5 Things You Need to Know to Start Your Day: Americas

Good morning. Stocks take a breath, bond traders return to a narrative that burned them just weeks ago and yet another big inflation report [View in browser]( [Bloomberg]( Good morning. Stocks take a breath, bond traders return to a narrative that burned them just weeks ago and yet another big inflation report is on the way. Here’s what traders are talking about. — [David Goodman]( Want to receive this newsletter in Spanish? [Sign up to get the Five Things: Spanish Edition newsletter](. A pause for breath Global stocks are [taking a breather](after last week’s central bank-led rally. The Stoxx Europe 600 index declined following nine straight weeks of gains, the longest run in 12 years, while futures on the S&P 500 slipped after Wall Street’s best weekly performance this year. Global stocks need both earnings growth and central bank policy easing to defend current high valuations, according to JPMorgan Chase & Co. strategists led by Mislav Matejka. Trying again Indeed, the prospect for central bank easing drove the move in stocks last week, amid growing confidence the Federal Reserve and key global peers may begin reducing interest rates as soon as June. Bond traders are also cautiously reloading wagers on that narrative, [even after being burned by the same idea just weeks ago](. Michael Mackenzie, Liz Capo McCormick and Ruth Carson report today that, among money managers such as Pimco and BlackRock, as well as one-time bond king Bill Gross, the prospect of lower rates is boosting the allure of shorter-dated obligations due in around five years or less, which stand to gain the most as rate-cut speculation builds. Commodities poised Goldman Sachs says that commodities will also benefit from 2024 rate cuts, which it predicts will help support industrial and consumer demand. Raw materials [may return 15% over 2024](as borrowing costs come down, manufacturing recovers, and geopolitical risks persist, analysts wrote in a note on Sunday. Copper, aluminum, gold and oil products may climb, according to the bank, which also stressed the need for investors to be selective as gains wouldn’t be universal. Inflation test A key moment for the new narrative will come on Friday, when many markets will be closed for a holiday. Economists expect a report that day to show the core personal consumption expenditures price index — the Fed’s[ preferred measure of underlying US inflation](-- probably remained uncomfortably high in February, potentially disrupting the outlook for cuts. Friday also sees Chair Jerome Powell make remarks at the San Francisco Fed’s monetary policy conference, while other key US events of the week include new-home sales for February later today, followed by durable goods orders on Tuesday and GDP figures on Thursday. Yen speculation Elsewhere in markets, the yen strengthened as Japan’s top currency official delivered his [most robust salvo of warnings]( in months against speculative moves in the foreign exchange market as the yen continues to hover near a 2022 intervention level. “The current weakening of the yen is not in line with fundamentals and is clearly driven by speculation,” vice finance minister for international affairs Masato Kanda told reporters Monday. “We will take appropriate action against excessive fluctuations, without ruling out any options.” For more of a sense of how to parse those comments, read this [handy guide]( on how to decode the language used by Japanese policymakers before possible interventions. What we’ve been reading This is what’s caught our eye over the past 24 hours. - Kingfisher is latest UK retailer to [trim profit guidance.]( - Yuan rebounds as PBOC [sends strong message of support]( via fixing. - [Gucci’s China shock]( reverberates across the luxury landscape. - Hong Kong’s formerly high-flying bankers [become lost generation](. - European gas rises after[Ukraine attacks](add to supply jitters. And finally, here's what Joe’s interested in this morning On the Odd Lots podcast today, [Tracy Alloway and I spoke with MIT economist David Autor]( about his contention that AI will help reverse a long hollowing out of the middle class. As he sees it, the computer revolution over the last four decades has been a driver of many middle skill office jobs, with gains accruing to a small slice of high-paid experts in various fields (doctors, lawyers etc.). According to Autor, AI will allow people with some amount of training to have more advanced decision making capacity, reducing the bottleneck of our reliance on a handful of elite employees in any field. This is obviously simplified. And of course, it's counterintuitive. The dominant fear of course, is that AI will be so good, it will just wipe out scads of jobs everywhere, and the only winners will be a handful of people that control or build the technology. It's good to be open minded about the effects that technology can have, which often times are counterintuitive. It probably wasn't obvious 20 years ago that everyone having a phone in their pocket would end up obviating the need for phone calls. It probably wasn't intuitive that amidst a proliferation of legalized gambling everywhere, that the Las Vegas economy would be booming. In fact, cities in general have boomed alongside the rise of technologies that in theory allow people to live further away from each other. Anyway, as we discussed on the show, it's obvious that the development of AI tech is just getting started. So the idea that anyone really knows the frontier of their capabilities is still kind of absurd. But it was nice to talk to someone, who has studied labor force developments for years (Autor is well known for his work on the China shock, and the devastating effect that trade with China had on various parts of the US workforce) and isn't just throwing out motivated hot takes. Find the episode on [Apple](, [Spotify]( or elsewhere. Joe Weisenthal is the co-host of Bloomberg’s Odd Lots podcast. Follow him on X [@TheStalwart]( Like Bloomberg's Five Things? [Subscribe for unlimited access]( to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. [Bloomberg Markets Wrap: The latest on what's moving global markets. Tap to read.]( Follow Us Like getting this newsletter? 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