China: Jan CPI Inflation Fell To The Lowest Level Since 2009, Likely To Mark The Bottom

Economic

Summary:

China's January CPI inflation was weaker than forecast at -0.8% YoY, which marks the lowest level since September 2009. We expect this to mark the bottom of the current cycle.

Headline CPI fell to 14 year low

China's January CPI inflation came in at -0.8% YoY, which is the lowest level since September 2009, and marked the fourth consecutive month of negative headline inflation.

By category, the primary drag on inflation continued to be food prices, which fell by 5.9% YoY, the lowest level on record. As expected, pork prices (-17.3% YoY) continued to be a major drag on inflation, while fresh vegetables (-12.7% YoY) and fruit (-9.1% YoY) also contributed to the drag. Food inflation has been in negative territory for 7 consecutive months. However, it is worth noting that this month's data may look particularly poor due to the holiday effect from last year's Lunar New Year occurring in January, while this year's is set for February. Household demand for food products (especially pork) for the holiday feast results in food prices surging around the holiday period.

However, non-food inflation also came in somewhat softer than expectations at 0.4% YoY. The biggest drag in non-food inflation remains in transportation & communication (-2.4% YoY), where a decline in vehicle and communication device prices continued to suppress inflation.

Headline CPI fell to 14 year low

China: Jan CPI Inflation Fell To The Lowest Level Since 2009, Likely To Mark The Bottom_1

Silver linings in sequential numbers

The weaker-than-expected headline numbers will likely add fuel to the fire of the debate over whether or not China is facing deflation risks.

In our view, the deflation argument is overstated, and the base effects makes January's data look worse than they are. Sequential data paints a more upbeat picture. In MoM terms, headline CPI rose 0.3%, food CPI rose 0.4%, and non-food CPI rose 0.2%. While a far cry from the above-target inflation levels seen in many other economies, these numbers do not imply China is stuck in a deflationary spiral.

Furthermore, China's pork cycle also indicates that the drag from pork prices will also fade in the coming months. While still a major drag in January's data, pork price inflation has actually risen for the past two months, and the December 2023 MoM change in the pig stock was the largest decline since March 2022. With expected demand for the Lunar New Year holiday in February, this could return to positive growth in next month's release.

As such, considering the more favourable base effects for February's data, we see a high likelihood that January's data could mark the low point for YoY inflation in the current cycle.

China's pork cycle

China: Jan CPI Inflation Fell To The Lowest Level Since 2009, Likely To Mark The Bottom_2

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Samantha Luan

Economic

The United States is on a pace to add nearly $19 trillion to its national debt over the next decade as the mounting costs of an aging population and higher interest expenses continue to weigh on the nation’s fiscal outlook, the nonpartisan Congressional Budget Office said on Wednesday.

But the report did offer a sliver of relief: Recently enacted legislation to curb federal spending and a U.S. economy that has been growing faster than expected are making the fiscal picture slightly less bleak. Annual deficits over the next decade are 7 percent smaller than the $20.3 trillion the budget office forecast last year.

That decline reflects several conflicting forces. A deal that President Biden and congressional Republicans struck last year to limit discretionary spending for two years reduces deficits over the decade. So does a surge of 5.2 million new workers into the labor force, most of them immigrants.

But those deficit declines are partly offset by an increase in the estimated budget costs from Mr. Biden’s clean-energy agenda, an aging U.S. population and higher interest rates on the national debt.

The budget office’s director, Phillip L. Swagel, said that even with the decline in deficits, the nation remained on track to rack up more debt as a share of its total economic output in 2034 than at any other time in its history.

“The first message of the projections is a familiar one: that the fiscal trajectory is daunting,” Mr. Swagel said at a briefing with reporters on Wednesday. “On the other hand, it is a little bit less bad than it was in our projections last year.”

The projections for the nation’s finances come as Congress faces another deadline next month to agree on federal spending legislation to keep the government running. Lawmakers are also engaged in a heated debate over providing more aid to Ukraine and Israel and whether to expand the child tax credit and restore expired business tax breaks.The budget office projected that the annual deficit will grow to $2.6 trillion in 2034 from $1.6 trillion this year, adding $18.9 trillion to the national debt during the decade. By then, the debt is projected to surpass $54 trillion.

Interest rates have surged to two-decade highs over the past year, making borrowing costs an increasingly significant contributor to the national debt.

From 2024 to 2034, the United States will spend more than $12 trillion alone on interest costs. Starting next year, net interest costs will be larger as a share of the U.S. economy than at any time since the federal government started keeping records in 1940, according to the budget office.

Source：TheNewYorkTime

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Alex

Economic

According to figures published by the customs services, the balance of France’s trade balance on the exchange of goods for the year 2023, Wednesday February 7, is in a deficit of 99.6 billion euros. Thus the balance remains negative, but a clear improvement over the year 2022. Indeed, the deficit has reached a historic record of 162.7 billion euros in 2022.

The figure was explained by export values that rose dramatically, particularly in the energy sector, where oil and gas prices exploded after the outbreak of war in Ukraine. The crisis recorded in terms of electricity and forcing the import of this energy also affected the entire import bill. In 2023, things have still improved significantly, even if the import bill remains high.

An improvement driven by a reduction in the amount of hydrocarbon imports

Thus, imports have decreased by around 63 billion euros in the last twelve months. Despite the persistence of certain tensions until the beginning of 2024, the improvement recorded after the decline marked the values of energy imports with the gradual normalization of the world market. In 2023, in fact, it was a year in which the price of a barrel of oil returned to an average of about 80 dollars after reaching a peak of more than 100 dollars during the year 2022, during a recorded boom.

The tariff curve, and hence the value of gas imports, also follows a similar trend. This meant that the deficit on hydrocarbons was significantly reduced by the value of 25.5 billion euros. For example, France, in 2023, earned about 8.6 billion on the import of refined oil, the details of which our colleagues Figaro. Also, with the renewal of the nuclear fleet and the resumption of electricity production, which allowed France to become an exporter again, this energy balance becomes positive with a surplus of 11.3 billion euros.

How to achieve structural reform in equilibrium

Finally, ” The balance of energy goods improved by about 46.6 billion, or a 70% increase in the overall balance for 2023. “Furthermore, “The non-energy balance has remained stable since 2021, highlighting the role of energy prices in the deterioration of the French trade balance in 2022”.notes BNP Paribas senior economist Stefan Koliak.

Overall, this reduction in the balance sheet deficit is far from the result of a structural reform of the balance sheet, experts warn. Sylvain Bersinger, chief economist at Asters firm, quoted by the same source, puts forward his explanation for this chronic deficit: “It is with the decline in French manufacturing output that we find the source of the trade deficit, which is not a problem as such (the balance of payments is only slightly in deficit), but an incarnation of the difficulties of industry.

Source：codelist

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Alex

Economic

The December trade deficit rose by 0.5% to $62.2 billion, with both imports and exports showing growth. For the year, the trade gap narrowed by 18.7% to $773.4 billion, the largest decrease since 2009, contributing positively to the U.S. GDP growth of 2.5% for the year. The rise in exports to a record $3 trillion was propelled by various sectors, including capital goods and consumer goods, while imports fell by 3.6% to $3.8 trillion.

The report highlighted the U.S.'s growing status as a major oil producer, with the inflation-adjusted value of petroleum exports reaching a record high, reinforcing the U.S.'s position as a net oil exporter. Economists anticipate trade will continue to support the U.S. economy in 2024, although global shipping disruptions and environmental factors present potential risks.

Market Overview: -Trade deficit widens slightly in December, but 2023 sees sharpest contraction since 2009. -Exports jump to record high, fueled by capital goods, autos, and consumer goods. -US emerges as net oil exporter, reducing dependence on foreign oil and shrinking deficit.

Key Points: -2023 trade deficit falls 18.7% to $773.4 billion, contributing to 2.5% GDP growth. -December deficit increases 0.5% to $62.2 billion, slightly above estimates. -Red Sea shipping disruptions and Panama Canal drought pose potential risks.

Looking Ahead: -Trade expected to remain supportive to US economy in 2024 despite moderation. -Focus on export performance and potential impact of global shipping challenges. -GDP data revision likely to show stronger contribution from trade in Q4 2023.

In December, goods exports rose significantly, led by increases in industrial supplies and materials. Service exports also reached a record high, driven by growth in travel, transport, and financial services. Imports increased, with notable rises in consumer goods and industrial supplies, but capital goods imports saw a decline.

Despite the marginal increase in December's trade deficit, the overall contraction in 2023 marks a significant shift in the U.S.'s trade balance, reflecting changes in global trade dynamics and the U.S.'s economic resilience. The shift in trade patterns, particularly the reduction in dependence on foreign oil, indicates a strategic adaptation in response to global economic conditions and domestic production capabilities.

Source:Quiver Quantitative

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Chandan Gupta

Traders' Opinions

Commodity

Fundamental Analysis

The trading session for crude oil on Tuesday showed some minor fluctuations, but it continues to look for a basing pattern. The performance of the WTI Crude Oil market is closely tied to the economic momentum in the United States, which has been notably robust.

Taking a closer look at the West Texas Intermediate (WTI) crude oil market, we can see that it initially experienced a slight dip during Tuesday's session, only to rebound and show signs of vitality. The market's main goal seems to be protecting the established basing pattern at the $72.50 level, a trend that has persisted for some time.

The current state of the oil market suggests that it might have been oversold, indicating a potential buying opportunity. Despite the possibility of volatility, the sharp decline in oil prices is attracting value hunters to enter the scene.

Additionally, it is crucial to consider the actions of central banks worldwide, which may choose to reduce interest rates, subsequently stimulating economic growth. This economic expansion is expected to drive up the demand for crude oil. Furthermore, OPEC, the organization of oil-producing countries, is likely to take measures to curb production in response to changing market conditions.

It's essential to keep a close eye on the possibility of a U.S. recession. At present, the economy seems to be maintaining its momentum, significantly impacting the demand for crude oil, particularly the WTI grade.

The Tuesday trading session in the crude oil market showed some interesting movements, with slight ups and downs. But amidst this, the market seems to be on the lookout for a stable basing pattern. The WTI Crude Oil market's performance is riding on the economic momentum in the United States, which has been notably robust in recent times.

The current status of the oil market suggests a potential overselling, creating a window for a buying opportunity. Despite the looming volatility, the sharp decline in oil prices is drawing in value hunters.

In summary, the recent Tuesday trading session in the crude oil market hinted at some intriguing movements, showcasing a quest for stability in the form of a basing pattern. The WTI Crude Oil market's fortunes are intricately linked to the robust economic momentum in the United States.

The current state of the oil market opens up the possibility of overselling, presenting a potential buying opportunity. Despite the looming specter of volatility, the sharp decline in oil prices has beckoned value hunters into the scene.

As we navigate these intricate market dynamics, it's equally crucial to monitor the likelihood of a U.S. recession. The current economic scenario seems to be maintaining its momentum, exerting a considerable influence on the demand for crude oil, particularly the WTI grade.

The current landscape of the oil market hints at a potential overselling, creating an attractive window for those seeking a buying opportunity. Despite the looming potential for volatility, the sharp decline in oil prices is alluring value hunters to enter the market.

Expanding our analysis, it's crucial to take into account the actions of central banks globally. The possibility of a reduction in interest rates could serve as a stimulant for economic growth, subsequently increasing the demand for crude oil. Furthermore, OPEC, the organization of oil-producing countries, is poised to adapt its production levels in response to the dynamic market conditions.

In conclusion, the recent trading session on Tuesday offered insights into the crude oil market's pursuit of stability through a basing pattern. The WTI Crude Oil market's destiny is intricately linked to the resilient economic momentum in the United States.

Technical Analysis

Examining the technical landscape, the 50-day Exponential Moving Average rests near $75, serving as a short-term market target. Should this level be surpassed, attention shifts to the 200-day EMA, positioned around the recent swing high at roughly $78.

Beneath current price levels, sturdy support emerges at $70, accompanied by a longstanding support level at $68, resilient over several years. Considering these elements collectively, it's rational to perceive crude oil as a market ripe with buying opportunities during downtrends.

The 50-day EMA, a crucial indicator for short-term movements, holds sway over market sentiment. A breakthrough at the $75 mark could propel bullish momentum, setting sights on the 200-day EMA at $78.

Conversely, acknowledging the robust support at $70 and the enduring nature of the $68 support provides a strategic lens for risk management. The historical resilience of the $68 level underscores its significance, offering a key reference point for traders and investors.

In summary, the interplay between these technical indicators and support levels paints a holistic picture of crude oil. It underscores the potential for strategic buying during market downturns, providing a nuanced perspective for those navigating the intricacies of the oil market. Crude Oil Seeks Buyers Following Temporary Downturn_1

Crude Oil Seeks Buyers Following Temporary Downturn_1

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Chandan Gupta

Traders' Opinions

Stocks

The NASDAQ 100 continues its bullish trend, signaling strategic buying opportunities during price dips for savvy investors seeking potential value gains. This trend has persisted for a considerable period, showing no imminent signs of deviation.

Recent trading sessions, particularly in the early hours of Tuesday, depict a subdued NASDAQ 100 movement. This apparent stagnation aligns with the index's current position at the peak of a robust uptrend. The market is undergoing a temporary pause, a natural response to the preceding surge.

During this adjustment phase, the 17,000 level emerges as a crucial support, corresponding to a significant candlestick formation from the previous week. Additionally, the 50-day Exponential Moving Average stands ready to provide additional support, enhancing the market's stability. NASDAQ 100 Grooves Through Bullish Moves, Yet Feeling a Bit Tired_1

NASDAQ 100 Grooves Through Bullish Moves, Yet Feeling a Bit Tired_1

Looking ahead, attention is directed towards the psychologically significant 18,000 level, poised to attract market focus and potentially become a target for future price movements.

Despite the prevailing bullish sentiment, investors are advised to exercise patience amid the current consolidation phase. The market awaits catalysts for potential upward momentum, and a lack of significant triggers contributes to its current holding pattern.

It's imperative to recognize the NASDAQ 100's unique weighting dynamics. Unlike a uniformly weighted index, it is influenced significantly by a select few stocks, akin to trading an Exchange-Traded Fund (ETF). This highlights the importance of understanding the market's selective behavior. NASDAQ 100 Grooves Through Bullish Moves, Yet Feeling a Bit Tired_2

NASDAQ 100 Grooves Through Bullish Moves, Yet Feeling a Bit Tired_2

In summary, the NASDAQ 100 maintains its bullish stance, emphasizing strategic buying during price dips. The ongoing consolidation and stability are natural responses to the prior rally. Key support levels, such as 17,000 and the 50-day EMA, should be monitored, along with the psychological significance of the 18,000 level. Patience is paramount as the market anticipates potential catalysts for further upward movement, considering the distinct weighting dynamics.

Over time, investors have consistently paid higher prices for the Nasdaq-100 Index, reflecting a rising trend channel in the medium to long term. This upward trajectory indicates positive market development and increasing buy interest. The absence of resistance in the price chart signals potential further gains. In the event of a negative reaction, support is expected around 15,800 points. The RSI above 70 suggests strong positive momentum in the short term, indicative of rising optimism and continued price appreciation. However, caution is advised, especially for prominent stocks, as a high RSI may signal overbought conditions and potential downward reactions. The upward-trending RSI curve supports the positive trend. Overall, the index is assessed as technically positive for the medium to long term. NASDAQ 100 Grooves Through Bullish Moves, Yet Feeling a Bit Tired_3

NASDAQ 100 Grooves Through Bullish Moves, Yet Feeling a Bit Tired_3

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Zi Cheng

Cryptocurrency

Traders' Opinions

Bitcoin miners are preemptively preparing for an expected decrease in revenue resulting from the upcoming halving event in April. During this event, the blockchain's network protocol will halve rewards for verifying transactions.

What Is Bitcoin Halving?

Bitcoin halving occurs every four years, marking a reduction of the reward for Bitcoin mining by half.

Incorporated into Bitcoin's mining algorithm, the halving policy serves to counteract inflation by upholding scarcity. Theoretically, the decrease in the rate of bitcoin issuance suggests that the price could rise provided that demand remains constant.

Bitcoin Reserves Reducing

According to data gathered by CryptoQuant, miner reserves, referring to unsold Bitcoin held in digital wallets associated with mining companies, have declined by 8,400 tokens since the beginning of 2024, reaching 1.8 million. This level matches figures seen in June 2021. Analysts interpret this decrease as a sign that miners are actively selling their tokens.

Matthew Sigel, head of digital-asset research at VanEck, stated, "Miners have started selling more of their coins to strengthen balance sheets and finance growth capital expenditures in anticipation of tougher times for margins post the halving in April. Scale will become even more crucial after the halving."

The quadrennial halving event reduces the amount of Bitcoin miners receive for operating energy-intensive computers, which secure the network by solving intricate puzzles. This halving is integral to capping the supply of Bitcoin at 21 million tokens. In the upcoming event, rewards will decrease from 6.25 coins per block to 3.125 coins.

Source: CryptoQuant

Following the ETF approvals, there has been a net movement of 3,617 Bitcoin from miner wallets to exchanges, as reported by CryptoQuant. On February 1, there was a net outflow of 13,542 tokens, marking the largest single-day outflow since December 2020.

While smaller mining companies with limited access to capital markets may be utilizing their Bitcoin reserves, larger firms have been utilizing cash reserves and raising funds through share sales.

The reason why Bitcoin price currently is going towards the downside although the halving event is near is because people have been selling their Bitcoin, as seen from the reserves chart above, amount of Bitcoin held personally has been reducing. There are many reasons why they are selling Bitcoin, either to raise capital to purchase mining rigs or selling Bitcoin and waiting for a cheaper price to buy in again.

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