UK headline inflation cooled sharply in July to an annual 6.8%, but the core consumer price index remained unchanged, posing a potential headache for the Bank of England
The headline CPI reading was in line with a consensus forecast among economists polled by Reuters, and follows the cooler-than-expected 7.9% figure of June. Despite the decline, UK inflation is still the highest among "advanced" economies (see upper chart below). On a monthly basis, the headline CPI decreased by 0.4% versus a consensus forecast of -0.5%. However, core inflation — which excludes volatile energy, food, alcohol and tobacco prices — stayed 6.9%, unchanged from June and slightly above a consensus forecast of 6.8%.
European gas spikes on market jitters over LNG strike risk
European natural gas futures spiked for the second time in less than a week, with market tensions running high over the possibility of strikes in Australia that could severely tighten the global market.
Source: Bloomberg
The clearest signal that Russia is losing this war?
The Russian ruble slid past 100 to the U.S. dollar on Monday, nearing a 17-month low as President Vladimir Putin’s economic advisor blamed loose #monetarypolicy for the rapid depreciation. The ruble has lost around 27% against the greenback since the turn of the year. It also has lost 23% vs Chinese Yuan, which Russia is embracing for trade as it seeks to ditch Western currencies. The Bank of Russia has blamed the country’s shrinking balance of trade, as Russia’s current account surplus fell 85% year on year from January to July. This slide that threatens to stoke inflation in an economy that has been kneecapped by Western sanctions. Source: HolgerZ, Bloomberg, DJ, CNBC
During stagflationary periods, the SP500 index tends to be inversely correlated with inflation
Tavi Costa: "From the late-1960s to the mid-1970s, equity markets declined whenever CPI rates re-accelerated to the upside. The primary driver behind this negative correlation stems from the market's growing concern about the potential for a tighter monetary policy to address the persistent increase in consumer prices". Source: Crescat Capital, Bloomberg
Will US inflation move in waves as it did in the 70's?
Source: Bloomberg, www.zerohedge.com
Market-implied inflation expectations over the next 5-10 years have risen to the highest levels in more than a year
Traders are starting to game out a future with sustainably higher inflation and higher long-term bond yields. Source: Bloomberg, Lisa Abramowiz
Shorting US 10y bonds seems to be one of the most crowded trades at the moment
Among the shorts, Billionaire investor Bill Ackman. To his opinion, if long-term inflation is 3% not 2%, the 30y Treasury yield could rise to 5.5%. In contrast, Warren Buffett has announced buying positions in 10y US Treasuries. Source: Bloomberg, HolgerZ
Consumer price inflation is creeping higher again on a month-over-month basis, driven in part by higher gas prices, according to the Cleveland Fed's forecast
Source: Lisa Abramowicz
