Marketmind: Peak inflation, seriously?

September 15, 2021

A look at the day ahead from Dhara Ranasinghe.

News that inflation came off the boil in the United States last month was a win for those in the “inflation is transitory” camp and markets cheered the news too. But not so fast.

Not only was relief in equity and bond markets short-lived but there are plenty of other signs that the inflation debate is far from over.

Take data out this morning in Europe showing 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.

Graphic: UK inflation surges – https://ift.tt/3Ca9vDl

And for some, Tuesday’s U.S. data perhaps masks the supply shortages and disruptions that are pushing up prices globally.

Michael Every, global strategist at Rabobank put it like this in a note: “You know where else used to have low reported inflation, but no goods on the shelves? It started with US and ended SR.”

In the meantime, investors have other concerns on their mind – notably further signs of a slowdown in the world’s number two economy.

China’s factory and retail sectors faltered last month with output and sales growth hitting one-year lows as fresh coronavirus outbreaks and supply disruptions took a toll.

Adding to China’s woes are nagging concerns about property developer Evergrande. Ratings agency Fitch is warning that numerous sectors could be exposed to heightened credit risk if the firm were to default on its debt, although the impact on the banking sector would be manageable.

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

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

– Apple’s new iPhone 13 touts faster 5G, sharper cameras to spur trade-ins

– Japan’s machinery orders rebound in sign of capex recovery

– Euro zone industrial output, employment, wages

– ECB Bond Market contact group annual online conference.

– ECB speakers: Board member Isabel Schnabel, chief economist Philip Lane

– Russian central bank’s governor, Elvira Nabiullina. Speaks at Russian banking forum

– Georgia central bank meeting

– NY Fed manufacturing index/US industrial output

(Reporting by Dhara Ranasinghe; editing by Julien Ponthus)

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