The highly anticipated March CPI report delivered a slightly higher than anticipated headline number (8.5% year-on-year), however the core reading came in below expectations, flashing a .3% month-on-month reading, versus the .5% economists expected.
The latter has equity traders feeling it this morning. I.e., placing bets that inflation looks to be peaking.
Well, indeed, inflation is bound to ultimately come a bit off the short-term boil, so to speak (as demand wanes [our overall conditions read says growth is slowing] and bottlenecks ease — and, not to mention, base-effects), but, nevertheless, at 6.5% (core rate year-on-year), we’re still looking at a Fed determined to show its inflation-fighting mettle right here.
Interesting that commodities are catching a nice bid this morning as well… Suggesting perhaps that traders in that space have a different take… Or, they’re playing the prospects for the dollar giving way to potentially lower than previously discounted interest rates going forward… But still, a commodity rally would clearly not support a significantly lower inflation narrative from here…
Economist Peter Boockvar points out that the BLS’s method for calculating housing rent paints a perhaps less than real-world picture with regard to that month-on-month core CPI number (although used car prices declining no doubt helped as well):
“Headline CPI in March rose 1.2% m/o/m as expected. The core rate was up just .3% m/o/m (if only), 2 tenths less than expected and ‘if only’ because the BLS said owner’s equivalent rent in March rose just .4% m/o/m and 4.5% y/o/y. Rent of Primary Residence also showed a 4 tenths m/o/m increase and by 4.4% y/o/y. In reality if we combine new lease increases and rent rollover leases, rents are rising at around 10% so please don’t rely on today’s BLS data on this.”
Stay tuned…
Asian equities got hammered overnight, with all but 2 of the 16 markets we track closing notably lower.
Europe’s mostly lower this morning, with 12 of the 19 bourses we follow trading down as I type.
US stocks are green to start the session: Dow up 132 points (0.38%), SP500 up 0.64%, SP500 Equal Weight up 0.55%, Nasdaq 100 up 0.99%, Nasdaq Comp up 0.99%, Russell 2000 up 1.29%.
The VIX sits at 23.27, down 4.51%.
Oil futures are up 5.50%, gold’s up 0.70%, silver’s up 0.82%, copper futures are up 0.71% and the ag complex (DBA) is up 0.69%.
The 10-year treasury is up (yield down) and the dollar is up 0.08%.
Among our 38 core positions (excluding cash and short-term bond ETF), 35 — led by energy companies, MP Materials, base metals miners, Albemarle and Latin American equities — are in the green so far this morning. The losers are wind stocks, Warner Bros Discovery (AT&T spinoff) and Nokia, .
Like we’ve been saying:
“…globalisation in the guise of enhanced cross-border flows of goods and services, the migration of people, and capital flows is under increasing political threat as resurgent nationalism becomes politically more popular.”
And that my friends is long-term inflationary…
Have a great day!