Subjective market review (15-Feb-2024). At least in the case of stocks (S&P500 e-mini futures), this is what it looks like two days after the publication of US inflation. See Figure 1. In the case of gold, it is the worst, the price only made up for some 20% of the decline after the inflation release. But let's give the market a few more days to fully react and see if this inflation reading can be so easily swept under the carpet.
Tomorrow we will get the US PPI and at the end of the month the PCE inflation. Cleveland FED inflation nowcast indicates a headline PCE reading of +0.26% MoM and 2.30% YoY (before the CPI publication it was 2.16%). After the publication of the CPI, the Core PCE inflation nowcast for January 2024 jumped 8.1 bps (from 2.66% to 2.74%).
Tonight we also got the GDP data in Japan for Q4 2023. The market expected +1.1% and received -0.4% - see Figure 2. Are two negative quarters in a row a common definition of recession?
I have already written many times that based on inflation data in the cherry blossom Japan, the BoJ cannot raise interest rates in the Western style, and it is possible that it will only raise it once and be done.
After the publication of GDP data, it may turn out that even one increase may be problematic. Additionally, real households consumption is decreasing for the third quarter in a row (Figure 3), as households income does not keep up with the increase in inflation.
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