Here are some highlights from the CPI report. These are the two main alternative CPI measures. Sticky CPI:

Transcription

1 THE UNITED STATES 1. Let s begin with the CPI report, which was roughly in line with expectations. We are yet to see the labor market tightness broadly making its way into the US inflation measures. The headline CPI: The core CPI:

2 Here are some highlights from the CPI report. These are the two main alternative CPI measures. Sticky CPI:

3 Trimmed-Mean CPI:

4 Housing-related inflation is elevated but no longer rising. Rent: Owners equivalent rent:

5 After a period of declines, automobile prices appear to be stabilizing. Below is the CPI for new and used vehicles.

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7 Food at home is no longer a drag on the CPI. Last year s sudden cellular service price declines (discounted data plans, etc.) should be making their way out of the yearly CPI changes shortly (which will give the CPI a bit of a boost).

8 The medical care CPI seems to have stabilized for now.

9 Airline fares remain in deflation. Apparel prices are still falling.

10 Education CPI is at 2% the lowest rate in decades.

11 2. Retail sales continue to show strength. Retail sales excluding gasoline:

12 Retail sales excluding autos:

13 3. Real wage growth remains tepid. 4. Loan growth seems to be stabilizing, albeit at relatively low levels. Total loan growth:

14 Business loans:

15 5. Are investors ignoring the rising odds of the federal government shutdown this week? The probability in the betting markets is still below 30% but climbing. Source: PredictIt.org Source: ABC News; Read full article 6. The US dollar is getting hammered (at 3-year lows now) as growth outside the US picks up momentum. Expectations of other central banks

16 reducing/removing stimulus are boosting several currencies (particularly the euro). The US dollar weakness (combined with record stock prices and tight credit spreads) is contributing to easing US financial conditions. The four rate hikes scenario this year is now quite possible despite the tepid inflation measures.

17 Back to Index ADVERTISEMENT CANADA 1. Economists expect the BoC s rate trajectory to follow the Fed s normalization.

18 Source: BMI Research 2. Unlike the situation in the US, the Canadian prime-age population keeps expanding.

19 Source: Matthieu Arseneau, Economics and Strategy Group, National Bank of Canada 3. The BoC continues its attempts to rein in the housing market.

20 Source: Matthieu Arseneau, Economics and Strategy Group, National Bank of Canada Back to Index THE EUROZONE 1. Economists have once again upgraded their forecasts for the euro area GDP growth in 2018.

21 2. The euro hit the highest level in three years.

22 Speculative accounts net EUR futures positions touch another record high (bets on the euro s appreciation). A crowded trade?

23 3. Spain s CPI was below consensus.

24 However, the euro-area long-term inflation expectations are rising with crude oil. Back to Index EUROPE 1. Elsewhere in Europe, the British pound touched the highest level since the Brexit vote.

25 And speculative accounts (such as hedge funds) are getting net long the pound. 2. The Swiss franc is at the lowest level in three years (against the euro).

26 Back to Index ASIA PACIFIC Asian currencies are advancing against the dollar. The Chinese renminbi (strongest in two years):

27 The Australian dollar:

28 Back to Index EMERGING MARKETS 1. The end of NAFTA could be devastating for Mexico s economy.

29 Source: Oren Klachkin, Oxford Economics But investors are hoping that the US will not walk away from the trade agreement.

30 Read full article As a result, the peso bounced on Monday.

31 However, the damage due to the persistent NAFTA uncertainty may have already been done. Mexico s capital investment was meaningfully below consensus.

32 2. India s industrial production surprised to the upside.

33 The country s inflation rate is back above 5%.

34 3. Russia s rates continue to drift lower, with the 5yr domestic bond yield dipping below 7% for the first time since 2013.

35 4. Turkey s stock market tumbled as the images of a passenger plane sliding off the runway hit the news around the world.

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37 Source: CBS News; Read full article The anti-us, anti-kurd rhetoric also put pressure on the Turkish lira.

38 Source: Reuters; Read full article 5. Hard-currency EM bond issuance is hitting new records. It s all fun & games until the dollar starts rising.

39 Source: Back to Index CRYPTOCURRENCY 1. Bitcoin remains range-bound.

40 2. Ripple is under pressure again.

41 3. Mnuchin is worried about Bitcoin being used to evade taxes.

42 Source: Bloomberg; Read full article Back to Index ENERGY MARKET 1. Brent crude is trading above $70/bbl for the first time in three years.

43 2. The NYMEX crude oil net speculative positions hit another record high (record bets on oil appreciating further). With a large percentage of US and Canadian production profitable at current prices, oil s downside risk is increasing.

44 3. Higher prices should raise the number of active oil rigs in the US.

45 Back to Index COMMODITIES 1. Gold miners shares are underperforming gold. 2. March US corn futures keep tumbling.

46 3. High-end flash memory prices are declining again, which is becoming a drag on chip manufacturers.

47 Further reading Back to Index EQUITY MARKETS 1. Investors are betting on the US tax holiday boosting stock buybacks.

48 2. REITs broke out to the downside on higher bond yields.

49 3. The rotation out of active equity mutual funds continued in 2017.

50 Source: Credit Suisse 4. Dominated by three firms, ETFs saw record inflows last year. Source: Credit Suisse

51 Source: Credit Suisse 5. Equity market implied correlations continue to shrink.

52 6. Here is a scary headline. Read full article Back to Index CREDIT was a good year for investment-grade bond fund inflows.

53 Source: Credit Suisse 2. US high-yield funds saw the largest inflow in weeks. Read full article

54 Back to Index RATES 1. The Treasury yield curve flattened on Friday. Here is the 30yr 5yr spread (the lowest since 2007). 2. The 2yr Treasury yield hit 2% on Friday for the first time in years.

55 3. Speculative accounts are shorting the longer-dated Treasury notes.

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57 Back to Index GLOBAL DEVELOPMENTS 1. Are investors paying enough attention to the expected acceleration of central bank stimulus withdrawal? Source: Capital Economics

58 @josephncohen; Read full article 2. This chart shows the national pension fund assets as a percentage of the GDP.

59 Source: Matthieu Arseneau, Economics and Strategy Group, National Bank of Canada 3. Finally, the chart below has the government debt and the fiscal deficits as a percentage of the GDP. Source: Matthieu Arseneau, Economics and Strategy Group, National Bank of Canada Back to Index FOOD FOR THOUGHT 1. What happens to Americans born in the bottom income quintile? It depends on the person s race.

60 Read full article 2. What do Americans see as the country s top problem? Read full article

61 3. Two nations in one, locked in a perpetual ideological conflict. Read full article 4. Below is the betting markets probability of Democrats taking control of the House this year. Source: PredictIt.org 5. The percent of the population describing their state as the worst one to live in.

62 6. Who thinks the media organizations are reporting the news accurately?

63 Read full article 7. The most popular Wikipedia pages.

64 Read full article 8. Car sales forecasts for the EU, the US, and China. Read full article