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Macro Regime — 2013-W10

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US · China · EU · Japan · mechanism-first, taught

Read at: thesis narrative mechanism data
↩ HomeMacro index← 2013-03 board
⚠ 0 very-stale + 2 stale series across the four blocs — flagged inline.

Standing macro backdropBORROWED

Borrowed from its month (2013-03); the weekly reads the standing object, it does not recompute the aggregate.

month aggregated actuals

United States

IndicatorBasis2013-032013-02Change
Core CPI% MoM0.1 2013-03-010.15 2013-02-01→ -0.05
Core PCE% YoY1.48 2013-03-011.56 2013-02-01→ -0.08
CPI (YoY)% YoY1.52 2013-03-012.02 2013-02-01▼ -0.5
FX vs USDpxnot recorded
GDP% QoQ ann.not recorded
PMI (mfg)index54.2 2013-03-0153.1 2013-02-01▲ 1.1
PMI (svc)index56 2013-03-0555.2 2013-02-05▲ 0.8
Policy rate%0.25 2013-03-310.25 2013-02-28→ 0
2s10s slopepp1.62 2013-03-281.64 2013-02-28→ -0.02
Unemployment%7.5 2013-03-017.7 2013-02-01▼ -0.2
10Y yield%1.87 2013-03-281.89 2013-02-28→ -0.02
2Y yield%0.25 2013-03-280.25 2013-02-28→ 0

China

IndicatorBasis2013-032013-02Change
CPI (YoY)% YoY3.2 2013-03-092 2013-02-08▲ 1.2
FX vs USDpxnot recorded
GDP% YoYnot recorded
PMI (mfg)index50.9 2013-03-0150.1 2013-02-01▲ 0.8
PMI (svc)index54.5 2013-03-0356.2 2013-02-03▼ -1.7
Policy rate% (1Y LPR)not recorded
2s10s slopepp0.5 2013-03-290.52 2013-02-28→ -0.01
Unemployment%not recorded
10Y yield%3.54 2013-03-293.6 2013-02-28▼ -0.06
2Y yield%3.03 2013-03-293.08 2013-02-28→ -0.04

Euro area

IndicatorBasis2013-032013-02Change
CPI (YoY)% YoY1.8 2013-03-152 2013-02-28▼ -0.2
FX vs USDpxnot recorded
GDP% YoY0.4 2013-03-01-1 2013-02-01▲ 1.4
PMI (mfg)index46.6 2013-03-2147.8 2013-02-21▼ -1.2
PMI (svc)index46.5 2013-03-2147.3 2013-02-21▼ -0.8
Policy rate%0.75 2013-03-070.75 2013-02-07→ 0
Unemployment%11.9 2013-03-0111.7 2013-02-01▲ 0.2
10Y yield%3.03 2013-03-012.86 2013-02-01▲ 0.17

Japan

IndicatorBasis2013-032013-02Change
Core CPI% YoY-0.9 2013-03-28-0.7 2013-02-25▼ -0.2
CPI (YoY)% YoY-0.7 2013-03-28-0.3 2013-02-25▼ -0.4
FX vs USDpxnot recorded
GDP% YoYnot recorded
PMI (mfg)not recorded
Policy rate%0.1 2013-03-070.1 2013-02-14→ 0
Unemployment%4.2 2013-03-01——
10Y yield%0.49 2013-03-010.67 2013-02-01▼ -0.18

ThesisL0

(historical week — no Claude narration run)

Standing pictureL1

United States
expansion, at target
expansion · at target · on hold
Solid growth with inflation near target. Constructive for risk assets broadly; the watch-item is whether inflation starts to push above target and shifts policy.
● 2 active
China
overheating / late-cycle
stall · above target · on hold
Above-trend growth with above-target inflation. Late-cycle: cyclicals and inflation beneficiaries can still run, but the central bank is biased to tighten, so duration and high-multiple growth are exposed.
● 1 active
Euro area ⚠ stale
disinflationary stall
contraction · at target · on hold
Sub-trend growth with low, easing inflation. Duration and quality tend to lead; cyclicals lag until growth re-accelerates. Policy easing is the usual circuit-breaker.
● 1 active
Japan ⚠ stale
deflation watch
unknown · deflation risk · on hold
Activity is soft and inflation is at/below zero — the risk is entrenched deflation. Favors duration (long bonds) and quality; cyclicals struggle until policy eases decisively. The catalyst to watch is stimulus / a policy cut.
○ no change

Mechanisms & channelsL2

United States

M2Inflation surprise (downside / disinflation)
Trigger: core_cpi: 0.3 → 0.1 (-0.2)
  1. Core inflation falls more than the prior reading.
    Why: A faster-than-expected cooling in the persistent part of inflation tells the market the central bank has more room to ease.
  2. The market prices an earlier or deeper easing path.
    Why: Lower inflation removes the reason to keep rates high, so traders pull forward expected cuts into the curve.
  3. Real yieldsreal yield — The yield after subtracting expected inflation — what a lender actually earns in purchasing power. Real yield ≈ nominal yield − expected inflation. fall.
    Why: The expected 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. drops while inflation expectations stay anchored, so the inflation-adjusted return demanded by lenders declines.
  4. A lower discount ratediscount 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. re-rates long-duration assets upward; long bonds rally.
    Why: Future cash flows are now discounted less harshly, lifting growth equities most; bond prices rise mechanically as their yields fall.
Helps
long-duration growth equitieslong-dated government bondsgoldrate-sensitive sectors (utilities, REITs)
Hurts
USD (vs easing-laggard peers)bank net-interest margins
Caveat: Misfires if disinflation is driven by demand collapse rather than supply normalization — then the growth scare dominates and risk assets fall despite lower yields.
House-view hook — empty (textbook default; Stephen's view bakes in here).
M5Growth acceleration (expansionary PMI)
Trigger: pmi_mfg: 53.1 → 54.2 (+1.1)
  1. 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.
  2. 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.
  3. 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).

China

M5Growth acceleration (expansionary PMI)
Trigger: pmi_mfg: 50.1 → 50.9 (+0.8)
  1. Manufacturing PMI 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.
  2. 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.
  3. Cyclicals, small-caps, EM and commodities lead; defensives 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
  • 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.
  • Yield-curve inversion (2s10s < 0) The 2s10s curve is positive (not inverted), so this warning channel is dormant. It fires if 2s10s turns negative — watch it because inversion is a classic late-cycle recession warning, though with long and variable lead times.

Euro area

⚠ Stale inputs (latest print is old): 10Y yield. The standing read uses the most recent available release — treat as provisional.
M9Long-end yield spike / term-premium rise
Trigger: yield_10y: 2.85792 → 3.02681 (+0.168884)
⚠ Fired on a stale print: yield_10y as of 2013-03-01 (9d old). The change may predate current conditions — treat as provisional.
  1. 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.
  2. 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.
  3. 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 yield 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).
What would change the read
  • 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.
  • Monetary tightening (rate hike) The policy rate is steady, so the tightening channel is dormant. A hike would fire it — watch it because it hits long-duration growth, long bonds, and gold first.
  • 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.

Japan

⚠ Stale inputs (latest print is old): 10Y yield. The standing read uses the most recent available release — treat as provisional.

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

IndicatorCurrentPriorΔAs of
CPI (YoY)1.521.60-0.08 ▬2013-03-01
Core CPI0.100.30-0.20 ▼2013-03-01
Core PCE1.481.56-0.08 ▬2013-03-01
Policy rate0.250.25+0.00 ▬2013-03-10
GDP0.10-0.10+0.20 ▬2013-02-28
PMI (mfg)54.2053.10+1.10 ▲2013-03-01
PMI (svc)56.0055.20+0.80 ▲2013-03-05
Unemployment7.707.50+0.20 ▲2013-03-08
10Y yield2.062.00+0.06 ▲2013-03-08
2Y yield0.270.25+0.02 ▬2013-03-08
2s10s slope1.791.75+0.04 ▬2013-03-08
FX vs USDn/a

China

IndicatorCurrentPriorΔAs of
CPI (YoY)3.202.00+1.20 ▲2013-03-09
Policy raten/a
GDP7.907.40+0.50 ▲2013-01-18
PMI (mfg)50.9050.10+0.80 ▲2013-03-01
PMI (svc)54.5056.20-1.70 ▼2013-03-03
Unemploymentn/a
10Y yield3.583.58+0.00 ▬2013-03-08
2Y yield3.063.05+0.01 ▬2013-03-08
2s10s slope0.530.53-0.00 ▬2013-03-08
FX vs USDn/a

Euro area

IndicatorCurrentPriorΔAs of
CPI (YoY)2.002.00+0.00 ▬2013-02-28
Policy rate0.750.75+0.00 ▬2013-03-07
GDP0.40-1.00+1.40 ▲2013-03-01
PMI (mfg)47.9047.80+0.10 ▬2013-03-01
PMI (svc)47.9047.30+0.60 ▲2013-03-05
Unemployment11.9011.70+0.20 ▲2013-03-01
10Y yield3.032.86+0.17 ▲2013-03-01 ⚠
FX vs USDn/a

Japan

IndicatorCurrentPriorΔAs of
CPI (YoY)-0.30-0.10-0.20 ▼2013-02-25
Core CPI-0.70-0.60-0.10 ▬2013-02-25
Policy rate0.100.10+0.00 ▬2013-03-07
GDPn/a
PMI (mfg)n/a
Unemployment4.204.30-0.10 ▬2013-03-01
10Y yield0.490.67-0.18 ▼2013-03-01 ⚠
FX vs USDn/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.