Manufacturing PMIPMI — Purchasing Managers' Index. Above 50 = the sector is expanding vs last month; below 50 = contracting. A timely read on activity. is above 50 and rising.
Why: A reading above 50 means more firms report expanding activity than contracting; rising means the breadth of expansion is widening — a timely, forward-looking growth signal.
Earnings expectations broaden toward economically-sensitive sectors.
Why: Stronger activity feeds revenue and pricing power first in the parts of the market geared to the physical economy.
Cyclicalscyclicals — Sectors whose earnings rise and fall with the economic cycle — industrials, materials, energy, consumer discretionary., small-caps, EM and commodities lead; defensivesdefensives — Sectors whose demand is steady through the cycle — consumer staples, utilities, healthcare. They outperform when growth slows. lag.
Why: Capital rotates toward the cycle — industrials, materials, energy, smaller and more leveraged firms, and the commodities their activity consumes — while steady-demand defensives become relatively less attractive.

Helps
cyclicals (industrials, materials, energy)small-capsEM equitycommodities

Hurts
defensive sectors (staples, utilities)long government bonds

Caveat: If acceleration also stokes inflation fears, the bond-yield response can offset the equity benefit (good growth becomes 'too good'), especially late-cycle.

House-view hook — empty (textbook default; Stephen's view bakes in here).

What would change the read

Inflation surprise (upside) Core inflation is steady, so the upside-surprise channel is quiet. It would fire on a core reading ≥0.2pp above the prior — watch it because that is what forces a central bank to stay restrictive and pressures the longest-duration assets first.
Inflation surprise (downside / disinflation) Core inflation isn't cooling fast enough to trigger the disinflation channel. A fall of ≥0.2pp would fire it — worth watching because it is the cleanest tailwind for long-duration growth and government bonds.
Monetary easing (rate cut) The policy rate is on hold, so the easing channel is dormant. A cut would fire it — it matters because the first cut of a cycle typically broadens a rally and pressures the currency.

China

No active mechanism this week — the standing read above carries the bloc.

What would change the read

Growth acceleration (expansionary PMI) Manufacturing isn't both expanding and accelerating, so the growth-acceleration channel is dormant. A rising PMI back above 50 would fire it — it matters because it's the signal to rotate from defensives toward cyclicals.
Growth slowdown (deepening contraction) Manufacturing is not both below 50 and falling, so the deepening-contraction channel is dormant. It fires when a sub-50 PMI turns lower — that is the trigger for the defensive rotation and a bid for duration (a sub-50 PMI that is *rising* is the trough channel, M13, not this one).
Long-end yield spike / term-premium rise The 10-year yield isn't spiking, so this channel is dormant. A jump of ≥0.1pp would fire it — watch it because it compresses the highest-multiple growth names and long bonds fastest.

Euro area

M4Monetary tightening (rate hike)

Trigger: policy_rate: 1.25 → 1.5 (+0.25)

The central bank raises its policy ratepolicy rate — The interest rate a central bank sets directly (e.g. the Fed funds rate, the ECB deposit rate, China's LPR). It anchors all other rates..
Why: It lifts the risk-free baseline and signals an intent to drain liquidity to cool demand or inflation.
Discount ratesdiscount rate — The rate used to convert a future cash flow into today's value. A higher discount rate makes far-off cash flows worth less now. rise; the most rate-sensitive assets are hit first.
Why: A higher risk-free rate lowers the present value of future cash flows, and long-duration growth, long bonds, and non-yielding gold have the most distant or rate-sensitive payoffs.
The currency firms; exporters and dollar-debt EM borrowers are pressured.
Why: A wider yield advantage pulls in capital and strengthens the currency, which hurts exporters' competitiveness and raises the real burden on dollar-denominated EM debt.

Helps
the tightening currencycash/short-duration real yieldbanks (early-cycle)

Hurts
long-duration growth equitieslong-dated bondsgoldEM assets

Caveat: Late in a hiking cycle, a hike can paradoxically rally bonds if the market reads it as the last one and pulls forward the eventual cuts.

House-view hook — empty (textbook default; Stephen's view bakes in here).

M9Long-end yield spike / term-premium rise

Trigger: yield_10y: 4.37438 → 4.59668 (+0.2223)

⚠ Fired on a stale print: yield_10y as of 2011-07-01 (30d old). The change may predate current conditions — treat as provisional.

The 10-year yield jumps.
Why: The long yield sets the cost of long-term money for the whole economy and the discount rate for the longest cash flows.
The discount rate on all long-dated cash flows rises.
Why: Equity valuations and long-bond prices are present values of distant cash flows; a higher long yield shrinks those present values.
Long-duration growth equities compress, long bonds fall, gold is pressured.
Why: The longest-duration assets are most exposed to the discount-rate move, and a higher real yieldreal yield — The yield after subtracting expected inflation — what a lender actually earns in purchasing power. Real yield ≈ nominal yield − expected inflation. raises the opportunity cost of holding non-yielding gold.

Helps
banks/insurers (reinvestment)cashvalue over growth

Hurts
long-duration growth equitieslong-dated bondsgoldrate-sensitive REITs/utilities

Caveat: Granularity is daily, so a single-session jump can be noise; a sustained multi-session move is the real signal. Distinguish a growth-driven rise (risk-on) from a supply/term-premium rise (risk-off).

House-view hook — empty (textbook default; Stephen's view bakes in here).

Japan

No active mechanism this week — the standing read above carries the bloc.

What would change the read

Inflation surprise (upside) Core inflation is steady, so the upside-surprise channel is quiet. It would fire on a core reading ≥0.2pp above the prior — watch it because that is what forces a central bank to stay restrictive and pressures the longest-duration assets first.
Inflation surprise (downside / disinflation) Core inflation isn't cooling fast enough to trigger the disinflation channel. A fall of ≥0.2pp would fire it — worth watching because it is the cleanest tailwind for long-duration growth and government bonds.
Monetary easing (rate cut) The policy rate is on hold, so the easing channel is dormant. A cut would fire it — it matters because the first cut of a cycle typically broadens a rally and pressures the currency.

The dataL3

United States

Indicator	Current	Prior	Δ	As of
CPI (YoY)	3.60	3.58	+0.02 ▬	2011-07-15
Core CPI	0.30	0.23	+0.07 ▬	2011-07-15
Core PCE	1.73	1.59	+0.14 ▲	2011-07-01
Policy rate	0.25	0.25	+0.00 ▬	2011-07-31
GDP	1.30	-0.10	+1.40 ▲	2011-07-29
PMI (mfg)	55.30	53.50	+1.80 ▲	2011-07-01
PMI (svc)	53.30	54.60	-1.30 ▼	2011-07-06
Unemployment	9.20	9.00	+0.20 ▲	2011-07-08
10Y yield	2.82	2.98	-0.16 ▼	2011-07-29
2Y yield	0.36	0.42	-0.06 ▼	2011-07-29
2s10s slope	2.46	2.56	-0.10 ▼	2011-07-29
FX vs USD	n/a

China

Indicator	Current	Prior	Δ	As of
CPI (YoY)	6.40	5.50	+0.90 ▲	2011-07-09
Policy rate	n/a
GDP	9.50	9.70	-0.20 ▬	2011-07-13
PMI (mfg)	50.70	50.90	-0.20 ▬	2011-07-01
PMI (svc)	56.60	58.70	-2.10 ▼	2011-07-01
Unemployment	n/a
10Y yield	4.05	4.06	-0.01 ▬	2011-07-29
2Y yield	3.72	3.73	-0.01 ▬	2011-07-29
2s10s slope	0.32	0.33	-0.01 ▬	2011-07-29
FX vs USD	n/a

Euro area

Indicator	Current	Prior	Δ	As of
CPI (YoY)	2.50	2.70	-0.20 ▼	2011-07-29
Policy rate	1.50	1.25	+0.25 ▲	2011-07-07
GDP	0.00	0.00	+0.00 ▬	2011-07-01
PMI (mfg)	50.40	52.00	-1.60 ▼	2011-07-21
PMI (svc)	51.40	53.70	-2.30 ▼	2011-07-21
Unemployment	9.90	9.90	+0.00 ▬	2011-07-01
10Y yield	4.60	4.37	+0.22 ▲	2011-07-01 ⚠⚠
FX vs USD	n/a

Japan

Indicator	Current	Prior	Δ	As of
CPI (YoY)	-0.40	-0.40	+0.00 ▬	2011-07-26
Core CPI	-0.80	-0.80	+0.00 ▬	2011-07-26
Policy rate	0.10	0.10	+0.00 ▬	2011-07-12
GDP	n/a
PMI (mfg)	n/a
Unemployment	4.70	4.60	+0.10 ▲	2011-07-30
10Y yield	1.07	1.08	-0.01 ▬	2011-07-01 ⚠⚠
FX vs USD	n/a

Concept libraryL3

Terms marked ✓ are linked inline above — click any dotted term in the text to expand it in place.

2s10s: The gap between the 10-year and 2-year government bond yields. Positive = normal upward-sloping curve; negative ('inverted') = a classic late-cycle/recession warning.
PMI ✓: Purchasing Managers' Index. Above 50 = the sector is expanding vs last month; below 50 = contracting. A timely read on activity.
carry trade: Borrowing in a low-rate currency (long the yen's case) to buy higher-yielding assets elsewhere. It unwinds violently when the funding rate rises or the funding currency strengthens.
credit impulse: The change in the flow of new credit into an economy. A rising impulse front-runs stronger demand for commodities and cyclical goods, with a lag.
cyclicals ✓: Sectors whose earnings rise and fall with the economic cycle — industrials, materials, energy, consumer discretionary.
defensives ✓: Sectors whose demand is steady through the cycle — consumer staples, utilities, healthcare. They outperform when growth slows.
discount rate ✓: The rate used to convert a future cash flow into today's value. A higher discount rate makes far-off cash flows worth less now.
disinflation: Inflation that is still positive but falling (prices rising more slowly) — distinct from deflation, where prices actually fall.
duration: How sensitive an asset's price is to interest rates. 'Long-duration' assets (long bonds, fast-growing stocks whose profits are years away) move most when rates change.
net interest margin: The spread a bank earns between what it charges on loans and pays on deposits. Higher short rates / steeper curves tend to widen it.
nominal yield: The headline interest rate on a bond, before subtracting inflation.
policy rate ✓: The interest rate a central bank sets directly (e.g. the Fed funds rate, the ECB deposit rate, China's LPR). It anchors all other rates.
rate path: The market's expectation of where the policy rate goes over the next year or two — not just today's level, but the whole expected trajectory.
real yield ✓: The yield after subtracting expected inflation — what a lender actually earns in purchasing power. Real yield ≈ nominal yield − expected inflation.
term premium: The extra yield investors demand to hold a long bond instead of rolling short ones — compensation for tying money up and for issuance/inflation risk.