Morning Brief: ECB Hikes Rates by 25bps to 2.50%; US PPI Tops Forecasts, US Treasury Yields Surge, Oil Jumps Over 6%

【Key Snapshot】

· 🏛️ The European Central Bank lifted its deposit facility rate by 25 basis points to 2.50%, marking its second hike this year, citing persistent inflation pressures stemming from Middle East conflicts.

· 📊 US August PPI rose 5.4% YoY, above consensus of 5.3% and sharply higher from July’s 4.7%. The 30-year US Treasury yield hit its highest level since June 2007.

· 🛢️ Oil prices rallied sharply for a second session. WTI climbed 6.69% to $102.48/bbl, Brent rose 6.34% to $107.63/bbl, both hitting peaks since late May.

【I. Market Outlook】

Core Events:

‑ US PPI beats estimates, Treasury yields spike: Final demand PPI for August rose 5.4% YoY, exceeding market forecasts of 5.3% and accelerating notably from July’s 4.7%. → US 10-year Treasury yield jumped 11.58 bps to 4.9565%, nearing the 5% threshold; 30-year yield gained 8.17 bps to 5.3706%, the highest since June 2007. All three major US equity benchmarks closed lower for the fourth consecutive session.

Exclusive View:

The ECB rate hike paired with hotter-than-expected US PPI creates a global monetary tightening feedback loop. The 10-year Treasury yield edging close to 5% serves as the market’s primary warning signal, as financial conditions tighten rapidly. With Brent above $107/bbl and PPI accelerating to 5.4% YoY, inflationary pressures are spilling from energy into broader industrial supply chains.

【II. Overnight Market Performance】

‑ US Equities: S&P 500 -0.58% at 7591.70; Dow Jones -0.60% at 52064.10; Nasdaq -0.65% at 26081.72. All three indices fell for the fourth straight day.

‑ European Equities: STOXX 600 dropped 0.69% to 635.97, down for three consecutive sessions and hitting the lowest mark since July 8.

‑ Fixed Income: US 10-year Treasury yield +11.58 bps to 4.9565%; 2-year yield +13.61 bps to 4.5666%; 30-year yield +8.17 bps to 5.3706%, highest since June 2007.

‑ Commodities: WTI October contract +6.69% at $102.48/bbl; Brent +6.34% at $107.63/bbl, both at late-May highs. COMEX Gold -2.29% at $4358.50/oz; Silver -6.64% at $64.09/oz.

‑ FX: US Dollar Index +0.23% to 99.048; USD/JPY rose to 154.32.

‑ Crypto: Bitcoin fell roughly 1.3% near $77,900.

【III. Macro News】

1. 🏛️ ECB raises rates by 25bps to 2.50%, second hike of the year. The central bank cited ongoing inflation risks from Middle East hostilities, noting inflation will remain materially above target for an extended period. Lagarde delivered remarks afterward.

Insight: The ECB’s second consecutive hike reinforces the global central bank priority to fight inflation. Sustained energy shocks force the Eurozone to prioritize inflation control despite weak economic growth.

2. 📊 US August PPI rises 5.4% YoY, beating consensus of 5.3%. This marks a sharp pickup from July’s 4.7%, while the MoM reading of +0.4% matched forecasts. Core PPI climbed to 4.6% YoY. Treasury yields surged, with the 10-year yield closing in on 5%.

Insight: PPI accelerating to 5.4% YoY shows inflation is propagating from energy across the industrial chain. The 10-year yield nearing 5% signals sharply tighter financial conditions.

3. 📉 US existing home sales for August fell below 4mn units, inventory absorption period hit a decade high. The housing market remains under strain amid elevated interest rates.

【IV. Corporate News】

1. ☁️ Oracle reported Q1 revenue of $19.3bn, up 30% YoY. Cloud infrastructure revenue jumped 121%, and remaining performance obligations rose to $664bn. AI compute demand continues to surge, lifting RPO to a record high.

2. 💾 TSMC August revenue hit a monthly record for the period at NT$514.8bn, rising 53.3% YoY. Capacity expansion cannot keep pace with demand, and advanced node supply stays tight.

3. 📊 Adobe beat revenue and profit estimates for Q3. AI-powered features pushed monthly active users above 1bn, with AI tools acting as a key driver for subscription growth.

【V. Key Events To Watch】

· 🇷🇺 Bank of Russia rate decision.

· 📊 University of Michigan preliminary US Consumer Sentiment (Sep). With oil above $100/bbl, consumer inflation expectations are in focus.

· 🛢️ IEA monthly oil market report. The EIA has upgraded oil price forecasts; investors will watch IEA’s global supply-demand assessment.

· 📊 US August federal budget and weekly oil rig count.

· 🗣️ ECB President Lagarde speech, for fresh guidance on the rate path after the hike.