US 10Y-2Y spread turned negative, US inflation and unit labor cost increased, Mexico cut rates
Issued by Labis Michalopoulos, CFA
As we are heading towards the Jackson Hole summit on Friday, the prudent thing to do is exiting all risk-off trades. It’s true that the most recognizable alarm for a recession, the spread of 10Y-2Y US government bond yields has turned negative, but the music has not slowed down. New bands are coming in, the participation rate increases, and new government spending will be needed to finance the dream of net zero emission economies and the welcoming of migrants.
The summer holiday week included promising macro releases from the USA and worrisome macro releases from China and the EU.
Major events of last week:
- USA-China: New face–to face meeting are set to take place in September. Meanwhile, some of the new US tariffs have been postponed for December.
- Italy is heading to snap elections.
- Argentina: The elections results were not welcomed by the markets and the Peso fell significantly.
- Protests: Protests in Hong Kong continue for the 11th weekend. Paramilitary Chinese forces have been gathered near Hong-Kong borders. Trump urges Xi to resolve the issue humanly. China denied the US navy requests to enter the Hong Kong port.
Major events of next week:
- Jackson Hall summit of the central bankers