This Week's CPI Report Could Be A Disaster For The Market

seekingalpha2024-08-12

CPI data expected to confirm the Fed rate-cutting cycle starting in September, leading to falling rates and USD/JPY levels, negative for equity markets.Market-based data and models predict CPI to miss...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

meurasian77
2024-08-12
meurasian77
‌[可怜] ‌

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2458667129?lang=en_US&edition=fundamental","thumbnail":"","is_english":true,"pubTime":"2024-08-12 11:00","share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","id":"2458667129","market":"us","top_or_hot":-1,"title":"This Week's CPI Report Could Be A Disaster For The Market","media":"seekingalpha","content":"<div>\n<p>CPI data expected to confirm the Fed rate-cutting cycle starting in September, leading to falling rates and USD/JPY levels, negative for equity markets.Market-based data and models predict CPI to miss...</p>\n\n<a href=\"https://seekingalpha.com/article/4713433-cpi-report-could-be-disaster-for-market\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>This Week's CPI Report Could Be A Disaster For The Market</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nThis Week's CPI Report Could Be A Disaster For The Market\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-08-12 11:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4713433-cpi-report-could-be-disaster-for-market><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>CPI data expected to confirm the Fed rate-cutting cycle starting in September, leading to falling rates and USD/JPY levels, negative for equity markets.Market-based data and models predict CPI to miss...</p>\n\n<a href=\"https://seekingalpha.com/article/4713433-cpi-report-could-be-disaster-for-market\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":".IXIC","symbol_name":"NASDAQ Composite","start_time":0,"source_url":"https://seekingalpha.com/article/4713433-cpi-report-could-be-disaster-for-market","article_id":"2458667129","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2458667129","pubTimestamp":1723431600,"columns":[],"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"CPI data expected to confirm the Fed rate-cutting cycle starting in September, leading to falling rates and USD/JPY levels, negative for equity markets.Market-based data and models predict CPI to miss","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{".IXIC":"NASDAQ Composite",".DJI":"道琼斯",".SPX":"S&P 500 Index"},"translate_title":"本周的CPI报告对市场来说可能是一场灾难","themeId":"","isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{".IXIC":1.1,".SPX":1.1,".DJI":0.9,"US10Y.BOND":0.9,"US12M.BOND":0.9,"US2Y.BOND":0.9,"US30Y.BOND":0.9,"US3Y.BOND":0.9,"US5Y.BOND":0.9,"US6M.BOND":0.9,"US7Y.BOND":0.9,"US912797GK78.BOND":0.6,"US912797GL51.BOND":0.6,"US912797GW17.BOND":0.6,"US912797HE00.BOND":0.6},"content_text":"CPI data expected to confirm the Fed rate-cutting cycle starting in September, leading to falling rates and USD/JPY levels, negative for equity markets.Market-based data and models predict CPI to miss expectations, indicating a real disinflation trend and potential Fed rate cuts in September.Yield curve steepening expected due to falling short-term rates, further contraction of interest rate differentials, and potential slowdown in economic growth.HadelProductionsThis will be a make-or-break week for the market across all asset classes. Over the past few weeks, we have seen equity, rates, and the dollar fall materially. The inflation data this week will either suggest that the slowing we see in the data to this point is concerning, meaning the sell-off to this point has been justified, or the data this week will suggest that the trends of the past weeks are not a concern, leading to a reversal of the declines we have seen thus far.However, based on market-based data and various models, the CPI data will likely confirm that the Fed rate-cutting cycle is about to start in earnest in September. As a result, one can expect rates to fall, leading to further yield curve steepening. More importantly, this will further deteriorate interest rate differentials, leading the USD/JPY to lower levels and further unwinding the carry trade, which is negative for equity markets.CPI Could MissAnalysts expect the CPI to rise by 0.2% m/m in July, compared to a decline of -0.1% m/m in June. Meanwhile, headline CPI is expected to remain unchanged at 3.0% y/y. Core CPI is expected to increase by 0.2% m/m, up from 0.1% in June and rise by 3.2% y/y, down from 3.3% in June.The market is predicting, using CPI swaps, that headline CPI will only rise by 0.15% m/m in July and by 2.92% y/y. If swap pricing is correct, there would be a clear miss on the headline CPI year-over-year, and that 0.15% increase is really too close to call, as to whether we get a 0.1% or 0.2% m/m increase.BloombergThe other models from Kalshi, the Cleveland Fed, and Bloomberg Economics suggest that CPI, on a rounded basis, does not come in above 0.2% m/m and not above 3% y/y. But more importantly, three of the four pricing models suggest that headline CPI comes in at 2.9% y/y, a clear miss.Carry Trade ImpactsIf the models are pricing things correctly, this would likely suggest that the disinflation trend that started in May is real. It would likely give the Fed the confidence it needs to start cutting rates in September. In all likelihood, this would result in short-term rates at the front of the US yield curve to fall.But more importantly, it would also lead to further contraction of interest rate differentials between US Treasuries and Japan's Government Bonds. This further contraction would likely resume the downward movement in the USD/JPY and further unwind the carry trade. For example, this could result in the US 10-year rate falling towards the 10-year JGB, causing the difference or spread between the government bonds to decline, making the carry trade less desirable.This past week was a prime example because when interest rate differentials paused their declines, the USD/JPY paused its decline. The movements in the USD/JPY have more to do with US rates falling than the BOJ hiking. Yes, a BOJ rate hike increases the borrowing cost for the yen, but falling US rates contract the spreads, making the trades less profitable.BloombergYield Curve SteepeningAdditionally, we have seen a considerable shift in the bond market, with the difference between the 10-year and the 2-year falling, mainly because the 2-year rate is falling to the 10-year rate. Because the 2-year rate was higher than the 10-year rate, the spread had been stuck below the -15 bps level since July 2022, meaning the 10-year rate could never close the gap with the 2-year. So, the recent move above that technical resistance at -15 bps is significant. It should support the yield curve steepening further as the 2-year moves lower to account for expectations of the Fed cutting Fed Funds rates and, more importantly, serve as an indicator of the slowdown in economic growth.BloombergAdditionally, we have seen specific market-based financial instruments that measure inflation expectations, such as 5-year inflation breakevens and 5-year zero-coupon inflation swaps, break through some key levels of technical support. These levels of technical support had held multiples over the past two years, even when it appeared that inflation was coming down in the second half of 2023. This current break of support seems to suggest that the market thinks something has changed, not just regarding inflation but regarding economic growth.BloombergThese measures of inflation expectations also track nominal GDP growth reasonably closely over time, and the sudden decline in both measures would forecast a further slowing of economic growth in the coming months.BloombergAdditionally, the July job report showed that the total private aggregate weekly payrolls index fell to 4.8% year over year, its lowest level since January 2024. It, too, tends to track nominal GDP growth closely over time, suggesting a slowdown in nominal GDP growth.BloombergFurther RisksAll of these changes signalled prior to this coming week would likely only further accelerate should CPI data come in weaker than analysts forecast, as swaps suggest might happen. This would likely lead to further yen appreciation versus the dollar and further steepening of the yield curve. Because the regime of good news is bad news, it has flip-flopped to bad news being bad news.A further unwind of the yen carry trade and a further steepening of the yield curve would both be a negative for the equity market, as it would continue to unwind the higher-for-longer trade that has been in place since March 2023.If the inflation data should come in hotter than expected, the USD/JPY would rally, the yield curve would probably invert as short-term rates rise above 10-term rates, and the equity market would be saved, at least for a while longer.But again, CPI swaps, which are market-based, do not suggest a hotter-than-expected reading.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"-1","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[{"id":337524175216832,"gmtCreate":1723439544521,"gmtModify":1723439549389,"author":{"id":"3587020790873268","authorId":"3587020790873268","name":"meurasian77","avatar":"https://static.tigerbbs.com/029ef04cb8ec6291c3e5d53eb5cfac4b","vip":1,"hat":"https://static.tigerbbs.com/f84d87792f02cf78e80ee34979fd31e5","crmLevel":6,"crmLevelSwitch":1,"idStr":"3587020790873268","authorIdStr":"3587020790873268"},"htmlText":"‌<a href=\"\">[可怜]&nbsp;</a>‌","listText":"‌<a href=\"\">[可怜]&nbsp;</a>‌","text":"‌[可怜] ‌","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/337524175216832","repostId":2458667129,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":13,"commentSize":1,"repostSize":1,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.4","shortVersion":"4.29.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2458667129"}