It's judgement day for inflation in America

Welcome to Charts and Caffeine - Livewire's pre-market open news and analysis wrap. We'll get you across the overnight session and share our best insights to get you better set for the investing day ahead.

MARKETS WRAP

THE CALENDAR

Today is the main course of a humongous week in macro and economics. (All times Sydney)

At 12pm: The RBNZ delivers its July interest rate decision. Economists are widely expecting the Bank will go 50 basis points. What's more amazing is that if it does that, it will be the third 50 basis point rate hike in a row. Much like in Australia, consumer and business confidence has already plunged. Unlike Australia, the housing market is really feeling the pinch across the ditch.

At 4pm: We'll get the UK's latest GDP print. Last month, it was a negative print which means we are one negative print away from a technical recession. The consensus call is for a 0.1% expansion - perhaps, showcasing just how close this call is.

Then... the main event:

At 10:30pm: Inflation in America. Economists expect headline inflation to hit 8.8%, but are holding firm that core inflation (headline minus food and energy) will cool slightly. Even the White House Press Secretary Karine Jean-Pierre called the print "out of date" - but that's not what consumers want to hear especially in an election year.

THE CHART

Today's chart is brought to us by Sara Allen. It shows the 30-year performance of various asset classes - and in turn, the importance of staying invested. Over the last three decades, the clear outperformer in this comparison has been the S&P 500 (in Australian dollar terms, plus dividends). Meanwhile, the worst performer has been Australian bonds.

STOCKS TO WATCH

Today, we're devoting our stocks to watch segment to the failed Zip/Sezzle merger. In case you missed the news, the two companies decided to pull the plug on their near-$500 million plans to combine the two tier-two BNPL players.

UBS analyst Tom Beadle characterised the news as a reason to add more uncertainty to the outlook. Beadle added:

The termination of the proposed merger has the potential to slow Zip's near-term cash burn given Sezzle is loss-making, but it also slows the scaling of Zip's US business, where we continue to have concerns around transaction frequency

As a direct result of the merger failing, he is already reviewing both companies' target prices. Mind you, this comes with a big caveat that Tom has been long-bearish in the sector. He, at one point, had a sub-$40 price target for Afterpay (especially before the Square/Block acquisition last August.)

THE STAT

$119 billion: The market capitalisation of the Australian ETF market. Source: ASX

Five years ago, it was under $30 billion. Talk about how far they have come. And this chart from Stockspot shows that growth in all its glory.

In contrast, the LIC market capitalisation has only grown $14 billion in size over the same time frame. 

THE TWEET

You don't have to know the movie, you just have to understand that the US Dollar Index is trading at highs not seen in decades. The Euro, for instance, against the US Dollar broke parity (i.e. 1:1) for the first time since November 2002. The chart below shows the strength I'm talking about:

Today's report was written by Hans Lee.

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