M Update Global Macro Commentary | Global January 12Morgan Stanley & Co. LLCMartin W Tobias, CFAStrategist Martin.Tobias@morganstanley.com +1 212 761-6076 Zoe K StraussStrategist Zoe.Strauss@morganstanley.com +1 212 761-0407 Eli P CarterStrategist Eli.Carter@morganstanley.com +1 212 761-4703 Lenoy DujonUS/Canada Economist Lenoy.Dujon@morganstanley.com +1 212 761-2779 Morgan Stanley & Co. International plc+Marie-Anais C FrancoisStrategist Marie-Anais.Francois@morganstanley.com +44 20 7425-1877 Morgan Stanley MUFG Securities Co., Ltd.+Koichi SugisakiStrategist Koichi.Sugisaki@morganstanleymufg.com +81 3 6836-8428 Morgan Stanley Asia Limited+Min DaiStrategist Min.Dai@morganstanley.com +852 2239-7983 Soft PPI lowers core PCE forecasts; USTs twist-steepen, front-end rally persists; lower front-end US real yields weigh on USD/JPY; European rates bull-steepen, implied ECB cuts rise; ECB's Lane talks data, cuts; TWD slips before Taiwan elections; DXY at 102.44 (+0.1%); US 10y at 3.939% (-2.7bp).• Soft healthcare services and airfares in PPI lead to lower estimates for December core PCE inflation, a release in line with our economists' forecast brings 3-month annualized core PCE to 1.5%. • USTs twist-steepen in a continuation of a rally led by the front-end; benign inflation data leads STIR markets to price in almost seven 25bp Fed rate cuts this year.• Further declines in front-end US real yields weigh on USD/JPY (-0.3%), which slides below 145.• European duration bull-steepens sharply as OIS markets imply 150bp of ECB rate cuts this year.• ECB Chief Economist Lane says rate cuts "will come to the forefront" only when "we have developed sufficient confidence that we are firmly on our way back to 2% inflation."• TWD slips 0.1% against USD, ahead of the presidential and primary elections on Saturday.The next Global Macro Commentary will be published on Tuesday, January 16. Please refer to our recent publications and collaborations (Government Bond Auction Pipeline: The Month Ahead; EM Strategy: Fiscal Risk Premia Update; EM Fixed Income Flows Update: Where Supply Meets Demand; Global Fixed Income & ESG Strategy: ESG-Labeled Debt Quarterly Tracker; Podcast | The Global Macro Guide: January 12). The main G10 central bank events in the week ahead are the release of the Federal Reserve’s (Jan 17) Beige Book and Accounts from the December ECB (Jan 18) meeting. Selected scheduled G10 speaking engagements include ECB Governing Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as only a single factor in making their investment decision.For analyst certification and other important disclosures, refer to the Disclosure Section, located...
