Global stocks and bonds continued to spiral down as the war in the Middle East continues with no end in sight. In this update, I discuss the Fed's dilemma in a stagflation scenario, and how oil prices are likely to affect both headline and cor inflation.

Stocks liked the economic data that was released this week, even though it was still light on official data as the US government recovers from its recent closure. Bond investors less happy, as yields gapped higher across the curve. All eyes are now on next week's FOMC meeting, where a 25bps reduction in the Fed Funds rate looks fully priced in.

Lots of US economic data last week that pushed the S&P 500 to another record level. UST yields flattish. Chinese equities better. Read on

Dullsville although markets did gyrate a bit, with equities and bonds lower, the USD, credit and oil better. US inflation bang on.

A goldilocks CPI report for Dec cheered markets on Thurs. spurring further risk-on. Bank earnings had warnings on Friday that were ignored.