Macro Intelligence · Weekly · deep read

Macro Regime — 2018-W02

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

Read at: thesis narrative mechanism data

↩ Home Macro index ← 2018-01 board

⚠ 0 very-stale + 2 stale series across the four blocs — flagged inline.

Standing macro backdropBORROWED

Borrowed from its month (2018-01); the weekly reads the standing object, it does not recompute the aggregate.

United States: expansion, at target
China: stall-speed, at target
Euro area: expansion, at target
Japan: disinflationary stall

month aggregated actuals

United States

Indicator	Basis	2018-01	2017-12	Change
Core CPI	% MoM	0.34 2018-01-01	0.21 2017-12-01	▲ 0.13
Core PCE	% YoY	1.63 2018-01-01	1.58 2017-12-01	→ 0.05
CPI (YoY)	% YoY	2.15 2018-01-01	2.13 2017-12-01	→ 0.02
FX vs USD	px	not recorded
GDP	% QoQ ann.	3.3 2018-01-01	—	—
PMI (mfg)	index	59.7 2018-01-03	58.2 2017-12-01	▲ 1.5
PMI (svc)	index	55.9 2018-01-05	57.4 2017-12-05	▼ -1.5
Policy rate	%	1.5 2018-01-31	1.5 2017-12-31	→ 0
2s10s slope	pp	0.58 2018-01-31	0.51 2017-12-29	▲ 0.07
Unemployment	%	4 2018-01-01	4.1 2017-12-01	→ -0.1
10Y yield	%	2.72 2018-01-31	2.4 2017-12-29	▲ 0.32
2Y yield	%	2.14 2018-01-31	1.89 2017-12-29	▲ 0.25

China

Indicator	Basis	2018-01	2017-12	Change
CPI (YoY)	% YoY	1.8 2018-01-10	1.7 2017-12-09	→ 0.1
FX vs USD	px	not recorded
GDP	% YoY	6.8 2018-01-18	—	—
PMI (mfg)	index	51.3 2018-01-01	51.6 2017-12-01	→ -0.3
PMI (svc)	index	55.3 2018-01-31	55 2017-12-31	→ 0.3
Policy rate	% (1Y LPR)	4.3 2018-01-31	4.3 2017-12-29	→ 0
2s10s slope	pp	0.39 2018-01-31	0.1 2017-12-31	▲ 0.29
Unemployment	%	5 2018-01-01	—	—
10Y yield	%	3.91 2018-01-31	3.88 2017-12-31	→ 0.03
2Y yield	%	3.53 2018-01-31	3.79 2017-12-31	▼ -0.26

Euro area

Indicator	Basis	2018-01	2017-12	Change
CPI (YoY)	% YoY	1.3 2018-01-31	1.5 2017-12-18	▼ -0.2
FX vs USD	px	not recorded
GDP	% YoY	0.4 2018-01-17	0.1 2017-12-18	▲ 0.3
PMI (mfg)	index	59.6 2018-01-24	60.6 2017-12-14	▼ -1
PMI (svc)	index	57.6 2018-01-24	56.5 2017-12-14	▲ 1.1
Policy rate	%	0 2018-01-25	0 2017-12-14	→ 0
Unemployment	%	8.7 2018-01-31	—	—
10Y yield	%	1.03 2018-01-01	0.88 2017-12-01	▲ 0.15

Japan

Indicator	Basis	2018-01	2017-12	Change
Core CPI	% YoY	0.1 2018-01-26	0.1 2017-12-26	→ 0
CPI (YoY)	% YoY	1 2018-01-26	0.6 2017-12-26	▲ 0.4
FX vs USD	px	not recorded
GDP	% YoY	3 2018-01-01	—	—
PMI (mfg)		not recorded
Policy rate	%	-0.1 2018-01-23	-0.1 2017-12-21	→ 0
Unemployment	%	2.8 2018-01-30	2.7 2017-12-26	→ 0.1
10Y yield	%	0.08 2018-01-01	0.04 2017-12-01	→ 0.04

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.

● 1 active

China

stall-speed, at target

stall · at target · on hold

Growth hovering near flat with inflation roughly at target. A balanced, low-conviction regime — direction depends on which way growth breaks next; watch PMI for the tell.

○ no change

Euro area ⚠ stale

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.

● 1 active

Japan ⚠ stale

disinflationary stall

unknown · below 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.

○ no change

Mechanisms & channelsL2

United States

M5Growth acceleration (expansionary PMI)

Trigger: pmi_mfg: 58.2 → 59.7 (+1.5)

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

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.

Euro area

M9Long-end yield spike / term-premium rise

Trigger: yield_10y: 0.879026 → 1.03093 (+0.151903)

⚠ Fired on a stale print: yield_10y as of 2018-01-01 (13d 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 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. 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).

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

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)	2.10	2.15	-0.05 ▬	2018-01-12
Core CPI	0.30	0.34	-0.04 ▬	2018-01-12
Core PCE	1.63	1.50	+0.13 ▲	2018-01-01
Policy rate	1.50	1.50	+0.00 ▬	2018-01-14
GDP	3.30	3.20	+0.10 ▬	2018-01-01
PMI (mfg)	59.70	58.20	+1.50 ▲	2018-01-03
PMI (svc)	55.90	57.40	-1.50 ▼	2018-01-05
Unemployment	4.10	4.00	+0.10 ▬	2018-01-05
10Y yield	2.55	2.54	+0.01 ▬	2018-01-12
2Y yield	1.99	1.98	+0.01 ▬	2018-01-12
2s10s slope	0.56	0.56	+0.00 ▬	2018-01-12
FX vs USD	n/a

China

Indicator	Current	Prior	Δ	As of
CPI (YoY)	1.80	1.70	+0.10 ▲	2018-01-10
Policy rate	4.30	4.30	+0.00 ▬	2018-01-12
GDP	6.80	6.90	-0.10 ▬	2017-10-19
PMI (mfg)	51.30	51.60	-0.30 ▼	2018-01-01
PMI (svc)	55.00	54.80	+0.20 ▬	2017-12-31
Unemployment	5.00	—		2018-01-01
10Y yield	3.93	3.95	-0.02 ▬	2018-01-12
2Y yield	3.62	3.62	+0.00 ▬	2018-01-12
2s10s slope	0.31	0.34	-0.02 ▬	2018-01-12
FX vs USD	n/a

Euro area

Indicator	Current	Prior	Δ	As of
CPI (YoY)	1.40	1.50	-0.10 ▼	2018-01-05
Policy rate	0.00	0.00	+0.00 ▬	2017-12-14
GDP	0.10	0.10	+0.00 ▬	2017-12-18
PMI (mfg)	60.60	60.60	+0.00 ▬	2018-01-02
PMI (svc)	56.60	56.50	+0.10 ▬	2018-01-04
Unemployment	8.70	8.80	-0.10 ▼	2018-01-09
10Y yield	1.03	0.88	+0.15 ▲	2018-01-01 ⚠
FX vs USD	n/a

Japan

Indicator	Current	Prior	Δ	As of
CPI (YoY)	0.60	0.20	+0.40 ▲	2017-12-26
Core CPI	0.10	0.00	+0.10 ▬	2017-12-26
Policy rate	-0.10	-0.10	+0.00 ▬	2017-12-21
GDP	n/a
PMI (mfg)	n/a
Unemployment	2.70	2.80	-0.10 ▬	2017-12-26
10Y yield	0.08	0.04	+0.04 ▬	2018-01-01 ⚠
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.