- Inflation data front and centre: digesting China CPI and PPI, awaiting US CPI and weekly jobless claims, Brazil IBGE IPCA inflation; modest run of central bank speakers, busier day for corporate earnings; UK, German, Portuguese and US govt bond auctions
- China PPI; energy and mining raw materials drive PPI to 25-yr high, but pass through to consumer durables still largely non-existent
- China CPI: still very subdued despite higher than expected outturn, largely due to food price base effects and petrol prices; nothing for PBOC to fret about
- US CPI: re-opening, autos and other consumer durables price pressures likely to augment housing and energy pressures, base effects adverse
EVENTS PREVIEW
Inflation data dominates the day’s data schedule via way of the overnight China CPI and PPI, and less significantly Norwegian CPI, while ahead lie US and Brazilan consumer prices, with US Initial Claims getting an early release due to tomorrow’s Veteran’s Day holiday (Govt and bonds only), and Russia’s advance Q3 GDP reading also due. A quieter day in terms of central bank speakers talking about policy issues (BoE’s Tenreyro & Riksbank’s Breman). A busy day for corporate earnings features amongst others: NTT, Continental AG, E.On, EDF, Infineon, Norilsk Nickel, Siemens Eenergy and Walt Disney, while there are govt bond auctions in UK (I-L 10-yr), Germany (10-yr), Portugal (10 & 16-yr) and the US (30-yr). Brazil’s IPCA IBGE inflation (CPI) is seen posting another strong m/m rise of 1.06%, that would see the y/y rate climb to 10.5% from 10.25% and per see still leaving “real” BCB offical rates (7.75%) deeply in negative territory, and still suggesting further aggressive tightening. Otherwise the focal point will be the sharp setback (initially down ca. 7.0%) in ICE (Europe) NatGas prices, as flows from Russia resume after a hiatus. As much as this will be some welcome relief, it hardly resolves the underlying grid problems in many countries, and much depends on how the European and Asian winters pan out – a repeat of 2020/21 long and very cold winters would unleash another wave of price pressures.
** China – October CPI and PPI **
– It will be the much higher than expected PPI reading (13.5% y/y vs. expected 12.3%, Sept 10.7%) which attracts attention as energy and mining related raw materials prices continue to climb sharply, Mining 66.5% y/y, though the consumer goods element remained very weak at 0.6% y/y (vs. Sept 0.4%), above all Durable Consumer Goods (-0.1% y/y). Per se it is little wonder that Chinese authorities continue to look to intervention measures to quell very pronounced PPI pressures (highest in 25 years). As much as CPI jumped (1.5% vs. forecast 1.4%, Sep 0.7%), it was largely due to a combination of petrol prices (31.4% y/y) and Food Price base effects (-2.4% y/y vs Sept -5.2%), which will ensure that the PBoC continues to stick with a steady policy path signal, even if Non-food prices (2.4% y/y vs. prior 2.0%) prove to be a little stickier than most had been expecting, with Food Price base effects set to continue until early next year.
** U.S.A. – October CPI **
– Base effects and energy price pressures will be the key drivers of an expected y/y jump in US CPI, with headline seen up 0.6% m/m pushing the y/y rate to 5.9% y/y from 5.4%, the highest since 1990, while core CPI is seen up 0.4% m/m to push the y/y rate up to 4.3% from 4.0%, but still just shy of June’s 4.5% cyclical high. While energy and housing were the key contributors to September CPI, and will again feature in today’s report, autos (both new and used) and renewed re-opening pressures (hospitality, travel) and pass through pressures from supply chain and logistics to consumer durables and non-durables will likely also be very noticeable (Finished Goods ex-Foods PPI rose 1.8% m/m, 17.8% y/y), imparting some upside risks for both headline and core. Eminently a 6.0 handle on headline CPI would beg a lot of questions about the Fed’s transitory narrative, though whether markets are really in any mood to put the Fed’s feet to the fire against a backdrop of continued financial repression is doubtful.
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ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
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© 2021 ADM Investor Services International Limited.
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