Peak inflation, really? By Reuters

A look at the day that awaits us from Dhara Ranasinghe.

The news that inflation came out of the boil in the United States last month was a victory for those in the “inflation is transitory” camp and markets also applauded the news. But not so fast.

The relief in the stock and bond markets was not only short-lived, but there are many other signs that the inflation debate is far from over.

Pull out this morning’s data from Europe showing that British inflation hit a more than nine-year high last month after the biggest monthly jump in the annual rate in at least 24 years.

Chart: UK Inflation Spikes:

And for some, Tuesday’s US data may mask supply shortages and disruptions that are driving up prices globally.

Rabobank global strategist Michael Every put it this way in a note: “You know where else inflation used to be low, but there are no products on the shelves? It started with the United States and ended with SR.”

Investors meanwhile have other concerns on their minds, particularly more signs of a slowdown in the world’s second largest economy.

China’s factory and retail sectors staggered last month with production and sales growth hitting year-long lows as novel coronavirus outbreaks and supply disruptions took their toll.

Adding to China’s woes are lingering concerns about developer Evergrande. The rating agency Fitch warns that many sectors could be exposed to higher credit risk if the company defaults on its debt, although the impact on the banking sector would be manageable.

Asia equities are down, equities futures suggest European equities will open slightly lower, although on a positive note for Wall Street, U.S. equities futures are trading in positive territory.

Key developments that should provide more direction to the markets on Wednesday:

– Apple’s new iPhone 13 (NASDAQ 🙂 touts faster 5G and sharper cameras to stimulate tradeoffs

– Japan machinery orders rebound as capex recovery

– Industrial production, employment, wages in the euro zone

– Annual online conference of the ECB bond market contact group.

– ECB speakers: Council member Isabel Schnabel, Chief Economist Philip Lane

– The governor of the Russian central bank, Elvira Nabiullina. Speak on the Russian banking forum

– Georgia central bank meeting

– New York Fed Manufacturing Index / US Industrial Production.

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