Market Developments
Global risk assets consolidated near record highs as softer-than-expected July inflation data reduced the near-term case for Fed tightening, while renewed Middle East tensions pushed oil sharply higher. The S&P 500 gained 0.4% and the Nasdaq added 1.1%, while the Dow declined by 0.6%. July headline CPI eased to 3.4% from 3.5%, producer prices were changed on the month (still 4.7% year-on-year), and retail sales fell 0.6%, the first decline in nine months. This pushed September hike odds down to roughly 32% by Friday, per CME FedWatch, but also raised a different concern: markets may be shifting from inflation anxiety toward doubts about household demand. Oil moved the other way, with WTI rising 5.4% to $82.40 as tanker attacks and stalled U.S.-Iran talks restored the geopolitical risk premium. The 10-year Treasury yield closed near 4.69%, still sensitive to energy-driven inflation risk.
In the global markets, the Nikkei rallied 4.7% on strong technology earnings and a weaker yen, while the Bank of Japan’s July summary of opinions signalled policymakers see room for further rate hikes, with one member suggesting the pace could accelerate. The yen drifted back toward 159-160 against the dollar, giving back roughly half the gains from the unprecedented joint U.S.-Japan intervention earlier in the month, as the underlying pressures of wide rate differentials and heavy energy import costs reasserted themselves. Hang Seng fell 2.1% on weakness in internet heavyweights, while MSCI EM gained 2.6%. The Nifty 50 snapped a two-week streak, down 0.83%, while the SENSEX fell 0.6%, as West Asia tensions weighed on sentiment even as bank deposits hit a record high. European equities were flat to lower, with the Stoxx 600 down 0.4% on the same Middle East uncertainty.
