In today’s briefing:
- Will Copper Shine Brighter than Gold?
- Despite Record Crushing Ascent, Japanese Stocks Remain Bullish
- EM Watch: China is preparing something BIG!
- US CPI Review: Inflation is accelerating, no return to 2% in sight
- [US CPI Preview] Rising Gasoline Prices & Shelter Costs to Result in Hot US Inflation
- US CPI Inflation 3.48% y-o-y (consensus 3.4%) in Mar-24
- 5 Things We Watch – Rates Pricing, Liquidity turning, Labor Market, Commodities & China
- New Zealand Policy Rate 5.5% (consensus 5.5%) in Apr-24
- Thailand Policy Rate 2.5% (consensus 2.5%) in Apr-24
- Norway CPI Inflation 3.9% y-o-y (consensus 4.2%) in Mar-24
Will Copper Shine Brighter than Gold?
- Copper supply facing headwinds with a shortage of copper ore which has led to spiraling copper refining margins.
- Copper futures trading sharply higher than cash prices and term structure for copper futures has steepened.
- Gold to copper ratio can be used to express a bullish view on copper prices with relatively lower risk compared to a straightforward long copper position.
Despite Record Crushing Ascent, Japanese Stocks Remain Bullish
- TSE market reforms are helping underperforming Japanese firms improve profitability.
- Japanese equities remain undervalued relative to the US with lower P/E and PEG ratios. While Japanese firms still lag on CAPEX growth, dividend growth has been higher than the US.
- Nikkei faces headwinds from the potential strengthening of the Yen as BoJ shifts towards less accommodative policy. For now, the impact is minimal.
EM Watch: China is preparing something BIG!
- The below chart of ours have made the rounds in recent days and weeks as China seems to be preparing for something big given the heavy restocking efforts in Copper space.
- As the price trends are diverging in copper versus steel and iron ore, the strategic initiatives of China are becoming increasingly evident in price action across the commodity complex, but we are yet to fully understand and accept the ramifications for global rates.
- We have read plenty of bad takes on why China is building up copper reserves and the most obvious reason seems to be neglected by many.
US CPI Review: Inflation is accelerating, no return to 2% in sight
- US inflation printed at 0.4% in both headline- and core terms, which was in line with our nowcasts and substantially above embedded market expectations.
- In full transparency, we didn’t get everything right, but the broadness of the continued inflation in services and the early signs of a re-acceleration in goods prices outside of cars rhyme with our predictions.
- Especially transportation services keep printing at levels that are way too hot for the Fed to take comfort in and it is likely a hint of a re-increasing momentum in wage expectations and wage growth.
[US CPI Preview] Rising Gasoline Prices & Shelter Costs to Result in Hot US Inflation
- US CPI remains well above Fed’s 2% target range. Rising gasoline and shelter costs will push March CPI number upwards.
- Consensus is for March CPI to print at 3.4% YoY in March from 3.2% in Feb. Core CPI is expected to clock 3.7% YoY.
- Rising CPI will dent the likelihood of rate cut in the near term. Fed has reiterated its data dependence. Hot CPI data will vindicate Fed’s hawkish stance.
US CPI Inflation 3.48% y-o-y (consensus 3.4%) in Mar-24
- US CPI inflation in March 2024 rose to 3.48% year-on-year, surpassing consensus forecasts and indicating a more persistent inflation issue.
- Core CPI inflation also unexpectedly remained at 3.8% year-on-year in March 2024.
- This was due to a 0.4% month-on-month increase in March 2024.
This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.
5 Things We Watch – Rates Pricing, Liquidity turning, Labor Market, Commodities & China
- Hello everyone, and welcome back to our weekly ‘5 Things We Watch’, where we provide 5 of the things we keep an eye out for in global macro in a short and concise format.
- This week we are watching out for the following 5 topics within global macro: Rates Pricing, Liquidity Turning, Labor Market, Commodities, China.
- The market went into the year expecting 7 cuts in total from the Fed, which has now been narrowed down to less than two, all while equity markets have continued their drift higher as the economy is doing better than expected paired with benign liquidity conditions.
New Zealand Policy Rate 5.5% (consensus 5.5%) in Apr-24
- The Reserve Bank of New Zealand’s decision to maintain the OCR at 5.50% reflects a strategic intent to manage inflationary pressures influenced by domestic and global economic conditions.
- Persistent inflationary pressures, amid weak economic growth and the nuanced impact of net migration on the labour market and consumer spending, underscore the complexities of returning consumer price inflation to the target range.
- Future policy decisions will hinge on the balance between restrictive monetary policy measures and their impact on economic stability, with a keen eye on global economic trends, labour market dynamics, and inflationary trends.
This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.
Thailand Policy Rate 2.5% (consensus 2.5%) in Apr-24
- The Bank of Thailand’s decision to keep the Policy Rate unchanged at 2.5%, despite some members advocating for a reduction, demonstrates a cautious optimism about economic growth and structural impediments, alongside a commitment to macro-financial stability.
- Growth projections for 2024 and 2025 are supported by private consumption, tourism, and public expenditure, albeit tempered by structural challenges in exports and manufacturing, underscoring the need for comprehensive structural reforms.
- The inflation outlook remains subdued, with expectations of a gradual increase towards the target range, necessitating vigilant monitoring of external shocks and the efficacy of monetary policy in fostering an environment conducive to sustainable economic growth amid financial stability concerns.
This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.
Norway CPI Inflation 3.9% y-o-y (consensus 4.2%) in Mar-24
- Norway’s CPI inflation rate decreased by 0.6 percentage points to 3.9% year-on-year in March 2024, which is lower than the predicted 4.2%.
- This is the lowest growth rate since September 2023.
- The CPI-ATE inflation rate, which excludes volatile components, was a contributing factor to this decrease but still remained at a higher 4.5% year-on-year.
This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.
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