Good news are coming... while US Q4 earnings season is off to a strong start thanks to banks beating estimates, US inflation numbers came in somewhat cooler than expected:
Core CPI slows to 3.2% in December from 3.3% in November. Analysts had expected the rate to remain unchanged at 3.3%. Overall CPI is unchanged at 2.9% as forecasted. Headline CPI inflation is up for 3 straight months, but core inflation is falling again. It seems enough to please investors: S&P 500 futures are surging over +85 points - the equivalent of a $750B market cap gain - as 10y US bond yields are tumbling by 10 basis points. The dollar is easing, gold is shining and cryptos is surging with bitcoin back to $99K. Alles gut... Source: Bloomberg
The first quarter of FY 2025 produced a deficit of $710.9 Billion.
That’s $200B more than the first quarter of fiscal 2024, or a 39% increase YoY. The US is now running a ~$3 TRILLION annual deficit...
Inflation expectations have almost perfectly bottomed exactly when the Fed started to cut rates.
10-year breakeven rates are now at its highest level since October 2023. As highlighted by Tavi Costa, this is a reminder that when debt limits a monetary authorities actions, inflation becomes the path of least resistance. Source: Tavi Costa, Bloomberg
🚨US PPI DATA SHOULD PLEASE POWELL! December US PPI annual inflation rises 3.3%, below expectations for 3.5%.
vCore PPI inflation increased 3.5% Y/Y, compared to forecasts for a gain of 3.8%. BULLISH🚀 YoY Growth: 🇺🇸 PPI (Dec), 3.3% Vs. 3.5% Est. (prev. 3.0%) 🇺🇸 Core PPI, 3.5% Vs. 3.8% Est. (prev. 3.4%) MoM Growth: 🇺🇸 PPI (Dec), 0.2% Vs. 0.4% Est. (prev. 0.4%) 🇺🇸 Core PPI, 0.0% Vs. 0.3% Est. (prev. 0.2%)
A stunning chart by Goldman: the outperformance of US productivity growth is remarkable, particularly in the COVID/post-COVID era.
Source: GS, Tony Pasquariello, Giovanni Pierdomenico
Markets do not like interest rate uncertainty: Stocks and long-term bonds have declined for 5-straight weeks, the longest streak in at least 13 months.
During this period, the S&P 500 ETF, $SPY, has fallen 4.2% to the lowest since November 6th, a day after the Presidential election. At the same time, the popular bond tracking ETF, $TLT, has dropped 9.1% to the lowest since May 2024. Source: The Kobeissi Letter, Bloomberg
🚨 Great chart and post by James Bianco about US 10-year TIPS breakeven during inflationary time.
👉 The chart below shows the 10-year TIPS breakeven. The LEFT part of the line in RED shows the first 115 days after the Fed started HIKING in 2022. Expectations went straight DOWN. See the RIGHT part of the line in RED, the first 115 days after the Fed started CUTTING in September. Expectations are going straight UP and are at a 15-month high. 👉 Restated, the Fed hikes and inflation expectations GO DOWN. The Fed cuts and inflation expectations GO UP. This is classic "inflationary environment" behavior. 👉Markets were disappointed that the Fed did not cut enough is a previous cycle (pre-2020) reaction. This cycle (post-2020) is about dealing with inflation, and cutting is NOT dealing with inflation. Source: Bianco Research
China trade surplus soared to $1 Trillion on Pre-Trump exports
👉 China’s trade data in December beat expectations by a large margin, with exporters continuing to frontload shipments as worries over additional tariffs mount, while the country’s stimulus measures appear to be supporting demand in the industrial sector. 👉 Exports in December jumped 10.7% in U.S. dollar terms from a year earlier, beating expectations of a 7.3% growth in a Reuters poll. That compares with a 6.7% growth in November and a spike of 12.7% in October. 👉Imports rose 1.0% last month from a year earlier, reversing from the contraction in the preceding two months. Analysts had forecast imports to fall 1.5% on year. That compares with a bigger drop of 3.9% in November and 2.3% in October. Source: Bloomberg, CNBC
