US wholesale inflation declines. The UK prepares energy support for business

According to a report from the US Bureau of Labor Statistics released Wednesday, the Producer Price Index, which reflects wholesale price levels, fell by 0.1%. Excluding food, energy, and trade services, the PPI rose by 0.2%. The PPI report fleshes out the US inflation picture and makes it not as bad as the August Consumer Price Index report. Inflation is clearly slowing as gas prices fall. But the process is slow, and inflation will likely remain well above the Fed’s target for at least a few more quarters.

At the moment, there is now a 33% chance of a 100 basis point Fed rate hike next week and a 36.1% chance of a rate hike to 4.75% by May 2023.

Banks in Germany reduced their holdings of banknotes and coins by a record 11 billion euros. There is plenty of reason to believe they will continue to reduce their non-interest-bearing cash reserves as the ECB interest rate will rise further in October.

The UK will unveil an energy support package for businesses next week. Thousands of businesses are facing steep increases in energy prices as many fixed-price contracts expire, raising fears that the promised support will not be delivered in time. Conversations between government officials and companies have so far failed to provide details about what unit price the government will set for companies or when it is likely to go into effect.

The prospect of using more oil to heat Europe in winter as Russia blackmails gas cuts has helped oil prices rise for the fourth time in five days. Also boosting the market was a smaller rise in US crude inventories reported by the government over the past week. The American Petroleum Institute said crude inventories rose by 6.035 million barrels on September 9.

Spot gold prices traded below a key support level of $1700 on Thursday, extending recent declines, as concerns over more aggressive Federal Reserve measures continue to weaken metals markets.

Asian markets were trading lower yesterday. Japan’s Nikkei 225 (JP225) decreased by 2.78%, Hong Kong’s Hang Seng (HK50) ended the day down by 2.48%, and Australia’s S&P/ASX 200 (AU200) ended Wednesday down by 2.58%.

The Chinese say they are increasingly feeling the rise in prices, although official data shows that the inflation rate is much lower than in the US and other countries. China’s Consumer Price Index hit a two-year high in July, rising to an annualized 2.7%. The Index slowed to an annualized 2.5% in August.

Japan’s efforts to stem the yen’s plunge with market interventions will be limited, a senior member of the country’s ruling party warned, as data showed that the currency’s recent slide has led to a record trade deficit.

A slight rise in the unemployment rate (from 3.4% to 3.5%) may prompt the Reserve Bank of Australia (RBA) to slow growth to 25 basis points at its next meeting.

New Zealand’s GDP rose by 1.7% in the last quarter. The growth drivers were air transport and transportation services. Drivers of the downturn are declines in manufacturing and construction.