ORLANDO, Florida, Aug 11 (Reuters) - U.S. stocks fell and

oil rose on Tuesday, price moves driven by deepening pessimism

around the prospect of a U.S.-Iran peace deal, while major

currency and bond markets were largely steady as investors

awaited the release of U.S. inflation figures on Wednesday.

In my column today, I look at the tug-of-war going on in U.S.

rates markets. A relatively dovish Fed would please President

Donald Trump but risk pushing long-dated yields up, to Treasury

Secretary Scott Bessent's irritation. On the other hand, Fed

rate hikes would likely bring down the 10-year yield,

infuriating Trump, but easing Bessent's worries about the

10-year yield. It's a conundrum.

If you have more time to read, here are a few articles I

recommend to help you make sense of what happened in markets

today.

1. Hormuz to stay closed unless U.S. meets Iran's

conditions, Iran official says

2. Inflation is the biggest problem, Fed's Goolsbee says

3. Trump reopens Fed battle at critical time for bond

markets: Mike Dolan

4. Australia's central bank warns further hike "quite

possible" after holding rates steady

5. Shein plans to launch Hong Kong IPO as soon as August 19,

sources say

Today's Key Market Moves

* STOCKS: South Korea +1%, Europe and UK little-changed. Big

three U.S. indices lower, Dow and S&P 500 -0.3%, Nasdaq -0.6%.

* SECTORS/SHARES: Three sectors on the S&P 500 rise, eight

fall. Comms services -2%, energy +1%. Private credit giants KKR

+8%, Apollo +6%. Honeywell -5%, Dell and Alphabet -4%. CoreWeave

+9% after the bell.

* FX: Very quiet across G10 FX, most pairs flat. CAD hits

2-month high. BRL among biggest EM decliners -1%, CLP +0.5%.

* BONDS: U.S. 3-year auction goes well, strong 2.71

bid/cover. U.S. yields down 1-2 bps across the curve.

* COMMODITIES/METALS: Oil +1.4%, gold pauses recent rally

just under $4,000/oz.

Today's Talking Points:

Circular thinking

Nvidia has struck a $500 billion "deal" with the world's top

private credit and equity firms to essentially help them fund

the purchases of its chips. It points to plenty of institutional

demand still out there for "compute", which Nvidia CEO Jensen

Huang on Monday said is now an "investible asset class."

Perhaps. But if you believe the AI boom is built on

labyrinth-like foundations supported by increasingly opaque and

circular financing, this will probably raise another red flag -

the seller is underwriting the buyer's debt on a huge scale, and

hyperscalers are piling another $500 billion on top of the

roughly $250 billion already borrowed this year, analysts point

out. Whether this matters much, or at all, comes back to a

familiar point - will the AI splurge generate the returns needed

to justify outlay and borrowing?

CPI on the prize

U.S. rates market pricing right now for the Fed's September

meeting is essentially a coin flip, between no change and a

25-basis-point rate hike. The July CPI inflation report to be

released on Wednesday morning may go a long way to deciding how

the coin lands.

It's an important number. While the Fed bases its 2% annual

inflation goal on the PCE index, investors are even more

desperate than usual for signposts following Fed Chair Kevin

Warsh's remarks and equivocal commitment to the 2% target at his

last press conference. Warsh seems reluctant to hike rates,

while a growing number of his colleagues on the FOMC are leaning

in that direction. CPI on Wednesday, then PCE on August 26.

Re-emerging markets?

Is the exodus from emerging markets over, and if so, does that

point to an upswing across EM in the second half of the year?

Flows data from the IIF on Tuesday showed that non-residents

plowed nearly $19 billion into EM securities in July, snapping

two straight months of outflows. But bonds did all the heavy

lifting, with $26.7 billion of inflows, against a $7.8 billion

equity outflow.

Still, the stock market bleeding was significantly reduced,

and the recent deleveraging and repricing across tech-heavy

markets like South Korea and Taiwan could tempt investors to

rebuild exposure. EM stocks are still handily outperforming DM

markets and Wall Street this year, but investors have had to

stomach the usual FX risk, and unusually high realized

volatility.

What could move markets tomorrow?

* Developments in the Middle East

* Germany CPI inflation (July, final)

* U.S. Treasury sells $42 billion of 10-year notes at

auction

* U.S. CPI inflation (July)

* U.S. earnings, including Cisco Systems

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