CPI Inflation Turns Negative

Economic Data

- (BR) Brazil Feb FGV Inflation IGPM M/M: 0.3% v 0.3%e; Y/Y: 3.9% v 3.9%e
- (BR) Brazil Jan Unemployment Rate: 5.3% v 5.0%e
- (US) Jan Durable Goods Orders: 2.8% v 1.6%e; Durables Ex Transportation: 0.3% v 0.5%e; Capital Goods Orders (Non-defense/ex-aircraft): 0.6% v 0.3%e; Capital Goods Shipments (Non-defense/ex-aircraft): -0.3% v +0.2%e; Durables Ex-Defense: +3.0 v -3.2% prior
- (US) Jan CPI M/M: -0.7% v -0.6%e; Y/Y: -0.1% v -0.1%e
- (US) Jan CPI Ex Food and Energy M/M: 0.2% v 0.1%e; Y/Y: 1.6% v 1.6%e
- (US) Jan CPI NSA: 233.707 v 233.639e; CPI Core Index: 239.871 v 239.670e
- (US) Initial Jobless Claims: 313K v 290Ke; Continuing Claims: 2.401M v 2.29Me
- (CA) Canada Jan CPI M/M: -0.2% v -0.4%e; Y/Y: 1.0% v 0.8%e ; Consumer Price Index: 124.3 v 124.5 prior
- (CA) Canada Jan CPI Core M/M: 0.2% v 0.1%e; Y/Y: 2.2% v 2.1%e; (Seasonally Adj) M/M: -0.2% v -0.1% prior; CPI Core (Seasonally Adj) M/M: 0.2% v 0.2% prior
- (US) Dec FHFA House Price Index M/M: 0.8% v 0.5%e; Q/Q: 1.4% v 0.9% prior
- (MX) Mexico Jan Trade Balance: -$3.3B v -$3.2Be
- (US) Weekly EIA Natural Gas Inventories: -219 bcf vs. -240 to -244 bcf expected range
- (US) Feb Kansas City Fed Manufacturing Activity: 1 v 3e

The US January CPI inflation report roiled global markets earlier this morning, although the volatility stemming from the data has pretty much subsided mid-morning. As of writing, the DJIA is up 0.04%, the S&P500 is down 0.11% and the Nasdaq is up 0.28%.

The US CPI inflation reading for January has fallen into negative territory for the first time since December 2009, with the -0.1% decline a big slip from the prior month's +0.8% reading. There's no mystery behind the reading, which was widely expected: crating crude prices. The core reading, which strips out energy prices, was unchanged from the prior month at +1.6%. Still well short of Fed expectations, but still healthy. The durable goods data bounced back in January from the very weak showing in December, with most components growing strongly.

Fed moderate Bullard responded to the CPI data by highlighting the core reading. Bullard said impressive monthly jobs reports would continue and wage growth around +2% is roughly commensurate with where the economy is performing right now, given +1.5% core CPI and +0.5% productivity growth. Fed Governor Williams said if data kept coming in as expected, rate hikes could begin as early as this summer.

The euro has fallen off a cliff in the wake of the US CPI data. EUR/USD has fallen to one-month lows, from 1.1370 before the data to 1.1210 currently. Recall that the 1.1110 level seen in late January was the lowest level in the pair since 2003. After contracting into the report, the 10-year UST yield jumped about 2.5 basis points to trade around 1.993%.

In earnings, Salesforce.com is among the biggest gainers this morning, up 12% after merely meeting expectations in its fourth quarter results. The firm's key deferred revenue and free cash flow metrics were up very sharply, driving the gains. ADRs of Vale are down nearly 5% after the iron ore giant disclosed a massive fourth-quarter net loss, on a 45% y/y decline in the price for iron ore.

Note that later today the FCC will vote on Chairman Wheeler's modified net neutrality proposals. The measures have already garnered majority 3-2 support from the FCC's Democratic majority, virtually ensuring their passage. The lawsuits will begin as soon as the measure pass, and the GOP has promised a fight over the measures in Congress.

Looking Ahead

- 13:00 (US) Fed's Lockhart (moderate, FOMC voter) speaks on US Outlook at Banking Conference
- 13:00 (US) Treasury to sell $29B in 7-Year Notes
- 13:15 (US) Fed's Fisher (hawk, non-voter) in London
- 14:00 (AR) Argentina Jan Industrial Production M/M: No est v -1.0% prior; Y/Y: -2.8%e v -2.3% prior
- 16:00 (KR) South Korea Mar Business Manufacturing Survey: No est v 73 prior; Non-Manufacturing Survey: no est v 70 prior
- 16:45 (NZ) New Zealand Jan Building Permits M/M: No est v -2.1% prior
- 18:30 (JP) Japan Jan Jobless Rate: 3.4%e v 3.4% prior
- 18:30 (JP) Japan Jan National CPI Y/Y: 2.4%e v 2.4% prior; CPI Ex Fresh Food Y/Y: 2.3%e v 2.7% prior; CPI Ex Food, Energy Y/Y: 2.1%e v 2.1% prior
- 18:30 (JP) Japan Feb Tokyo CPI Y/Y: 2.2%e v 2.1% prior; CPI Ex Fresh Food Y/Y: 2.2%e v 2.3% prior; CPI Ex Food, Energy Y/Y: 1.7%e v 1.8% prior
- 18:50 (JP) Japan Jan Preliminary Industrial Production M/M: 3.0%e v % prior; Y/Y: -3.2%e v +0.1% prior
- 18:50 (JP) Japan Jan Retail Sales M/M: -0.5%e v -0.4% prior (revised from -0.3%); Retail Trade Y/Y: -1.2%e v +0.1% prior (revised from +0.2%); Large Retailers' Sales: -0.2%e v +0.1% prior
- 19:05 (UK) Feb GfK Consumer Confidence: +2e v +1 prior
- 23:00 (JP) Japan Jan Vehicle Production Y/Y: No est v -2.5% prior