What US CPI won’t tell

00:00:00: Hi and welcome to Swisscodes, daily market toll.

00:00:03: It's Wednesday the twelfth of August.

00:00:05: investors are looking for direction aimed at fluctuations that we see in the Middle East headlines and their impact on oil trading and corporate earnings as well.

00:00:14: today The latest US CPI update could provide some short-term direction Some short term clarity but the data per se warned, captured the renewed surge in oil price systems weeks leaving the Fed watchers with increasingly complicated inflation and rate outlook.

00:00:33: Isn't it a problem though?

00:00:34: We will talk about that more but before we do as always please keep in mind opinions are my own.

00:00:41: this is not financial advice.

00:00:51: So market sentiment is mixed.

00:00:53: On one hand, oil prices fluctuate on every single headline.

00:00:57: On the other hand technology sucks swing between hope and worries with incoming quarterly reports from companies moving markets up one day down another.

00:01:07: A good report from Kovir yesterday boosted technology appetite and Korean Cosby indexes up by around four percent at a time.

00:01:15: I'm talking this morning but that optimism isn't really reflected in European futures as higher energy prices are waiting heavier on today's mood just before the European Open.

00:01:26: Now speaking of that, yesterday the rally in US could pose for a minute after Pakistani defence minister said they were getting close to some sort of arrangement.

00:01:38: But a lot is the relief from being short-lived.

00:01:40: after Iran added that, the straight up homeless will remain closed until their conditions—the condition that it demands —from U.S.

00:01:47: unmet.".

00:01:48: And well given US conditions as well both parties' demand for each other suggests problems won't be solved by tomorrow.

00:01:56: Meanwhile, the situation in oil reserves is getting tighter.

00:01:59: The U.S.

00:02:00: Strategic Oil Reserves continue to nosedive and IMF warns that the actual crude oil prices don't reflect the severity of the oil supply shock today that the world is going through.

00:02:12: Lesser demand more oil production at inventory drawdown have actually prevented a larger price spike during this Middle East war.

00:02:20: but buffers are running low they say leaving the World weaker when next comes.

00:02:26: This is what the IMF said on their latest blog post.

00:02:29: and disruption in terms of barrels that can sail through the Strait of Hormuz, it's actually very much notable because now there are wars every single supply shock that the world experienced including the nineteen seventies oil strike Iran revolution and wars Gulf War Iraq war Iraq and Iran war and Ukrainian war.

00:02:48: And as I mentioned yesterday, crude oil market is back to backwardation today.

00:02:53: Meaning that prices are rising faster than the future prices asking a premium from those who actually all willing get oil immediately due to supply concerns regarding tomorrow.

00:03:06: As such ongoing Middle East disruptions continue to pressure oil prices higher across the curve and the redeteriorating supply outlook will likely help oil extend this recent gains toward a ninety to ninety five dollar per barrel range for the US grid and potentially up to ninety-five two hundred dollars per barrel, range four grand oil.

00:03:27: But of course it's not an easy trade because everything can change in a blink of an eye.

00:03:32: any headline found or not does move the market very quickly vanishing gains and clearing positions.

00:03:38: therefore energy stocks are In my opinion is better alternative For those who still willing to maintain an exposure prices in the Middle East without necessarily taking the volatility and oil prices of the short term.

00:03:52: Exonant Chevron, for example made around twenty six-and a half billion US dollars on the second quarter alone aimed at the middle east disruptions while European Oil majors earned around twenty four billion us dollars combined in Second Quarter profit.

00:04:05: and European majors have an extra weapon in their hands.

00:04:08: they had big trading operations which actually allow them to profit not only from higher energy prices but also from moving oil around the globe to take advantage of their geographical and price arbitrage opportunities.

00:04:23: In need, SBDR's energy ETF has been outperforming technology ETF since start off this year simply because it is quite an interesting hedge against both the technologies tell-off due to AI worries building around big technology companies somehow delayed returns on that investment.

00:04:44: And also the Middle East will let inflation risk.

00:04:47: speaking of inflation risks, all eyes are On.

00:04:50: The US CPI released you later today.

00:04:52: both headline and core inflation metrics in the U?

00:04:55: S may have ease In the month of July thanks to a notable pullback in energy prices during the month Of july.

00:05:01: yet oil prices rebounded since then.

00:05:03: an?

00:05:03: u s guessing prices for example Which fell more than sixteen percent between july and august?

00:05:09: Have already rebounded than thirteen percent since that August.

00:05:13: step hence.

00:05:14: Today's US CPI print will give an idea on how fast inflation could fade when the Iran war is over and upside pressure in energy prices fades for good but unfortunately it won't tell us what the Fed should do next as the next month figures will again be tainted by a rebound in energy price.

00:05:33: on that matter, The EIA height is gasoline by, three point seven percent and five point four percent respectively.

00:05:44: And also increases to a thousand twenty-seven forecast for retail prices by six and half per cent while besides energy the significant rise that we see in chip prices due to AI.

00:05:54: demand is also expected to keep pressure on both consumer and producer price especially on electronics and their components.

00:06:01: Morgan Stanley for example predicts that the chip flation could add zero point ten percentage points increase headline CPI in the US and up to a fifteen percentage point increase for PCs & smartphones.

00:06:16: Looks high?

00:06:17: Well indeed, The annual change in electronic component prices is skyrocketing.

00:06:22: It rose twenty seven point six percent In month of June from same time last year And that was by far I'm saying BY FAR THE LARGEST INCREASE ON RECORDS SINCE Nineteen Sixty Six.

00:06:35: In comparison this metric rose less than percent at a speak during the nineteen eighties when PCs boomed and around five percent during pandemic disruption months to say.

00:06:46: So what I'm trying to say is that whatever the US CPI data says today, upside risks on inflation won't fade in a blink of an eye.

00:06:55: But if the numbers are softer than ones that were penciled by analysts we might obviously well see further rallying both bonds and stock prices as earning season is going surprisingly well for US and European companies bullies side of the trade.

00:07:14: The former, so their S&P five hundred companies are in paths to print a fifty percent earnings growth from the second quarter while the latter-the European and the stock six hundred companies Are enjoying at twenty two per cent earnings growth despite energy shock And even though Europe's problems have only gotten worse with this summer's abnormally hot temperatures drying rivers and further disrupting transport within the continent the earning expectations for the stocks six hundred company just keep rising At many points that the European stock started.

00:07:43: now, it's a very sweet spot because european growth remains subdued.

00:07:46: Yes but It is better than feared by analysts But not enough to encourage a tighter european central bank policy either.

00:07:54: Corporate earnings grow at the fastest pace in four years though.

00:07:57: That number is of course skewed higher by energy and banks outperformance In the second quarter aiming volatile energy prices And also huge tech trades.

00:08:06: Now finally The European bonds!

00:08:10: performed their U.S.

00:08:12: peers aiming at the US debt that is now spiraling out of control with middle-east war and all rumors that it's failing to keep up with eminutions, and a growingly opaque and unpredictable Fed policy as well!

00:08:26: So the Eurodollar returned to its highest levels in two months not on the back of a hawkish ECB Fed divergence this time but due to renewed loss of appetite around the US Treasuries And Dollar Yen's rebound toward the one hundred and sixty level is only adding fuel to the fire in terms of U.S.

00:08:46: Treasury markets as a weaker yen revised worries off Japanese US treasury sales which were actually very notable between April and May.

00:08:54: so this not just a rumor it really happening, and latter adds further positive pressure on the US yields.

00:09:01: So what happens next?

00:09:02: anybody's guess.

00:09:03: but it is worth noting that the markets around the world have been actually very, very resilient to the Middle East.

00:09:10: uncertainties rising oil prices.

00:09:12: The technology fatigue or questions around big technologies AI spending...the US fatigues were trade geopolitical problems and also climate problems which had been really hard indeed for Europeans.

00:09:25: But alas!

00:09:26: The bulls are dominating the market today.

00:09:28: Let us see if that positiveness lasts And how long?

00:09:31: So this is all for today.

00:09:32: I'm Yipega Skardishkaya and thank you market commands and please don't forget to hit the like button on these videos.

00:10:07: so let us know that you enjoy them.

00:10:09: So I will meet again tomorrow, until then good day trading!