Breakfast Bites - Busy Friday

PPI heats up; Trump-Putin Meeting today; China's data disappoints but Japan's data improves; Buffett takes stake in UNH

Aug 15, 2025

Rise and shine everyone

Happy Busy Friday!

Looks like the hotter PPI report dampened market spirits somewhat. Analysts are saying the increase in core PPI will challenge the Fed’s September rate cut. I still think the Fed will likely cut in September, with markets still pricing in over 90% probability as well. We have three meetings left in the year - September, November, and December. I think the Fed will at least cut once, if not twice, this year. It’s not like the Fed didn’t expect inflation to increase, but they were concerned about is the uncertainty of where tariffs end up and the quantum of increase.

With the new set of tariffs in place, the uncertainty has declined, and the Fed can better approximate the one-time increase that they have been talking about. Resuming their easing cycle could help balance some of the labor market cooling, as well, which is also what we’re seeing in the PPI - higher services costs.

We have import prices data coming in today. That should give us some clue as to where tariffs are tracking, even though that impacts only one PCE item. The Core PPI increase would probably mean a MoM increase of 0.3% in core PCE, translating to about 2.9% (vs. 2.8% in the prior month). This isn’t a drastic enough jump in inflation, so the print right before the September meeting will also be an important one, given that a new set of tariffs has gone into effect.

China’s macro data releases were quite bad. We discuss this in detail below.

On a better note, Japan’s economy grew 1.0% annualized in Q2 2025, beating expectations and marking a fifth straight quarter of expansion. Growth was driven by resilient consumption, strong capital spending, and a surge in exports to the US ahead of new 15% tariffs, though economists warn the impact of tariffs could weigh in the coming quarters.

Nevertheless, this now increases the probability of a rate hike in September. Markets are pricing in the odds at 35%. The Nikkei soared on this data release.

Corporate Stories

Intel

Intel is restructuring under CEO Lip-Bu Tan after a $2.9 billion Q2 loss, halting projects in Germany and Poland, slowing Ohio expansion, cutting 15% of its workforce, and refocusing on AI and foundry services. Shares jumped about 7% on reports that the Trump administration may take a government stake to support its Ohio factory plan.

Applied Materials

Applied Materials beat Q3 expectations with EPS of $2.48 and revenue of $7.3 billion but guided Q4 sharply lower due to weak China demand, stalled export license approvals, and uneven orders, sending the stock down more than 10%.

United Health & Buffett

Berkshire Hathaway revealed a new $1.6 billion stake in UnitedHealth Group, acquiring about 5 million shares as of June 30. The move, made amid UnitedHealth’s challenges, including a DOJ investigation, soaring healthcare costs, a cyberattack, and the death of a top executive, sparked a 12% rally in the stock, signaling Buffett’s long-term confidence despite the insurer’s recent headwinds.

China’s data release disappoints

China’s economy slowed sharply in July as retail sales, industrial output, and fixed-asset investment all came in weaker than expected. Retail sales grew 3.7% year-on-year, the weakest since December, while industrial production rose 5.7%, the slowest pace since November. Fixed-asset investment increased just 1.6% in the first seven months, dragged by a 12% plunge in property investment and softer infrastructure and manufacturing growth.

The weaker data was in part due to adverse weather conditions in July which included unusually high temperatures and heavy rainfall that led to flooding in large parts of China. These conditions disrupted factory and mining operations, slowed construction activity, and added to what is typically a seasonally weak period for the economy.

The urban unemployment rate climbed to 5.2% from 5%. Some of this was attributed to the 12.2million new graduates entering the job market.

So far, Beijing has released targeted measures, focusing on curbing aggressive competition in sectors with overcapacity while rolling out selective consumer subsidies. But these subsidies appear to be losing traction, with slower spending on household goods, weaker demand for electronics and furniture, and the first drop in car sales since early in the year.

We have a rate decision from the PBoC next week. The consensus is for a hold after a 10bp reduction in May. It remains to be seen whether this data moves the needle, but we know that China has always been measured in their actions and taken time to consider next steps.

Economists caution that if August data also disappoints, policymakers may be forced to introduce more stimulus in late September or early October. Any package, however, is expected to be smaller than last year given the relatively stable stock market and confidence in meeting the around 5% annual growth target.

Chart of the Day

The Trump-Putin Meeting is set to take place around 3 pm ET. We discussed yesterday why we don’t think this meeting will amount to much, the market impact, and tactical trades. Post:

MacroVisor

The US-Russia Meeting

We don’t have high hopes for the meeting between President Trump and President Putin, as the relationship is no longer as friendly as before. The US President has already spoken about the possibility of further sanctions if the Russian President does not agree to a ceasefire, while also commenting on the weakness of the Russian economy…

8 days ago · Ayesha Tariq

Putin’s Alaska summit with Trump marks his first one-on-one with a US president on American soil since 2007, a symbolic move to project parity while giving Washington the home-field advantage. But Washington is also downplaying the meeting, saying a full treaty cannot be reached without Zelensky, and possibly EU leaders.

President Putin spoke to President Trump ahead of the meeting, trying to mend fences. But, Putin still has his demands and will likely not give them up easily.