Disappointing inflation data again…

Thoughts of the Day

The US PPI rose by 1.6% YoY (EXP +1.1%, PREV +1.0%) in Feb 2024, surpassing expectations and marking the highest increase since Sep. This data further disappointed investors after the higher-than-expected CPI data on Tuesday, causing bond yields to rise and stocks to dip (-0.8% intraday, closed at -0.3%). Despite concerns, the trend in risk assets remains strong. Dips should continue to be bought for now.

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Day Ahead

The Preliminary data for the US University of Michigan Consumer Sentiment Survey will be released and the inflation expectations components will be closely watched.

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What Happened Yesterday

Market Movements as of New York Close 14 Mar 24

The US Producer Price Index (PPI) showed that prices rose +1.6% YoY in February (vs +1.1% expected and +1.0% prev [revised from +0.9%]), the most significant rise since Sep 2023. The core PPI, excluding volatile items, grew by +2% annually, maintaining the pace from the previous month and slightly surpassing the +1.9% forecast. Month-over-month, the PPI for final demand surged by +0.6%, the largest since last August and above the expected and previous rate of +0.3%. The core rate saw a +0.3% increase, a deceleration from last month’s +0.5%, but still above the +0.2% consensus.

U.S. retail sales saw a month-on-month increase of +0.6% in Feb (vs +0.8% expected), coming after the previous -1.1% drop (revised from -0.7%). This modest rise, following the previous month’s more significant decrease, hints at a possible deceleration in consumer expenditure. Year-on-year, retail sales went up by +1.5%, an improvement from 0% last month (revised from +0.6%).

The US Treasury Yield curve inversion narrowed to 0.39% as the US 2-year bond yield rose +0.07% to 4.68 while the 10-year yield increased +0.10% to 4.29% on the back of the hot PPI data. 

The US stock futures range traded through the Asian and London trading sessions ahead of the release of the US PPI data with the S&P 500 futures rising +0.24%. 

The US stock market opened higher from Wednesday. However, a selloff was triggered by the higher than expected PPI data. The market closed lower on the day despite multiple attempts to bounce from the lows As a result, the S&P 500 fell -0.29% (high: +0.22%, low: -0.81%), the Dow Jones slid -0.39% (high: +0.39%, low: -0.87%) while the Nasdaq dropped -0.30% (high: +0.41%, low: -0.86%).

The crypto market took a breather with Bitcoin and Ether finishing lower on the day. Bitcoin fell as low as 68,553 (-6.3%) while Ether fell as low as 3,720 (-7.1%) before recovering from the lows to close -2.35% and -3.15% lower respectively.
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Headlines & Market Impact

Japan no longer in deflation, wage hike trend strong, says finance minister

Notable Snippet: Japan’s economy is no longer in deflation, and a strong trend of wage hikes is taking place, Finance Minister Shunichi Suzuki said on Friday.

Policymakers, including Prime Minister Fumio Kishida and Suzuki, have repeatedly said in recent days that the country was not yet in a position to be able to declare a solid exit from deflation.

The government will mobilise all available policy steps to continue the positive momentum on wages, Suzuki said, declining to comment on Bank of Japan policy steps at its meeting taking place next week.

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Former Treasury Secretary Mnuchin is putting together an investor group to buy TikTok

Notable Snippet: Former Treasury Secretary Steven Mnuchin is building an investor group to acquire ByteDance’s TikTok, as a bipartisan piece of legislation winding its way through Congress threatens its continued existence in the U.S.

The House of Representatives on Wednesday passed a bipartisan bill that if signed into law would force ByteDance to either divest its flagship global app or face an effective ban on TikTok within the U.S.

“I think the legislation should pass and I think it should be sold,” Mnuchin, who leads Liberty Strategic Capital, told CNBC’s “Squawk Box” on Thursday. “It’s a great business and I’m going to put together a group to buy TikTok.”

“This should be owned by U.S. businesses. There’s no way that the Chinese would ever let a U.S. company own something like this in China,” Mnuchin said.

Lawmakers on both sides of the aisle have highlighted TikTok’s reach in the U.S. — by its own estimates, 170 million Americans use the app — as providing the Chinese government with ready access and influence over the U.S.

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El Salvador Has Thousands More Bitcoins Than Previously Known

Notable Snippet: Bitcoin-forward Central American nation El Salvador this week moved $400 million worth of bitcoin (BTC) – “a big chunk” – into a cold wallet, according to its President, Nayib Bukele.

In a post on X (formerly Twitter), Bukele referred to the new setup as “our first #Bitcoin piggy bank.” El Salvador stored the cold wallet “in a physical vault within our national territory,” he said, including a photo of a wallet that held 5,689.68 BTC, worth $411 million at Thursday’s prices.

A bitcoin treasury of that size places El Salvador’s holdings far higher than previously believed. Even on Thursday, public trackers place the nation’s trove at less than 3,000 BTC ($205 million). Earlier this week Buckle teased that the country was not simply buying BTC but also getting it by selling passports, through currency conversions for businesses, from mining and from government services.

The revelation represents the first time that Bukele has tied his nation’s holdings to a specific address. He previously relied solely on social media posts to make claims about the size of his trove, providing occasional updates whenever El Salvador bought more.

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Stock Indices

Phan Vee Leung
CIO & Founder, TrackRecord