- September headline PPI rises 1.3% m/m — most since March 2022 — on energy costs
- Warsh signals Fed likely to hold in October; stocks snap two-day losing streak
- Euro set to end five-week slump; Nagel says ECB may need to hike again
- IMF sees one more BoJ hike; Europe +0.8%, Japan +1.5%, Brent steady at $106
Producer prices rose more than expected in September, intensifying concerns about sticky inflation a day after a stronger-than-forecast core consumer price reading rattled markets.
Headline producer prices increased 1.3% month over month, well above the 0.5% consensus estimate and the upwardly revised 0.5% gain in August — the largest monthly increase since March 2022, driven mostly by higher energy prices. The combination of hot producer and core consumer prints suggested price pressures are broadening even as the data’s inflation-fighting credibility rested on the Fed’s response.
Federal Reserve Chairman Kevin Warsh, speaking at the International Monetary Fund’s annual meeting in Washington, boosted the odds of the central bank holding interest rates steady at its October meeting. The more dovish-than-feared tone triggered a relief rally: US stocks climbed after two days of losses, and the euro is set to end a five-week losing streak against the dollar.
Central banks elsewhere leaned hawkish. Bundesbank President Joachim Nagel said the European Central Bank may need to raise interest rates once again, while the IMF sees one more hike by the Bank of Japan — a reminder that the easing bias rests squarely on the Fed.
The shift in tone rippled through global markets, with equities staging a broad recovery. Europe advanced 0.8%, Japan climbed 1.5%, Hong Kong gained 0.5% and mainland China traded flat, while US futures pointed to a steady open following yesterday’s gains.
Markets at a Glance
- Equities: European benchmarks rose 0.8%, Japan added 1.5% and Hong Kong gained 0.5%, as the global recovery extended into a second session. Mainland China traded flat.
- US Futures: Contracts pointed to a roughly unchanged open after Thursday’s advance, with traders parsing the competing signals from hot PPI and Warsh’s comments.
- FX: The euro is set to end its five-week losing streak as the dollar came under pressure from the Fed’s hold signal.
- Commodities: Brent crude was flat at $106 a barrel, with the energy-driven inflation shock showing no signs of abating.
- Rates: Warsh’s comments tempered expectations for near-term tightening in the US, even as Nagel and the IMF signaled further action from the ECB and the Bank of Japan.
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