Good morning. Yesterday following Wednesday’s rally, US equities opened modestly lower amidst concerns that the ceasefire wouldn’t hold. However, markets moved higher throughout the session as there were reports that Israel would scale back Lebanon operations which Iran claimed were a breach of the ceasefire agreement. The S&P 500 ended the session up 0.6%. Semis and AI infrastructure stocks led to the upside while software stocks were back under pressure with the sector trading down ~5%, amidst concern about the new Anthropic Mythos model. In fact, that model caused enough concern for Treasury Secretary Bessent and Fed Chair Powell to summon bank CEO’s to a meeting earlier in the week to discuss vulnerabilities.

Ahead of the US inflation data and ceasefire negotiations which are set to take place this evening, global markets moved modestly higher overnight with tech heavy Asian indices outperforming. US futures had traded on either side of unchanged ahead of the data. As widely expected, there was a big jump in headline CPI which was up 0.9% m/m and 3.3% y/y in line with estimates. This was driven by a 21.2% increase in gasoline prices which accounted for nearly three quarters of the monthly increase. Food prices were unchanged m/m. Core came in a tenth better than expected up 0.2% and 2.6%, respectively, helped by a 0.4% decline in used cars. Airline fares, which are volatile, and highly impacted by fuel costs were up 2.7%. The overall reaction to the data was reasonably muted with equity futures ticking up slightly. Yields initially ticked down but are pretty much back to where they were ahead of the release. Markets are clearly looking past the data as it will take some time to move more broadly through prices but the real focus is on the ceasefire negotiations as this will be the detriment factor as to whether this will be transitory (there I said it).

Commodities are mixed. Oil prices have reversed overnight gains trading slightly lower. Gold and silver are both lower but off the worst levels while copper is up >2%. Ag is mixed. Crypto is hovering around unchanged off the overnight lows and has been broken its correlation with software recently. Over the last twenty-four hours there has been a swell of calls to get the Clarity Act passed.