• Meanwhile in markets, the tech self-off is back with a vengeance. At the same time, a leading FOMC member had the hawkish Warsh makeover, signaling that getting inflation down trumps all;

• Yesterday’s tech/AI relief rally, which was sparked by Micron’s blowout earnings, has proved fleeting. This morning, the Korean Kospi took a 9% plunge, triggering a circuit breaker yet again. At pixel time, the Kospi was trading down almost seven percent. The Nikkei is shedding more than four percent, which these days is a quite normal day-on-day loss. Nasdaq futures are down more than two percent, though off the lows;

• In the greater scheme of things – there is one, actually – the tech losses are still in flesh wound territory. Tech high-flyers, like SK Hynix, Sandisk, or Micron, are up triple digits. Or, in the case of Sandisk, almost quadruple digit gains (883% YTD to be precise). The Nasdaq’s YTD gain of ten percent isn’t too bad;

• Turning to the Fed, NY Fed President gave a remarkably hawkish performance in a speech yesterday. In a sign that he has bent the knee to the new Chairman Warsh and his battle against inflation, Williams in a speech yesterday put inflation front and center instead of his prior rather boring balanced views on prices and employment. Williams dubbed inflation “unquestionably elevated”, adding that to the usual suspects of higher prices we can now add the AI investment boom. He concluded that Fed rates are well-positioned to counter high inflation. Read that as him suggesting that not too many hikes are needed to quench inflation;

• Fed rate hike pricing has stayed remarkably static this week at two hikes priced in, thereby ignoring the epic decline in oil prices. Still, for the week UST yields are down 4-8bps across the curve, which has bull-flattened;

• And speaking of the black gold, Brent crude oil futures prices are off the lows (trading at a reasonable $74 a pop) following reports of a strike on a tanker in the Strait of Hormuz yesterday. According to Bloomie, it’s the first attack on a ship since the US and Iran struck the truce deal. For us peons it’s not clear how much disruption the attack has caused. Regardless, the Bloomberg Hormuz Strait transit tracker is rebounding off the lows. On Thursday 57 vessels officially made the crossing, which is a third of pre-war volumes;

• Paradoxically, those lower oil prices have done the Fed’s job of tightening financial conditions. Inflation-linked swap rates and breakevens have fallen hard on the back of lower oil prices, outpacing declines in nominal yields by a large margin. As a result, US Treasury real yields are at the highest level in years;

• Bunds have outperformed USTs this week, with yields declines of 12-13bps across the curve. And rightly so as punters are starting to get second thoughts about another ECB hike in September. A 25bps hike is no longer fully priced in – we’re at 15bps or thereabout. And while ECB Board Member Schnabel tried to convince punters that another hike is likely in a speech earlier this week, I expect the dovish contingent to seize the oil price plunge and dismal Euro Area economic growth to put a hold on the table for September. For the record, I still have a 25bps hike penciled in, but the risks are now clearly towards a hold;

• In FX, the dollar is steady this morning, though still up more than half a percent for the week. Furthermore, the greenback is up more than a percent YTD on a broad trade-weighted basis. Japanese FX officials will breathe a sigh of relief that the dollar rally has halted (for now at least). USDJPY hasn’t reached the 162 handle yet. For the record, Bank of Japan rate hike pricing didn’t budge following Tokyo CPI figures released this morning that showed in uptick in core to 1.6% annual in May from 1.4% in April. Pricing remains firm at about one more hike priced in for the second half of the year;

• Looking ahead, the calendar for today is basically empty. Focus will be on next week’s US labor market figures (out on Thursday this time). ECB watchers like yours truly can eat their heart out with the start of the central bank’s annual Sintra forum on Monday eve. According to the Bloomberg Calendar, Fed Chairman Warsh will attend the event on Wednesday. Note that Warsh's predecessor, Powell, also attended the Forum last week.