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

Good morning. Traders await key US inflation data, Bitcoin jumps, and the barrage of Fedspeak continues. Here’s what’s moving markets. — Dav [View in browser]( [Bloomberg]( Good morning. Traders await key US inflation data, Bitcoin jumps, and the barrage of Fedspeak continues. Here’s what’s moving markets. — [David Goodman]( Want to receive this newsletter in Spanish? [Sign up to get the Five Things: Spanish Edition newsletter](. Inflation Data The number traders have been waiting for all week will finally arrive today, as the US reports a gauge of personal consumption expenditures inflation — a key metric for the Federal Reserve. The data is expected to show the headline and core data both picked up last month, highlighting the bumpy path the Fed faces in achieving its 2% inflation target. Russ Mould, investment director at AJ Bell, warns that a hotter-than-expected reading “could put the final [nail in the coffin of the idea of a pivot to rate cuts before the summer.”]( Bitcoin Soars Until then, Bitcoin remains the hottest topic in markets. The digital currency [extended gains Thursday]( after surging above $60,000 for the first time in more than two years. It almost touched $64,000 and is in sight of the 2021 record high of just below $69,000. The move is being helped by [new demand from exchange-traded funds,]( which are shaking up the market for the original cryptocurrency. The funds have seen more than $7 billion of net inflows in less than two months. Fed Comments Back to inflation, and today’s data is under more scrutiny after three Federal Reserve officials said yesterday that the pace of interest-rate cuts will [depend on incoming economic data.]( Boston Fed President Susan Collins and New York’s John Williams said the Fed’s first rate cut will likely be appropriate “later this year,” while Atlanta’s Raphael Bostic said he’s currently penciling in a cut for sometime this summer. We’ll hear from Bostic again today after the PCE report,  along with comments from Austan Goolsbee and Loretta Mester. Index Confusion With the stakes so high, the US Labor Department’s statistical agency [sowed some extra confusion this week](with an email to a group of data “super users” saying that a surge in a measure of rental inflation last month — a key factor in the jump in price gains — was caused by an adjustment to how subcomponents of the index are weighted. The information has implications for the path of inflation in the near term because the adjusted weights could keep readings on rents elevated through the first half of the year. Stocks and Bonds Dip US futures slid, and Treasuries and other global bonds fell, before the PCE data, with contracts for the S&P 500 and the tech-heavy Nasdaq 100 both [retreating by about 0.3%](. The yen jumped after Bank of Japan Board Member Hajime Takata sent a strong signal that the case for ending the negative interest rate policy is [gaining momentum.]( In Asia, a gauge of the region’s equities rose following a rebound in Chinese shares. The nation yesterday [banned a top-performing quant fund]( from the stock-index futures market and vowed tighter oversight of high-speed trading, expanding a crackdown on computer-driven investment strategies that some have blamed for exacerbating market turmoil. What we’ve been reading This is what’s caught our eye over the past 24 hours. - earnings[provide comfort](after slew of profit warnings. - [French inflation eases]( to lowest level since September 2021. - Rolex sales reach [$10 billion milestone](, Morgan Stanley says. - British trader [pleads guilty to tax scandal](charges in Denmark. - Singapore’s richest banking dynasty [grapples with succession](. - What [$1 million buys]( in the world’s most expensive markets. And finally, here's what Joe’s is interested in this morning Hello and happy PCE day. At 8:30 AM ET, we get the latest reading of the Fed's favorite inflation gauge. Core PCE is expected to come in at 0.4% MoM. The report is expected to feed into the broader narrative that things remain warm at the start of 2024. Growth has been more active than people had expected, the inflation trajectory doesn't appear to be cooling quite as it was in the second half of 2023. Anyway, I'll get back to all that in a second. In a [recent episode of the Odd Lots podcast]( from a couple weeks ago, we were talking about financial regulation with [Steven Kelly]( of the Yale Program on Financial Stability. One of the questions I asked him was basically 'What is the core product of a bank? What does a bank sell?'. His answer is that a bank sells deposit services. That's the core product. And of course the way we "pay" for that product is by accepting sub-market interest rates in exchange for our loan to the bank. So if you're getting 1% on your checking account and if the Fed Funds rate is at 5%, you can think of yourself paying that 4% spread for deposit and checking and other services you expect for your bank. People don't typically think like this, but that's basically the way to think about what's going on. [This also came up in today's episode of Odd Lots](. Today the conversation was about basically "what is PCE?" We always hear how the PCE report, particularly the core PCE is the Fed's preferred measure of inflation. Our guests are [Omair Sharif](, the founder and President of Inflation Insights, along with [Skanda Amarnath](, Executive Director of Employ America. We talked about what the PCE encompasses, the methodology behind it, how it's different than CPI, why the Fed likes it, and more. Among the things that came up are the various "imputed" prices. Some prices of course are fairly easy to see like the price of a tomato or an apple at the grocery store. There's a price tag. But somethings you pay for, even if there's no price tag. One of these categories Imputed Financial Services, which measures the cost of banking services in part by basically the approach measures above... subtracting deposit rates from the Fed Funds Rate. But what's funny is that creates situations where if the Fed hikes rates faster than bank deposit rates go up, that actually causes measured inflation to go higher. At least in this one category, higher rates lead to higher measured inflation and vice versa. Anyway, there are multiple categories that are difficult or surprising like this, and the conversation is a fascinating look at how these numbers -- which for most of us just appear on a screen like magic -- actually come together. Find the episode on [Apple](, [Spotify]( or elsewhere. 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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