Swallowing the cost of tariffs
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What did the latest US inflation data do to equity markets and the Fed outlook?
Equity markets have responded very favorably to the latest uh inflation data coming from the United States. They've assumed tariffs aren't a problem and the Fed will cut in September. The RBA cut yesterday, of course, we'll look at the decision and the takeouts from yesterday's NAB Business Survey as well. And weak job starter from the UK and Aussie wages data today. Think that'll do it. It's Wednesday, the thirteenth of August 2025. It's the morning call from NAB. Good morning. So big rises in US equities on the back of that inflation data, the Nasdaq is up one point four percent. The S P up one point one percent and hitting another new high, one point one percent for the Dow two. We've got smaller rises in Europe.
The Eurostocks fifty closed up just naught point one percent, naught point two percent for the FTSE one hundred and the DAX is actually down a quarter percent. Uh the US dollar is down as well, naught point four percent lower on the DXY. That's helped the pound And the euro up half a per cent. The Aussie is up almost naught point three per cent to sixty five point three US cents. And bond yields higher. Well, just one basis point for ten year treasuries, but up five for German bunds, same in France, six for UK ten year guilt yields. Aussie ten years were down one basis point yesterday to four point two four percent now. On futures, they are four basis points higher than that this morning. And oil is lower, two percent off WTI and
point eight percent uh lower for Brent at sixty six point one a barrel. And Ken Compton joins me today from NAB in Sydney. So no surprise with the US inflation course CPI for July in the United States up naught point three percent from naught point two percent the month before. Um but looking at equity markets, uh they obviously are seeing this as a as a as a very
Yeah, good morning. Phil equity markets certainly off to the off to the races to some extent off the back of CPR. I mean, look, the headline numbers not too of the headline and the the overall numbers I should say, not too far from from from consensus, as you mentioned. I guess sort of tearing some of the detail apart. I guess probably the thing that's a little gonna be a little bit comforting to um equities to some extent was probably that uh there's still sort of not much um sign of tax.
How are tariff‑related price pressures affecting core inflation and corporate margins?
Tariff-related inflation coming through there. In fact, the the downside surprises come on some of the the goods measures. And indeed, where core was being lifted a bit, there was actually sort of some service categories like sort of airfares, dental services, and a few things there. So there's not really broad base price pressure there, but um but the fact that the tariff pass through is still pretty limited, you know, core goods inflation only at zero point two percent. I think that's probably something that the market's taken a bit of comfort in. And we did see a r a reasonably sharp drop in in in U.S. Treasury yields and expectations for Fed cuts did spike did spike after the release.
Well I mean you could say, you know, it's still a bit early and there were obviously there was a bit of an inventory build up and obviously this isn't the month when uh you know, we saw the highest one. That's that's this month. That's when they started to pick up again. But vehicle new vehicles, I mean, they were being tariffed quite high and uh their prices remained unchanged. So that was but again it could have been just, you know, buying up inventories or maybe it worked and people were buying American cars instead.
Uh, probably the former at this point is is is is possibly more likely. Although I mean, what this does speak to more generally is that the longer we're sitting there and not seeing clear tariff related inflation coming through, meaningfully it probably does point to what we're seeing in a few other bits of data around the place and anecdotes that uh the a a good chunk of the tariff related uh price increases are being taken by the by the importers or the or the or or the people ultimately selling the goods in the US more so than um you know more so than seeing full and complete pass three.
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Chapters
7 chapters
1
What did the latest US inflation data do to equity markets and the Fed outlook?
0:01–2:03
2
How are tariff‑related price pressures affecting core inflation and corporate margins?
2:03–4:29
3
Why are markets pricing in a September Fed rate cut despite lingering tariff concerns?
4:29–6:37
4
What were the key takeaways from the RBA’s surprise rate cut and its forecast revisions?
6:37–9:18
5
How did the NAB Business Survey reveal divergent confidence and conditions across industries?
9:18–11:24
6
What do the latest UK and Australian wage data suggest for future inflation pressures?
11:24–13:45
7
How is President Trump’s criticism of the Fed influencing market sentiment and the dollar?
13:45–14:31