Economists anticipate a very low core PCE inflation reading

The Daily Shot: 13-Dec-24
The United States
Canada
The United Kingdom
The Eurozone
Europe
Japan
China
India
Emerging Markets
Cryptocurrency
Equities
Credit
Rates
Global Developments
Food for Thought



 

The United States

1. The headline PPI index rose more than anticipated in November, driven by wholesale food inflation (3 charts).
 

 
Source: @TheTerminal, Bloomberg Finance L.P.  
 

 
Source: Reuters   Read full article  
 
The core PPI was in line with forecasts.
 

 
Excluding trade services (business markups), the core PPI barely budged last month, with core wholesale services inflation unchanged.
 

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2. Economists now anticipate a very low November core PCE inflation reading, the Fed’s preferred measure. Both Nomura and Pantheon Macroeconomics project a 0.13% increase.
 
Source: Pantheon Macroeconomics  
 
Source: Nomura Securities  
 
The core goods PCE inflation is expected to be negative for the month.
 
Source: Nomura Securities  
 
However, inflation risks persist.
 
Source: MRB Partners  

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3. The post-Thanksgiving rise in jobless claims was quite a bit larger than the increase observed in 2023.
 

 
4. Household net worth reached a record high last quarter, with real net worth finally surpassing (albeit slightly) the peak achieved at the end of 2021.
 

 
Source: @economics   Read full article  
 
5. The US dollar is nearing its November highs.
 

 
6. US government agencies responsible for producing vital economic data are experiencing operational difficulties due to diminished budgetary allocations.
 
Source: @BW   Read full article  


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Canada

1. The loonie is nearing US 70 cents, the lowest since the COVID shock.
 

 
2. TSX Index breadth remains positive.
 
Source: Aazan Habib, Paradigm Capital  
 
3. The value of building permits in Canada was CAD 12.6 billion in October, near record highs. However, after adjusting for new housing prices (2nd panel), the permits’ value shows a more moderate trend.
 


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The United Kingdom

1. UK consumer confidence edged higher this month.
 

 
2. Are markets underestimating the extent of BoE rate cuts expected next year?
 
Source: Nomura Securities  


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The Eurozone

1. The ECB delivered another rate cut on Thursday.
 

 
Source: @economics   Read full article  
 
Bond yields rose as the market interpreted Christine Lagarde’s comments as slightly hawkish.
 

 
Staff projections show downward revisions to GDP growth over the next couple of years, …
 

 
… driven by weaker net exports and softer business investment.
 
Source: ECB  
 
Lower energy prices resulted in a downward revision to next year’s CPI.
 
Source: ECB  

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2. Here is a look at euro-area bond spreads.
 
Source: @DanielKral1  


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Europe

1. The Swiss central bank unexpectedly cut rates by 50 bps.
 

 
Source: Reuters   Read full article  
 
The SNB highlighted sluggish inflation, rising risks related to future US economic policy (tariffs), and political challenges in Europe, such as French political gridlock. However, its primary concern remains the strength of the Swiss franc.
 

 
The market sees another 30+ bps of rate cuts by the end of March.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
The Swiss franc and bond yields declined in response to the surprise jumbo rate cut.
 

 

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2. This chart compares social protection benefits as a percentage of GDP in EU countries for 2022 and 2023, showcasing variations in spending levels across member states.
 
Source: Eurostat   Read full article  
 
3. Next, we have top dairy producers in the EU by product category
 
Source: Eurostat   Read full article  


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Japan

1. The Tankan report indicated an improved sentiment among the nation’s large manufacturers.
 
Source: Nikkei Asia   Read full article  
 

 
The nonmanufacturing indicator edged lower.
 

 
CapEx growth improved.
 

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2. Economists have raised their projections for BoJ rate hikes through the end of 2025, now anticipating a total of 55 bps.
 


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China

1. Lending growth and fixed-asset investments remain weak, although additional stimulus could provide some relief.
 
Source: MRB Partners  
 
2. Trading activity is still elevated.
 
Source: @DavidInglesTV  
 
3. China-focused equity funds are seeing inflows again.
 
Source: BofA Global Research  


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India

1. The headline CPI eased last month, …
 

 
Source: @economics   Read full article  
 
… while core inflation was unchanged.
 

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2. Growth in India’s industrial production edged higher in October.
 

 
3. Stock prices eased.
 


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Emerging Markets

1. Economic indicators continue to reflect strong activity in Brazil.
 
Retail sales (above forecasts):
 

 
Vehicle sales (multi-year highs):
 

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2. South Africa’s inflation expectations continue to moderate.
 

 
Payrolls declined last quarter.
 

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3. This has been a tough quarter for EM currencies so far.
 
Source: @financialtimes   Read full article  


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Cryptocurrency

1. Highlighting the speculative frenzy in the crypto market, Fartcoin’s market cap surged to $700 million, surpassing that of a number of US public companies.
 

 
2. Here is the percentage of cryptos within 5% of their 1-year high.
 
Source: Simon White, Bloomberg Markets Live Blog  
 
3. Crypto fund inflows are hitting extreme levels.
 
Source: BofA Global Research  
 
4. It has been a tough week for cryptos, with Bitcoin Cash (BCH) and XRP underperforming top crypto peers, although BTC managed to outperform.
 
Source: FinViz  
 
5. Bitcoin’s market cap relative to the total crypto market cap (dominance ratio) has normalized.
 
Source: Damanick Dantes; Bloomberg  
 
6. There was an uptick in Ether (ETH) long liquidations during the recent price dip.
 
Source: Coinglass  
 
7. Open interest in the ETH options market reached a new high.
 
Source: @glassnode  


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Equities

1. Market breadth has been deteriorating, with the S&P 500 advance-decline spread remaining in negative territory for nine consecutive days – a phenomenon not seen in decades.
 

 
Here is the percentage of S&P 500 members trading above their 200-day moving average.
 

 
Weakening breadth is reflected in the sharp underperformance of the equal-weighted index, as the average S&P 500 stock increasingly lags behind the index.
 

 

 
Even the Nasdaq 100 Equal-Weighted Index has seen its underperformance widen.
 

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2. Investment managers remain very bullish.
 

 
3. Small-cap positioning continues to climb.
 
Source: Deutsche Bank Research  
 
4. Rising liquidity has provided a tailwind for stocks, …
 
Source: Simon White, Bloomberg Markets Live Blog  
 
… with the potential for more to come.
 
Source: Simon White, Bloomberg Markets Live Blog  
 
Source: @WSJ   Read full article  

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5. Lower volatility has boosted risk-adjusted returns.
 
Source: Goldman Sachs; @neilksethi  


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Credit

1. US corporate credit spreads remain very low.
 

 
2. Leveraged loan funds continue to see inflows.
 
Source: BofA Global Research  


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Rates

1. The 10-year/3-month Treasury yield curve is on the verge of uninverting for the first time in over two years.
 
.
 
2. Bond markets have become more sensitive to economic data releases.
 
Source: @markets   Read full article  
 
3. Here is a look at the Fed’s balance sheet over time.
 
Source: Morgan Stanley Research  


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Global Developments

1. G7 government bonds have underperformed spread products this year as market expectations for policy rates swung widely.
 
Source: MRB Partners  
 
2. Here is a look at savings rates and current account balances as a percentage of GDP.
 
Source: @financialtimes   Read full article  
 
3. This chart illustrates net fund flows as a percentage of AUM following the week of the 2024 US presidential election.
 
Source: BofA Global Research  


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Food for Thought

1. US home sales per real estate agent:
 
Source: Torsten Slok, Apollo  
 
2. Growth in Americans’ average retirement savings goals:
 
Source: @wealth   Read full article  
 
3. 401-k millionaires at Fidelity:
 
Source: @wealth   Read full article  
 
4. Unemployment rates by state:
 
Source: Visual Capitalist   Read full article  
 
5. Shifting public opinion in Ukraine on ending the war with Russia:
 
Source: Gallup   Read full article  
 
6. CO2 emissions per year:
 
Source: The New York Times   Read full article  
 
7. Fewer babies are born on Thanksgiving:
 
Source: The Economist   Read full article  
 

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Have a great weekend!


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