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- Yields Recover, Sydney Lockdown & Chinese Inflation Miss
Yields Recover, Sydney Lockdown & Chinese Inflation Miss
Well that was fun while it lasted.
The US 10 year is now yielding 1.33%, well up from the 1.25% low yesterday.
US equities are basically flat and the yen has weakened overnight, USDJPY trying to recapture that 110 handle.
Jimmy always gets straight to the point 👇👇👇
Sorry I meant 4230-4250 https://t.co/pAdLke40LH— James Jude (@Jimmyjude13) July 8, 2021
The speed of the move in yields in the absence of news flow did strike me as strange...
If growth concerns are truly the main driver and there were genuine fears that real yields would return to a deeply negative level (and stay there) then gold should be much stronger, to my mind at least... 👇
10 Year Real Yields (inverted) vs Gold
That said, China will be an ever-present concern as their credit impulse slows and de-leveraging takes effect...
ICYMI yesterday 👇
Asian equities are mainly red, although off the lows.
Hang Seng bucking the trend as the dip in Tencent has attracted buyers...
07:22BST
The Delta variant is back in the news...
Mary Daly (SF Fed President) gave an interview to the Financial Times, cautioning against the premature removal of monetary support for the US economy, especially with low vaccination rates putting constraints on the the economic rebound in many countries.
“In the United States the news has been pretty positive, but the global news hasn’t been all that positive,” Daly said. “It’s been good but it hasn’t been terrific. Markets respond to those things, and that can of course lower yields because they’re pricing in the risk there.” She added: “What you’ve seen is an increasing sense of the downside risk to the global economy.”
“I think there’s always this excitement that ‘Oh my gosh: look, the vaccinations are working, this could be the end’. But it would be premature to say that we’ve achieved a victory here.”
Daly is known as one of the more dovish members, but the these comments should still help manage expectations for the Federal Reserve to rush rate hikes.
In Australia, the low vaccination rates are leading to more restrictions in Sydney:
Whilst the government looks to speed up the vaccine rollout
44 cases sounds like nothing, (especially when compared to the UK for example), but case numbers in Australia have remained relativiely low throughout the pandemic due to border closures and swift lockdowns, so very low portion of the population have antibodies via contacts or vaccinations.
For contrast:
@naufalsanullah
South Korea is also re-imposing restrictions...
China's CPI & PPI data
June PPI +8.8% y/y vs May's more than a decade high of 9.0%
June CPI +1.1% y/y vs +1.3% poll, +1.3% in May
Pork prices, a key component of China's CPI, have been on the decline in recent months, driving a drop of 1.7% in food prices. Concerned about tumbling pork prices, authorities late last month also announced plans to buy pork for state reserves.
Core inflation, which strips of volatile food and energy prices, stood at a mild rate 0.9% in June, unchanged from May, a potential source of concern for policymakers as it suggests underlying demand remains weak.
"In our view, the elevated PPI inflation reading is the result of supply side constraints, so we expect Beijing to turn to easing measures – rather than tightening – to contain the surge in raw materials prices and support growth," said analysts at Nomura.
"The low CPI inflation reading, though largely driven by slumping pork prices, also provides space for Beijing to ease."
China’s commerce ministry said on Friday it expects retail sales in the 14th five-year plan period, from 2021 to 2025, to grow by an average of 5% a year, amid a push by China to expand domestic demand to drive growth.
That compares with an average annual growth target of around 10% set in the previous five-year plan period. Trade in goods is expected to grow by 2% per year, the ministry added, in a notice posted online.
Foreign investment into China will be 'scrutinised more closely' for national security...
And in the U.S. more Chinese companies will be added to the blacklist...
Very light calendar today, with ECB Minutes the errr highlight...
Bailey & Lagarde will be speaking on digitalisation, while G20 finance ministers and central bankers are meeting in Venice.
The High-Level Tax Symposium is up first.
First England reach the final of the euros and now this. Too much excitement for one week...