Market 04/08: Stable inflation expectations, debt increase concerns

Fed New York Survey: Stable inflation expectations, debt increase concerns

According to Fed NY survey, March inflation expectations trend stable:

• 1-year inflation expectations: +3% (previous: +3%)

• 3-year inflation expectations: +2.9% (previous: +2.7%)

• 5-year inflation expectations: +2.6% (previous: +2.9%)

• Home price forecast: +3% (previous: +3%)

Other data:

• Forecast wage growth next year: +2.8% (previous: +2.8%)

• Consumer worry indicator about losing debt repayment ability rises to highest in 4 years (12.9%).

  • … mainly in ages 40-60, those with higher debt tendencies and slower income growth.

US employment trends slightly up in March - Conference Board

CB Employment Trends Index slightly up in March to 112.84 (> previous 111.85).

→ Employment likely to continue increasing in Q2/2024.

• This is aggregated data from previous data so it has little impact on the market.

• With a still strong labor market, concerns about Fed keeping rates high have pushed 10Y bond yield to highest in the year…

  • T-bond 10Y yield ~ 4.4% and trending to continue rising near 5%.

• CPI index on Wednesday will decide if yields stay stable or rise to new highs.

China: Holiday spending increase boosts hopes for improving consumer confidence.

• Chinese tourists spent 7.5 billion USD in 3 days of holiday 04/4-6.

  • Average: 60.14 USD /person in 3 days - equivalent to 101.1% spending level 5 years ago and exceeding pre-Covid level (same period).

  → Raises hopes consumer confidence is being strengthened, good signal for the stagnant economy.

  

• PBOC relending 70 billion USD for small and medium-sized enterprises in technology and science fields, with preferential interest rates 1.75%.

  • This is one of the science and technology development commitments at China's Two Sessions from the beginning of the year: read more here.

• PBOC continuously buys gold for 17 consecutive months, increasing gold reserves to 72.74 million ounces in March 2024.

• Real estate developer Shimao Group sued by China Construction Bank (CCB) for failing to repay on time debt of 1.6 billion HKD (~202 million USD).

  • Shimao's USD-denominated listed bonds have plummeted.

Japan: Real wages decline, labor force increases. JPY faces alert

Wage report:

• Real wages in Japan have declined for 23 consecutive months, specifically:

  • Nominal wages: average 1,865.84 USD/month, up +1.8% YoY.

  • But other payments (including bonuses) down -5.5% YoY.

• Meanwhile, the number of workers recorded increased 1.3%, reaching 50.236 million workers.

Yen faces highest selling pressure in 17 years

• Net short positions in JPY increased to 148,388 contracts, highest since 2007.

→ Investors fear JPY will fall further due to large interest rate differential between Japan and the US.

Cryptocurrency market:

• Crypto VC investors ramp up investments again, reaching 2.5 billion USD, up +32% QoQ.

• Solana (SOL) helped Pantera Capital grow 66% in Q1.

  • SOL price up about 99% to 200 USD, 3-year high, pushing market cap to all-time high.

Events this week:

1. March CPI inflation - Wednesday

2. Fed Meeting Minutes - Wednesday

3. March PPI inflation - Thursday

4. Initial jobless claims data - Thursday

5. MI Consumer Sentiment Index - Friday

6. Remarks by 8 Fed officials

This week's earnings report schedule:

Some other news:

1. Southwest Airlines' Boeing 3695 had engine cowling detach during takeoff.

   

   • Previously, Boeing CEO also announced resignation after recent aircraft incidents,

     

2. TSMC receives 6.6 billion USD subsidy to build 3 advanced chip factories in Arizona state.

   • Previously, TSMC was loaned 5 billion USD. Currently, this group's chip production facilities are mainly concentrated in Taiwan.

     

3. Tesla expected to unveil self-driving taxi (Robotaxi) in August this year.

   • Meanwhile, Tesla is also struggling with declining car sales and competition from cheap Chinese electric vehicles.

   

4. Discount retailer 99 Cents Only Stores files for bankruptcy.

   

5. Blackstone Inc. acquires luxury apartment REIT Apartment Income REIT for 10 billion USD after a period of caution in real estate.

   

6. Today's total solar eclipse may reduce solar power output. Power suppliers will need to prepare alternative power sources for customers.

   

7. Biden's student debt forgiveness plan could eliminate up to 20,000 USD in interest for 25 million borrowers.