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

Good morning. Stocks and bonds are selling off as traders pare back their bets on Federal Reserve rate cuts and China’s economic growth disa [View in browser]( [Bloomberg]( Good morning. Stocks and bonds are selling off as traders pare back their bets on Federal Reserve rate cuts and China’s economic growth disappoints. Here’s what’s moving markets. — [Sam Unsted]( In the red A risk-off mood is permeating markets, driven by a paring back of bets on the speed and depth of central bank rate cuts this year. [US stock futures are sinking](, following a drop across equities markets in Asia and Europe. Pricing in swaps markets for a Federal Reserve rate cut in March has slipped to about a 65% chance, from 80% at the end of last week. Bond traders have started to [pick up options]( to hedge against the prospect of a half-point March cut. Pullback and pushback The pullback in rate-cut bets picked up pace following comments yesterday from the Fed’s Christopher Waller. He said the central bank needs to take a [careful approach to cutting rates](, saying there is no need to move as quickly in the past. His comments, though showing an openness to cuts, were interpreted as more hawkish than what traders had been pricing. Meanwhile, European Central Bank policymakers have been forcefully pushing back on what the market expects. China’s woes The mood was also darkened by [disappointing economic growth data]( from China. A measure of [prices]( underlined the deflation challenge, with its longest streak of declines since 1999. Investors responded by exiting [Chinese stocks]( in a show of pessimism about the nation’s economy. That’s fueled more calls for stimulus measures, with the action taken by authorities so far underwhelming investors. Crude slips [Oil prices are in retreat too](, weighed down by a combination of the stronger dollar, Chinese economic weakness and the broader risk-off sentiment which is overshadowing supply risks related to turmoil in the Red Sea. WTI futures slid close to $70 a barrel, while Brent fell below $77. Those Red Sea concerns remain prominent, however. Saudi Arabia said it was [“incredibly concerned”]( about regional security as conflict in the Middle East spreads, while European Central Bank President Christine Lagarde flagged the [potential inflationary risks]( from supply chain disruption. Coming Up… The Fed will release its Beige Book on current economic conditions will be released later and a slew of other speakers from the bank will be up to bat — that includes John Williams and Michelle Bowman. Given the pullback in rate-cut bets, those will be watched closely. Retail sales data is on the slate too. More financial stocks will report results, including Charles Schwab and Discover Financial, and keep an eye on shares of [airlines JetBlue and Spirit]( after their planned merger was blocked by a Judge yesterday. That sent Spirit shares down by 47% and they are falling another 9% in premarket trading. What We’ve Been Reading This is what’s caught our eye over the past 24 hours. - Shutdown talks and Christine Lagarde on the [Daybreak podcast](. - A spending bill to [avert a shutdown]( passes the first Senate hurdle. - [Apple tops Samsung]( as the world’s top phone maker. - Remote work doesn’t seem to [impact productivity](. - Japan’s markets are [roaring back to life](. - LA film and TV production [dropped by 32% last year](. - A bad year for [Blackstone’s real estate trust](. And finally, here's what Joe’s interested in this morning Yesterday, Bank of America released its latest fund manager survey, where they ask respondents their various takes on the market outlook. Here's a chart that is pretty extraordinary. It shows what the survey takers perceive as being the most crowded trade at any given moment. What's wild is that if you go back to the middle of 2017, almost every month, the most crowded trade is some version of "long big tech." Sometimes it's Long Magnificent Seven (these days). Sometimes it's Long US Tech Stocks. Sometimes it's Long FAANG or Long NASDAQ. But basically for over 6.5 years, through multiple waves of the cycle (ZIRP, not-ZIRP etc.) not only has tech been hot, but it's perceived to be crowded. Now if you noticed there's one month early in there in 2018, where the most crowded trade was Long FAANG + BAT. You don't hear about BAT so much these days. That acronym stands for Baidu, Alibaba, Tencent, the three giants of the Chinese internet industry. Here's a chart of them since the beginning of 2018, when they were so popular as to make the survey. Rough. Follow Bloomberg's Joe Weisenthal 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? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. Before it’s here, it’s on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can’t find anywhere else. [Learn more](. Want to sponsor this newsletter? [Get in touch here](. You received this message because you are subscribed to Bloomberg's Five Things to Start Your Day: Americas Edition newsletter. If a friend forwarded you this message, [sign up here]( to get it in your inbox. 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