Oil above $100 and a 10-year near 5% sink Asia; UK GDP surprises at +0.4%

The S&P 500 closed 0.58% lower at 7,591.7, the Nasdaq Composite lost 0.65% to 26,081.7 and the Dow fell 0.6% to 52,064.1, a fourth straight decline for the blue-chip index. S&P 500 futures have recovered 0.38% overnight to 7,627, the only live read on the US day.

In Asia the Nikkei 225 has been down 1.95% at 64,001 in late trade, the Kospi 1.75% lower at 6,911 and the Shanghai Composite off 0.98%; the Hang Seng has held up better, down 0.43%. Europe finished Thursday in the red across the board: FTSE 100 -0.57% to 10,608.9, DAX -0.84% to 25,361, CAC 40 -0.49% and the Euro Stoxx 50 -0.67%.

The tape is being driven by one mechanism: energy-led inflation feeding straight into rate expectations. Brent is trading at $106.13, down 1.39% overnight but still 8.38% higher on the week, after the biggest wave of attacks on Middle East shipping in the widening US-Iran conflict and a second front between Saudi Arabia and the Houthis. Thursday's US producer prices rose 0.4% in August, in line with consensus, but the annual rate of 5.4% was a tenth above forecasts, and traders moved to price roughly a 64% chance of a Fed hike at next week's meeting. That pushed the 10-year Treasury yield up 10.7bp to 4.944% and the 30-year up 7.5bp to 5.361%; the 10-year now sits above its 52-week high, a level Reuters described as near its 2023 peak. Higher long yields compress the value of distant earnings, which is why technology took the biggest sector hit.

Asia is amplifying the same trade. Japan and Korea import almost all of their oil, so a crude spike is a direct tax on corporate margins, and the Bank of Japan is widely expected to raise rates next week, which is pulling Tokyo lower alongside chipmakers Samsung, SK hynix and Kioxia. The yen has softened, with USD/JPY 0.34% higher at 154.09.

At the single-stock level, Cooper Companies fell 14.67% after missing on revenue, guiding fourth-quarter earnings well below consensus and deciding not to sell CooperSurgical; American Eagle lost 13.97% as a 1% decline in its namesake brand's comparable sales and soft operating-income guidance overwhelmed a headline beat. In London, Associated British Foods dropped 7.92% after warning that Primark's fourth-quarter like-for-likes will fall around 3% and that its sugar arm could lose up to £170 million next year.

This is a broad, not narrow, risk-off. The VIX rose 8.38% to 17.84 and the MOVE index of rates volatility jumped 6.98% to 82.1, its 5-day gain running at 12.31%. Across PrimerIQ's US universe decliners outnumbered advancers 3,820 to 1,902, an advance-decline ratio of 0.5, and only communication services (+0.6%) and consumer staples (+0.05%) finished up among the eleven S&P sectors, with technology (-1.41%) and materials (-1.23%) at the bottom. The safe-haven bid is selective: gold is 0.74% higher at $4,397, but the dollar index is flat at 99.03, and Treasuries are being sold rather than bought, which tells you this is an inflation scare rather than a growth scare. Copper's 1.88% rise is the one discordant note.

The ONS reported at 07:00 BST this morning that UK GDP grew 0.4% in July against economist forecasts of no growth, following 0.3% in June. Output over the three months to July also rose 0.4%, with services up 0.6% while production and construction each fell 0.5%; the ONS singled out computer programming and AI-related activity as the largest contributor. Sterling is 0.21% lower at $1.3524, so the beat has not yet shown up in the currency.

The day's main event is US August CPI at 08:30 ET (13:30 BST), the final inflation reading before the Fed's 16 September decision. Consensus is for headline prices up 0.4% on the month and 3.4% year-on-year, with core at 0.4% and 2.4%. After Thursday's producer-price data lifted hike odds, an upside surprise would push the 10-year through 5% and extend the equity sell-off; a soft core print is the one thing that could take pressure off rates into the weekend.

The prints that have landed were badly received: Cooper Companies (-14.67%) and American Eagle (-13.97%) both fell on guidance rather than the quarter itself, and Associated British Foods (-7.92%) sold off on its Primark and sugar outlook. Nothing of consequence has yet reported in London this morning; Kroger is due before the US open with consensus at $1.05 a share.