James Brodie
Head of Learning & Development, Flux
US CPI, Chinese Data, Japanese Retail Traders Boost Dollar Shorts
US inflation cools, China weakens and refiners thrive as record margins offset soft crude amid global supply disruptions.
U.S. CPI declined 0.4% month-over-month (largest drop in 5 years), with core CPI easing to 3.5% year-over-year.
Core disinflation is now evident, and inflation expectations keep drifting lower, with 2-year breakevens down to 1.90% (Bloomberg). This backdrop points to the Fed staying on hold, and the 32bp of hikes currently priced into OIS still looks like a sell.
The bigger yield concern should be the rising 30-year, now just 8bp away from cycle highs. (Chart 2: Bloomberg)
Weak Chinese data
China's latest data dump just landed: Q2 GDP came in at 4.3% YoY, below the 4.5% estimate. Retail sales stayed weak, up just 1%, though that's an improvement from negative growth in May. H1 investment contracted -5.7%.
The picture is clearly K-shaped: consumption remains soft and is falling in real terms, while investment is outright contracting. Exports continue to be the main pillar holding up growth.
BofA Warns Stock Bulls to Consider Curbing Aggressive Buying
Bank of America's latest fund manager survey suggests investors buying stocks aggressively should think about trimming exposure. Asset allocators have turned extremely bullish - a classic warning sign - with cash levels dropping to an "uber-low" 3.6% of assets, down from 4.1% the prior month. US equity positioning now sits at a net 24% overweight, the highest since December 2024.
Strategists led by Michael Hartnett noted the BofA Bull & Bear Indicator has hit an extreme bull reading of 9.4, signaling investors should reduce equity and high-beta exposure. The indicator runs on a one-to-ten scale. Bullish positioning is likely to keep capping summer upside for risk assets. (Bloomberg)
Japanese Retail Traders Boost Dollar Shorts to Most Since 2008 – Bloomberg
IBM shares plunge 25% as customers shift spending to AI – FT(Chart 3: FactSet, @C_Barraud)
The KOSPI (stop laughing) is currently down -31.3% from its most recent all time highest point. This is the 7th worst crash already in KOSPI history, which goes back to 1980. The 6 worse crashes all took a MINIMUM of 242 trading days to go from peak to trough. The current crash is 17 trading days old.
Oil refiners are posting historic profits, with the 3-2-1 WTI refining margin hitting a record $59 per barrel - nearly triple where it stood at the start of 2026 and far above the ~$10 average from 1985-2021 or the sub-$30 peak of the 2004-2008 boom. The surge stems from a severe global refining capacity shortage, driven by the Iran War, attacks on Russian refineries, and reduced fuel exports, which have knocked roughly 8 million barrels per day (about 10% of global capacity) offline. This has kept gasoline, diesel, and jet fuel prices elevated even as crude oil trades about $40 per barrel below its March high. (Bloomberg)
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