James Brodie
Head of Learning & Development, Flux
Conflict Disruptions, Rising PPI, and Widening Spreads Shake Global Markets
Geopolitical shock lifts gold, hits equities, widens credit spreads as hot PPI and bank stress deepen global risk-off.
Gold +2.4%, Silver +2%, S&P 500 futures -1.6% right on critical support 6780, bond yields opened lower but are back on Fridays close.
I expect they go lower on the negative shock to the global economy, though seeing some short-term buying on inflationary pass through of the oil price. The extent of this shock will depend on the duration and spread of the conflict.
18% of global air freight capacity has been taken out of the market by conflict in the Middle East this weekend.
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Credit spreads are widening to the highest this year.
Friday saw January PPI inflation come in at 2.9%, above expectations of 2.6%. Core PPI inflation unexpectedly rose to 3.6%, above expectations of 3.0%. Core PPI inflation is now at its highest level since July 2025. PPI inflation is running hotter than expected
Friday saw a continued sell off in financial stocks with the KBW bank Index down another 4.9% on renewed credit concerns as AI worries have consumed nearly every part of the financial sector. Wealth managers, insurance brokers, big banks, boutique advisers, financial data providers and even exchanges have all taken a hit. (Chart 1, Bloomberg)
The global rotation out of US-based assets and into the rest of the world has officially begun. (Chart 2, Bloomberg, Tavi Cota)
Data this week (largely irrelevant to the Middle Eastern conflict)
Monday – US & Canada ISM manufacturing PMIs, Japan unemployment
Wednesday – Australian GDP, Japan, China, German, UK PMIs. US & Canada services PMIs, US ADP employment
Thursday – Challenger job cuts & weekly jobless claims
Friday – US payrolls (+60k expected with 4.3% unemployment)
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