Higher growth + slowing inflation = happy investors. 4Q23 GDP rose at a 3.3% annualized rate, way above the consensus figure of 2.0%. The core PCE deflator rose at a 2.0% rate, in line with consensus. The GDP deflator rose at a 1.5% rate, below consensus of 2.2%. US equities are up again this morning, becoming more expensive versus global peers, per Reuters. The US’ share of world mkt cap is now almost 47%, per BBG.
MSFT is laying off 1,900 employees, or roughly 9% of the gaming division post-acquisition of Activision Blizzard. Lloyds is cutting 1,600 folks to move more biz online.
That’s what the Chinese investors are saying. After a $6 trn stock market rout, it’s understandable. The Chinese have no clue when things will turn around with the world’s 2nd largest economy, and seeing your stock market tumble by -40% over three years and the gov not doing much about it—well, that doesn’t make you feel good, right? Neither does seeing your home price tank. Or exports tank. Or the population shrink. Or seeing a huge number of jobless graduates.
The Fed raised the cost of its Bank Term Funding Program after a recent surge in borrowing. The rate on the emergency facility, most recently at around 4.88%, will be no lower than the rate on reserve balances, currently at 5.4%, effectively removing what The Economist called “a free-money machine for banks”.
The Red Sea situation remains hostile. Bloomberg reports that two Maersk container ships that were carrying US gov cargoes were forced to make a U-turn after being attacked, even though they were being escorted by two US Navy vessels. Red Sea hostilities have driven the Rotterdam-to-Shanghai container benchmark to $975 as of Jan. 18, from $466 a month earlier. It’ll be hard to contain inflation in the EZ with that kind of move. That’s probably one reason why Lagarde is holding firm with her summer rate cut estimate, and not the spring.
Chinese EVs like BYD may be eating Elon’s lunch. Tesla flagged a “notably lower” growth forecast, postponed manufacturing to 2025, and revealed a low-cost car in its fight to compete per the FT.
Around 1,200 homes in metro Atlanta have squatters, per BBG. It’s a trend that’s occurring, especially in institutional-landlord-owned homes. Sometimes they’re offering money to get the people out. Starwood, Cerberus, etc. are dealing with this. It sounds like squatters often have weapons and threaten neighbors. Rents are up, people can’t afford the rents, and institutions went on a binge a few years ago. So, unless they’re willing to spend money on smart home security, they’re dealing with this. Squatters turn on the internet, get a bill, then add water and power—and now they’re at home!