A hot inflation print, and the market takes the hint

Clarity, of a sort

The August consumer price report arrived on Friday morning and did what CNBC had warned a day earlier it might do: it settled the argument. Inflation persisted through the month, CNBC reported, potentially locking in an interest rate increase from the Federal Reserve. The Wall Street Journal's own summary of the print was blunter still, filed under the heading "Inflation Comes In Hot".

Shares went up regardless. The Dow rallied through the session, according to the Journal's live coverage, with the inflation figure lifting the odds of a rate rise rather than denting them. The Journal's read of the day was that Wall Street was cheering clarity on the Fed outlook even if that clarity pointed towards higher rates. Separately it reported that the Fed is now poised to raise rates for the first time in years — a sentence that has not been available to write for some time.

Not everyone in the economy shares the market's composure. A consumer survey released the same day showed the outlook plunging in September as households' inflation expectations worsened, CNBC reported.

In London, This is Money framed the coming meeting as a test of nerve: the Fed chief under pressure to defy Donald Trump with a rate hike, with a soaring oil price threatening a fresh inflation shock. The Journal, for its part, published a piece on Friday night picking apart how energy is driving inflation and how it is not.

The bond market got there first

Long before the CPI release, the selling in government bonds had already made the point. The 10-year Treasury yield closed in on 5% on Thursday, the Journal reported, with oil fuelling the inflation anxiety. A Treasury buyback operation the same day did nothing to arrest it; bonds sold off anyway. By Friday's close, yields on US and European government bonds had finished near multiyear highs on rate-rise bets, having edged lower during the session without going anywhere much.

The South China Morning Post logged the US 10-year at a 19-year high, alongside a firmer Japanese yen, in its round-up of the numbers moving markets.

Britain fared worse. UK borrowing costs hit a 28-year high in what This is Money described as a bond market rout, with traders ramping up bets on a Bank of England rate rise as soaring oil and gas prices fed inflation fears. The European Central Bank raised rates over the same stretch. City A.M. reported that four interest rate hikes now loom, notwithstanding a surprise reading on economic growth — an awkward pairing of headlines for anyone hoping the two would move in the same direction.

The BBC took the trouble to explain why interest rates could rise again across the world, which is the sort of article that tends to appear when a turn in the cycle has stopped being a forecast and started being an itinerary.

Away from the rates desk

The FTSE 100 rallied on Friday as the UK economy beat forecasts, City A.M. reported in its live blog, with oil falling back over the session — a small counterweight to the week's energy story.

Corporate news kept its own pace. C&C, the maker of Bulmers, agreed to buy Asahi's UK wholesale business in a bid to lift sales. At Ryanair, 39% of shareholders voted against Michael O'Leary's £130m payday, which This is Money called a bloody nose; the vote did not stop it. On AIM, the week brought doublings and deals, from Empyrean's Mako transaction to a lift for a Bitcoin-focused recruiter.

In Brussels, 50 chief executives and investors wrote to urge the Commission not to dilute the EU Inc law. A separate Commission plan, to fast-track trade deals by publishing them in English, faces a looming French blockade, Euronews reported on Friday evening.

Asia supplied the week's quieter reading. The South China Morning Post examined why China's young investors, who describe themselves as comfortable with risk, hold such conservative portfolios. It also reported that mainland Chinese investors are expected to drive a Hong Kong wealth boom despite new tax rules, that Hang Seng has rolled out five wealth management strategies for families, and that Yuen Kee Food has entered the final stage of its Hong Kong listing after approval from the exchange. Elsewhere, Azerbaijan's state oil fund helped launch a China-ASEAN investment council.