Markets Could be Mispricing the US Recession and Stubborn UK Inflation

Sebastian Vismara, global macroeconomist and strategist at BNY Mellon Investment Management, discusses the risks of mispricing the timeline for a US recession; the turmoil ahead for the equities markets, and when we can expect the UK’s stubborn inflation to weaken.

North America

  • Equities volumes surged last week but spreads remain wide. US Investment-grade volumes are low but liquidity is good. 
  • Primary Equities: We can expect IPOs in Health Care, Consumer staples, and Tech on Nasdaq.
  • Data this week: Housing and Jerome Powell’s second annual testimony. Noteworthy: Some activity could be driven by Options Expiries and Indices Rebalancing.
  • US axe data, which is within normal ranges, indicates a higher proportion of buying versus selling of credit.

Europe and UK

  • Equities volumes are low but bid-ask spreads are tight. Volumes in Euro Investment-grade debt rebounded compared to the week prior and spreads remain tight for the year.
  • Last week saw huge spikes in bilateral and off-exchange equities trading by the end of the week.
  • Data: UK inflation rate, PPI numbers, Retail Prices on Wednesday. The main event will be the Bank of England’s interest rate decision on Thursday.
  • EU axe data, which is within normal ranges, suggests a higher proportion of EU dealer asks versus bids of credit.
  • GBP axe data, within normal ranges, suggests much higher net selling versus buying of credit.

Published on June 19, 2023

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