Daily BriefsMacro

Daily Brief Macro: Out of the Box #3 – Will the Hiring Cycle End Due to Falling Inflation? and more

In today’s briefing:

  • Out of the Box #3 – Will the Hiring Cycle End Due to Falling Inflation?
  • U.S Debt Countdown: Will a Deal Go Through Today?
  • UK-US Peak Pricing
  • CX Daily: China’s EV Industry Calls on Regulators to Curb the Back-Seat Driving
  • A Thaw in US-China Relations and What It Means for Asia
  • No Crisis in China Local Government Finances (Yet)
  • Germany Yield Curve

Out of the Box #3 – Will the Hiring Cycle End Due to Falling Inflation?

By Andreas Steno

  • Soft indicators of inflation are falling off a cliff. There is little doubt left about the 6-month path for CPI prices
  • Wages remain stickier, which will lead to a remarked real wage growth in H2-2023 and early 2024
  • The demand for labour is driven by the price of wages adjusted for consumer inflation. A rapid increase in real wages is hence a negative for the hiring cycle

U.S Debt Countdown: Will a Deal Go Through Today?

By Mikkel Rosenvold

  • Does Biden and McCarthy have the necessary votes to suspend the debt ceiling and save the U.S from default?
  • We will find out TODAY when the House of Representatives will vote on the Biden-McCarthy compromise to suspend the debt ceiling until 2025. debt  The short answer is YES.
  • My prediction is that the vote will carry, but that it will come at a cost to Speaker Kevin McCarthy. 

UK-US Peak Pricing

By Phil Rush

  • A substantial repricing of the monetary policy outlook embraces our “tighter for longer” theme. However, pricing may have overextended the UK relative to the US.
  • The US cycle is proving even more resilient than the UK, albeit without the worryingly excessive inflation expectations in wage settlements.
  • With 25bp BoE hikes almost entirely priced at the following four meetings, while the Fed grinds to one, further frontend repricing seems likely to shrink the BoE-Fed spread.

CX Daily: China’s EV Industry Calls on Regulators to Curb the Back-Seat Driving

By Caixin Global

  • Electric cars /: China’s EV industry calls on regulators to curb the back-seat driving
  • Spacecraft /: China sends first crew into orbit since space station’s completion
  • Education /: Strengthen China’s education system to drive innovation, Xi says

A Thaw in US-China Relations and What It Means for Asia

By Manu Bhaskaran

  • After a period of deteriorating ties, Washington and Beijing are making tentative moves to patch up relations and to form guardrails against inadvertent escalation.
  • Barring a freak accident, we expect the imminent resumption of high-level ministerial dialogues, followed by modest agreements where common ground can be found. 
  • The rest of Asia stands to benefit from the efforts by both Washington and Beijing to rally support for their respective camps. Expect action in the economic and security arenas.

No Crisis in China Local Government Finances (Yet)

By Manu Bhaskaran

  • Credit risks in local government finance vehicles have caused jitters among markets and the government. Recent financial turmoil in Guizhou may be a harbinger of more to come. 
  • Given their size and interconnectedness, even a modest deterioration of asset quality linked with local government finance may lead to outsized macro-financial effects.
  • While the central government is maintaining a hawkish stance against providing backstops, but is unlikely to stand aside if there is a material risk of a major meltdown.

Germany Yield Curve

By Untying The Gordian Knot

  • On Monday, the European Yield Curve exhibited a significant flattening trend in low trading volume due to the holidays.
  • This trend was also observed in France.
  • Those curious about the underlying cause can gain valuable insights from the China PMI, a leading indicator by two months, and PPI, a lagging indicator by two months.

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