Key Takeaways
- ECB raises rates by 25 bps to 2.50% and lifts inflation forecasts for 2027 and 2028, citing persistent energy pressures from the Middle East conflict.
- US 30-year Treasury yield hits 5.34%, matching its highest level since June 2007, as wholesale inflation (PPI) remains elevated at 5.4% annually.
- Brent crude oil surges above $105 and US crude hits $100/bbl for the first time since May, driven by intensifying military strikes in the Persian Gulf.
- Spot Silver prices plunge nearly 5% to approximately $63.94/oz as a recovering US Dollar and rising yields weigh on non-yielding assets.
- Corporate earnings are mixed, with Macy's (M) raising its full-year outlook while Cooper Companies (COO) shares tumble on a lowered 2026 forecast.
The European Central Bank (ECB) raised its benchmark deposit rate by 25 basis points to 2.50% on Thursday, marking its second hike of 2026. Policymakers warned that inflation is set to remain above the 2% target for an "extended period," specifically raising their 2027 inflation projection to 2.5% (from 2.3%) and the 2028 outlook to 2.1%. The central bank noted that the ongoing conflict in the Middle East continues to generate significant supply-side price pressures, particularly in energy.
In the United States, the Bureau of Labor Statistics reported that the Producer Price Index (PPI) for final demand rose 0.4% in August, bringing the annual rate to 5.4%. While the monthly figure met expectations, the annual reading was slightly higher than the 5.3% forecast, fueling bets that the Federal Reserve may need to maintain a more aggressive stance. Consequently, US 30-year yields surged to 5.34%, a level not seen in 19 years, while the 2-year yield climbed to 4.50%.
Energy markets reacted sharply to escalating military activity, with Brent oil futures rising above $105 a barrel. US crude futures also breached the $100/bbl threshold for the first time since May 21, as traders priced in a more prolonged disruption to oil flows through the Strait of Hormuz. The surge in energy costs is a primary driver for the upward revisions in global inflation forecasts and the subsequent sell-off in sovereign debt.
The labor market showed continued resilience as US Initial Jobless Claims came in at 206,000 for the week ending September 5, nearly matching estimates. Continuing claims fell slightly to 1,774,000, suggesting that despite high interest rates, the employment environment remains firm. This stability provides the Federal Reserve with more room to focus on taming wholesale price increases without immediate fear of a labor market collapse.
In equity markets, Macy's (M) reported a strong second quarter, beating earnings estimates with an adjusted EPS of $0.63 and raising its full-year revenue outlook to a midpoint of $21.75 billion. Conversely, Cooper Companies (COO) saw its stock plunge over 17% in pre-market trading after missing revenue targets and lowering its fiscal 2026 outlook. Other notable movers included Freeport-McMoRan (FCX), which fell 8.4% on reports that the US administration has yet to decide on refined copper tariffs.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.