US stock indices finished mostly flat with price action choppy after hot PPI data - Newsquawk Asia-Pac Market Open

US stocks were choppy and the major indices ultimately finished flat, although the Russell 2000 underperformed, with index futures initially pressured in the premarket as recent bets of a Fed September rate cut were slightly trimmed on inflationary fears following a hot US PPI report. The headline and core PPI metrics markedly accelerated above expectations, surpassing both the consensus and forecast range on all fronts, with core & headline M/M rising 0.9% against the expected 0.2%, while over three-quarters of the move higher in producer prices can be tracked to the index for final demand services (+1.1%) and over half can be attributable to margins for final demand trade services rising 2%. However, stocks then staged a recovery during US trade, albeit in a choppy fashion, as participants turned their attention to the Trump-Putin meeting on Friday.
USD strengthened with the DXY returning to above the 98.00 level after hot PPI data which exceeded all analyst expectations and saw a slight unwinding of Fed rate cut bets although money market pricing is still heavily leaning towards a 25bps rate cut in September but it is no longer fully priced in. There were also notable comments from officials including Fed's Daly who pushed back against a larger 50bps rate cut which she said doesn't seem warranted and could send off an urgency signal, while Treasury Secretary Bessent said he did not tell the Fed what to do and that it may start with a 25bps cut and accelerate.
Looking ahead, highlights include Japanese GDP, Australian MI Inflation Gauge, Chinese House Prices, Industrial Production & Retail Sales, Supply from Australia & Japan, Holiday Closures in South Korea & India.

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LOOKING AHEAD

Highlights include Japanese GDP, Australian MI Inflation Gauge, Chinese House Prices, Industrial Production & Retail Sales, Supply from Australia & Japan, Holiday Closures in South Korea & India.
Click for the Newsquawk Week Ahead.

US TRADE

US stocks were choppy and the major indices ultimately finished flat, although the Russell 2000 underperformed, with index futures initially pressured in the premarket as recent bets of a Fed September rate cut were slightly trimmed on inflationary fears following a hot US PPI report. The headline and core PPI metrics markedly accelerated above expectations, surpassing both the consensus and forecast range on all fronts, with core & headline M/M rising 0.9% against the expected 0.2%, while over three-quarters of the move higher in producer prices can be tracked to the index for final demand services (+1.1%) and over half can be attributable to margins for final demand trade services rising 2%. However, stocks then staged a recovery during US trade, albeit in a choppy fashion, as participants turned their attention to the Trump-Putin meeting on Friday.
SPX +0.01% at 6,467, NDX -0.07% at 23,832, DJI +0.01% at 44,927, RUT -1.35% at 2,297.
Click here for a detailed summary.

TARIFFS/TRADE

US President Trump said Brazil is one of the worst trade partners and imposes 'tremendous tariffs' on US goods.
US President Trump said Chinese EVs are not entering the US due to tariffs.
White House Trade Advisor Navarro said pharma tariffs are likely under the section 232 probe because it is very clear we have a national security crisis, while he added that export controls by China and Russia could hurt them. Furthermore, he said pharma tariff rates are still being worked on and the majority of tariffs will target generic pharmaceutical products.
EU Commission spokesperson said on US tariffs, that the EU has received text from the US with their suggestions to get closer to finalisation of a document, while they are committed to getting that joint statement finalised and ready ASAP.

NOTABLE HEADLINES

US President Trump said inflation is down to a perfect number and there is hardly any inflation at all, while he added that 401(k)s and the stock market are soaring.
Fed's Musalem (2025 voter) said inflation is running close to 3% and tariffs are feeding through to inflation, as well as expects most of the impact of tariffs on inflation to fade in 6-9 months, but could be more persistent, according to CNBC. Musalem said he is taking a meeting-by-meeting approach and bringing an open mind, while he will further revise the view as more data comes in and noted it is too early to say what the right decision for September is, but added that a 50bps move is not supported by the state of the economy or data.
Fed's Barkin (2027 voter) said business sentiment has picked up in some ways, but not yet on the hiring side, while credit card and other data are providing a sense that July consumer data may be stronger. Furthermore, Barkin said it is still early days for companies adapting supply chains to account for tariffs.
Fed's Daly (2027 voter) said a large rate cut next month does not seem warranted, while she added that a 50bps cut could send off an urgency signal and she prefers moving gradually to a more neutral setting "over the next year or so", according to WSJ.
US Treasury Secretary Bessent said he did not tell the Fed what to do and that it may start with a 25bps cut and accelerate, while he believes there is room for a series of rate cuts and on the Fed Chair job, they need someone who is going to rationalise it. Bessent said regarding the crypto reserve, that they are not going to be buying it, but will use confiscated assets, while they are going to stop selling Bitcoin holdings and that BTC reserves are worth around USD 15-20bln.
Potential Fed Chair pick Zervos backed aggressive interest rate cuts, according to CNBC.
Trump admin is said to discuss the US taking a stake in Intel (INTC) and is discussing with Intel a plan that would bolster Ohio expansion, according to Bloomberg.

DATA RECAP

US PPI exFood/Energy MM (Jul) 0.9% vs. Exp. 0.2% (Prev. 0.0%)
US PPI exFood/Energy YY (Jul) 3.7% vs. Exp. 2.9% (Prev. 2.6%)
US PPI Final Demand MM (Jul) 0.9% vs. Exp. 0.2% (Prev. 0.0%)
US PPI Final Demand YY (Jul) 3.3% vs. Exp. 2.5% (Prev. 2.3%, Rev. 2.4%)
US Initial Jobless Claims 224k vs. Exp. 228k (Prev. 226k, Rev. 227k)
US Continued Jobless Claims 1.953M vs. Exp. 1.964M (Prev. 1.974M, Rev. 1.968M)

FX

USD strengthened with the DXY returning to above the 98.00 level after hot PPI data which exceeded all analyst expectations and saw a slight unwinding of Fed rate cut bets although money market pricing is still heavily leaning towards a 25bps rate cut in September but it is no longer fully priced in. There were also notable comments from officials including Fed's Daly who pushed back against a larger 50bps rate cut which she said doesn't seem warranted and could send off an urgency signal, while Treasury Secretary Bessent said he did not tell the Fed what to do and that it may start with a 25bps cut and accelerate.
EUR gave way to the resurgence in the dollar with the single currency not helped by the mixed data releases from the EU including in-line GDP.
GBP retreated from resistance just shy of the 1.3600 level despite firmer-than-expected UK GDP data.
JPY weakened and USD/JPY approached to near the 148.00 level after the hot US PPI which resulted in a widening of US-Japan yield differentials.
Norwegian Key Policy Rate 4.25% vs. Exp. 4.25% (Prev. 4.25%), while the Committee judged that a restrictive monetary policy is still needed but added it will likely be appropriate to continue with a cautious normalisation of the policy rate ahead.
Russian government abolished mandatory repatriation and sale of foreign currency proceeds by exporters, according to Interfax.

FIXED INCOME

T-notes settled lower with bear flattening seen following a hot PPI report.

COMMODITIES

Oil prices were initially choppy in the European morning but then rallied throughout US trade ahead of the Trump/Putin meeting with the White House tempering expectations for any breakthrough at Friday's talks.
Russian Deputy PM Novak supported the energy ministry's idea to extend the ban on gasoline exports through September.

GEOPOLITICAL

MIDDLE EAST

Israel's Mossad head is visiting Qatar to revive Gaza peace talks, according to two Israeli officials cited by Reuters.
Houthis said they bombed Ben Gurion airport in Tel Aviv, Israel, with a hypersonic ballistic missile, according to Al Qahera News.
US President Trump may visit Israel next month before his scheduled visit to Britain, while Trump's visit to Israel depends on ceasefire talks and stopping the war, according to Al Jazeera citing White House officials.
Iran said it is working with Russia and China to stop European sanctions, according to journalist Elster.

RUSSIA-UKRAINE

Russian Kremlin's Ushakov said the Alaska summit will begin at 11:30 local time on Friday (20:30 BST/15:30 EDT) with Russian President Putin and US President Trump to have a one-on-one meeting with translators, while they are also to have a wider meeting with delegations in which the central topic is Ukraine and the leaders are to give a joint press conference at the end of the summit. It was also reported that Russian Finance Minister Siluanov, Defence Minister Belousov, and Special Envoy and head of Sovereign Wealth Fund Kirill Dmitriev will participate in the Trump-Putin meeting on Friday.
Russian President Putin said the US is making a sincere effort to find a solution for the Ukraine crisis and is seeking agreements that are acceptable to all, according to Ifx. Putin said peace will be strengthened if at the next stage Russia and the US reach agreements in the field of strategic offensive arms control, while he added that new arms agreements with the US are possible.
US President Trump said on Fox radio that he thinks "he wants to get it done", in reference to Russian President Putin ahead of the Alaska meeting and thinks they will make a deal but does not know if there will be an immediate ceasefire or not and said he will not be doing the negotiations for Ukraine and Russia, it is up to them to sort it out. Trump also said he does not know if there will be a joint press conference with Russian President Putin after the Alaska meeting, although Trump will have a press conference however the talks go. Furthermore, he said the first meeting sets up the second meeting, which is much more important but noted there is a 25% chance that the first meeting (Alaska) is not successful and their could be more sanctions if the meeting is not successful, as well as stated it will be a give-and-take on boundaries and land regarding Russia and Ukraine.
US President Trump reiterated that a second meeting with Putin and Zelensky will be more important and thinks they will make peace, while he added that the Putin meeting is not a reward and will get peace in the near future if they have a good meeting.
US Secretary of State Rubio said to achieve peace in Ukraine, there needs to be some conversation about security guarantees, and the US is hopeful about the Trump-Putin meeting, but ultimately it will be up to Ukraine and Russia to agree on peace.
White House said regarding US President Trump's meeting with Russian President Putin that Trump wants to exhaust all options to have a peaceful end to the war and confirmed a joint presser after the meeting, while it was stated that Trump has plenty of tools to use if needed.
French President Macron said US President Trump told European leaders that all willing allies should be part of security guarantees for Ukraine, while he said Trump clearly ruled out NATO being part of security guarantees for Ukraine.

ASIA-PAC