US EARLY MORNING: US equity futures a touch better than flat; PPI data to provide further inflation signals today

US PREMARKETS: US equity futures are trading slightly higher, Treasury yields are rising with the curve moderately bear-steepening, the Dollar Index is mildly pressured, while crude futures are trading with slight gains. Cooling inflation dynamics briefly supported US equities on Thursday, and traders will get a look at another proxy of price pressures today, with the release of PPI data for the month (also expected to show an annual cooling). However, the equity upside did not stick; analysts reasoned that the data does not provide any significant change of narrative to bake into implied pricing for the Fed's rate trajectory (money markets are pricing rates are already at terminal, and expect rate cuts to begin in Q1 2024). Additionally, weekly initial jobless claims data jumped above expectations in the week, and although it can be a choppy series, highlights market (and official) expectations that the labour market will begin loosening in the months ahead, and that will slow economic growth, which will eventually lead to the Fed having to dial down hawkishness in order to support the economy. Next week's FOMC meeting minutes will provide a gauge on how officials are prioritising this debate, particularly in the context of some Fed participants now suggesting that rates are in a good place.

WEEKLY FLOWS: BofA's weekly flow report noted USD 20.5bln inflows into cash, USD 6.9bln inflows into bonds, USD 1.5bln into stocks, USD 700mln out of from gold. Its Bull/Bear indicator remains at 4.1. The bank said hedge fund positioning was most bullish since December 2022, while long-only funds remian bearish. In terms of the specifics, US equities saw outflow of USD 1.6bln in the week, the first outflow in the last three weeks; Japan equities saw inflows of USD 2.5bln, and has now seen inflows for the last two weeks; Europe equities saw outflow of USD 3.5bln in the week, marking 22 weeks of outflows; while EM equities have now seen inflows for the last five weeks, with USD 6.0bln in the latest week. In fixed income, government bonds saw inflows of USD 4.4bln in the week, marking 26 weeks of inflows; HY bonds saw outflow of USD 4.0bln (outflows now seen for three weeks), while EM debt saw outflows of USD 1.2bln (outflows in the past two weeks). TIPS funds saw outflows of USD 16mln (outflows in the past 2 weeks), while munis saw inflows of USD 1bln, resuming inflows. 

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11 Aug 2023 - 09:30- Fixed IncomeData- Source: Newsquawk

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