Citi‘s Most Read – Global

Research evidence excerpt

Citi‘s Most Read – Global

Post June NFP, a Fed hike in the near term has become much less likely. We take

profits on long USDNOK. In equities, typically the picks and shovels theme persists

until the market tops out, but our US strategist downgraded semis. As our residual

Kospi position has hit its trailing stop, we take profits on our remaining position,

as well as on EM Asia in GAA. Having said that, we stay overweight US equities in

GAA, and also remain tactically long Europe, as large rotations in US equity

internals are not necessarily a warning sign for the overall index. We investigate

the breakout in copper vs gold, but doubt it is a very bullish cyclical sign this time

around. The EMFX carry trade faces headwinds from extreme crowdedness and

the risk of JPY intervention, warranting caution before adding exposure.

Adam Pickett | Dirk Willer | Alex Saunders | Giammarco Miani | Charlie Massy-Collier

US Economics Weekly - The economy is not overheating

Front-end Treasury yields have fallen from their post-FOMC highs. We see further

room for markets to price-out hikes and price-in cuts as we expect softer

upcoming labor market data – including a weak 25k advance in payrolls next week.

The rapid drop in oil prices, cooler core CPI and plans to fix methodological

problems boosting core PCE should reduce upside inflation concerns. This weeks’

data present a trend toward softer consumer spending, declining real incomes and

rising continuing jobless claims, all sharply at odds with the narrative that the US

economy is at risk of “overheating.”

Andrew Hollenhorst | Veronica Clark | Gisela Young

Oil prices have declined meaningfully Core PCE diverging from other inflation metrics

2y tsy yield WTI price 5 Core PCE

4.3 120 Core CPI

4.2 110 4 Dallas Trimmed Mean PCE