PPI & CPI de-risk September rate hikes and as a result, the Jackson Hole next week. But combing through the finer details tells us that macro concerns are not alleviated, despite the optimism.

The jobs report coming soft last week, coupled with a soft CPI on Wednesday and a soft PPI on Thursday, I believe, takes the rate hike off the table for September, and de-risks the Jackson Hole meeting that is due to take place next Friday. 

We should see a continued grind higher, into September, but we may see some OPEX related volatility next week. Bigger picture though, the market is set to trend choppily higher. 

To go through the PPI briefly because there are some nuances that I believe probably go under the radar for most people. 

Headline came In soft, again benefiting from advantageous comparable and base effects. 

COre also came in at 0.2% vs 0.3% expected. 

However, there are a few points here that suggest that the macro stress on the market is not unwound. 

Ex food, energy and trade, we saw PPI come in at 0.4% vs 0.3% expected, which is the hottest since May. 

June core was revised higher, which means that last month's cooler print never actually happened. It won't be surprising to see this print revise higher too. Produce costs are rising faster than consumer costs, which means that there is this constant upward pressure on inflation. 

We have report that Tehran is prepared to keep the Strait closed as strategic leverage. 

Diesel-to-crude crack spread has widened to its highest level since 2020, signaling that a severe supply-side crisis is brewing beneath the surface

https://preview.redd.it/2yn76rvtwbjh1.png?width=1076&format=png&auto=webp&s=050d2fa898e1b84d84fc32c285239ff650125061

The 2 year broke down on the PPI print yesterday:

https://preview.redd.it/jc0yz7ruwbjh1.png?width=1266&format=png&auto=webp&s=0461fd03652ee108fcc02476576f86a20e747d86

This alleviates some pressure on the index in the near term, and supports the case for higher now into September or October, but there are still large macro concerns, is my point. We aren't in the clear, even with PPI and CPI coming in soft.

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