US Economy

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Is US inflation surging?

Meh, from Westpac: Market inflation expectations have trended higher over the past two years. However, this has been as much about the pricing-out of deflation risk as it has been the inflation outcomes themselves. It has only really been in the past six months that inflation has shown a sustained lift to target. This occurred

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Inside US inflation

Goldman on firming US inflation before tonight’s CPI: Using our top-down and bottom-up core PCE models, we project that both macroeconomic fundamentals as well as sector-specific factors are likely to push core inflation meaningfully higher this year. …We highlight three key drivers of the core PCE acceleration to 1.8% by end-2018 in our forecast: a 0.15pp

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PIMCO ready to pounce on US long bond

Via the AFR: As the US 10-year bond rate heads towards 3 per cent, longer-term bonds are looking attractive again, PIMCO’s Newport-based chief investment officer of global credit, Mark Kiesel, said “At that rate it will start to generate interest from insurance companies and pension and funds and importantly, while we do see inflation rising we don’t see it

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The end of rational exuberance?

DXY was soft last night: AUD was strong against DMs: But not so strong as EMs: Gold firmed: Importantly, oil fell: As this monster long has further liquidation ahead: Base metals rebounded: Big miners launched: EM stocks too: Junk bottomed: Treasuries were bid a little: Bunds too: Stocks flew: News on the night was all

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Dalio: It’s late cycle

Big back-flip from Ray Dalio today that will not surprise MB readers: Let’s start by putting what’s happening within the context of the classic short-term debt/business cycle. What is Classic? In the “late-cycle” phase of the short-term debt/business cycle, when a) an economy’s demand is increasing at a rate that is faster than the capacity

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VIX the new CDO

Nice wrap today from Shae Russell: A decade ago, outside of investment banks, almost no one knew of derivatives. Few people had heard of collateralised debt obligations (CDOs) or credit default swaps (CDSs). It was only when the financial crisis nearly crippled global markets that these terms gained wider notoriety. Banks used CDOs to make

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Stocks flushed as rates panic builds

DXY firmed last night but not enough: The Australian dollar tumbled against DMs: But EMs fell faster: Gold held on: Oil let go: Base metals held on: Miners let go: As did EM stocks: And US junk: The Treasury curve steepened as only the short end caught a safe haven bid: Bunds were better bid:

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Markets signal it’s all good!

DXY jumped then stabilised last night: AUD rebounded against DMs: But couldn’t keep pace with EMs: Gold was hit: Oil too: And base metals: Big miners snapped back: EM stocks too: And junk: Treasuries lost the bid: Bunds didn’t: And stocks rebounded: It’s all good then! Who knows if the VIX accident is over? Maybe,

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Nomura: More selling to come

Via Zero Hedge: By Charlie McElligott, managing director of cross-asset strategy at Nomura. Fade to Black The “grey swan” we all have spoken about for years—that being the absurd “tail wagging the dog” potential of VIX ETN market structure (inverse and leveraged products) AND the massive growth in “negative convexity” / “vol target” / “vol

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Stocks smashed

DXY lifted last night on safe haven flows: AUD kept falling against the USD: It was mixed against EMs: Gold was soft: Oil was hit harder: Base metals were mixed: Big miners were hammered: High yield broke: However, Treasuries were strongly bid: And bunds: Stocks were smashed -3% and are still falling as I write:

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Previewing US jobs

Via the excellent Calculated Risk: On Friday at 8:30 AM ET, the BLS will release the employment report for January. The consensus, according to Bloomberg, is for an increase of 175,000 non-farm payroll jobs in January (with a range of estimates between 150,000 to 205,000), and for the unemployment rate to be unchanged at 4.1%. The BLS

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Bond bull or bond bear?

DXY resumed its crash last night: But AUD fell even faster, against all DMs: And EMs: Gold is strangely muted given the USD weakness: Oil firmed on the big buy from the Squid: Base metals loved the falling USD: Big miners yawned: EM stocks fell: Junk is threatening to break lower: As Treasuries cop a caning

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US wages growth is coming

Via a US reader today: As an American I don’t like everything he [Trump] says or the way he acts on twitter but the guy didnt become a billionaire by being an idiot. What cracks me up is reading people and the media comments that he is an idiot. He wasnt going to get the

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Previewing a hawkish Fed

Via Goldman: At Janet Yellen’s final FOMC meeting next week, we expect the FOMC to issue a generally upbeat post-meeting statement that includes an upgrade to the balance of risks and a slightly hawkish rewording of the inflation assessment. Taken together, we believe the tone of the statement will be consistent with a hike at the March

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Stocks melt-up to Heaven

The USD is in free fall: CFTC longs rose 7k to modestly long 17k with clear scope to go higher AUD was strong against all DMs: And EMs: Gold remains suspicious: Brent was soft but WTI now wants $70: The US rig count jumped 12 to 759 with more to come: : Base metals too:

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Trump ignites solar trade war

Make America unwashed and unpowered again? Yesterday, President Trump slapped tariffs on two of its biggest trading partners, Korea and China, with new charges on washing machines and solar cells in his first major trade “deal”. From Bloomberg: The U.S. will impose new duties of as much as 30 percent on foreign-made solar equipment, the

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Boom, baby, boom!

DXY fell last night as the US government shutdown ended: It looks more like a consolidation before another push lower than it does a capitulation bottom. As risk rose over the past few days there was a bid but as it returned it’s gone. That suggests the better things get the more it will fall

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Shutting down the US government means a stock shutdown too

The US government shutdown is providing great headlines about Trump’s incompetence – it’s pretty hard to beat shutting your own government down when your party controls the legislative and executive branches – and equal measure to the lack of risk surrounding the shutdown. It will be over in a few days, nothing to worry about

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Trump tax cut benefits flow

Via BofAML: …expect upward revisions to continue through earnings season, particularly as guidance trends have remained strong as well…we expect more details as earnings season progresses; several companies also indicated they will provide more clarity at upcoming Investor Days. Some early details have emerged from the 20+ S&P 500 companies that announced one-time bonuses, where

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Trump tax cut to have little impact on US wages

Goldman Sachs analyst Dann Struyven has taken a look at the impact of minimum wage increases and the GOP tax bill on wage growth – perhaps the most important factor in maintaining one’s standard of living as price inflation creeps ever-higher (the whole “wages keeping up with inflation” thing). Struyven concludes that short-term wage growth may be negligible outside of the leisure and

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Yuan dominating US dollar

While the headlines surround the trajectory of the Australian dollar versus the USD, it’s the Yuan making the rounds as it hits a new two year high. From SCMP: On Monday, the People’s Bank of China (PBOC) lifted the daily yuan reference rate by 0.55 per cent to 6.4570 per dollar, in its biggest daily move since

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Welcome to the global blowoff of 2018

Welcome to the global blowoff of 2018. DXY is the driver, breaking to three year lows Friday night: AUD flew north of 79 cents: It’s been treading water against EMs: CFTC net positioning blasted from moderately short to modestly long at 5k. Gold is screaming higher as DXY plunges: Oil is tearing the roof off: