Stocks and bonds jump following softer core inflation report

The Daily Shot: 16-Jan-25
The United States
Canada
The United Kingdom
The Eurozone
Japan
Asia-Pacific
India
Emerging Markets
Commodities
Energy
Equities
Global Developments
Food for Thought



 

The United States

1. Inflation picked up in December, …
 

 
… driven by an increase in gasoline prices.
 

 
However, the core CPI rise came in below expectations.
 

 
Source: Nomura Securities  
 
Source: @economics   Read full article  
 
The core goods CPI was almost flat last month, …
 

 
… dragged lower by furniture and appliances (3 charts).
 

 

 
Source: Nomura Securities  
 
The core services CPI gains slowed again.
 

 
Leading indicators point to further easing in core services inflation.
 
Job openings to unemployment ratio:
 
Source: BCA Research  
 
Services PMI price index:
 
Source: Pantheon Macroeconomics  
 
We will have more inflation data in the days ahead.

——————–

 
2. Treasury yields dropped sharply following the softer-than-expected core CPI print.
 

 
Real yields declined as well.
 

 
Market-based inflation expectations eased.
 

 
Stocks jumped, driven by the decline in bond yields.
 

 
The US dollar dropped after the CPI report but quickly rebounded.
 

 
By the way, the 2016 post-election analog suggests potential downside risks for the dollar.
 

 
Copper futures rose.
 

 
Bitcoin touched $100k again.
 

——————–

 
3. The market raised expectations for upcoming Fed rate cuts, …
 

 
… now pricing 38 bps of reductions this year, …
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
… and 58 bps in total for this easing cycle.
 
Source: @TheTerminal, Bloomberg Finance L.P.  

——————–

 
4. Last week’s mortgage applications were slightly below 2024 levels.
 

 
Here is the rate lock count.
 
Source: AEI Housing Center  
 
Refi activity increased.
 

——————–

 
5. The month’s first regional manufacturing report, from the NY Fed, indicated a decline in activity.
 

 
Workers’ hours were reduced sharply.
 

 
However, forward-looking indicators were more upbeat.
 
CapEx plans:
 

 
Outlook for business conditions:
 

 
The region’s manufacturers expect sharp increases in both input and output prices in the months ahead.
 


Back to Index

 

Canada

1. Existing home sales declined sharply last month.
 

 
Source: @markets   Read full article  

——————–

 
2. Canadian bond yields declined alongside US Treasuries after the US CPI report.
 

 
3. The loonie remains range-bound.
 

 
4. Canada’s stock market has been consolidating.
 


Back to Index

 

The United Kingdom

1. The official UK home price index revealed accelerated price gains in November, …
 

 
… with additional strength in December, according to RICS.
 

——————–

 
2. The pound is moving lower again.
 


Back to Index

 

The Eurozone

1. Germany’s economy contracted for the second year in a row in 2024.
 

 
Source: CNBC   Read full article  
 
Last year’s budget deficit was wider than expected.
 

——————–

 
2. Dutch exports are rebounding.
 

 
3. Spain’s economy is outpacing the euro area, driven by tourism, immigration, and non-tourist service exports. However, despite strong job growth, income per capita remains subdued, reflecting challenges in translating macroeconomic success into broader social prosperity.
 
Source: The Economist   Read full article  
 
4. Consumer unemployment expectations suggest upside risks for unemployment in the Eurozone.
 
Source: Capital Economics  


Back to Index

 

Japan

1. The yen outperformed other DM currencies on Wednesday.
 

 
Dollar-yen held support at the 50-day moving average.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
Yield differentials point to downside risks for dollar-yen.
 
Source: @TheTerminal, Bloomberg Finance L.P.  

——————–

 
2. Machine tool orders were 11% above 2023 levels in December.
 

 
3. Japan’s PPI growth is nearing 4%.
 


Back to Index

 

Asia-Pacific

1. Despite political turmoil, South Korea’s central bank unexpectedly left rates unchanged.
 

 
Source: CNBC   Read full article  

——————–

 
2. Next, we have some updates on Australia.
 
The employment report surprised to the upside again. However, full-time employment declined.
 

 
The unemployment rate edged higher.
 

 
Australia’s labor force participation rate hit a new high.
 

 
Despite the strong employment report, a rate cut is still possible next month.
 

 
Source: Reuters   Read full article  
 
Consumer inflation expectations eased this month.
 


Back to Index

 

India

1. Exports were slightly below 2023 levels in December, topping expectations.
 

 
The trade deficit narrowed sharply.
 

——————–

 
2. The NSE Nifty 50 Index has entered a death cross, signaling continued bearish momentum.
 
Source: @TheTerminal, Bloomberg Finance L.P.  


Back to Index

 

Emerging Markets

1. How did EM equity ETFs perform on the US CPI day?
 

 
2. Brazil’s services output dropped more than expected in November.
 

 
Vehicle sales growth slowed last month.
 

——————–

 
3. Indonesia’s central bank unexpectedly cut its benchmark rate.
 

 
Source: Reuters   Read full article  

——————–

 
4. Nigeria’s inflation is nearing 35%.
 

 
5. Non-resident capital flows into EM economies remain lackluster.
 
Source: IIF  


Back to Index

 

Commodities

1. How did commodity markets perform on the US CPI day?
 

 
2. Copper futures continue to rebound.
 

 
The copper/gold price ratio held long-term support.
 

——————–

 
3. In late 2024, gold’s correlation with stocks started to decline, while the stock/bond correlation turned positive.
 
Source: Koyfin   Read full article  
 
4. Coffee futures are climbing again.
 

 
5. Commodities are on the verge of a breakout while maintaining a tight correlation with US CPI.
 
Source: Aazan Habib, Paradigm Capital  


Back to Index

 

Energy

1. Crude oil prices continue to climb, with Brent up sharply this month.
 

 

——————–

 
2. US crude oil inventories declined again last week, but refined product stockpiles have been rising faster than expected.
 

 
Below are the inventory levels.
 

——————–

 
3. Here is a look at tankers sanctioned by the US.
 
Source: Capital Economics  
 
4. Who buys Saudi crude?
 
Source: @JavierBlas, @opinion   Read full article  


Back to Index

 

Equities

1. Here is an overview of equity market performance across different segments on US CPI release day.
 

 
2. The S&P 500 is testing resistance at the 50-day moving average.
 

 
3. There was some short-covering on Wednesday, particularly in tech.
 

 
4. Small caps jumped 2% as Treasury yields declined.
 

 
Small-caps are now highly correlated to Treasuries.
 

 
And fund managers are underinvested in small caps.
 
Source: BofA Global Research  

——————–

 
5. Bank shares rose on strong earnings and a soft core CPI, though regional banks have extended their underperformance.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
6. The SPDR Homebuilding ETF (XHB) held support relative to the S&P 500 after reaching deeply oversold levels.
 

 
7. S&P 500 stock buybacks are likely to exceed $1 trillion.
 
Source: MUFG Securities  
 
8. Insiders have been selling this month.
 
Source: @dailychartbook  
 
9. Institutional investor sentiment cooled this month.
 
Source: S&P Global PMI  
 
However, investors are very bullish on the US.
 
Source: S&P Global PMI  
 
What will drive US equity returns over the next 30 days?
 
Source: S&P Global PMI  
 
10. According to Vanda Research, retail investors tend to concentrate their purchases in January and February, with these months accounting for over 20% of annual activity on average.
 
Source: Vanda Research  
 
The pace of inflows is expected to continue accelerating from here.
 
Source: Vanda Research  
 
However, retail investor interest in tech megacaps has been declining.
 
Source: Vanda Research  
 
Retail investor sentiment deteriorated this week.
 

 
Retail investors have been snapping up quantum computing stocks—a highly speculative investment, as it may take a decade or more before the technology becomes profitable.
 
Source: Vanda Research  
 


Back to Index

 

Global Developments

1. Wells Fargo anticipates that proposed US tariff policies could lead to a slowdown in global growth this year.
 
Source: Wells Fargo Securities  
 
2. US fixed-income markets account for roughly 40% of total global debt outstanding.
 
Source: MUFG Securities  


——————–

Back to Index

 

Food for Thought

1. 151 years of S&P 500 returns with a forecast for 2025:
 
Source: Visual Capitalist   Read full article  
 
2. EV leasing gains popularity.
 
Source: @WSJ   Read full article  
 
3. Most winter holiday flight delays are under 3 hours, but some exceed 9 hours.
 
Source: @Datawrapper   Read full article  
 
4. Africa’s death rates from malaria:
 
Source: Semafor   Read full article  
 
5. Feelings of loneliness across different living arrangements:
 
Source: GWI  
 
6. Which way do you ski?
 
Source: OpenSkiStats   Read full article  
 

——————–


Back to Index