AM Notes: Inflation Panic Day

Markets still on an aimless wander...

Overnight data

Australia's NAB business survey was resoundingly positive

  • Business conditions rose to a record high in March, driven by strong increases in all subcomponents - which are all now also all at record highs

  • The strength in conditions is evident across all states and industries. Forward orders – which also rose to record levels – points to ongoing strength in activity with the pipeline of work rising further

  • While business confidence edged lower in the month, it remains at a high level, suggesting that firms themselves are optimistic that the strength in activity will continue. Alongside the strength in activity, capacity utilisation rose further in the month and is now well above average

  • Encouragingly, capacity utilisation is at or above pre-COVID levels in all industries except for rec & personal services – which unsurprisingly is still impacted by pandemic related restrictions

  • Taken together, the strength in conditions alongside high levels of capacity utilisation, point to an economy that is continuing to grow at a relatively healthy rate as we transition through the wind-up of the JobKeeper program and beyond

 Interesting that the retail sector has the highest surveyed (current) conditions but the lowest surveyed confidence in the future - speaks to the boost to household incomes being transitory and the risks around that for spending #ausbiz pic.twitter.com/ll5pUl6EM0— Alex Joiner (@IFM_Economist) April 13, 2021 

China’s exports rose at a slower pace than expected in March even as global demand remained strong, while imports surged on the back of rising commodity prices.

Exports climbed 30.6% in dollar terms in March from a year earlier, customs data showed Tuesday, lower than the 38% median forecast in a Bloomberg survey of economists. Imports jumped 38.1%, leaving a trade surplus of $13.8 billion for the month, well below the $52 billion expected.

(Reuters) Official and private manufacturing surveys in China pointed to robust growth, with export orders returning to growth amid improving foreign demand.

However, many analysts believe exports could lose some momentum in the short term and the advantages of orders transferred from other countries due to coronavirus-related disruptions will begin to abate.

Yesterday's treasury auctions went well: about as boring as the general market...

 US 3-Year Notes Sale:

- High Yield Rate: 0.376% (prev 0.355%)

- Bid-Cover Ratio: 2.32 (prev 2.69)

- Direct Accepted: 15.8% (prev 18.2%)

- Indirect Accepted: 51.1% (prev 47.8%)

- WI: 0.378%— LiveSquawk (@LiveSquawk) April 12, 2021 

The $24 billion 30 year auction at 6PM this evening should follow suit...

Right, lots on the calendar today: German wholesale prices, UK GDP, IP & trade data are all for February, well out of date but worth keeping an eye on GBP to see if any Brexit trade relief filters through on the headline 👇

 ICYMI, latest German and French data suggest that UK exports to the EU (ONS figures are out next Tuesday) bounced back strongly between January and February.

Probably still down on the same month a year earlier, but that was pre-Covid... (1/2) pic.twitter.com/3Ia6ph0Ny0— Julian Jessop (@julianHjessop) April 9, 2021 

Story in the FT this morning highlighting that French companies are also being hit hard by Brexit & pain from the EU-UK trade deal has not only been felt by British businesses and consumers - No Shit Sherlock

More than three months after the introduction of the UK’s new trading relationship with the EU, the damaging consequences of non-tariff barriers have become all too clear for many British companies reliant on exports to the bloc’s single market.

Perhaps less well documented has been the impact on businesses and consumers in the EU and in particular France, one of the UK’s closest trading partners.

'Perhaps less well-documented' = We didn't publish it because we were too busy Brexit-bashing the UK...

A pickup in trade is a sign that companies are adapting to the new processes -  perhaps we can start looking forwards instead of backwards now...

Germany's ZEW is far more current, although even this probably hasn't factored in the latest restrictions, and the German industrial machine is holding up well enough...  

Consensus expectations are for the sentiment reading to come in at 79 with current conditions at -53, both of which would be improvements on the previous reading...

The Dax is usually sensitive to this release...

Then we get the big one... U.S. inflation data

Nomura: “Year-ago base effects will start leading US core CPI higher (13 April; cons 1.6% YoY; prev: 1.3%), which should be largely expected and likely managed again by Fed Chair Powell (Speaking on 14th).”

Goldmans: "If bond markets can look through a stronger-than-expected Core CPI result as well, rate volatility may begin to come down, opening room for Dollar shorts vs EUR and potentially other crosses."

Tim Duy (SGH/FedWatch): "Watch for the persistent factors that will drive underlying inflation like shelter costs and discount the temporary factors like used car prices."

That last one seems to make a lot of sense, right?

Unfortunately, even shelter costs are suffering from the dreaded base effects as this chart from Nordea shows:  

12th Feb 

A few Fed speakers lined up at a 'racism and the economy' event later in the day, could see some comments hit the wires...