Germany's inflation slowed to 3.8% YoY in Oct from 4.5% in Sep vs 4% expected and lowest since Aug 2021 as energy prices dropped 3.2% YoY and food inflation slowed to 6.1% YoY
German October Core CPI dropped to 3.8% from 4.6% in September. Source: HolgerZ, Bloomberg
US Q3 GDP numbers summarized in one cartoon
Source: Elizabeth Oliveira Fonseca
When will the Fed start cutting rates?
This chart from James Bianco is derived from market pricing. The first cut is currently priced for August 2024 (top panel), or 337 days away (bottom panel). Notice the first cut is always about 10 to 12 months away. It never gets any closer.
Here's the downside risk on gold. Either this longstanding correlation is broken or inflation is grossly understated and real rates remain negative
Source: Henry Smith
For now, the monetary policy transmission route of tightening US financial conditions are NOT reaching the economy...
Indeed, an avalanche of US macro data on Thursday presented a positive blend of updates across growth (better), inflation (lower), and labor markets (looser/worse). - Economic Growth: Real GDP rose 4.9% in 3Q (consensus 4.5%) driven by strong demand across consumer and federal/state government, and inventories. However, a major contribution from inventories could in turn weigh significantly on growth in 4Q - Manufacturing: Orders for Durable and core capital goods also grew by more than expected... thanks to a massive surge in non-defense aircraft orders (so don't expect it to last). - Housing: Pending home sales rose 1.1% month over month in September, above expectations for a decline... but brace for October to be a bloodbath as mortgage rates re-accelerated. - Inflation: Core PCE prices component of the GDP report rose less than expected. - Labor: Initial and continuing jobless claims both increased by more than expected -- a positive for markets which are focused on labor market re-balancing (i.e., could benefit from less wage inflation).
He probably has a point ->
"Key measures of inflation have reaccelerated in recent months...The implication for investors is that the Fed will keep rates high until nonfarm payrolls go negative, because that is what is needed to get inflation under control:" Apollo's Slok through Lisa Abramowitz
US GDP grew 4.9% in Q3 QoQ annualized, way faster than +4.3% expected
However, bond yields dropped in the afternoon session. This Bloomberg US GDP chart shows why. Indeed, US GDP growth in Q3 was mainly driven by private consumption & inventories. This may not last. Source: Bloomberg, HolgerZ
ECB's Lagarde: "Rate cuts weren't discussed, would be totally premature".
Meanwhile, markets see the first ECB cut at April 2024 meeting. Source: Bloomberg, HolgerZ
