Something for your Espresso: Why the U.S. Over Germany is the Trade to Watch
Morning from Copenhagen. The Trump trade is still roaring and the US PPI today may fuel that case further with the US outperforming peers on a relative basis. Trump allegedly picking Lighthizer for the role as Trade Representative has further added to this narrative.
US CPI Review: Softish print below the surface, but 2% is faaaaaaaar away
U.S. CPI lands right in line with consensus – a softish report if you dig deeper. Used cars popped as the predictable outlier, while transportation services cooled off from last month’s highs. Shelter? Still running a bit hot above that 2% target. For the hawks, this one’s a snooze: nothing here to feed their whispers. The risk/reward was tilted dovish, and it delivered. Supercore inflation (core services less housing) ticked down to 0.3% from 0.4%, hitting its lowest level since July. We see a 25bps cut as our base case for the next Fed meeting in December.  Â
Chart 1.a: Slightly Softer CPI print
While markets try to digest the effect of the inflation prints and the Republican Sweep – we stick to our trade: long U.S. over Germany equity trade amidst Germany’s political and China-exposure headwinds looks like a no-brainer.
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