What moved
- US (closed Thursday): the S&P 500 finished at 7,591.7 (-0.58%), the Nasdaq Composite 26,081.7 (-0.65%) and the Dow 52,064.1 (-0.60%) — a fourth straight loss, with the S&P now 1.64% lower on the week. S&P 500 futures are trading 0.63% higher at 7,646 and Nasdaq 100 futures 0.73% higher, holding their pre-CPI gains after the print.
- Europe (live): the FTSE 100 is 0.81% higher at 10,694.5, the DAX 0.68% higher at 25,534.6 and the CAC 40 0.83% higher at 8,184.5; the Euro Stoxx 50 is trading 0.89% higher. All still sit lower on the week.
- Asia (closed): the Nikkei ended 1.93% lower at 64,011, the Kospi 1.76% lower at 6,909.9, the Hang Seng 0.60% lower at 24,805.6 and Shanghai 1.18% lower.
Why
The morning's data was not the relief the bulls were after. Headline CPI rose 0.4% in August and 3.4% year on year, unchanged from July, with gasoline doing most of the damage; the problem is core, which rose 0.3% against a 0.2% consensus. That is an upside surprise on the number the Fed actually cares about, one day after producer prices also rose 0.4%, and it lands four sessions before the FOMC decision on 16 September. Before the print, the CME tool put the odds of a 25bp hike at 67%; the case for a move has only strengthened. The rates market is taking it in the front end — the 5-year yield is 2.8bp higher at 4.761% while the 30-year is 2.2bp lower at 5.339% — a flattening that says tighter policy now, less growth later. The 10-year is barely changed at 4.947%, still pressed against 5%.
What is holding equities up is oil and Oracle. Brent is 2.82% lower at $104.59 and WTI is 2.88% lower at $99.53, back below $100 after the IEA cut its demand forecast; with energy driving the inflation print, a softer crude tape is the closest thing to a dovish input on the day. Oracle then reported $19.3bn of quarterly revenue, up 30%, and booked more than $30bn of new AI cloud contracts to take its backlog to $664bn against a $640bn estimate. Shares are 5.5% higher pre-market, and the read-across matters because the Nasdaq had been leading the decline on exactly the 'can AI capex pay for itself' question.
Asia's session was the hangover from Thursday: surging bond yields, crude above $100 and a chip sell-off across Samsung, SK Hynix and Advantest, with the Bank of Japan widely expected to hike on 18 September. Europe's bounce is more about positioning after the ECB's 25bp hike to 2.50% on Thursday pushed the STOXX 600 to a two-month low; the region is still on course for its sharpest weekly fall in about two months.
Sentiment & risk appetite
Risk appetite is fragile but not panicked. The VIX is 6.5% lower at 16.68, yet the MOVE index closed 6.98% higher at 82.1 — the stress is in rates, not equities, and that is where the CPI surprise hits. Thursday's US tape was narrow and defensive: PrimerIQ's breadth count across our US universe shows 1,908 advancers against 3,825 decliners, and sector dispersion ran from Communication Services (+0.60%) to Technology (-1.41%), with our Basic Materials median at -1.75%. Gold is 0.73% higher at $4,396 and the dollar index is flat at 99.12, so the haven bid is modest. Asia's breadth was outright ugly: 2,978 advancers to 9,813 decliners in our universe.
Economic calendar
August CPI printed at 08:30 ET (13:30 BST) today: headline +0.4% month on month and +3.4% year on year, core +0.3% versus a 0.2% forecast. Gasoline rose 3.9% in the month. This follows Thursday's PPI (+0.4%, as expected) and Thursday's ECB decision, a 25bp rise in the deposit rate to 2.50% with Lagarde flagging upside inflation risks.
Still to come: the University of Michigan's preliminary September consumer sentiment at 10:00 ET (15:00 BST), against an August final of 51.7. Beyond today, the FOMC meets 15–16 September and the Bank of Japan on 18 September.
Earnings
Kroger beat this morning with adjusted EPS of $1.09 against a $1.05 consensus and revenue of $46.12bn versus $45.59bn expected, but identical sales ex-fuel grew just 0.2% and full-year EPS guidance of $5.10–5.30 sits below the $5.27 consensus; the shares were marked lower pre-market. Oracle's Thursday-evening beat is the larger story for the tape. Thursday's losers are still being digested: Cooper Companies fell 14.67% after a revenue miss, a guidance cut and a decision to keep CooperSurgical, while American Eagle lost 13.97%.