No 671 - The tough and volatile road ahead

　　原创

　　BANDSFinancial

　　磐石金融有限公司（ BANDS Financial Limited ）在香港注册成立，是一家持有香港证监会（SFC）2号牌照的期货经纪公司，业务涉及中国以外全球大部分活跃期货及期权市场。

　　There is a faint whiff of “yeah, we knew about it” in the reporting overnight as pundits struggle to maintain that they are unsurprised that the US CPI inflation rose to 4.2% year-on-year, and well above market expectations of 3.6% and last month‘s print of 2.6%. Indeed, much of the overnight commentary is looking to choose its own facts, (if you excluded X or Y data point it’s not so bad,) But I would like to remind them, life is not lived in a bell jar, the man in the street feels prices in their totality, and probably feels that 4.2% is underreporting. Used car prices have risen 20% in the first four months of 2021 as US car production is compressed due to a shortage of semiconductors. Rising rental costs, reflecting the 12% rise in house prices YoY are yet to filter into the data numbers. So there is plenty of potential for the CPI to rise further.Fridays US non-farm surprised alarmingly, detailing how few people had entered employment, and it is true that employers are competing with the high unemployment benefits which cause workers to stay at home. But one must suspect US employers will have to offer significantly higher wages as potential employees require wages to pay their rising bills and will not be content with levels from 2019.So, the Fed will have to stare down 4.2% inflation and potentially higher levels in coming months repeating their “its only transitory” mantra. For markets that will be a tough and volatile road.It is a road that will become increasingly difficult if any of the recovering economies, and there are a few, break with the Fed and start to move their sympathetic expansionary monetary policies from support at least to neutral. The downward pressure on the dollar could be intense, leading to further imported inflation.Of course, here in China, Beijing planners have not just tapped on the brakes, they have pressed the pedal to the floor. “China remains firmly in the credit downcycle” is one headline, as my favourite data point, Total Social Financing surprised on the downside, Falling to RMB 1850 billion in April from RMB 3340 billion in March and below forecasts of an already tapered RMB 2250 billion.Tonight, we have US PPI, last at 4.2% expected at an elevated 6.1% any higher and the markets may have a tough time maintaining their poiseHave a good day

　　Joh