Prepare for volatile inflation data, risks in cyclicals, and US / Chinese frictions

Published on 11 September 2023

Arun Sai, senior multi-asset strategist at Pictet Asset Management, discusses how trading desks should prepare for volatility in the US’s disinflation journey and his take on the European Central’s rate decision this week. He also walks through vulnerabilities in the equities market, risks in High Yield, and the impact of US and Chinese frictions.

North America

  • Equities volumes are still low but recovering. Liquidity worsened week on week but still appears good for the year to date.
  • Volumes in US investment grade are up week on week and nearing normal levels for 2023. Liquidity remains good for the year.
  • Data: US Inflation Rate and CPI on Wed, Sept 13. Retail Sales, PPI, and Initial Jobless Claims, Thurs, Sept 14.
  • US axe data, which is within normal ranges, indicates a slightly higher proportion of bids versus asks in credit.

Europe and the UK

  • Equities volumes were low but recovering. Liquidity has stabilized for 2023 levels.
  • Euro investment grade volumes are up week on week and bid-ask spreads are still tight for the year.
  • Data: UK Unemployment Rate on Sept 12, UK GDP on Sept 13, and the ECB’s Interest Rate move on Sept 14.
  • EU axe data, which is within normal ranges, suggests a higher proportion of EU dealer bids versus asks in credit.
  • GBP axe data, within normal ranges, suggests much higher net selling versus buying of credit.