It was the week's most eagerly awaited macroeconomic figure, the US inflation rate for August. The headline inflation figures were in line with expectations (+0.6% on a sequential basis). This was the biggest monthly rise since June 2022 and the second consecutive monthly increase. The energy index rose by 5.6% in August after increasing by 0.1% in July. Airline fares underwent a major turnaround. They rose by 4.9% after falling by 8.1% over the previous two months. On a rolling 12-month basis (see chart below), the overall CPI index rose by 3.7%, slightly more than expected (3.6%).

The surprise came from the core index, which was slightly higher than expected (+0.3% on a sequential basis), an acceleration compared to July. This was mainly due to the housing index, which has risen by 7.3% over the past year, accounting for over 70% of the total increase in all items except food and energy. On a rolling 12-month basis, the Core index is up 4.3%, in line with expectations.

The European Central Bank raised the deposit rate by 25 basis points to a record 4% on Thursday, with inflation risks outweighing economic gloom. Concerns about the dynamics of underlying inflation appear to have taken precedence over the negative (and worrying) dynamics of economic growth in Europe:

"Inflation continues to fall but is likely to remain too high for too long. The Governing Council is determined to ensure that inflation returns rapidly to its medium-term objective of 2%. In order to reinforce progress towards this objective, the Governing Council today decided to raise all three key ECB interest rates by 25 basis points."

It was a mixed week for US equity markets, with the S&P 500 and Nasdaq indices ending the week in slightly negative territory after Friday's profit-taking. Technology and growth stocks slightly underperformed the value style. Since the start of the year, the S&P 500 has continued to rise strongly, up 15.9%.

However, there is a strong dichotomy between the two categories of stocks. In fact, all the S&P 500's gains this year have come from the boom in AI-sensitive stocks, i.e., some very large caps such as Microsoft, Alphabet, Nvidia, Amazon and Apple. As for the rest of the market, it did not post any significant gains, reflecting concerns about the slowdown in global economic growth.

WTI crude oil (the US benchmark) closed above $90 a barrel for the first time since last November and is now up 12% on the year and 40% from its summer low. In the US, petrol prices have risen by 11% in the last month and by 50% since 2020, with US oil reserves at their lowest level since 1983.

This chart from Bloomberg shows the huge supply deficit that oil markets will face over the next quarter. OPEC is forecasting a supply deficit of more than 3 million barrels a day. If OPEC is right, the result will be the biggest reduction in stocks since 2007.

Voluntary production cuts by OPEC members are removing an additional 1.3 million barrels from the oil supply every day. This shortfall is taking place against a backdrop of rising oil prices and at a time when US reserves are at their lowest.

The table below highlights the top 10 companies in the S&P 500 index with exceptional credit ratings. Among them, Microsoft and Johnson & Johnson are the only two companies with an AAA rating, i.e. the highest credit rating.

At the end of August, most hedge fund strategies had posted a positive performance over 2023. The best performers were long/short global equity funds (+9.98%).  Multi-strategy funds rose by 4.51%, while credit strategies gained 5.34%. The year was more complicated for CTA (-2.48%) and global macro (-0.81%) strategies.