Fed poised for first hike since 2023 as UK inflation hits 3.1%

Wall Street ended Tuesday lower on an AI-led fade and heavy Treasury yields: the S&P 500 closed down 0.45% at 7,585.73, the Nasdaq Composite fell 0.78% to 25,981.57 and the Dow lost 0.63% to 52,093.11. US cash is shut; the live read is futures, and they point the other way — S&P 500 futures are up 1.13% and Nasdaq 100 futures up 1.47%.

Asia finished broadly higher. The Kospi rose 1.37% to 6,717.97, the Nikkei 225 gained 0.69% to 63,923 and the Shanghai Composite added 0.71%; the Hang Seng managed just 0.19%. Europe is trading up: the FTSE 100 is 0.6% higher at 10,721.97, with the DAX up 0.35%, the CAC 40 up 0.54% and the Euro Stoxx 50 up 0.58%.

Everything today bends around one event. Futures markets put the odds of a Federal Reserve rate rise this evening at roughly 92%, which would take the target range to 3.75–4.00% and be the first increase since 2023 — the product of a summer of hot inflation prints, a war-driven oil spike and Chair Kevin Warsh's hawkish Jackson Hole turn. Tuesday's US session captured the discomfort: long yields ground higher, with the 10-year at 4.996% after a 3.5bp rise and the 30-year at 5.364%, and richly valued AI names bore the cost. Higher long yields raise the discount applied to profits expected years out, which is exactly where the AI trade's value sits.

The crypto complex had its own catalyst. The US Senate failed to advance the Clarity Act on a procedural vote, and the read-through hit listed intermediaries hard — Coinbase fell 10.1% and Circle 11.41%.

The overnight bid is thinner in its justification. Crude has paused after a violent run — Brent is down 1.51% at $107.11 and WTI down 2.44% at $103.25 — and Beijing's new five-year electronics plan lifted Chinese chip names. Beyond that, the scale of the futures move looks like pre-decision positioning rather than fresh news, and is worth treating as such.

This is not a fearful tape. The VIX is trading at 16.93, down 1.57% and 52% below its 52-week high, and gold's 1.32% gain leaves it 21.4% beneath its own 52-week peak — hardly a safe-haven stampede. The strain sits in rates: the MOVE index of Treasury volatility is up 9.1% over five sessions, and the 10-year yield is within a whisker of its 52-week high. Tuesday's US internals were poor beneath the index level — PrimerIQ's universe counted 1,879 advancers against 3,884 decliners, an advance-decline ratio of 0.48, with a mean move of -0.81%. Dispersion tells the story: energy stocks rose a median 1.89% on our numbers while consumer cyclicals fell 1.80%. Asia's session was the mirror image — 7,071 advancers to 4,488, and a 2.42% median gain across Asian technology.

UK consumer price inflation printed at 07:00 this morning and came in at 3.1% for August, up from July and the strongest reading since March on Bloomberg's account. It matched the median economist forecast in a Reuters poll but sits above the Bank of England's own 2.8% projection, with motor fuel costs up around 23% year on year the dominant contributor — the direct channel from the Gulf conflict into the UK basket. Sterling has not liked it: GBP/USD is at 1.3462, down 0.29%, and EUR/GBP is up 0.21% at 0.8572.

Still to come: US August retail sales at 13:30 BST (08:30 ET), where consensus looks for a 0.8% fall after July's 1.1% contraction, alongside housing data. The Fed decision and dot plot land at 19:00 BST (14:00 ET), with Warsh's press conference at 19:30 BST — the part that matters, given the open question of whether October is a live meeting. The Bank of England's own decision follows tomorrow at 12:00 BST, with a hold at 3.75% the consensus.

The prior session's outsized moves were deal and policy news rather than results: Skyworks jumped 13.55% and Qorvo 9.34% as management signalled their $22bn merger could close this calendar year, well ahead of the earlier target. Enova fell 23.43% on nearly nine times its median volume, and Alignment Healthcare dropped 19.86%. Nothing of consequence has reported into this morning's tape; the day's meaningful results sit after the US close, on the far side of the Fed.