U.S. Indexes closed higher on Friday, with broad-based strength seeing the SPX, NDX and DJI rise by around 1%, while the equal-weight S&P gained 0.8%. The majority of sectors finished higher, with Communication Services, Technology and Consumer Discretionary outperforming, while Utilities, Health Care and Energy lagged; Utilities and Health Care were the only sectors to close in the red. Sentiment was initially supported by Oracle (ORCL) earnings released after-hours on Thursday, although the stock ultimately faded its gains and closed the session lower. The highlight of the session was the US CPI report. The majority of metrics were in line with expectations, although core CPI rose 0.3% M/M, above the 0.2% forecast. The hotter-than-expected core print saw markets price a 25 basis points Fed rate hike next week with greater conviction, with the implied probability rising to around 86% from 70% pre-data, while several banks revised their calls from a hold to a hike. The initial reaction to the data was hawkish, with equities, T-notes and Gold coming under pressure while the Dollar rallied. However, much of the initial move subsequently reversed. The Dollar finished broadly flat, Gold erased its losses to close higher, while equities more than recovered their post-data weakness and finished firmly in the green. The Treasury curve ultimately flattened, with front-end yields rising while the long end was little changed. Front-end yields reflected the hawkish shift in near-term Fed expectations, while the relative resilience of the long end may partly have reflected position squaring following the recent backup in yields, particularly at the long end. The move may also have reflected some concern that tighter monetary policy could ultimately weigh on growth further out. In FX, the Yen and Antipodeans outperformed, while the Swiss Franc and Canadian Dollar lagged. Crude prices settled lower, paring some of the sharp gains seen earlier in the week after the FT reported that Gulf foreign ministers are planning to meet with their Iranian counterpart as part of efforts by Oman and Iran to secure a deal on shipping through the Strait of Hormuz. Meanwhile, US President Trump reportedly rejected a Saudi request to strike the Houthis. Nonetheless, tensions remain elevated, with a Saudi Arabian oil pipeline struck by projectiles, resulting in the temporary shutdown of the East-West pipeline. Reports also suggested that Saudi Arabia is considering launching strikes against the Houthis independently, although no final decision has been made. Attention this week will largely be on the FOMC rate decision, where a 25bps hike is now largely priced in following Friday’s CPI report. As such, the updated SEP and dot plot, alongside Chair Warsh’s commentary, will be important in shaping expectations for the policy path beyond September. The Bank of Japan and Bank of England rate decisions will also be in focus. Core CPI rose 0.29% M/M in August, above the expected 0.22%, while the Y/Y rate eased to 2.4%, in line with forecasts and below the prior 2.5%. Headline CPI rose 0.396% M/M, in line with the forecast and accelerating from the prior 0.1%, while the Y/Y rate was unchanged at 3.4%, in line with expectations. Within the report, supercore inflation accelerated to 0.51% M/M from 0.19%, while core goods inflation eased marginally and core services accelerated slightly. Following the slightly hotter-than-expected core M/M print, the implied probability of the Federal Reserve hiking by 25bps next week increased to 90% from 70% pre-data. The inflation side of the mandate is currently the Fed’s primary focus, so an above-consensus M/M print may be enough for the Committee to lift rates by 25bps next week. Oxford Economics writes that next week’s confab is on a knife’s edge, and while the firmer core CPI reading pushes them towards a hike, it is still no guarantee, particularly as the Fed’s preferred inflation measure is likely to prove more benign. Oxford adds that the acceleration in core prices was most notable within non-housing core services, particularly transportation services, which underscores the risk of further energy pass-through to a broader array of consumer prices. The University of Michigan Consumer Sentiment survey deteriorated in the preliminary September report, with headline sentiment falling to 47.8 from 51.7, below the 51.0 forecast. The weakness was led by a decline in the forward-looking expectations index to 45.8 from 51.5, also below the 50.5 forecast. The political-party breakdown showed sizeable declines among both Democrats and Republicans, while sentiment among independents was little changed from August. Five-year expected business conditions remained stable at levels well below their historical average, suggesting consumers believe the emerging risks this month have not materially worsened the longer-run outlook. Pantheon Macroeconomics notes that the downbeat report can “probably be pinned mostly on consumers’ worries about potential increases in interest rates and the renewed climb in energy prices.” Inflation expectations also moved higher, with the 1-year measure jumping to 4.6% from 4.0%, its highest since June, while long-run inflation expectations ticked up to 3.4% from 3.3%, ending three consecutive months at 3.3%. Finally, on Thursday the ECB hiked rates by 25 basis points as expected in a unanimous decision and maintained its non-committal guidance. Meanwhile, its 2027 HICP inflation forecast was raised, although the projection was lower than some desks had expected. Later sources suggested further tightening is likely, with an October hike in play. Elsewhere, Oil closed lower by 2% while Gold was basically flat following a volatile two-way trading session.
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For anyone following my Platinum Service it made 1140 points on Friday and is now ahead by 2440 points for September after ending the month of August with a gain of 2645 points after closing July with a gain of 8031 points, after ending June with a new record of 10527 points after ending May with a loss of 1104 points, having ended April with a gain of 1730 points, after ending March with a massive gain of 9002 points, having closed February with a strong gain of 5482 points after ending January with a gain of 4757 points, having closed December with a gain of 2599 points, after ending the month of November with a gain of 4542 points, after ending October with a nice gain of 5110 points after closing September with a gain of 3774 points while ending August with a gain of 3362 points after closing July with a gain of 3753 points after closing June with a gain of 3530 points, having closed May with a gain of 3606 points, after closing April with a gain of 7685 points after closing March with a gain of 2254 points while closing February with a gain of 4180 points. January ended with a gain of 2768 points while 1997 points were gained in December. October ended with a gain of 2179 points, after closing September with a gain of 4402 points, following a loss of 301 points in August. July gained 1908 points while June saw a gain of 2074 points. The Platinum Service made a previous record 9619 points in October 2022. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 2300 points. I have a YouTube Channel which contains recent interviews I have given This can be viewed by clicking HERE Please subscribe to this for new interview notification
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