Wealthion Macro Bites – Diesel Tops $6 for the First Time Ever as Inflation Pressures Build

In a dramatic escalation of Middle East hostilities, military advances from Yemen's Iran-aligned Houthi militants have reached the Red Sea islands of Hanish after capturing the coastal city of Mocha, directly threatening the Bab el-Mandeb Strait, one of the world's most important shipping routes.  Fighting between the Houthis and Saudi-backed government forces has intensified in recent days, with the militant group shifting its focus ‌to control over Yemen's long coastline (instead of just the north) putting them in a stronger position to disrupt maritime trade.

In a classically polite cultural statement, Japanese Finance Minister Satsuki Katayama said Treasury Secretary Bessent’s recent comments claiming he was “the house” in yen markets because he had access to “asymmetric information” regarding BOJ policy steps sounded a little frightening when translated into Japanese.  Media reports in Japan translated Bessent’s “house” reference to “domoto,” a term associated with illegal gambling.  Translations aside, we would suggest Bessent’s remarks were scary enough in English!

Increasingly focused on “affordability” ahead of Nov. midterms, the White House has not yet ​made a decision on refined copper tariffs as officials weigh concerns that higher prices for the metal could raise manufacturing costs against the benefits of ‌encouraging more domestic mining.  A Reuters article speculating these election concerns may delay (or shelve) new copper tariffs sent LME 3-mos Cu futures down 3.6% and CME Dec. Cu futures down 4.95% on Thursday.

AI watch: Bridgewater co-CIO Greg Jensen issued a dire forecast comparing complacence over AI risks and consequences to the early days of the Covid pandemic.  “Unfortunately, this is what it was like in February 2020.  Until the AI starts killing people, unfortunately, history would suggest we’re not going to do anything, but we are going to face that.  That’s going to happen, and it’d be much better if started dealing with it before then.”  Importantly, Jensen was an early investor in both Open AI and Anthropic and over 30 years at Bridgewater was integral in adoption of algorithmic trading, quantitative investing strategies and other technologies that aim to replicate human decision-making and execution.

Concerns that details of the Aug. PPI report (+0.4% m/m & +5.4% y/y) suggest higher energy prices are flowing through to goods and services increased odds of a Sept. FOMC rate hike to 71%.  Price tracker GasBuddy reports U.S. national average diesel prices touched $6.055/gal on Thursday (first time ever above $6) and in California reached $8/gal.  GasBuddy commented, “Every truck, every delivery, every package, every grocery run just got more expensive.  Record diesel prices will impact every cargo, shipment, every delivery Americans are taking, and are likely to reignite inflation up and down the supply chain.”

In the most highly anticipated CPI print in recent memory, any variance from consensus estimates of +0.4% m/m and +3.4% y/y (and core +0.2% m/m and +2.4% y/y) has the potential to trigger steep moves in all asset classes.