CPI

The Art And Pseudoscience Of Monetary Policy

Central planning via Fed monetary policy circa 2017 is an exercise in nonsense, plain and simple. But that’s not all, in addition to the fatal conceit of it all, there’s another fatal flaw.

Futures, European Shares Stumble After Massively Overbought World Stocks Hit Record High

Whether it is due to overnight news that much of the recent rally may have been due to one specific fund's cover of a synthetic "short SPY" trade, or just because algo traders have gotten a case of overbought robotic vertigo, S&P futures dropped 0.2% in early Thursday trading as risk appetite fizzled and European shares dropped on concern the longest rally since July 2015 went too far, while the yen, bonds and gold advanced as the dollar fell.

Goldman Raises March Rate Hike Odds After January Inflation Spike

"Based on today's stronger-than-expected data--especially the CPI report's likely implications for January core PCE inflation--we are revising up our subjective probability that the next move in the federal funds rate will be a hike at the March FOMC meeting to 30% from 20% previously"

January Spending Spree Has US Retail Sales Rising Most In Nearly Five Years

US consumers started off 2017 with a bang driven perhaps by optimism over Trump's new administration, as headline retail sales jumped 0.4% in the month, better than the 0.1% expected, after rising an adjusted 1.0% in December (up from 0.6%). Sales have now grown in every month since August last year.

Frontrunning: February 15

  • World stocks at 21-month highs on Yellen, U.S. outlook (Reuters); Dollar notches longest run of gains in five years before CPI data (Reuters)
  • Nervous About the ACA, GOP Divisions Emerge Over Repeal Effort (BBG)
  • Flynn Probed by FBI Over Calls With Russian Official (WSJ)
  • Russia Questions Mount for Trump White House Reeling From Flynn Fallout (BBG)
  • Trump knew for weeks aide was misleading over Russia (Reuters)

Global Stocks Hit 21 Month Highs, Futures Point To New Record Ahead Of Inflation Data

The global "risk on" melt-up continues. After a modestly hawkish Yellen warned that every meeting is live, and refused to take March off the table, sending the dollar and yield higher and the S&P to fresh record highs, world stocks rose hitting a 21-month high on Wednesday with the dollar rising for the 11th straight day, the longest positive streak since July 2015.

RBC's Story Of The Day: "Reflation Trade Back On With A Vengeance"

For now, the market reaction is ‘higher real rates’ = ‘higher USD’ as Trump pro-growth and protectionist policies (BAT, overseas USD repatriation, tariffs) looks certain to create further Dollar strength, despite the incremental ‘weak USD’ jawboning from the administration.  Nominal rates have held in a range with real rates are again grinding higher.

Here Are The Best Hedges Against A Le Pen Victory

According to BofA, the best ways to hedge increased risks of a potential Eurosceptic win in the upcoming French election is favouring 10y peripheral spread wideners in Spain vs France, longs in 5y5y Germany and 5y Dutch sovereign CDS. In the options space, the banks recommends going long vol with a hybrid 6m10y strangle. In inflation, it likes 5y5y French CPI v HICP widener and a long 30y OATei breakeven vs inflation swap.

Key Events In The Coming Humphrey-Hawkish Week

The key economic releases this week are CPI, retail sales, and industrial production on Wednesday. In addition, there are several scheduled speaking engagements from Fed officials this week, including Chair Yellen’s semi-annual Monetary Policy Report to Congress on Tuesday and Wednesday (Humphrey-Hawkins).