Macro Intelligence · Weekly · deep read
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Macro Regime — 2024-W06

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

Read at: thesis narrative mechanism data
↩ HomeMacro index← 2024-02 board
⚠ 0 very-stale + 2 stale series across the four blocs — flagged inline.

Standing macro backdropBORROWED

Borrowed from its month (2024-02); the weekly reads the standing object, it does not recompute the aggregate.

month aggregated actuals

United States

IndicatorBasis2024-022024-01Change
Core CPI% MoM0.4 2024-02-010.36 2024-01-01→ 0.04
Core PCE% YoY3.06 2024-02-013.16 2024-01-01→ -0.1
CPI (YoY)% YoY3.16 2024-02-013.09 2024-01-01→ 0.07
FX vs USDpx104.16 2024-02-29103.27 2024-01-31▲ 0.89
GDP% QoQ ann.not recorded
PMI (mfg)index49.1 2024-02-0147.4 2024-01-03▲ 1.7
PMI (svc)index53.4 2024-02-0550.6 2024-01-05▲ 2.8
Policy rate%5.5 2024-02-295.5 2024-01-31→ 0
2s10s slopepp-0.39 2024-02-29-0.28 2024-01-31▼ -0.11
Unemployment%3.9 2024-02-013.7 2024-01-01▲ 0.2
10Y yield%4.25 2024-02-293.99 2024-01-31▲ 0.26
2Y yield%4.64 2024-02-294.27 2024-01-31▲ 0.37

China

IndicatorBasis2024-022024-01Change
CPI (YoY)% YoY-0.8 2024-02-08-0.3 2024-01-12▼ -0.5
FX vs USDpx7.2 2024-02-297.09 2024-01-31→ 0.1
GDP% YoYnot recorded
PMI (mfg)index49.1 2024-02-0149.2 2024-01-01→ -0.1
PMI (svc)indexnot recorded
Policy rate% (1Y LPR)3.45 2024-02-203.45 2024-01-22→ 0
2s10s slopepp0.28 2024-02-290.3 2024-01-31→ -0.01
Unemployment%5.3 2024-02-015.2 2024-01-01→ 0.1
10Y yield%2.34 2024-02-292.43 2024-01-31▼ -0.1
2Y yield%2.05 2024-02-292.13 2024-01-31▼ -0.08

Euro area

IndicatorBasis2024-022024-01Change
CPI (YoY)% YoY2.8 2024-02-222.9 2024-01-17→ -0.1
FX vs USDpx1.08 2024-02-291.08 2024-01-31→ -0
GDP% YoY-0.4 2024-02-220.2 2024-01-17▼ -0.6
PMI (mfg)index46.1 2024-02-2246.6 2024-01-24▼ -0.5
PMI (svc)index50 2024-02-2248.4 2024-01-24▲ 1.6
Policy rate%not recorded
Unemployment%6.4 2024-02-016.4 2024-01-09→ 0
10Y yield%3.03 2024-02-012.9 2024-01-01▲ 0.12

Japan

IndicatorBasis2024-022024-01Change
Core CPI% YoY2.6 2024-02-272.8 2024-01-19▼ -0.2
CPI (YoY)% YoY2.2 2024-02-272.6 2024-01-19▼ -0.4
FX vs USDpx150.66 2024-02-29147.37 2024-01-31▲ 3.29
GDP% YoYnot recorded
PMI (mfg)not recorded
Policy rate%not recorded
Unemployment%not recorded
10Y yield%0.71 2024-02-010.73 2024-01-01→ -0.02

ThesisL0

(historical week — no Claude narration run)

Standing pictureL1

United States
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.
● 2 active
China
deflation watch
stall · 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
Euro area ⚠ stale
stagflationary
contraction · above target · on hold
Contracting activity *and* above-target inflation — the hardest mix: the central bank can't ease freely. Real assets, energy and value tend to hold up better than long-duration growth and bonds.
● 1 active
Japan ⚠ stale
stall-speed, at target
unknown · 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

Mechanisms & channelsL2

United States

M10Yield-curve inversion (2s10s < 0)
Trigger: slope_2s10s: -0.31 → -0.31 (+0)
  1. The 10-year yield falls below the 2-year (2s10s2s10s — 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. inverts).
    Why: Normally longer bonds yield more; inversion means the market expects policy ratespolicy 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. to be lower in the future than now — i.e. it expects cuts, usually because growth is set to weaken.
  2. Bank lending margins compress.
    Why: Banks borrow short and lend long; when long rates sit below short rates, the spread they earn (net interest marginnet 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.) is squeezed, discouraging lending.
  3. Capital rotates toward defensivesdefensives — Sectors whose demand is steady through the cycle — consumer staples, utilities, healthcare. They outperform when growth slows. and durationduration — 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. as the cycle turns.
    Why: An inverted curve is a historically reliable late-cycle warning, so investors position ahead of a slowdown — favoring steady-demand defensives and long bonds that rally when cuts arrive.
Helps
long-duration bonds (as the turn approaches)defensivesquality
Hurts
banks (margin compression)cyclicalssmall-caps
Caveat: Inversion has long and variable lead times to any actual downturn; it's a regime warning, not a timing signal, and can persist for months while risk assets keep rising.
House-view hook — empty (textbook default; Stephen's view bakes in here).
M13Contraction easing (sub-50 PMI, rising)
Trigger: pmi_mfg: 47.4 → 49.1 (+1.7)
  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 but rising.
    Why: Activity is still contracting in absolute terms (below 50), but the rate of contraction is easing — the second derivative has turned up, which historically clusters near cyclical lows.
  2. Forward-looking investors start to price the trough.
    Why: Markets discount the turn before it completes; an improving-but-sub-50 PMI often coincides with the low in cyclical risk assets, well before the PMI itself crosses back above 50.
  3. Early-cycle cyclicalscyclicals — Sectors whose earnings rise and fall with the economic cycle — industrials, materials, energy, consumer discretionary. and small-caps tend to lead off the low; defensives' relative edge fades.
    Why: The names most beaten down in the contraction have the most operating leverage to even a marginal improvement, so they re-rate first when the deterioration stops.
Helps
early-cycle cyclicalssmall-capsEM equity
Hurts
defensives (relative)long government bonds (if the recovery firms)
Caveat: A one-month uptick that doesn't persist is a head-fake; the turn needs follow-through, and a sub-50 level still means activity is contracting in absolute terms — this is an inflection signal, not an all-clear.
House-view hook — empty (textbook default; Stephen's view bakes in here).

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

⚠ 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: 2.90442 → 3.02538 (+0.120969)
⚠ Fired on a stale print: yield_10y as of 2024-02-01 (10d 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 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.
  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 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

⚠ 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)3.163.40-0.24 ▼2024-02-01
Core CPI0.400.30+0.10 ▲2024-02-01
Core PCE3.062.90+0.16 ▲2024-02-01
Policy rate5.505.50+0.00 ▬2024-02-11
GDP3.300.80+2.50 ▲2024-01-25
PMI (mfg)49.1047.40+1.70 ▲2024-02-01
PMI (svc)53.4050.60+2.80 ▲2024-02-05
Unemployment3.703.90-0.20 ▼2024-02-02
10Y yield4.174.15+0.02 ▬2024-02-09
2Y yield4.484.46+0.02 ▬2024-02-09
2s10s slope-0.31-0.31+0.00 ▬2024-02-09
FX vs USD104.08104.15-0.07 ▬2024-02-09

China

IndicatorCurrentPriorΔAs of
CPI (YoY)-0.80-0.30-0.50 ▼2024-02-08
Policy rate3.453.45+0.00 ▬2024-01-22
GDP5.204.90+0.30 ▲2024-01-17
PMI (mfg)49.1049.20-0.10 ▬2024-02-01
PMI (svc)50.7050.40+0.30 ▲2024-01-31
Unemployment5.305.20+0.10 ▬2024-02-01
10Y yield2.432.44-0.01 ▬2024-02-09
2Y yield2.152.15+0.00 ▬2024-02-09
2s10s slope0.280.29-0.01 ▬2024-02-09
FX vs USD7.117.10+0.01 ▬2024-02-09

Euro area

IndicatorCurrentPriorΔAs of
CPI (YoY)2.802.90-0.10 ▼2024-02-01
Policy rate4.504.50+0.00 ▬2024-01-25
GDP-0.400.20-0.60 ▼2024-02-01
PMI (mfg)46.6046.60+0.00 ▬2024-02-01
PMI (svc)48.4048.40+0.00 ▬2024-02-05
Unemployment6.406.40+0.00 ▬2024-02-01
10Y yield3.032.90+0.12 ▲2024-02-01 ⚠
FX vs USD1.081.08+0.00 ▬2024-02-09

Japan

IndicatorCurrentPriorΔAs of
CPI (YoY)2.602.80-0.20 ▼2024-01-19
Core CPI2.802.70+0.10 ▬2024-01-19
Policy rate-0.10-0.10+0.00 ▬2024-01-23
GDPn/a
PMI (mfg)n/a
Unemployment2.502.60-0.10 ▼2024-01-30
10Y yield0.710.73-0.02 ▬2024-02-01 ⚠
FX vs USD149.26148.09+1.17 ▲2024-02-09

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.