In today’s briefing:
- The Latest CPI Release Teases Markets
- CX Daily: How Will the U.S. Import Tariff Hikes Impact Chinese Industries?
- Business Cycle Watch – What to buy if manufacturing keeps surprising to the upside?
- Dominant Dollar (Part 1): Strong Greenback Deters EM Equities
- Quant Signals: Central Bank Sentiment Indicators
- Philippines Policy Rate 6.5% (consensus 6.5%) in May-24
- Australia Unemployment Rate 4.05% (consensus 3.9%) in Apr-24
- Assets May Inflate Like It’s ‘98
The Latest CPI Release Teases Markets
- The April CPI release, though market friendly, did not change the overall message
- The key message that inflation is still above the Fed’s goal and that the level of trend inflation is uncertain remains unchanged
- Although market-based expectations for a rate cut improved after the CPI data, the odds of potential Fed action are unsettled
CX Daily: How Will the U.S. Import Tariff Hikes Impact Chinese Industries?
- Tariffs /Caixin Explains: How will the U.S. import tariff hikes impact Chinese industries?
- Corruption /: Bribes, booze and books uncovered in veteran securities regulator’s corruption probe
- Micro Connect /: Charles Li’s Micro Connect rallies key employees to invest in ‘leading sheep’ program
Business Cycle Watch – What to buy if manufacturing keeps surprising to the upside?
- Hello everyone, and welcome to a short and sweet look at the current business cycle, what to expect, and which assets to buy ahead of what could be significant cyclical expansion.
- April data has in general been week in our models and nowcasts, which was reflected in the fairly dovish CPI report yesterday.
- However, May actitivity is picking up momentum again, and our Truck Demand indicator points to the business cycle picking up again from May onwards.
Dominant Dollar (Part 1): Strong Greenback Deters EM Equities
- Although the Fed paused rate hikes in July 2023, the dollar remained strong buoyed by the US economy outperforming other advanced economies.
- A strong dollar usually benefits domestic businesses and small caps but hurts export-focused companies and large caps in the US.
- The current account deficits of emerging nations have been worsening due to the strong dollar and rising energy prices.
Quant Signals: Central Bank Sentiment Indicators
- Our updated state-of-the-art Central Bank Sentiment indicators are flagging important changes in communication dynamics since the beginning of the year.
- We recently upgraded our sentiment measurement to a more fine-tuned and nuanced NLP model that effectively captures the meaning of Central Banker rhetoric and here share key findings.
- We regularly track and update our measure of positivity/negativity of Bank language contained in statements, outlooks and speeches on a scale of -1 to +1 in our DataHub for premium subscribers.
Philippines Policy Rate 6.5% (consensus 6.5%) in May-24
- The BSP maintained its policy rate at 6.5%, aligning with the consensus forecast, reflecting a balanced approach amid persistent inflationary pressures and moderated economic activity.
- While the inflation forecast for 2024 eased slightly to 3.8%, the forecast for 2025 increased to 3.7%, indicating persistent inflation risks from higher transport, food, electricity, and oil prices.
- The BSP’s restrictive policy stance aims to anchor inflation expectations and ensure price stability, with readiness to adjust policy settings as necessary, supported by government measures to address supply-side pressures.
This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.
Australia Unemployment Rate 4.05% (consensus 3.9%) in Apr-24
- The unemployment rate in Australia rose to 4.05% in April 2024, exceeding the predicted 3.9% and marking the highest level since January.
- This increase occurred despite a significant employment boost of 38,500 in April.
- The rise in unemployment was due to a faster growth in the labour force.
This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.
Assets May Inflate Like It’s ‘98
- Rate cuts are rare outside of recessionary regimes. The 1998 experience seems a more similar historical example for the BoE than 1989 or 2005, when its policy diverged.
- CPI inflation will probably be less benign because wage growth is much higher, so sterling may not stay as stable. The speed of possible policy reversal would be critical.
- Loosening monetary conditions when the real economy doesn’t need it risks stimulating a financial bubble. Carefully hedged investments would help avoid the eventual bust.
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