Morning from Europe.

I have been up extraordinarily early today as the sell-off after the CPI report yesterday annoyed me all night. Is the MoM deflation seen as a potential warning signal for markets?

Can core momentum come down this fast and this sudden without it being a sign that the wheels are coming off? We had one of those days, where practically everything moved against us in our portfolio, despite us having the right lean on US inflation, so pardon me for asking all of these questions. I simply have to as we are currently getting macro right but markets somewhat wrong.

We have seen such sudden sell-offs in concentrated risk asset markets before over the past few months, and obviously, market concentration cluster risks work in both directions. A vast majority of the 500 largest equities actually traded up yesterday, so there is potential for rotation in the equity space. However, neither the inflation report nor the increasing/improving breadth in equity markets can be construed as outright bad news.

Chart 1: China’s exports are through the roof