In today’s briefing:
- FOMC’s Hawkish Pause: Recession and a FF Peak of 5.5% to Finally Restrain Core PCE
- The Weekly Market Monitor (24) – Our Key Sentiment Index Signals Market FRENZY
- CX Daily: China’s Faltering Recovery Is Good for Business — at Least if You’re Pinduoduo
- EA: Core Convergence Continues in May
- TPW Advisory Friday Musings: What A Difference A Year Makes
- US 10-Year on The Fence
FOMC’s Hawkish Pause: Recession and a FF Peak of 5.5% to Finally Restrain Core PCE
- With core PCE and core CPI both rising more than 4.8%MoM annualised in recent months, and up 4.7%YoY and 5.3%YoY respectively, the pause could only be justified with forward hawkishness.
- ISM manufacturing PMI below 50 for six months, manufacturing new orders below 50 for 9 months, and Services PMI at 50.3 now, suggest that the US is already in recession.
- We continue expecting the FedFunds rate to peak at 5.5%, with the Apr-Sep’23 recession and lagged impact of rate hikes enabling core PCE inflation to subside to 3%YoY by end-2023.
The Weekly Market Monitor (24) – Our Key Sentiment Index Signals Market FRENZY
- For the first time in the current melt-up, our Fear & Frenzy Sentiment has touched ‘Frenzy’ territory, suggesting the rally has run its course, at least temporarily.
- China has cut rates and is contemplating more stimulus to bolster sectors like real estate and domestic demand. Meanwhile, the economy continues to slow.
- In a surprise move, Blackrock has filed for a spot Bitcoin ETF with Coinbase as a custodian!
CX Daily: China’s Faltering Recovery Is Good for Business — at Least if You’re Pinduoduo
- Pinduoduo /: China’s faltering recovery is good for business — at least if you’re Pinduoduo
- Palestine-Israel /: Xi proposes three-point resolution for Palestinian-Israeli conflict
- Jobless /: Chart of the Day: China’s youth unemployment breaks record as graduate influx looms
EA: Core Convergence Continues in May
- The final EA HICP inflation print confirmed the 86bp slowing to 6.1% in May-23, while the ex-tobacco rate matched our 6.11% forecast.
- Slowing in the central tendency of price changes has continued, with the monthly impulse drifting towards the target and dipping marginally below it in Spain.
- Another couple of months like this should reassure the ECB that underlying inflation is under control, potentially allowing it to resist hiking in September.
TPW Advisory Friday Musings: What A Difference A Year Makes
- H’tip to the Bespoke folks for today’s title; they used it earlier this week and I thought let’s use that & so here we are.
- It’s a very useful exercise to think about where we were a year ago, where we are today and more importantly what the road ahead might look like.
- Our job is to keep up with and even surpass a forward looking discounting machine that incorporates all the thinking of all those participating, I mean the global financial markets. Talk about HI!
US 10-Year on The Fence
- Yesterday, the market consensus expected the Federal Reserve to pause raising interest rates.
- This expectation was widely publicized, with initial reaction to selling bonds.
- However, the market subsequently recovered some of its losses before declining again.
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