The U.S. Dow Jones index (US30) slumped 200 points ahead of the market open after a surprising jump in inflation.
US30 – 4H Chart
The US 30 trades near the previous market peaks and could be a warning sign for a potential top in the market.
The benchmark Dow Jones index of the 30 largest industrial stocks is seen as the most important shares to foreign investors. The latest data was a shock to investors, as they also called the tariff strategy into question.
The latest producer price index data (PPI) showed rising inflation in the wholesale sector.
The July core PPI came in hot at 3.7% on an annual basis, which was well above the expected 2.9% and the 2.6% reading in June. Analysts are now questioning the tariff strategy, and they are also seeing the interest rate cut odds plummeting. The headline figure also came in higher at 3.3% YoY, which was above the 2.5% prediction.
With costs sharply higher for producers and manufacturers in July, there is a risk that they will begin to trickle down to American consumers.
“Producers are starting to feel the inflation fire heat,” said economist Chris Rupkey at FwdBonds, wrote Thursday. “It will only be a matter of time before producers pass their higher tariff-related costs on to the backs of inflation-weary consumers”.
Market odds of a September interest rate cut slipped to 90% from being fully priced in a day earlier. The upcoming talks between Trump and Putin will be an important time for markets. A peace deal could lead to a rally in risk sentiment and an end to the three-year conflict.
Trump told reporters that Russia would face ‘very severe consequences’ if Putin does not agree to stop the conflict against Ukraine after Friday’s meeting. That could be a headwind risk for markets.
