5 Things You Need to Know to Start Your Day

Good morning. A key US inflation report is coming, Yellen hits back at ratings agencies and anticipation builds for the Biden-Xi meeting. He [View in browser]( [Bloomberg]( Good morning. A key US inflation report is coming, Yellen hits back at ratings agencies and anticipation builds for the Biden-Xi meeting. Here’s what’s moving markets. — [Sam Unsted]( Sticky inflation US consumer prices data on Tuesday is likely to show a slowdown in the headline rate but [stickiness in core inflation](. The core number will be the most closely-watched and is predicted to be flat, which will likely keep the Federal Reserve’s bias towards more restrictive monetary policy. That will keep the debate on the Fed’s rate path rolling amid [increasingly stark divides between banks]( on when cuts may appear and how deep they will go. The latest Bank of America fund manager survey found investors have turned the [most bullish on bonds since the global financial crisis]( on “big conviction” that inflation and yields will move lower in 2024. Rating risks Treasury Secretary Janet Yellen has [hit back at ratings agency Moody’s]( for shifting to a negative outlook on the US’s credit rating. She expressed confidence in the country’s economy and in the safe-haven qualities of Treasuries. The comments come after Moody’s threatened to remove the top credit rating for the US owing to wider budget deficits and political polarization. Her remarks also coincide with Republican House Speaker Mike Johnson’s planned vote on Tuesday for his [temporary funding proposal to avert a government shutdown](, for which he’ll need support from a large number of Democrats. Biden-Xi US President Joe Biden and Chinese Premier Xi Jinping are set to meet on Wednesday in San Francisco and [traders are watching for any sign of thawing relations]( between the two nations which could help boost sentiment in beaten-down Chinese assets. Steps have been taken in that direction recently on jets and soybeans, plus an agreement on China cracking down on the manufacture and export of [synthetic opioid Fentanyl](. The meeting will coincide with a [slew of data on China’s economy](, likely to show that activity faltered in October, and as the country mulls [$137 billion of new funding]( to boost its housing market. Holding pattern Treasuries, the dollar and US stock futures are all relatively calm, with markets mostly in a holding pattern ahead of the inflation data. It’s a similar picture in Europe, with most indexes higher but some underperformance in the UK’s FTSE 100. Elsewhere, commodities giant Glencore has [struck a deal]( to buy a majority stake in the coal arm of Canada’s Teck Resources, ending a long-running M&A saga. Coming Up… The US inflation data will top the bill and there will be plenty of Federal Reserve speakers on the slate too, including John Williams, Philip Jefferson, Tom Barkin, Loretta Mester and Austan Goolsbee. Home Depot gets the ball rolling on a week of earnings from the consumer sector, with Target, Walmart and Best Buy still to come. Tesla’s share price has slumped more than 40% from its peak in 2021, and the company is now the eighth-largest in the S&P 500. Two years from now, will it still be in the top ten? Are concerns about demand for electric vehicles valid or overblown? When will the selloff in green stocks end? Share your views in the latest [MLIV Pulse survey](. What We’ve Been Reading This is what’s caught our eye over the past 24 hours. - Car loans for customers [who can’t repay](. - ICBC executives flown to the US to [contain hack fallout](. - An FTX employee wants his [$275,000 bonus](. - Unionized Starbucks workers plan their [biggest ever strike](. - Asset managers warn of [more failed trades]( in the US. - A [1962 Ferrari GTO race car]( sells for $51.7 million. - Los Angeles braces for a [traffic nightmare]( after a freeway fire. And finally, here's what Joe’s interested in this morning Hello and Happy CPI Day. As I've been writing lately, there's been a real shift in consensus toward the view that rate hikes are over and that cuts are now only a matter of timing. I'll get back to CPI in a second. But first check out this chart from Bank of America's latest fund manager survey. An overwhelming number of recipients see long-term rates heading lower next year. Not surprisingly, fund managers [have flipped to being bullish on bonds]( in a way we haven't seen since 2009. Ok, back to CPI. The expectation is that, on a headline basis, the number rises just 0.1%, whereas the core rises 0.3%. We've seen the tumble in gasoline prices, which will obviously weigh significantly on the main number. Of course the Fed and markets will look through that to various core and super-core measures that are expected to show a bit more heat. A chart put together by Bloomberg economists Anna Wong and Stuart Paul shows that while 2023 has generally been a year of disinflation, recent months have shown a halt to the progress made in core measures. Of course, the month-to-month trend is always going to be a bit noisy. But things could still get a little tricky. After today's number we get one more CPI reading (December 11th) before the next Fed meeting (December 13th). [As Omair Sharif of Inflation Insights noted in a recent interview](, it's very plausible that they walk into that meeting having seen four straight readings all rising at a faster rate than they're comfortable with. Obviously the data is TBD. And the widespread view is still that the hiking cycle is over, at least for the year. However, there's at least a possibility that things get a bit hairy between now and the end of the year in terms of the pivot and whether the Fed is ready to declare victory. Against a backdrop of the rush into bonds, and high conviction that long-term rates are going lower, there could be some interesting market tension on how things play out. As for today's number, obviously people are going to slice it and dice it into a numerous different measures. A big thing to watch, [as noted by Skanda Amarnath at Employ America](, will be the Owner's Equivalent Rent number, which everyone expects will prove to be a drag in the months ahead, but which showed a mini-spike in September. Various market measures of rent have showed weakness in past months, and so part of the question here is the degree to which that shows up more strongly in the official data. Follow Bloomberg's Joe Weisenthal on Twitter [@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. Follow Us Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. 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