Macro Intelligence · Weekly · deep read

Macro Regime — 2020-W17

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

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↩ Home Macro index ← 2020-04 board

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

Standing macro backdropBORROWED

Borrowed from its month (2020-04); the weekly reads the standing object, it does not recompute the aggregate.

United States: stall-speed, at target
China: overheating / late-cycle
Euro area: disinflationary stall
Japan: deflation watch

month aggregated actuals

United States

Indicator	Basis	2020-04	2020-03	Change
Core CPI	% MoM	-0.49 2020-04-01	-0.12 2020-03-01	▼ -0.37
Core PCE	% YoY	1 2020-04-01	1.53 2020-03-01	▼ -0.53
CPI (YoY)	% YoY	0.31 2020-04-01	1.49 2020-03-01	▼ -1.18
FX vs USD	px	99.02 2020-04-30	99.05 2020-03-31	→ -0.03
GDP	% QoQ ann.	-28 2020-04-01	—	—
PMI (mfg)	index	49.1 2020-04-01	50.1 2020-03-02	▼ -1
PMI (svc)	index	52.5 2020-04-03	57.3 2020-03-04	▼ -4.8
Policy rate	%	0.25 2020-04-30	0.25 2020-03-31	→ 0
2s10s slope	pp	0.44 2020-04-30	0.47 2020-03-31	→ -0.03
Unemployment	%	14.8 2020-04-01	4.4 2020-03-01	▲ 10.4
10Y yield	%	0.64 2020-04-30	0.7 2020-03-31	▼ -0.06
2Y yield	%	0.2 2020-04-30	0.23 2020-03-31	→ -0.03

China

Indicator	Basis	2020-04	2020-03	Change
CPI (YoY)	% YoY	4.3 2020-04-10	5.2 2020-03-10	▼ -0.9
FX vs USD	px	7.08 2020-04-30	7.1 2020-03-31	→ -0.02
GDP	% YoY	-6.8 2020-04-17	—	—
PMI (mfg)	index	50.8 2020-04-01	52 2020-03-01	▼ -1.2
PMI (svc)	index	53.2 2020-04-30	52.3 2020-03-31	▲ 0.9
Policy rate	% (1Y LPR)	3.85 2020-04-20	4.05 2020-03-20	▼ -0.2
2s10s slope	pp	1.17 2020-04-30	0.68 2020-03-31	▲ 0.48
Unemployment	%	6 2020-04-01	5.9 2020-03-01	→ 0.1
10Y yield	%	2.54 2020-04-30	2.59 2020-03-31	▼ -0.05
2Y yield	%	1.37 2020-04-30	1.91 2020-03-31	▼ -0.53

Euro area

Indicator	Basis	2020-04	2020-03	Change
CPI (YoY)	% YoY	0.4 2020-04-30	0.7 2020-03-31	▼ -0.3
FX vs USD	px	1.09 2020-04-30	1.1 2020-03-31	→ -0.02
GDP	% YoY	0.3 2020-04-30	0.5 2020-03-31	→ -0.2
PMI (mfg)	index	33.6 2020-04-23	44.8 2020-03-24	▼ -11.2
PMI (svc)	index	11.7 2020-04-23	28.4 2020-03-24	▼ -16.7
Policy rate	%	0 2020-04-30	0 2020-03-12	→ 0
Unemployment	%	7.4 2020-04-30	7.4 2020-03-03	→ 0
10Y yield	%	0.55 2020-04-01	0.37 2020-03-01	▲ 0.18

Japan

Indicator	Basis	2020-04	2020-03	Change
Core CPI	% YoY	0.3 2020-04-24	0.2 2020-03-19	→ 0.1
CPI (YoY)	% YoY	0.4 2020-04-24	0.4 2020-03-19	→ 0
FX vs USD	px	106.61 2020-04-30	108.04 2020-03-31	▼ -1.43
GDP	% YoY	-7.81 2020-04-01	—	—
PMI (mfg)		not recorded
Policy rate	%	-0.1 2020-04-27	-0.1 2020-03-16	→ 0
Unemployment	%	2.5 2020-04-28	2.4 2020-03-31	→ 0.1
10Y yield	%	-0.04 2020-04-01	0.01 2020-03-01	→ -0.04

ThesisL0

(historical week — no Claude narration run)

Standing pictureL1

United States

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.

● 2 active

China

overheating / late-cycle

stall · above target · easing

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.

● 2 active

Euro area ⚠ stale

disinflationary stall

contraction · 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.

● 2 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

M1Inflation surprise (upside)

Trigger: core_cpi: -0.49 → -0.1 (+0.39)

Core inflation comes in higher than the prior reading.
Why: Core strips out food and energy, so a move in it signals persistent, broad price pressure rather than a one-off in volatile items — the kind a central bank reacts to.
The market reprices the policy-rate path higher.
Why: If inflation is stickier than thought, the central bank must keep rates higher for longer to cool it; traders bake that expectation into the whole rate curve immediately, before any actual hike.
Real yieldsreal yield — The yield after subtracting expected inflation — what a lender actually earns in purchasing power. Real yield ≈ nominal yield − expected inflation. rise, not just nominal yieldsnominal yield — The headline interest rate on a bond, before subtracting inflation..
Why: The inflation is already in the print, so the jump in nominal yields isn't just compensating for higher inflation — it's a genuine rise in the inflation-adjusted return demanded by lenders.
A higher real yield is a higher 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. on future cash flows.
Why: Money earned years from now is discounted back to today at the real rate; when that rate rises, distant cash flows shrink in present-value terms more than near ones.
Long-duration growth equities de-rate hardest; banks and value hold up; the currency firms.
Why: Growth stocks are valued mostly on far-future profits, so a higher discount rate hits them most. Banks earn more as rates rise (wider margins), and value/cyclical earnings sit nearer in time. Higher local rates also pull in foreign capital, lifting the currency.

Helps
financialsvalueUSDshort-duration bonds

Hurts
long-duration growth equitieslong-dated government bondsgold (in real terms)

Caveat: Misfires if the print is read as one-off/transitory, or if growth is simultaneously rolling over (a stagflation mix), where cyclicals don't get the usual lift.

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

M6Growth slowdown (deepening contraction)

Trigger: pmi_mfg: 50.1 → 49.1 (-1)

Manufacturing PMIPMI — Purchasing Managers' Index. Above 50 = the sector is expanding vs last month; below 50 = contracting. A timely read on activity. is below 50 and still falling.
Why: Below 50 means more firms are contracting than expanding; *falling* means the contraction is deepening, not bottoming — that combination is what leads earnings revisions down.
Investors rotate toward defensivesdefensives — Sectors whose demand is steady through the cycle — consumer staples, utilities, healthcare. They outperform when growth slows. and government bonds.
Why: When growth is deteriorating, steady-demand sectors (staples, utilities, healthcare) hold earnings better, and government bonds act as a hedge that rallies if the slowdown deepens further.
Cyclicalscyclicals — Sectors whose earnings rise and fall with the economic cycle — industrials, materials, energy, consumer discretionary., small-caps, EM and industrial commodities underperform.
Why: These are geared to the physical cycle and to leverage, so worsening activity hits their earnings and risk appetite hardest; commodity demand softens with industrial output.

Helps
defensive sectors (staples, utilities, healthcare)long government bondsquality/large-cap

Hurts
cyclicalssmall-capsEM equityindustrial commodities

Caveat: A shallow dip just below 50 that quickly reverses ('soft patch') doesn't trigger the full defensive rotation; the level must persist.

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

China

M3Monetary easing (rate cut)

Trigger: policy_rate: 4.05 → 3.85 (-0.2)

The central bank cuts 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: The policy rate anchors the entire rate structure, so a cut lowers the risk-free baseline against which every asset is valued.
Discount rates fall across asset classes and liquidity expectations rise.
Why: A lower risk-free rate raises the present value of future cash flows everywhere, and a cut signals the bank will keep conditions loose.
Risk assets re-rate up; the currency softens.
Why: Cheaper money flows toward higher-returning assets, and a lower local rate narrows the yield advantage of holding the currency, so it weakens.
The weaker currency lifts exporters, commodities, gold, and EM.
Why: Commodities priced in the easing currency rise in that currency; exporters gain competitiveness; and EM borrowers with dollar debt benefit as the dollar softens.

Helps
equities (broadly)goldEM assetslong-duration bondscommodities

Hurts
the easing currencycash/money-market real yield

Caveat: If the cut is an emergency response to a fast-deteriorating outlook ('cutting into a recession'), equities can fall even as bonds rally — the growth signal outweighs the liquidity boost.

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

M11China credit impulse (easing proxy)

Trigger: policy_rate: 4.05 → 3.85 (-0.2)

China cuts its benchmark lending rate (LPR).
Why: A lower LPR reduces borrowing costs and is the most visible signal that policymakers want credit to flow — a proxy for a turn-up in the credit impulsecredit 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..
The flow of new credit into the economy turns up.
Why: Cheaper credit pulls forward borrowing by firms and local governments, raising the change in outstanding credit — the impulse — which leads activity by one to three quarters.
Industrial commodities, China/HK cyclicals, and the EM/commodity-exporter complex benefit.
Why: China is the marginal buyer of many industrial commodities, so a credit-driven activity pickup lifts their prices and the equities and exporter currencies geared to that demand.

Helps
industrial commoditiesChina/HK cyclicalsEM equitycommodity exporters (AUD, BRL)

Hurts
CNY (on the rate cut)China government bond yields (fall)

Caveat: LPR is only a proxy; the true impulse needs total-social-financing / new-loan data (a Rung-2 addition). A cut without a pickup in actual credit demand ('pushing on a string') doesn't deliver the transmission.

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

Euro area

M6Growth slowdown (deepening contraction)

Trigger: pmi_mfg: 44.5 → 33.6 (-10.9)

Manufacturing PMI is below 50 and still falling.
Why: Below 50 means more firms are contracting than expanding; *falling* means the contraction is deepening, not bottoming — that combination is what leads earnings revisions down.
Investors rotate toward defensives and government bonds.
Why: When growth is deteriorating, steady-demand sectors (staples, utilities, healthcare) hold earnings better, and government bonds act as a hedge that rallies if the slowdown deepens further.
Cyclicals, small-caps, EM and industrial commodities underperform.
Why: These are geared to the physical cycle and to leverage, so worsening activity hits their earnings and risk appetite hardest; commodity demand softens with industrial output.

Helps
defensive sectors (staples, utilities, healthcare)long government bondsquality/large-cap

Hurts
cyclicalssmall-capsEM equityindustrial commodities

Caveat: A shallow dip just below 50 that quickly reverses ('soft patch') doesn't trigger the full defensive rotation; the level must persist.

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

M9Long-end yield spike / term-premium rise

Trigger: yield_10y: 0.372634 → 0.553776 (+0.181142)

⚠ Fired on a stale print: yield_10y as of 2020-04-01 (25d 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 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).

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)	1.50	0.31	+1.19 ▲	2020-04-10
Core CPI	-0.10	-0.49	+0.39 ▲	2020-04-10
Core PCE	1.00	1.80	-0.80 ▼	2020-04-01
Policy rate	0.25	0.25	+0.00 ▬	2020-04-26
GDP	-28.00	2.10	-30.10 ▼	2020-04-01
PMI (mfg)	49.10	50.10	-1.00 ▼	2020-04-01
PMI (svc)	52.50	57.30	-4.80 ▼	2020-04-03
Unemployment	4.40	14.80	-10.40 ▼	2020-04-03
10Y yield	0.60	0.61	-0.01 ▬	2020-04-24
2Y yield	0.22	0.22	+0.00 ▬	2020-04-24
2s10s slope	0.38	0.39	-0.01 ▬	2020-04-24
FX vs USD	100.38	100.43	-0.05 ▬	2020-04-24

China

Indicator	Current	Prior	Δ	As of
CPI (YoY)	4.30	5.20	-0.90 ▼	2020-04-10
Policy rate	3.85	4.05	-0.20 ▼	2020-04-20
GDP	-6.80	6.00	-12.80 ▼	2020-04-17
PMI (mfg)	50.80	52.00	-1.20 ▼	2020-04-01
PMI (svc)	52.30	29.60	+22.70 ▲	2020-03-31
Unemployment	6.00	5.90	+0.10 ▬	2020-04-01
10Y yield	2.52	2.51	+0.01 ▬	2020-04-26
2Y yield	1.37	1.37	+0.00 ▬	2020-04-26
2s10s slope	1.15	1.14	+0.01 ▬	2020-04-26
FX vs USD	7.07	7.08	-0.02 ▬	2020-04-24

Euro area

Indicator	Current	Prior	Δ	As of
CPI (YoY)	0.70	0.70	+0.00 ▬	2020-04-17
Policy rate	0.00	0.00	+0.00 ▬	2020-03-12
GDP	0.50	0.50	+0.00 ▬	2020-04-17
PMI (mfg)	33.60	44.50	-10.90 ▼	2020-04-23
PMI (svc)	11.70	26.40	-14.70 ▼	2020-04-23
Unemployment	7.30	7.40	-0.10 ▼	2020-04-01
10Y yield	0.55	0.37	+0.18 ▲	2020-04-01 ⚠⚠
FX vs USD	1.08	1.08	-0.00 ▬	2020-04-24

Japan

Indicator	Current	Prior	Δ	As of
CPI (YoY)	0.40	0.40	+0.00 ▬	2020-04-24
Core CPI	0.30	0.20	+0.10 ▬	2020-04-24
Policy rate	-0.10	-0.10	+0.00 ▬	2020-03-16
GDP	n/a
PMI (mfg)	n/a
Unemployment	2.40	2.40	+0.00 ▬	2020-03-31
10Y yield	-0.04	0.01	-0.04 ▬	2020-04-01 ⚠⚠
FX vs USD	107.67	107.81	-0.15 ▬	2020-04-24

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.