Euro Inflation Surges, US Inflation Slows, Global Markets Respond

Central banks and inflation data took center stage in Europe and the US. The European Central Bank's Lagarde and Schnabel, as well as the Federal Reserve's Barkin and Williams, delivered speeches, while market participants digested a slew of economic releases.

Inflation picked up steam in the euro area, with France, Italy, and Germany reporting higher-than-expected HICP inflation rates. French HICP inflation rose to 3.4% y/y, Italian HICP inflation climbed to 4.1% y/y, and German HICP inflation reached 3.3% y/y.

However, the US experienced a different story, with August headline PCE decreasing to 3.4% y/y and core PCE falling to 3.0% y/y, both below expectations. This led to a decline in expectations for an October Fed rate hike, from 50% to 35%, and caused a slight downward movement in US yields.

Global risk sentiment remained solid throughout the day, with equities experiencing a late-stage sell-off that left them down 0.1%. The tech sector rose 0.5%, with consumer discretionary also performing well, while defensives underperformed. European futures are currently trading lower due to 'catch-down' from late US trading.