Market Wrap US-Europe 11 August: Wall Street Slips Before CPI as Oil Climbs Past 89

By The Edge Research Team

Wall Street closed lower for a second straight session on Tuesday, the last before US inflation data, as a failed rebound in chip stocks pulled the Nasdaq down 0.60 percent to 26,445.45, with the S&P 500 off 0.32 percent at 7,728.20 and the Dow Jones down 0.34 percent at 53,791.85, per CNBC. Europe closed mixed earlier, with Germany’s DAX up 0.26 percent, and oil kept climbing after its settlement, with Brent at 89.15 dollars in late trading, per CNBC.

The US session was a holding pattern with a defensive tilt. Chip stocks tried to rebound and failed, per CNBC, the two-day stall extending Monday’s pause after Friday’s jobs-report rally, while the small-cap Russell 2000 moved the other way, rising 0.32 percent to 3,027.12, per CNBC, a sign of rotation rather than broad retreat. Treasury yields were little changed into the data, the 10-year at 4.692 percent. The VIX eased 1.16 percent to 15.28 at its final print, showing no panic in the stall, and the New York Fed’s research put US credit card debt at 1.26 trillion dollars and flagged a persistent K-shaped divide between households paying balances in full and those revolving them, per CNBC.

In Europe, the session split mildly along the middle. Germany’s DAX rose 0.26 percent to 26,391.42 and the Euro Stoxx 50 added 0.24 percent to 6,551.22, per CNBC, while Paris’s CAC 40 slipped 0.13 percent to 8,714.94 and London’s FTSE 100 eased 0.17 percent to 10,844.19, the continent closing before the late leg of oil’s climb.

In commodities, energy extended its move even after the close, as covered in our commodities wrap: Brent settled up 1.35 percent at 88.90 dollars and WTI up 1.31 percent at 83.21 on Iran’s conditions for reopening the Strait of Hormuz, per CNBC, and late trading pushed Brent further to 89.15 dollars and WTI to 83.41. Gold traded at 4,426.80 dollars an ounce into the US close, up 0.16 percent intraday after settling the official session almost flat, per CNBC.

In currencies and crypto, the majors were frozen. The euro was unchanged in effect at 1.1541 per dollar, sterling flat at 1.3503 and the yen flat at 159.30, per CNBC, while the Egyptian pound held at 50.13 per dollar after crossing the 50 level, as covered in our MENA-Asia wrap, and the Kuwaiti dinar stood at its official reference of 0.3071. Bitcoin slipped 0.44 percent to about 63,657 dollars.

For reference, Tuesday’s closes from our MENA-Asia wrap showed the region defensive and Asia split, with Singapore’s Straits Times up 0.98 percent leading the gainers, Qatar’s QE Index down 0.79 percent leading the Gulf’s broad declines, and Japan closed for the Mountain Day holiday.

Why it matters: Two sessions of shallow declines, with volatility easing on Tuesday and small caps rising, is not risk-off, it is a market that has stopped trading until Wednesday’s inflation print, our reading. The tension underneath is unchanged from Monday but tighter: equities are frozen while the one input that will not wait, oil, climbed again into and after the settlement, and Treasury yields refused to move in either direction. The New York Fed’s 1.26 trillion dollar credit card figure with its K-shaped divide is the structural footnote to that cyclical stall, a consumer that looks solid in aggregate while splitting underneath, which is exactly the kind of detail an inflation surprise in either direction would amplify.

Outlook: Everything resolves, or escalates, at Wednesday’s July US consumer price report at 8:30 AM New York time, 3:30 PM Kuwait time, the first checkpoint in the run to the Fed’s September decision that we mapped in our scenario article, our reading. The EIA’s weekly inventory data follows later Wednesday with Brent above 89 in late trading. The markers are whether the equity stall breaks upward or downward on the print, whether yields finally choose a direction, and whether oil’s Hormuz premium survives its first inventory test of the week.

Table – US equities, 11 August close, ranked by change:

Table – Europe equities, 11 August close, ranked by change:

Table – MENA and Asia, Tuesday 11 August closes, for reference, ranked by change:

Table – Commodities, intraday 11 August, ranked by change:

Table – Currencies, rates, volatility and crypto, intraday 11 August, ranked by percent change:

Sources: CNBC.

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