FISG Daily Market Wrap 13th August

Treasuries Rise as Oil Eases; AI Trade Drives Asian Equities Higher

Treasuries advanced and global equities held near record highs on Thursday as oil prices eased ahead of key US producer-price data, giving markets fresh clues on inflation and the Federal Reserve’s next policy move. The 10-year Treasury yield fell 3 basis points to 4.67%, while S&P 500 futures gained around 0.2% and Nasdaq futures were broadly unchanged. Investors are focused on the US producer-price index, which could provide an early signal on consumer inflation and help shape expectations for the Fed’s rate path. Attention is also turning to a $25 billion 30-year Treasury auction, which is expected to price at its highest yield in roughly 25 years. Oil prices provided some relief to markets, with Brent crude slipping toward $87 a barrel. However, crude remains sharply higher after a 12% surge over the previous six sessions, as hopes for a US-Iran agreement to reopen the Strait of Hormuz remain limited. The elevated oil price continues to represent an important inflation risk, particularly if geopolitical tensions persist. In Asia, the AI trade staged another powerful recovery, with South Korea’s Kospi rising 3.6% and entering technical bull-market territory after climbing roughly 22% from its July low. Semiconductor heavyweights Samsung Electronics and SK Hynix each gained more than 5%, highlighting renewed investor demand for the AI and memory-chip cycle. The yen remained around 159.33 per dollar as markets assessed expectations for the Bank of Japan’s next rate move. Reports suggest Japan’s government is supportive of a near-term rate hike, potentially as early as September or October. A move toward tighter policy could become increasingly important for the yen and global carry trades. Meanwhile, Cisco shares fell 6.4% in premarket trading after its latest earnings failed to meet investor expectations, providing a reminder that strong index performance is not being driven uniformly across the technology sector.

Market Focus

The market remains caught between strong equity momentum and persistent inflation risks. Falling Treasury yields and a recovery in AI-related stocks are supporting risk appetite, but elevated oil prices, geopolitical uncertainty and upcoming US inflation data could quickly challenge that optimism. For traders, the key variables remain US PPI, Treasury yields, oil prices and central-bank expectations. A softer inflation signal could reinforce expectations for easier Fed policy and support equities, while a stronger-than-expected reading—particularly alongside elevated oil prices—could push yields higher and put pressure on risk assets. The broader picture remains constructive for equities, but the next move will depend heavily on whether inflation continues to cool without another oil-driven shock.