14.01.25 - Attempt to rebound after inflation reading

The producer price index (PPI) rose 0.2% in December, less than the 0.4% increase in November and below the consensus estimate for 0.3%. Producer prices are a leading indicator of consumer prices. The release is the first of two key inflation readings published this week.

Markets: Markets and risk assets seem to stabilize since the latter part of yesterday’s trading session. Asian indices showed a strong rebound, European and US markets try to follow however rather shy. Interest rates are moving sideways.

My View: Markets are attempting to stabilize, but in my view, the rebound appears too modest following the recent drop in stock prices. Before increasing my equity exposure - whether by closing my short positions or buying additional stocks - I want to see a more decisive upward movement and a clearer indication of investor confidence.

As investors seem to overreact on the inflation topic, I expect interest rates to normalize and return to lower levels on some point. At the same time, the US dollar could lose some ground following its recent rally. I have started hedging a portion of my USD exposure against the Swiss franc at the price of 0.91702.
As the same story is cooked in the UK, I decided to gain some exposure to longterm UK Gilts (UK government bonds) to my portfolio today, implementing this strategy through an ETF.

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