| Good morning. UK store prices fall for the first time in two years, Apple's main supplier to boost India presence and hedge funds rein in positions. Here's what people are talking about. Prices in UK stores fell for the first time in two years, in another sign that the cost-of-living crisis is starting to ease. The British Retail Consortium said Tuesday that shop prices were 0.1% lower in July than in June. Annual inflation dropped to 7.6% in July from 8.4% in June. Cooking oils, fats, fish and breakfast cereals were cheaper while clothing and footwear retailers slashed prices due to wet weather. The figures should offer some relief for households struggling with tight budgets, although rising interest rates continue to lift mortgage costs for many homeowners. Apple's main supplier, Foxconn, plans to increase its investments to more than $1.2 billion in southern India's Karnataka state and add two component factories there, expanding a steady diversification from China to mitigate the risks of US economic and technology sanctions. At least one of the factories that the Taiwanese company plans to construct in Karnataka will produce Apple parts, including for iPhones, people familiar with the matter said. A formal announcement is expected as early as this week, the people said, declining to be named as the matter isn't public. For stock-picking hedge funds coping with 2023's loopy markets, risks are starting to outweigh the rewards. Pro managers who make both bullish and bearish equity wagers last week slashed positions on both sides of their book, also known as de-grossing, according to data compiled by JPMorgan's prime brokerage unit. Hedge fund clients of Morgan Stanley and Goldman Sachs have made similar moves. The retreat may mark a sentiment shift in a market where almost everyone started 2023 defensively before being forced to adjust to the gravity-defying advance. US-China tensions and Russia's invasion of Ukraine are leading companies to bring supply chains closer to home. A shift from fossil fuels is spurring demand for materials essential for electrification. Artificial intelligence is forcing employees to learn new skills so they won't be replaced by computers. Long before these trends are reflected in government data, they're already changing global commerce, which amounts to $32 trillion a year in goods and services, according to the World Trade Organization. European shares are on track for a steady start as traders assessed some positive signals about the health of the global economy. UK ministers meet with energy company leaders. A slew of countries across the region are expected to release manufacturing PMI data. HSBC, BP and Diageo are among companies scheduled to deliver earnings results. MLIV Pulse: Do you see the US entering a recession and, if so, when? Is the US stock market in a bull market, a bear market or a bubble? Is now a good time to invest in the longest-duration bonds? Share your views on a possible soft landing and its effects in the latest MLIV Pulse survey. This is what's caught our eye over the past 24 hours Economists are pricing a 60% chance of a recession in the US in the next 12 months. For the eurozone, it's at 50% and the UK is placed somewhere in the middle. Yield curves everywhere are still deeply inverted. And the base case is that resteepening only occurs as central banks are forced into cutting rates as they see the whites of the eyes of a recession, with the Fed seen cutting by a full point next year. Except, the argument goes, for stocks. The S&P 500 is up 20% this year, and the Nasdaq is near record highs after gaining a third in 2023. Everywhere from Japan to Stockholm, major indices have made double-digit gains. Surely those aren't pricing a looming recession. Well, actually, they might be -- even ignoring the fact that stocks can stay frothy very late into the cycle. Look at stocks on an inflation adjusted basis, and the gains look far less spectacular. In fact, far from pushing at the highs, it shows the S&P 500 a full 12.5% below 2021's record -- and that's on a total return basis! Even the Nasdaq 100 is 16% off its peak. (H/t to Dan Curtis for the chart.) Note also that on a logarithmic scale, the index is well below the trend. In other words, the stock market is yet to fully internalize the rising prices of goods and services in this inflationary cycle. Eddie van der Walt is Deputy Managing Editor of the Markets Live blog on the Bloomberg Terminal, based in London. Follow him on Twitter at @EdVanDerWalt | 
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