US02Y Hot PPI and CPI prints pushed the Fed path sharply more hawkish. As I warned in the 08.20 Desk Note, Treasury's expanded long-end buybacks provided only temporary relief. The underlying pressure from elevated oil, persistent inflation and the lack of fiscal restraint never changed. U.S. Treasury yields remain the single most important asset to monitor.
NKD1! was hit by the exact combination that matters most for Japan: oil above 100, higher domestic and global yields, and a stronger yen. The 10-year JGB yield briefly reached 3%, BOJ rate-hike expectations continued to rise, and exporters and AI-related names came under pressure.
Even so, the 63.8K level I have been highlighting was tested and reclaimed. It now converges with the ascending trendline. As long as both hold, the rebound remains alive, with 69K back in play. A break and hold below both opens further downside.
Z1! lost the ascending trendline as the energy shock fed directly into the UK bond market. Oil above 100 pushed inflation and BOE rate-hike expectations higher, while the 10-year gilt yield reached a 19-year high. FTSE's heavy energy exposure cushioned the move, but it was not enough to offset the broader pressure from higher yields.
RUT DJI
Small caps and industrials have already been hit hard by the inflation prints, with clear relative weakness across RUT and DJI.
SPX and ES1! are trading inside a compressing wedge. Both SPX and NDX are showing resilience against hotter inflation and soaring crude prices, as the Mag 7 and semiconductors continue to carry the indices.
The market is front-running another Trump TACO. If he does not deliver one, I expect a Volmageddon-style event across SPX and NDX.
Our ascending trendline support on NQ1! continues to hold despite the increasingly hostile macro backdrop.
Small caps and industrials have already been hit hard by the inflation prints, with clear relative weakness across RUT and DJI.
$DOT · Northstar Macro · Orders at publication
