EU CREDIT MACRO: EU Market Close

• The Philly Fed non-manufacturing survey special questions on inflation expectations show a somewhat similar split in the activity indexes touched upon earlier with their historically large discrepancy between strong firms’ own activity and weak regional activity in August.
• The median firm reported increasing its own prices by 2.5% over the past year, up from 2.0% in the May question and having essentially paused annual price increases through end 2024/early 2025. It’s the strongest actual increase since the May 2024 survey.
• Own price expectations also firmed from 2.0% to 2.5%, above a typical median of 2% in surveys over the past almost two years but not an unprecedented level.
• Firms’ expectations of consumer inflation meanwhile cooled from a particularly strong May release, with those for the next year reverting to 3.3% from 4.8%. Ten-year ahead expectations also cooled to 3.5% after 4.8%, still above the 3.1% in February prior to reciprocal tariff announcements but within ranges.
• Elsewhere, these non-manufacturing firms reported greater price sensitivity over the quarter (59% reported higher sensitivity vs 50% in May) and fewer expect cost changes over the near-term (57% vs 65%). Of those that do expect cost increases, a similar almost two thirds expect those to be higher, with price changes over a median 3 months vs 2.5 months in the May survey. 

Looking across both the Richmond Fed's services and manufacturing surveys, there was a divergence in indicated price pressures, suggestive of tariffs feeding through to manufacturers more immediately.

• The Richmond Fed's manufacturing prices paid rose to a 28-month high 7.2% (reflecting changes over the prior 12 months), up from 5.7% prior; prices received were relatively steady at 3.1% (3.2% prior anda  2nd consecutive decline). 12-month expected prices paid rose for a 3rd consecutive month to 7.0% (6.0% prior, still below April's 8.0% high), with expected prices received at 4.0% for a 3rd month.
• For services firms, current prices paid ticked down 0.1pp to 5.1% (from 5.2%), with current received up to a 4-month high 3.3% (3.2% prior).
• Expected prices paid pulled back to a 6-monthlow 4.9% (5.2% prior), with expected received up to a 3-month high 3.9% (3.2% prior).

• Stocks are holding steady (SPX eminis) to mixed early Tuesday, off lows while holding to narrow ranges after Monday's modest decline. Currently, the DJIA trades down 15.51 points (-0.03%) at 45273.75, S&P E-Minis up 1 points (0.02%) at 6457.25, Nasdaq up 32.8 points (0.2%) at 21486.44.
• Industrials and Information Technology sector shares led gainers in the first half:  GE Vernova +3.02%, Boeing +2.04%, General Electric +1.81% and Howmet Aerospace +1.78%.
• Leading tech stocks in the first half included: Palantir Technologies +2.30%, Advanced Micro Devices +2.26%, Monolithic Power Systems +2.21% and QUALCOMM +1.92%.
• On the flipside, Consumer Staples and Communication Services sector shares underperformed in the first half: Keurig Dr Pepper -2.99%, Brown-Forman -2.80%, Bunge Global -2.50% and Archer-Daniels-Midland -1.90%.
• Energy stocks weighed by a drop in crude prices (WTI -0.77 at 64.03): Devon Energy -1.29%, Diamondback Energy -1.23%, EQT -1.02% and Coterra Energy -0.98%.