Supply is sticky, fiscal is loose, and rates are the squeeze.

Transcript

Tom Buddy, the Fed's ready to hike and admits its main tool doesn't fix supply inflation. That's the London morning in a nutshell.

Marie It's Friday, September 11th, London Edition. I'm Marie, with Tom and Gerald.

Tom And Gerald, that sell long-duration Treasuries call from yesterday? Looking pretty sharp this morning.

Gerald Ha, fair enough. Though to be fair, it was already crowded. Let's not celebrate until the C P I lands.

Tom Polymarket just named Warren Jenson CFO — ex-Amazon, ex-Delta. They're building a regulated US exchange, and DraftKings should be nervous.

Marie Hold on — the same morning, ESMA says prediction markets are 'rife with insider trading.' Europe's reaching for the rulebook while the US rolls out the red carpet. That split is the real trade.

Tom Exactly — sell DraftKings, sell Flutter. The regulatory overhang on one side, the competitive threat on the other.

Gerald One hundred percent.

Tom And on oil — Iraq's tendering supertankers to go through Hormuz, and buyers doubt China can cut imports again. That's a supply-risk premium, buddy.

Gerald Yeah look, it's three Bloomberg pieces all pointing the same way. Buy crude, buy Frontline, buy Scorpio Tankers. But it's not a two-week trade.

Tom Fair, but the tanker charters move fast when war-risk hits. Frontline could gap on any headline.

Marie Just remember these are inferred signals from one source. But the direction is consistent.

Gerald Now the big one: Bloomberg has Fed officials ready to hike if C P I doesn't improve, while admitting the main tool does little on supply inflation. Combine that with Trump's cash-payout pledge hitting Treasuries into a 30-year auction — the long end is the squeeze.

Marie Right, and that's the problem. Fiscal is loose, supply is sticky, and rates are the release valve. Short long-dated Treasuries, buy short Treasuries, buy inflation-protected bonds, buy gold.

Tom But hold on — if Friday's C P I prints soft, every short Treasury in this digest unwinds violently. That trade is already crowded.

Gerald Fair point, but the C P I would have to be really soft to undo the fiscal pledge. The auction itself is telling you something.

Marie Exactly — supply-led inflation that policy can't fix. That's the whole story.

Tom One hundred percent.

Marie And FT Alphaville is asking whether we're worrying about a new China shock too early. If it's overestimated, Chinese large caps and European autos are mispriced.

Tom Buy BMW, buddy. European automakers are the most exposed to Chinese competition — if the shock is overhyped, that's a relief trade.

Gerald It's one column, short on data. But the timing call is the point. Watch China equities, don't short them yet.

Marie Exactly — the discipline is useful. If the shock is already priced, the discount on Chinese large caps looks less warranted.

Gerald Over in the UK, FirstRand wants out of Aldermore by year-end after that car-loan saga. That's a clean read on how badly motor-finance claims hit lender economics.

Tom So buy FirstRand, sell Lloyds? The redress cycle is still heavy for the most exposed UK lender.

Marie And it's a structural shift — regulation is repricing UK consumer credit. Lloyds is the obvious short.

Gerald Yeah look, that's the trade.

Gerald Also in the UK, mayors can now introduce an unlimited tourism tax. No cap, no parliamentary sign-off — just dial it up. Sell InterContinental, sell Whitbread.

Tom An unlimited tax on holidayers — that's one way to keep the Premier Inn breakfast buffet slightly less crowded.

Marie Ha, fair enough. But it's not a joke for city hotels — this hits dense UK footprints directly.

Gerald Exactly. The Premier Inn is the most exposed.

Tom And here's the best enterprise AI story: Latham & Watkins bought Nvidia servers to run open-weight models in-house. A law firm, not a hyperscaler. Nvidia demand is broadening.

Marie But it's also a substitution threat to Microsoft and Amazon — if enterprises can self-host, they don't need OpenAI or Anthropic.

Gerald It's one law firm. But the direction is clear — this is a concrete sign enterprise demand is moving beyond the frontier vendors.

Tom Exactly! Sell Microsoft, sell Amazon, buy Nvidia.

Marie And the coal story is quantified: US coal-fired generation fell eleven percent in the first half despite Trump's revival push. Cheaper natural gas is taking share.

Tom Political intervention lost to market economics — who knew? Sell Peabody, buy natural gas.

Gerald It's almost like price beats policy. But to be fair, it's a long-term trend, not a two-week trade.

Tom Intesa shareholders approved the share issue to fund that thirty-five point four billion euro bid for Monte dei Paschi. That's a floor under the target's shares.

Gerald Buy Intesa, buy Monte dei Paschi. Consolidation catalyst, confirmed acquirer. Hard to argue.

Marie And a landscape-changing deal for Italian banking. The consolidation trade now has a hard catalyst.

Gerald Franklin Templeton moved past the Western Asset crisis and hit one point eight trillion in assets. That's a re-rating story, not just flows.

Tom A damaged franchise at trillion-plus scale without collapsing — buy Franklin Resources.

Marie Just make sure it's not a head-fake — reputational recovery is hard to quantify. But the scale is real.

Marie And the online fashion story: Primark is finally launching delivery after years of saying it doesn't work. That's a direct assault on pure-play online fast fashion.

Tom Sell ASOS, sell Zalando. A low-price giant entering delivery is a nightmare for them.

Gerald Primark discovered that 'no delivery' wasn't a strategy, it was a sales slump. Took them a while.

Tom Ha — fair play, Gerald.

Marie And the most original take today is that FT Alphaville column. It's not just saying 'watch China' — it's asking whether the shock is already priced and whether early worry is recency bias.

Tom But if the shock is overestimated, then Chinese large caps and European autos are mispriced. That's a call to action, not just a question.

Gerald Exactly — it forces discipline. Until the next trade print, watch China equities, don't short them.

Gerald Here's our view: today's tape is about tools that stopped working. The Fed admits its main tool does little on supply inflation, while fiscal policy is loose and rates are the squeeze point.

Marie And on supply — Iraq's tanker tender, China's import lever looks spent, TotalEnergies spending ten billion in Angola just to hold output flat. Supply is sticky.

Tom OK but the bear case is that most of these signals are single-sourced and slow-burning. If C P I prints soft, the crowded short-Treasury trade unwinds fast.

Gerald Fair, but nothing on the tape contradicts a soft landing — it just argues the runway is narrower than bulls think.

Marie And what's missing is the dollar. With hike talk, fiscal slippage, and a China-shock debate live, the dollar should be leading coverage — and it isn't. That silence is a signal.

Tom So the cleanest expression isn't one ticker — it's dispersion. US and European regulation are splitting on prediction markets, AI demand is shifting from vendors to in-house stacks, and energy bears are losing release valves. Own the spread, not the level.

Gerald Exactly — that's the constructive takeaway. We'd rather own the spread until the data thickens.

Marie If you're just finding us, hit follow on Spotify or check investmentflash.com for the full digest with charts and sources. We're back later today at nine a.m. New York time for the New York Edition.

Tom See you there, buddy. Until then, trade the spread, not the level.

Gerald And remember, if the Fed says the tool doesn't work, maybe stop hitting the nail with it.