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CPI and PPI Picking Up...

Updated: Feb 21

BentinPartner Daily

Both the CPI and PPI showed inflation picked up last week, showing a reacceleration in inflationary pressures. This led to some renewed upside pressure on bond yields which set back expectations for Fed rate cuts back towards May, June and beyond rather than March.


On Tuesday, headline MoM January inflation rose 0.3% vs. 0.2% expected while YoY headline inflation came at 3.1% vs. 2.9%. Core (ex-food and energy) CPI also rose stronger than expected, with one-year inflation coming at 3.9% (vs. 3.7% expected). Later on Friday, the PPI conveyed a similar message with headline MoM Final Demand PPI climbing 0.3% (from 0.1% expected and -0.1% last)


While Gold and precious metals joined stocks and bonds lower in a knee jerk reaction (to higher inflation numbers) on Tuesday, gold and in particular silver, recovered towards the end of the week with silver breaching key moving averages on the upside. With China away for the Golden week, concerns were high for gold to be technically vulnerable. While gold breached the USD2’’000 level on the inflation news (with a nearly USD40$ gap down), it rapidly recovered and Friday’s COT report showed a particularly bullish picture with net long speculative gold positions cut by half to 34k contracts, primarily as a result of a large (and now failed) attempt to get and keep gold prices down, below key technical levels, during China’s Golden week.


Concerns about the soft-hard landing debate resurfaced last week as well with a particularly dismal US retail sales report published on Thursday (MoM -0.8% vs. -0.2% expected) which brought back some stagflationary risks to the economic outlook although jobless claims seemed to suggest a still resilient job market (212k vs. 220k expected). The small business optimism also dropped to 89.9 (from 91.9 last, defying expectations for an improving confidence).


US Stocks dropped slightly on the week with the VIX creeping higher and some notable deterioration observed in breadth that left the market orphan of a positive trend for most of the Mag7. Perhaps the time has come to keep dancing but with an eye to the exit given the mounting risks of a near term (albeit if only) temporary correction.


An historic AI mania is currently leading executives with access to cash and Credit to promote grand plans and spend lavishly on AI (washing), something that SEC Chair Gensler warned against last week. 


Interestingly, the Hang Seng recovered (gaining 4% so far this month, still -4.1% YTD) as did CSI300 (despite China being closed last week).


Treasury and MBS yields rose on the inflation report, some hawkish Fed comments and a warning on fiscal unsustainability from the Congressional Budget Office. The US budget deficit reportedly widened in the four months through January, as debt-servicing costs climbed further. The deficit for the first four months of the 2024 fiscal year reached USD532bn, or 16% more than recorded in the same period in the prior year with interest costs in the four months through January coming at USD357bn, a 37% jump from 2023. The US deficit has got three large components; social security, military and the interest rate charge. Recent Trump comments regarding pressure on allies to increase their military spending firmly suggested that, if elected, he would be looking to save money on the military, having little control over either the interest rate charge or social security.


That said, corporate risk premiums actually narrowed as money continued to pour into corporate bond funds (Investors added USD10.3bn to global investment-grade bond funds or the 16th straight week of inflows, according to EPFR data).


Elsewhere in Europe, ECB Governing Council member Joachim Nagel also said “History suggests that it’s worse to loosen monetary policy too soon than too late”, enabling EURUSD to recoup from its post US inflation drop.


Japan's gross domestic product (GDP) also fell an annualised 0.4% in the October-December period after a 3.3% slump in the previous quarter, confounding market forecasts for a 1.4% increase and leading to more JPY weakness.


The lack of geopolitical progress last week was only too obvious.


Following a Washington Post report that the United States was advancing plans to establish a Palestinian state, Israel Finance Minister responded ‘We will in no way agree to this plan, which says Palestinians deserve a prize for the terrible massacre they carried out against us.” “Israel will launch a ground offensive in the Rafah area of Gaza unless the hostages still held by Hamas are released by the Ramadan holiday in March, Israeli Minister Without Portfolio Benny Gantz also said this week end.


President J. Biden blamed US lawmakers’ failure to approve emergency aid to Ukraine for the fall of Avdiivka, which handed Russia a significant battlefield victory after months of fighting for control of the city, Bloomberg reported.



Over the past week, the S&P500 dropped -0,3% (5,1% YTD) while the Nasdaq100 dropped -1,5% (5,1% YTD). The US small cap index gained 1,2% (0,5% YTD). AAPL sold off by -3,5% (-5,3%).


The Equally Weighed SP500 gained 0,7% (1,4% YTD), outperforming the S&P500 by 1,0%. The median SP500 YTD return closed the week at 0,1%.

Cboe Volatility Index rallied 10,1% (14,4% YTD) to 14,24.

The Eurostoxx50 gained 1,1% (5,6%), outperforming the S&P500 by 1,4%.

Diversified EM equities (VWO) gained 1,1% (0,0%, Z-score 2,0), outperforming the S&P500 by 1,5%.


The Dollar DXY Index (UUP) measuring the USD performance vs. other G7 currencies gained 0,4% (3,7%) while the MSCI EM currency index (measuring the performance of EM currencies vs. the USD) gained 0,1% (-0,9%).


10Y US Treasuries underperformed with yields rising 10bps (40bps) to 4,28%. 10Y Bunds climbed 2bps (38bps) to 2,40%. 10Y Italian BTPs rallied -8bps (19bps) to 3,89%, outperforming Bunds by -10bps.

US High Yield (HY) Average Spread over Treasuries dropped -2bps (-9bps) to 3,14%. US Investment Grade Average OAS dropped -3bps (-5bps) to 1,00%.

In European credit markets, EUR 5Y Senior Financial Spread dropped -3bps (-1bps) to 0,67%.


Gold dropped -0,5% (-2,4%) while Silver rallied 3,6% (-1,6%). Major Gold Mines (GDX) dropped -0,4% (-13,4%).


Goldman Sachs Commodity Index dropped -1,0% (0,0%). WTI Crude rallied 3,1% (10,5%).




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Marc Bentin serves as Economic Advisor to Blue Lotus Management,

a specialist multi-manager investment firm, which seeks to provide investors a compelling alternative to the traditional 60/40 equity and bond portfolio by targeting higher returns without amplifying equity risks.

BentinPartner GmbH is Advisor to the Phi Funds AIF, an umbrella Alternative Investment Fund registered and regulated in Lichtenstein, specializing in the management of Funds focused on physical precious metals.


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