WHO HAS CUT POSITIONS IN EMERGING ASSETS?

Macroeconomic environment UK : headline inflation accelerated to +3.1% in August (from +2.5%), whereas core inflation was unchanged at +0.3% (like in July). Germany: Ju ly factory orders surprised on the down side with a decline of 0.9% (consensus +1.8%). Equities Risk-off mood continues fuelled by EM turmoil. European equity indices down for second consecutive session, with an underperformance by IT, energy and telecoms, the banking sector being the only one to close in the green. The FTSE MIB outperformed, closing just about unchanged. The VIX came in at 13. 9 %. US indices outperformed Europe but Tech stocks took a dent (-1.2% for the Nasdaq, -2.76% for the FAANG). EM turmoil accelerated yesterday with MSCI EM $ was down for the 6 th day in raw and cumulated loss of -4.6%. Peak-to-trough the MSCI EM$ is down 19.7% this year. Asian stocks are down this morning. Bond markets / Derivatives European sovereigns struggled like all Eurozone assets, with nonetheless a compression of spreads. The swap curve steepened in reaction to the sharp movement in the cash market. Italian sovereigns extended their rally, the triumvirate overseeing the country’s destiny having apparently agreed that the budget need not be excessively spendthrift. As a result, the BTP-Bund pulled back below 260bp to 255bp, having narrowed by 35bp since last Friday. Money markets / Central banks Canada : statu s quo by BOC , keeping the overnight rate target at 1.50%, b ut maintaining a hawkish bias. FX The US dollar weakened on Wednesday (the DYX dollar index shedding 0.27%) , save against the Japanese yen. The New Zealand dollar, euro and Danish krone outperformed, with gains of 0.3%-0.4% against the US dollar. No respite for emerging currencies, with the South African rand leading the retreat ( to set a 2-year low), followed by the South Korean won and Indian rupee. The Turkish lira rebounded by more than 1% against the US dollar. This morning the ZAR continues to fall (-0.4%) while CHF and JPY are up vs USD (+0.15%) as the Asian equities fall. Commodities Oil fell today as tropical storm Gordon, which added a risk premium in yesterday's session, changed course away from oil producing areas in the Gulf of Mexico. Copper continued to struggle, whereas gold modestly rebounded in the wake of the greenback’s decline and equity risk-off mode (+0.2%) .