Firms expect inflation to rise further

Core inflation could rise above 2%

Chart of the Day

US core inflation rose to 1.6% in March. Twitter was split over whether this was significant or not, as core inflation was higher not long ago. But small businesses' price expectations clearly seem to suggest it will soon increase much further. So it will be the next few data releases that are far more interesting.

Share MacroMarketsDaily

Macro

CPI inflation rose 2.6%, boosted by higher energy inflation in part due to “base effects” from the sharp drop in oil prices in March 2020.

Those base effects mean we need to focus on more recent trends, including the m/m% annualized rate which did jump in March for core inflation, but which was still lower than in July.

Markets

Inflation seemed to not rise by as much as some expected, given US yields generally fell yesterday.

The 5 bp fall in the 10 year was primarily due to a 4 bp drop in the real yield.

The drop in the real yield helps to explain the outperformance of tech stocks.

The underperformance of the S&P 500 was partly because financials suffered from the flattening of the yield curve.

EV and chipmakers were some of the big winners.

Nvidia’s outperformance lately stands out, especially with other US chipmakers not doing as well.

It was a strong day for the main cryptos yesterday which may have helped. Bitcoin is up by 9.6% in the past week and 14.2% in the past month. Ethereum is up by 28.5% in the past month.

Like what you see? Please forward this email to your friends and colleagues, or use the button below to share it on social media. They can also follow us on Twitter @macro_daily.