With little to destabilise financial markets over the past few days, soft landing narratives have remained in vogue. While this week’s US CPI report was certainly a little stronger-than-anticipated, other indicators, including the latest UK labour market report, were more benign. In charts this week we look in more depth at:

·       US Inflation drivers

·       The health of the UK labour market

·       Japan’s supply side drivers

·       China’s EV penetration

·       Consensus growth forecasts

·       Economic shocks and the consensus

The equity market rally that kicked off in late October has grabbed the financial headlines in recent weeks. And there has been an abundance of optimistic narratives that support the rally’s rationale and the prospects for an extension in the near term. In this week’s charts we provide some insights into some of these narratives. In particular we focus on:

·       The renaissance in US manufacturing investment

·       AI and the global semiconductor sector

·       Positive global growth surprises

·       A cooling US labour market

·       Japan’s foreign investor inflows

·       Cryptocurrencies

Prospects for a swift pivot toward looser monetary policy in the US and Europe have been diminished by persistent inflationary pressures and stronger-than-expected labour market conditions over the past few weeks. Equity market sentiment in most major economies, however, has remained resilient, buoyed by a positive stream of corporate earnings news, especially from the technology sector. In our charts this week we focus on:

·       Consumer confidence in the US and Europe

·       US technological innovation

·       Semiconductor inventories in Asia

·       The Italian bond market

·       Credit conditions in the euro area

·       Internet sales in the UK

A quiet economic calendar coupled with holidays in North America and much of Asia have left markets struggling for direction in recent days. A noteworthy development, nevertheless, was this week’s FOMC minutes which revealed concerns among some members about reducing US policy rates too soon. In our charts this week we home in on the following:

·       Market expectations for Fed policy

·       Inflation surprises and energy prices

·       High frequency gauges of labour market activity

·       Wage inflation in the euro area

·       South Korea’s semiconductor trade

·       Social progress in the world economy

Stronger than expected US inflation data this week has dampened hopes that the Fed might swiftly reduce interest rates in the coming months. This comes on the heels of a flurry of firmer-than-expected US economic data in recent weeks that had previously undermined the case for an early pivot toward looser monetary policy. Still, as we illustrate in several of our charts this week, evidence is accumulating to suggest that tighter monetary policy is taking a toll on the world economy. This week we home in on:

·         The UK and Japan’s recession phase

·         The weakness of Japan’s domestic demand growth

·         Labour market inactivity in the UK

·         Consensus growth and inflation forecasts for 2024

·         The shifting nature of the growth and inflation consensus

·         US service sector inflation

Last week's surprisingly strong US employment report has diminished investors’ expectations that central banks would quickly shift to more relaxed monetary policies. Nonetheless, equity market sentiment across most major economies has remained resilient, buoyed by positive corporate earnings news. In our charts this week, we examine:

·         Consensus forecasts for central bank policy

·         US capacity pressures and inflation expectations

·         Global supply chain pressures

·         Global business cycle surveys

·         Germany’s factory orders

·         Australia’s retail spending

Incoming data have reinforced a soft landing narrative in financial markets over the past few days. And although there was some push back from the Fed against expectations that it might begin cutting policy rates as soon as March, there was equally little to challenge the idea that a pivot toward looser monetary policy will shortly emerge. In our charts this week we home in on:

·         Data surprises and equity markets

·         Euro area inflation

·         The Indian economy

·         Global semiconductor sales

·         Supply chain bottlenecks

·         US household balance sheets

Lingering tensions in the Middle East are now adversely affecting shipping costs and raising concerns about the durability of global supply chains. Recent commentary and some data points, in the meantime, have also been casting more doubt on the willingness of central banks to swiftly pivot toward looser monetary policy. In our charts this week we focus on:

·         Global shipping costs

·         Euro area banking conditions

·         The UK manufacturing sector

·         Equity markets in Japan and China

·         China’s economy

·         The Bank of Japan

Over the past few days there has been further pushback to the idea that central banks might initiate easing cycles in the immediate months ahead. Added to this the flare up of instability in the Middle East has been another factor amplifying investor anxiety. Andy Cates and Tian Yong Woon discuss these and other issues in their podcast this week. Meanwhile, our charts this week focus on:

·         Maritime trade in the Red Sea

·         Energy prices and geopolitical instability

·         Global shipping costs

·         Supply chain efficiency

·         China’s labour market

·         The post-pandemic economic recovery

The soft-landing consensus that emerged toward the end of last year has come under increased scrutiny in recent days. Specifically, there are now more doubts about the notion that central banks will shift towards a much more accommodative monetary policy in the coming months. In this week's charts, we look more closely at consensus views for 2024. More specifically, we home in on:

·         The still-high influence of data surprises for markets

·         The US growth consensus versus other major economies

·         The inflation consensus for China versus Japan

·         Concerns in the US small company sector

·         Healthier high frequency indicators from China

·         Healthier data for global trade