Erik Schafhauser Zürich Erik Schafhauser Zürich Erik Schafhauser Zürich

Morning Brew August 9 2023

Morning Brew 1 minute to read
Erik Schafhauser

Senior Relationship Manager

Summary:  Saxo calls Stagflation

Good Morning,


SaxoStrats is changing its outlook for the US from non-recession to stagflation, and this has consequences for our outlook for interest rates and stock markets. We see a 1 in 3 chance of FED (and ECB) cutting rates before yearend and a 2 in 3 chance it will happen during Q1/Q2-2024. The main changes stems from the big increase in real rates which leaves funding costs for US almost too high to carry as seen by recent Fitch debacle, but also the big increase in cost-of-consumption. The interest rates on everything from credit cards, new cars to mortgages is trading 2 times the long-term average and is almost punitive. Finally, job data and spending seems to slow down while inflation through wages and energy remains stubbornly sticky. Low growth and semi high inflation equal Stagflation.

Markets seem nervous across the board:

  • Moody`s downgraded 10 US regional Banks and indicated more may be in scope pushings bank stocks lower globally and weighing on risk sentiment
  • Not only did China report weak trade data, the PPI fell 0.3% more than expected, the CPI fell by 0.3% vs an expectation of -0.4%
  • The Vix hit a two month high yesterday
  • Indexes trade lower across the board with the Dow -0.45%, S&P -0.42%, Nasdaq - 0.79%
  • According to BofA research, one-month correlations between the S&P 500 and the 10-year yield are the most negative since 2000, meaning they are moving sharply in opposite directions.
  • US Yields trade in large moves, the 10 year is now at 4.00
  • The USD Index traded as high as 102.80 before falling to 102.38 again Gold and Silver fell to 1923 and 22.70 before finding some buyers

For once there are positive news out of Germany , Taiwan Semiconductor announced a significant investment in Germany with 3.5 Bio Euro and VW outsold Tesla for Electric vehicles. The GER40 recovered from a low at 15700 to 15870 now.



Todays economic Agenda is fairly empty, watch the US yields as our Althea points out: This week’s US Treasury auctions and good CPI numbers might drive US Treasury yields lower, but their uptrend will likely remain intact. If current market levels hold, the new 10- and 30-year US Treasury bonds will price at the highest yield in fourteen and eleven years, attracting high investor demand.

The next planned key event is the US CPI tomorrow at 14:30 expected at 0.2% core. Worth noting is the fact that US online prices declined 1.6% from a year ago.


Wednesday August 9

Data: China CPI,

Earnings: Sony, Wendy`s, Disney, Sonos,


Thursday August 10

Data: US CPI, US Job data

Earnings: Baba, Novo Nordisk, Ionq, Wheaton,

Friday August 11

Data: China Money supply, UK GDP, US PPI



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