India WPI Print shows broad disinflation barring Food articles / Pullback in U.S Yields / Preliminary PCE Forecasts / Japan in Recession / Cool U.K Inflation and surge in EU Industrial production

For India, WPI rose 0.27% mom with Food masking the otherwise deceleration in prices of non food article / Fuel and Power / Manufactured Products. System Liquidity Deficit stood at Inr 224K crore and WACR traded at 6.69%. The Governor of the Reserve Bank of India met with senior management from Public and Private Sector Banks, emphasizing vigilance in areas such as risk management, customer protection, and financial stability. Yield on IN10s opened lower at 7.10% after the 7.14% peak seen yesterday. 

US yields pulled back sharply which could be attributed to the Fed Speakers dovish tone / lower Dec PPI revision and expectations of a softer PCE reading. S&P lifted off lows to close 0.90% higher on the day. The market is currently pricing in 97 bps of rate cuts into 2024. 

Yields	High	Low	Close	DoD ▲
US 2Y	4.67	4.56	4.58	-7.80
US10Y	4.33	4.25	4.26	-5.90
US2s10s	-0.31	-0.35	-0.32	1.90
US30Y	4.49	4.43	4.44	-2.90
JGB 10Y	0.77	0.75	0.76	3.00
DE10Y	2.39	2.32	2.34	-6.70

US December PPI was revised to -0.2% (prev. -0.1%)
US December Core PPI was unrevised at -0.1%.

Nick Timiraos, a journalist at the Wall Street Journal, reported that forecasters who convert the Consumer Price Index (CPI) into the Personal Consumption Expenditures (PCE) index anticipate a 0.30% increase in January's Core PCE, potentially bringing the 12-month rate down to 2.70%. However, these estimates may be subject to change following the release of the Producer Price Index (PPI) data.

Fed Chair Powell told Congress after the CPI report that the inflation data was "consistent with what they had been anticipating" and the Fed will look to the upcoming PCE report to give them more intel (zero hedge)

Chicago Fed President Goolsbee suggests high January inflation doesn't hinder potential future rate cuts, as Fed focuses on path to 2% target. He warns of overly restrictive rates leading to unemployment concerns. Challenges notion of difficulty in reaching target due to stable future inflation expectations. Notes unexpected delay in moderation of shelter inflation.

Japan's GDP contracted by 0.1% in Q4 2023, missing the 0.2% growth forecast. The economy shrank by 0.8% in Q3. Despite late-year weakness, real GDP expanded by 1.9% in 2023. Private consumption decreased by 0.2%, hindered by stagnant wage growth and cautious spending. Capital expenditures also declined by 0.1%. External demand contributed 0.2% to growth due to robust spending by foreign tourists.

Masato Kanda, vice minister of finance for international affairs, expressed concerns on Wednesday about the adverse impact of swift currency fluctuations on the economy. He said “We will monitor the foreign exchange market carefully with a high sense of tension and take appropriate action if necessary.”

In January, UK inflation rose by 4%, slightly below the consensus forecast of 4.20%. Additionally, the month-on-month reading showed a decrease of -0.60%. This data offers some reassurance that the recent high US inflation figures may not indicate a widespread inflation trend in developed markets.

German government expects GDP to grow by 1% in 2025 (prev. forecast 1.5% in October) and sees inflation at 2.8% in 2024 and 1.9% in 2025

EU GDP Flash Estimate QQ (Q4) 0.0% vs. Exp. 0.0% (Prev. 0.0%)
EU GDP Flash Estimate YY (Q4) 0.1% vs. Exp. 0.1% (Prev. 0.1%)
EU Industrial Production MM (Dec) 2.6% vs. Exp. -0.2% (Prev. -0.3%, Rev. 0.4%)
EU Industrial Production YY (Dec) 1.2% vs. Exp. -4.1% (Prev. -6.8%, Rev. -5.4%)