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- Inflation fears prove transitory
Inflation fears prove transitory
When you're right, but still wrong. All about the timing... 😐
It was less Whiplash Wednesday, more Turnaround Thursday.
Either way, those inflation fears have subsided for now & the S&P rallied over 1% yesterday with every sector except energy notching gains...
Both Waller & Bostic have commented that they expect these price pressures to persist for a few months yet and Waller added the visual element by saying that he does not want to move too fast "chasing inflationary ghosts"...
He added that the Fed will not raise rates until they see inflation above target for a long time with the caveat that if there were 4% inflation, month-in month-out, he would be very concerned...
Asia Pacific stocks were mostly up Friday morning, with investors shifting their focus to value from growth companies as signs of a strengthening U.S. labor market calmed inflation worries
06:30 BST
The 'value' heavy Nikkei saw strong gains, as did Chinese indices and pretty much everything else.
Commodities are cooling off, and Chinese policymakers have the speculators in their sights
Chinese policymakers don’t give up easily. Premier Li Keqiang — at a Wednesday meeting of the State Council, the country’s cabinet — called on officials to effectively deal with commodity prices, and said better coordination of monetary policy would be crucial for doing so. Those comments, combined with data showing a slowdown in credit growth, pulled prices back during trading on Thursday.
📣 JAWBONE ALERT!!
Not seen much of this lately, but Macklem DID comment on CAD strength in his speech yesterday...
“If it moves a lot further that could have a material impact on our outlook and it’s something we’d have to take into account in our setting of monetary policy,”
“If the dollar were to continue to move -- particularly if its not reflecting good developments for Canada -- that could become more of a headwind on our export projection.”
Scotiabank analyst Derek Holt played killjoy:
“Macklem only said that if the currency were to appreciate absent fundamental reasons, then they’d be more concerned about competitiveness implications but that so far that’s not the case,”
CAD definitely weakened on the back of Macklem's comments and it will be something to keep an eye on going forward...
Looking ahead, U.S. retail sales will be the main focus today. Expectations are more reasonable after last months stimulus led gains...
Newsquawk: Analysts expect April's retail sales data will see a +0.2% M/M rise (from the prior +9.8%), the ex-autos measure is seen rising +0.8% M/M (from +8.4%).
Given that the March data was underpinned by a fresh round of stimulus checks, the cooling in retail sales is understandable.
The key debate ahead is how sustainable the consumer impulse will be: will consumers have front-loaded spending, and turn more cautious, or will they continue spending as restrictions are lifted.
Some analysts have been making the case that the rounds of stimulus checks, pent-up savings, and a normalisation of economic conditions will result in consumption picking up.
RBC's analysts say that as the reopening continues, it can see in the weekly credit card data that many of the sales sub-categories continue to push higher, and this dynamic is likely to support the 'retail control' measure (RBC sees +1.4% in April); the bank says Q2 consumer spending appears to be starting out on a strong footing.
The data is what you make of it, especially right now...
If retail sales miss, that's bad, the economic recovery is slowing already OR...it's just one data point, and tempers fears of economic overheating and Fed withdrawing stimulus.
If it's a beat, that's bad because stimulus could be withdrawn sooner ORit's good because the economy is recovering and people are spending again.
You can spin it whichever way you want...
The mid-cycle transition is a risk , but ultimately there is ample liquidity in the system with not many places to go so it's hard to be an equity bear...
