell on Friday; WTI is projected to be down 0.7% this week and Brent + 0.4%. The IEA assesses that the oil market is increasingly bloated following the OPEC+ production increase, adding pressure on the price outlook. (ayu)
Source: Newsmaker.id
