Eurozone inflation cooled more than expected, putting 2% target in sight:
Headline CPI rose 2.4% YoY in November down from 2.9% in October. Core CPI, which excludes volatile components like fuel & food, moderated for a 4th month to 3.6% from 4.2% in October. Markets are now pricing 1st ECB rate cut to take place at the April meeting. Source: HolgerZ, Bloomberg
Buying a home is now 52% more expensive than renting, the highest premium on record (note: the premium peaked at 33% during the last housing bubble in 2006)
Source: Charlie Bilello
ECB QT continues. ECB balance sheet back <€7tn, shrank by €5.3bn to €6,996bn, lowest since Jan2021
Total assets now equal to 50% of Eurozone GDP vs Fed's 28% & BoJ's 128%. And Lagarde has warned that the timeline for ending PEPP reinvestments and so QT could be accelerated. Source: HolgerZ, Bloomberg
Crude oil trying to set a low
Crude oil WTI has consolidated 24% since September and nearly tested August 2022 downtrend line. Keep an eye at the pattern that is forming (red circle). Is the low in place ? Source : Bloomberg
So the FED is expected to pivot next year, maybe as soon as March
Is a pivot good for equity markets? Well, history shows that the months that follow the pivot are not the best ones for stocks... maybe this time will be different... Source: Phoenix Capital
Futures are now showing a ~45% chance that FED rate CUTS begin as soon as March 2024
There's also a growing (but small) chance that rate cuts begin in January 2024, at 4%. Prior to the most recent CPI inflation data, the base case showed rate cuts beginning in June 2024. There was also a 50% chance of another rate HIKE in 2024. This has been a quick turnaround... Source: The Kobeissi Letter
Bond Market's Best Month Since 1980s Sparks Cross-Asset Rally
In a year in which little has gone right in the US bond market, November turned out to be a month for the record books. Investors frantically bid up the price of Treasuries, agency and mortgage debt, sparking the best month since the 1980s and igniting a powerful pan-markets rally in everything from stocks to credit to emerging markets. Source: Bloomberg
German inflation sinks more than expected as energy retreats & costs of fuels & travel fell sharply from prior mth
Headline CPI slows to 3.2% YoY in Nov from 3.8% in Oct & vs 3.5% exp. Food inflation slows to 5,5% from 6.1%, Core CPI dropped from 4.3% to 3.8%, so a long way to go to 2% goal. Source: Bloomberg, HolgerZ
