Good morning,
 
There was a cloudless, gorgeous blue sky in New York City on this morning 25 years ago. A striking contrast to the events that unfolded that day when the world changed forever. Many of the people in this building were deeply affected by those events, and those memories will forever be etched in our minds. September 11 was a day of heartbreaking loss for so many. It was also a day of incredible bravery, with love, kindness and unity rising from the tragedy. We remember those we lost and honor the heroism of the first responders and service people who answered the call to duty. 25 years later, about 100 million Americans are too you to remember the events of that day. We will NEVER FORGET.
 
Yesterday oil and yields were sharply higher despite a slightly cooler core PPI. 2y yields jumped ~15bp, to 4.60% while the 30y approached 5.4%. Brent crude ripped ~7%, nearing $110. The main driver was news of the Houthis capturing a key port city in a new chokepoint, the Bab el-Mandeb Strait, but there was a lot of other news flow to help press crude higher. The ECB hiked by 25bp as expected. Equity losses were modest in light of the oil/yield moves. The S&P fell 0.6%, equal-weight off 0.7% and Russell 2000 down 1%. Comm Services and Staples were the only sectors- interesting that Energy was down despite crude’s move.   
 
Ahead of this morning’s CPI data, a modest reprieve in oil prices and yields were helping equity futures claw back some of yesterday’s weakness. Yields were down about 2bp across the curve ahead of CPI. Europe was trading higher as well. Positive developments in the Iran situation helping push oil lower this morning, but the Yemen situation is now rapidly deteriorating which could create another global choke point in the Bab el-Mandeb Strait. The NYT reported that JD Vance was given a dour assessment of the Iran war by military leaders. He also provided a strong case to be the leading potential Republican nominee in 2028 with his speech last night at the mid-term convention. Oracle is up >5% in the pre-market following earnings last night. OCI (cloud infrastrucutre) grew 120% y.y and RPO stands at $664B, including ~$30B from new AI contracts, while 850MW of compute capacity came online in the quarter.
 
Headline CPI was inline while core missed slightly month-over-month (0.3% vs 0.2%) but was inline year-over-year (+2.4%).  Yields spiked briefly but quickly came back in on the long-end while the 2y remained higher but off the peak. Recent comments by Fed officials like governor Waller put particular emphasis on this data. Waller noted the need to see continued improvement in the August inflation data to support a rate hold, otherwise it may appropriate to hike. S&P futures jumped around a bit right after the data but have headed to their best levels as we approach the open with yields falling.
 

 
2y yields are now down 2bp at 4.57%, down from the immediate post-CPI high of 4.65%. 10 and 30y yields are down 6bp- below levels before the data. Expectations for a hike at next week’s FOMC meeting rose to 90%, from 70% yesterday.  
 

• US 2yr -2bps to 4.57%, 5yr -5bps to 4.72%, 10yr -6bps to 4.91%, 30yr -6bps to 5.32%
• USD index: +$0.07 to $99.12

Crude is pulling back 3% after yesterday’ rip. Gulf foreign ministers are meeting with counterparts in Iran on Monday to press for a deal to reopen the Strait, according to the FT. It would be the first such meeting since the Iran war started in February. Meanwhile Houthis are advancing further down the Red Sea coast after their recent seizure of the Yemen port of Mokha, putting the Bab el-Mandeb Strait at risk. Saudi Crown Prince bin Salman’s request for the US to strike the group was rebuffed by President Trump, according to reports, as the President wanted to keep the focus on Iran and Hormuz. The IEA monthly report lowered its 2026 world oil demand by 940Kbpd, now expecting it to decline by 2.5Mbpd. 2027 demand was raised by 200Kbpd, which translates to 2.6Mbpd of demand growth next year. Supply is expected to fall 5.7Mbpd in 2026 but increase 8.4Mbpd next year. European natural gas is flat. Gold and silver are down about 1%, with gold hovering just below its 100d ma ~$4380. Ag commodities are modestly lower and crypto is unchanged.
 

 
European equities are higher to close out the week. Financials and telecom are leading while chemicals lag. UK Industrial production surprised to the upside. Asian equities closed the week under pressure, following US action on Thursday. The Nikkei fell almost 2% as JGB yields rose again ahead of next week’s BOJ rate decision, with a hike essentially fully priced in. Chinese equities dropped as well. AI model providers MiniMax and Z.AI fell ~25% this week, pressured by the release of DeepSeek’s latest model. Tensions around AI distillation ramped up as well, with Anthropic releasing detailed accounts of several Chinese firms’ methods of extracting US model structure. China may pause new battery projects as the industry giant CATL battles overcapacity issues. The Indian Stock Exchange’s IPO may come next week, with a valuation of up to $46B.
 

 
Earnings
After-Market (Thrs): ADBE, CPRT, DSGX, ORCL, RH, ZUMZ
Pre-Market: HOFT, KR
 
Economic Data:
US:

• CPI m.m / y.y: 0.4% / 3.4% vs 0.4% / 3.4% cons, prior 0.1% / 3.4%
• Core: 0.3% / 2.4% vs 0.2% / 2.4% cons, prior 0.2% / 2.5%
• 10:00am UofMich survey
• 12:00pm WASDE
• 1:00pm Rig count
• 2:00pm Budget Statement

Global:

• UK GDP July m.m: 0.4% vs 0.0% cons, prior 0.3%
• UK Industrial Production m.m / y.y: 0.2% / 0.6% vs -0.2% / 0.2% cons, prior -0.2% / -0.2%