Tomorrow, we get the CPI print (countdown below), which may show a pickup in inflation. Energy is up. The economy has not tanked. Traders are pricing in a pause next week by the Fed and a 50% shot at a hike in Nov. If the number comes in hot tomorrow, expect to see those odds rise. So, yields are up, the dollar is up, and investors are watching the tea leaves. It doesn’t help that OPEC data shows a 3mm barrel/day shortfall of oil next quarter, perhaps the biggest deficit in a decade—and the Saudis, remember, just extended their cuts. Moreover, folks are on edge for Thursday’s rate decision by the ECB. Sep 21’s decision by the BoE is more clear, since their inflation in the UK is still outrageous.
BBG is out with a story about the attractiveness of 5% yields on Treasuries. Money market funds are pulling in flows, as are t-bills. With cash yielding more than the S&P, folks don’t have to take risk to clip a nice coupon.
BBG is out with a story that mirrors a trend we mentioned in our prior summaries to clients. The new Cold War is benefitting Mexico (and Brazil, Canada, others) in a big way as the US and its businesses try to shift supply chains and materials from China. Tesla is building a $5bn factory. There have been issues with infrastructure, though, such as energy consistency and water access that still have to get worked out.
You’ve probably seen the headlines JPM’s Dimon warns that it’s a “huge mistake” to think the US economic strength will last for years. He listed about a dozen causes of his concern: QT, the war, prior excess spend, a future credit cycle, the worsening relationship with China, greater bank regulation and your mom. Well, maybe not that last one, but you get my drift.
TSMC, Taiwan’s largest contract chipmaker, approved an investment in the Arm IPO of up to $100mm. TSMC manufactures semis that often are based on Arm architecture, so it looks like they want to keep the friendship alive by showing support. The IPO is oversubscribed.
Oracle reported a slowdown in cloud sales, so you don’t need to be an oracle to know what’s happening with the stock price.
Uber drivers should think twice about their gig because UPS’ full-time drivers will earn up to $170k in pay and benefits in the last year of their new contract. The Teamsters finalized their deal, and the stock has declined by more than -14% since. So, the CEO has to start selling this deal to Wall Street.
A BofA survey shows a record shift from EM equities (esp China) to US equities, declining from a net overweight from 34% to 9%, the lowest level since Nov 2022.
North Korea’s Kim is basically trading labor and weapons for oil, gas and ag. With a not-so-stealth mode of transport, you have to believe some folks in the military were hoping to end that train ride early.