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US stocks climbed after US CPI data kept a September Fed rate cut on the table - Newsquawk Asia-Pac Market Open

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Tuesday, Aug 12, 2025 - 09:55 PM
  • US stocks were bid on Tuesday while the Dollar was sold and T-notes steepened in response to a "not as bad as feared" CPI in the face of Trump's tariffs, keeping a September rate cut on the table following the weak July jobs report. Outperformance was led by the Russell 2000 which rose almost 3% and the majority of sectors were in the green, with notable outperformance in Communication and tech stocks, while Real Estate, Consumer Staples and Health Care lagged. T-notes steepened, with the front-end bid and the long-end was sold after the CPI data, while T-notes hit lows after Trump announced he is considering suing Fed Chair Powell over the Fed renovations, raising more concerns over Fed independence and boosting term premium.
  • USD weakened with the DXY weighed on by the US inflation report which was largely deemed as "not hot enough" to prevent a September rate cut by the Fed in which the M/M figures printed in line with estimates, while Core CPI Y/Y was slightly hotter than expected, but the headline was marginally cooler than forecast. The greenback was further pressured following comments from US President Trump who said he is considering a lawsuit against Fed Chair Powell.
  • Looking ahead, highlights include South Korean Unemployment, Japanese PPI, Australian Wage Price Index, Supply from Australia & Japan.

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LOOKING AHEAD

US TRADE

  • US stocks were bid on Tuesday while the Dollar was sold and T-notes steepened in response to a "not as bad as feared" CPI in the face of Trump's tariffs, keeping a September rate cut on the table following the weak July jobs report. Outperformance was led by the Russell 2000 which rose almost 3% and the majority of sectors were in the green, with notable outperformance in Communication and tech stocks, while Real Estate, Consumer Staples and Health Care lagged. T-notes steepened, with the front-end bid and the long-end was sold after the CPI data, while T-notes hit lows after Trump announced he is considering suing Fed Chair Powell over the Fed renovations, raising more concerns over Fed independence and boosting term premium.
  • SPX +1.13% at 6,446, NDX +1.33% at 23,839, DJI +1.10% at 4,4459, RUT +2.99% at 2,283.
  • Click here for a detailed summary.

TARIFFS/TRADE

  • US Treasury Secretary Bessent said he will meet again with Chinese officials in the next two or three months and that they are solving several variables with China, while he added they will need to see months, if not a year, of progress on fentanyl flows before Chinese tariffs come down. Furthermore, he said India has been a bit recalcitrant in trade negotiations.
  • White House said perhaps the chips deal could expand to other companies.
  • Chinese Foreign Ministry urged the US to take practical steps to stabilise global chip supply chains. In relevant news, China reportedly demanded companies halt NVIDIA (NVDA) chip orders over security concerns, according to The Information.
  • EU spokesperson said they have no timeline on tariffs and are still awaiting US officials.
  • Brazil is to unveil measures against US tariffs on August 13th, according to CNN Brasil.

NOTABLE HEADLINES

  • Fed's Barkin (2027 voter) said they may well see pressure on inflation and unemployment, while the balance between the two is unclear and Fed policy is well positioned to adjust as visibility about the economy improves.
  • Fed's Schmid (2025 voter) said retaining a modestly restrictive policy stance is appropriate for the time being and he supports a patient approach on rates. Schmid added that policy is not far from neutral and inflation is too high, while the limited effect of tariffs on inflation is a reason to keep policy on hold and not an opportunity to lower rates.
  • Fed board nominee Miran said "inflation continues to be well behaved" and there is no evidence tariffs are pushing up aggregate inflation, while he only sees relative price changes, according to CNBC.
  • US President Trump posted that he is "considering allowing a major lawsuit against [Fed Chair] Powell" due to the construction of the Fed buildings.
  • EJ Antoni, the economist tapped by President Trump to lead the BLS, suggested suspending the agency’s monthly jobs report prior to his nomination and argued that its underlying methodology, economic modelling and statistical assumptions are fundamentally flawed. However, it was later reported that the White House said the plan is for BLS to put out monthly reports.
  • Former St Louis Fed President Bullard said he talked with US Treasury Secretary Bessent last week and would be happy to proceed however Bessent wants to proceed in regards to the possibility of the Fed Chair.
  • WSJ's Timiraos said "September rate cut could've been derailed by a hot CPI print today, and the July CPI wasn't a "no inflation" reading, but it likely wasn't hot enough to stop a September cut".

DATA RECAP

  • US CPI MM, SA (Jul) 0.2% vs. Exp. 0.2% (Prev. 0.3%)
  • US Core CPI MM, SA (Jul) 0.3% vs. Exp. 0.3% (Prev. 0.2%)
  • US CPI YY, NSA (Jul) 2.7% vs. Exp. 2.8% (Prev. 2.7%)
  • US Core CPI YY, NSA (Jul) 3.1% vs. Exp. 3.0% (Prev. 2.9%)

FX

  • USD weakened with the DXY weighed on by the US inflation report which was largely deemed as "not hot enough" to prevent a September rate cut by the Fed in which the M/M figures printed in line with estimates, while Core CPI Y/Y was slightly hotter than expected, but the headline was marginally cooler than forecast. The greenback was further pressured following comments from US President Trump who said he is considering a lawsuit against Fed Chair Powell.
  • EUR climbed on the back of a weaker buck but is off intraday highs after hitting resistance just shy of the 1.1700 handle.
  • GBP strengthened with early momentum stemming from the UK jobs data which showed the labour market is softening, albeit at a slower rate.
  • JPY mildly gained with USD/JPY reverting to sub-148.00 territory amid the dollar-related headwinds and with attention turning to Japanese PPI data.

FIXED INCOME

  • T-notes settled marginally lower and the curve steepened after CPI data kept a September rate cut on the table.

COMMODITIES

  • Oil prices were lower as participants awaited the upcoming Trump/Putin meeting in Alaska on Friday, while it was also reported that the first vessel to load crude bound for the US after the new license had docked at Venezuela's José port​.
  • EIA STEO sees world oil demand for 2025 at 103.7mln B PD (prev. 103.5mln BPD) and 2026 world oil demand at 104.9mln BPD (prev. 104.6mln BPD).
  • OPEC MOMR noted global oil demand growth forecast for 2025 remains at 1.3mln BPD Y/Y, while 2026 global oil demand is forecast to grow by 1.4mln BPD Y/Y, which was revised up by 0.1mln BPD from last month’s assessment on the back of supportive economic activities.
  • Chevron (CVX)-chartered tanker docked at Venezuela's José port, marking the first vessel to load crude bound for the US after the new license.

GEOPOLITICAL

MIDDLE EAST

  • Israel considers sending a high-level delegation to Doha later this week for meetings with senior Qatari officials as part of efforts to resume negotiations on a Gaza hostage and ceasefire deal, according to Axios citing sources.
  • Iran's First Vice President Aref said the demand for zero enrichment is a "joke", according to ISNA.

RUSSIA-UKRAINE

  • White House said the Trump-Putin meeting will be one-on-one, while it also stated that the meeting is a listening exercise for President Trump and perhaps there are plans for Trump to travel to Russia in the future.
  • Ukrainian President Zelensky said he understood that Russia wants Kyiv to pull out of Donbas and will not advance in other directions in exchange. However, he stated Ukraine will not pull out of Donbas as such a move would open the way for Russia to attack Dnipropetrovsk, Zaporizhzhia, and Kharkiv.
  • Russian President Putin held a phone call with North Korean leader Kim and updated him on talks with US President Trump, according to Russian press citing the Kremlin.
  • Russian Foreign Minister Lavrov held a telephone call with US Secretary of State Rubio and they discussed preparations for the Alaska summit between Trump and Putin, according to Tass citing the Russian Foreign Ministry.
  • Russian troops reportedly made one of their most dramatic advancements of the year on Tuesday when they pushed deeper into the Donetsk region of Ukraine, according to NY Post.

ASIA-PAC

NOTABLE HEADLINES

  • China’s Finance Ministry said China will offer interest subsidy policies to enterprises in eight consumer sectors, including catering, tourism, and elderly care.

EU/UK

NOTABLE HEADLINES

  • ECB's Nagel said inflation is no longer a major challenge and they can react flexibly if necessary, while he added tariff uncertainty is lower but not fully removed.

DATA RECAP

  • UK Employment Change (Jun) 238k vs Exp. 185k (prev. 134k)
  • UK HMRC Payrolls Change (Jul) -8k (prev. -41k) (rev. -26k)
  • UK ILO Unemployment Rate (Jun) 4.7% vs. Exp. 4.7% (Prev. 4.7%)
  • UK Avg Wk Earnings 3M YY (Jun) 4.6% vs. Exp. 4.7% (Prev. 5.0%)
  • UK Avg Earnings (Ex-Bonus)(Jun) 5.0% vs. Exp. 5.0% (Prev. 5.0%)
  • German ZEW Current Conditions (Aug) -68.6 vs. Exp. -65.0 (Prev. -59.5)
  • German ZEW Economic Sentiment (Aug) 34.7 vs. Exp. 39.8 (Prev. 52.7)
  • EU ZEW Survey Expectations (Aug) 25.1 (Prev. 36.1)
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