Macro Intelligence · Weekly · deep read

Macro Regime — 2018-W07

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

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↩ Home Macro index ← 2018-02 board

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

Standing macro backdropBORROWED

Borrowed from its month (2018-02); 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	2018-02	2018-01	Change
Core CPI	% MoM	0.2 2018-02-01	0.34 2018-01-01	▼ -0.14
Core PCE	% YoY	1.64 2018-02-01	1.63 2018-01-01	→ 0.01
CPI (YoY)	% YoY	2.26 2018-02-01	2.15 2018-01-01	▲ 0.11
FX vs USD	px	not recorded
GDP	% QoQ ann.	not recorded
PMI (mfg)	index	59.1 2018-02-01	59.7 2018-01-03	▼ -0.6
PMI (svc)	index	59.9 2018-02-05	55.9 2018-01-05	▲ 4
Policy rate	%	1.5 2018-02-28	1.5 2018-01-31	→ 0
2s10s slope	pp	0.62 2018-02-28	0.58 2018-01-31	→ 0.04
Unemployment	%	4.1 2018-02-01	4 2018-01-01	→ 0.1
10Y yield	%	2.87 2018-02-28	2.72 2018-01-31	▲ 0.15
2Y yield	%	2.25 2018-02-28	2.14 2018-01-31	▲ 0.11

China

Indicator	Basis	2018-02	2018-01	Change
CPI (YoY)	% YoY	1.5 2018-02-09	1.8 2018-01-10	▼ -0.3
FX vs USD	px	not recorded
GDP	% YoY	not recorded
PMI (mfg)	index	50.3 2018-02-01	51.3 2018-01-01	▼ -1
PMI (svc)	index	54.4 2018-02-28	55.3 2018-01-31	▼ -0.9
Policy rate	% (1Y LPR)	4.3 2018-02-28	4.3 2018-01-31	→ 0
2s10s slope	pp	0.47 2018-02-28	0.39 2018-01-31	▲ 0.08
Unemployment	%	5 2018-02-01	5 2018-01-01	→ 0
10Y yield	%	3.82 2018-02-28	3.91 2018-01-31	▼ -0.09
2Y yield	%	3.35 2018-02-28	3.53 2018-01-31	▼ -0.18

Euro area

Indicator	Basis	2018-02	2018-01	Change
CPI (YoY)	% YoY	1.2 2018-02-28	1.3 2018-01-31	→ -0.1
FX vs USD	px	not recorded
GDP	% YoY	-0.9 2018-02-23	0.4 2018-01-17	▼ -1.3
PMI (mfg)	index	58.5 2018-02-21	59.6 2018-01-24	▼ -1.1
PMI (svc)	index	56.7 2018-02-21	57.6 2018-01-24	▼ -0.9
Policy rate	%	not recorded
Unemployment	%	not recorded
10Y yield	%	1.27 2018-02-01	1.03 2018-01-01	▲ 0.24

Japan

Indicator	Basis	2018-02	2018-01	Change
Core CPI	% YoY	not recorded
CPI (YoY)	% YoY	not recorded
FX vs USD	px	not recorded
GDP	% YoY	not recorded
PMI (mfg)		not recorded
Policy rate	%	not recorded
Unemployment	%	not recorded
10Y yield	%	0.04 2018-02-01	0.08 2018-01-01	→ -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.

○ no change

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

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.

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: 1.03093 → 1.26966 (+0.238734)

⚠ Fired on a stale print: yield_10y as of 2018-02-01 (17d 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	2.26	-0.16 ▼	2018-02-14
Core CPI	0.30	0.20	+0.10 ▬	2018-02-14
Core PCE	1.64	1.50	+0.14 ▲	2018-02-01
Policy rate	1.50	1.50	+0.00 ▬	2018-02-18
GDP	2.60	3.30	-0.70 ▼	2018-01-26
PMI (mfg)	59.10	59.70	-0.60 ▼	2018-02-01
PMI (svc)	59.90	55.90	+4.00 ▲	2018-02-05
Unemployment	4.10	4.10	+0.00 ▬	2018-02-02
10Y yield	2.87	2.90	-0.03 ▬	2018-02-16
2Y yield	2.21	2.19	+0.02 ▬	2018-02-16
2s10s slope	0.66	0.71	-0.05 ▬	2018-02-16
FX vs USD	n/a

China

Indicator	Current	Prior	Δ	As of
CPI (YoY)	1.50	1.80	-0.30 ▼	2018-02-09
Policy rate	4.30	4.30	+0.00 ▬	2018-02-14
GDP	6.80	6.80	+0.00 ▬	2018-01-18
PMI (mfg)	50.30	51.30	-1.00 ▼	2018-02-01
PMI (svc)	55.30	55.00	+0.30 ▬	2018-01-31
Unemployment	5.00	5.00	+0.00 ▬	2018-02-01
10Y yield	3.87	3.87	+0.00 ▬	2018-02-14
2Y yield	3.51	3.53	-0.02 ▬	2018-02-14
2s10s slope	0.36	0.34	+0.02 ▬	2018-02-14
FX vs USD	n/a

Euro area

Indicator	Current	Prior	Δ	As of
CPI (YoY)	1.30	1.40	-0.10 ▬	2018-01-31
Policy rate	0.00	0.00	+0.00 ▬	2018-01-25
GDP	0.40	0.10	+0.30 ▲	2018-01-17
PMI (mfg)	59.60	59.60	+0.00 ▬	2018-02-01
PMI (svc)	58.00	57.60	+0.40 ▲	2018-02-05
Unemployment	8.70	8.70	+0.00 ▬	2018-01-31
10Y yield	1.27	1.03	+0.24 ▲	2018-02-01 ⚠⚠
FX vs USD	n/a

Japan

Indicator	Current	Prior	Δ	As of
CPI (YoY)	1.00	0.60	+0.40 ▲	2018-01-26
Core CPI	0.10	0.10	+0.00 ▬	2018-01-26
Policy rate	-0.10	-0.10	+0.00 ▬	2018-01-23
GDP	n/a
PMI (mfg)	n/a
Unemployment	2.80	2.70	+0.10 ▬	2018-01-30
10Y yield	0.04	0.08	-0.04 ▬	2018-02-01 ⚠⚠
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.