Released yesterday, US inflation data came in broadly as expected by analysts. Headline inflation eased slightly on a yearly basis in July, while underlying price pressures remained elevated. The latter comes on top of broadly soft jobs and wage data released last week.

Yes, but price pressures remain well above the Federal Reserve’s (Fed) 2% inflation target – still calling for tighter monetary policy, though the soft-ish looking numbers buy the Fed some time to wait a bit longer.

And the idea of a delayed Fed rate hike is giving a fresh boost to equity markets, along with a strong positive reaction to neocloud providers’ strong revenue growth.

• Nvidia-backed CoreWeave jumped around 20% after reporting 112% revenue growth compared with the same period last year. The company also raised its outlook, convincing investors that its widening loss to more than $620mn – more than double last year’s $290mn – was worth tolerating given the revenue it could generate thanks to exploding AI demand.
• Same for Nebius, which saw its own stock price soar 34% after reporting its results – suggesting that FOMO, the fear of missing out on the success story of these companies, is not fully over.

Also, the fact that these companies had sizeable short positions against them emphasised the size of the positive moves, as the macroeconomic setup – with softening rate expectations – helped lift their valuations by increasing the discounted value today of their hypothetical future earnings relative to an environment with higher borrowing costs.

So overall, and despite an early scare over Big Tech free cash flow plunging to low, and even negative, territory in some cases, cloud providers – both traditionally established ones and newcomers – have come out of this earnings season with a smile.

Among the big players, Amazon and Microsoft came out as the strongest links thanks to strong cloud performance. Microsoft, especially, which was battered for months for being a software company and a big AI spender, was finally praised for not boosting its spending plans further, while Meta – with its nascent plan to build a cloud unit to lend out all that AI capacity – remains the weakest link.

The chipmakers are coughing back to life following a harsh earnings season, when strong earnings couldn’t prevent a much-needed correction. Today, we are starting to see the rebound in Korea’s Kospi accelerate as investors return to building long positions, convinced that cheap valuations are worth the risk now that speculative positions have been mostly wiped out during the summer selloff.

And as for the circular-deal scare – the latest concerns being fuelled by Nvidia’s plan to work with major Wall Street firms to create more than $500bn in financing capacity for AI infrastructure for its  customers – the initiative helped ease financing pressure across the ecosystem and pulled Nvidia’s CDS lower from a peak, without however eliminating the risk that if something goes wrong among the companies benefiting from that financing – so that they can keep buying Nvidia’s chips – things could look ugly for Nvidia’s own revenue outlook.

Alas, for now, the good news is that the circular deals seem to be paying off. In the case of Microsoft, for example, reportedly around 70% of its AI-specific revenue has been generated by OpenAI. And Chinese rival DeepSeek warned earlier this month that it would significantly raise its prices, giving some relief to worries that price competition would destroy US companies’ profit margins and echo negatively across the AI buddies within the same circle.

The bad news is that the whole AI economy increasingly relies on the shoulders of two startups – OpenAI and Anthropic – which have multibillion-dollar deals with AI enablers, including data centres, cloud providers and chipmakers.

As for the Chinese rivals, appetite in the Hang Seng peaked in August as AI spending there also started worrying investors. Chinese tech companies will likely see periods of boost and retreat depending on their technological progress, but they must make sure to keep their competitive gap narrow enough to challenge the globally popular US rivals.

Equities, bonds react to soft US CPI, US dollar less.

Market mood has sweetened after the benign US inflation data pulled yields lower yesterday. The S&P 500 eked out a small 0.26% gain, while the technology-heavy Nasdaq-100 gained 0.74%, as the US 2-year yield eased below 4.20%. Activity in Fed funds futures now points to around a 60% chance of a September rate hold from the Fed, while the probability of an October rate hike stands at around 55%. The latter is echoing positively across Asian bond markets this morning as well.

US and European futures are in the green. Softer Fed expectations, on the other hand, have so far been clouded by rising oil prices and have not translated into a softer US dollar. The EURUSD sees resistance near two-month highs, which also coincide with the top of its year-to-date bearish trend channel, while the USDJPY is testing US and Japanese officials’ nerves a touch below the 160 level.

As discussed yesterday, the soft inflation report doesn’t mean that price dynamics are on a sustainably easing path. Energy prices – mainly responsible for this year’s heating-up – are rising again, with no easy resolution in sight in the Strait of Hormuz.

On the contrary, the latest news suggests that Iran is shifting towards a more offensive stance, making the situation look more complicated by the day. In reaction, US crude is consolidating near $83pb this morning, around 24% higher than the July dip, with potential to rise further.

Meanwhile, the latest US 10-year bond auction saw the highest yield since 2007 – the push being driven by real yields (adjusted for inflation), hinting that even when filtering the recent – and maybe temporary rise in inflation – the US debt is costing structurally higher today. Blame the exploding debt and deteriorating confidence in US institutions (including both treasury and the Fed).

As such, there is reason to believe that appetite for gold will strengthen further. Moves in the US dollar and US yields could interfere with intraday moves – potentially pulling gold prices lower if they rise – but the longer-term outlook for the yellow metal remains comfortably positive amid ongoing de-dollarisation efforts.