Breaking News
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Today’s Theme: Inflation

By MarketPulse (Jeffrey Halley)Market OverviewMay 11, 2021 05:59AM ET
Today’s Theme: Inflation
By MarketPulse (Jeffrey Halley)   |  May 11, 2021 05:59AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items

Markets again concerned about inflation

And just like that, we’re back to financial markets schizophrenic flirtation with inflation. Not enough meds have been ingested clearly because all the talk was of ebbing inflation fears after Friday’s mammoth Non-Farm Payrolls miss.

Yet overnight, the inflation ghoul reappeared as US yields moved higher, and Technology, stocks were hammered as cyclical rotation once again moved to the Dow Jones.

Some mentions have been made that the Colonial Pipeline cyberattack could lead to a spike in fuel prices, pushing up, you guessed it, inflation. That is nonsense, of course. Only a prolonged shutdown would show up in the data, and parts of the system are already being bought back in line.

To be sure, we have some inflationary hurdles this week, notably in the US, where official inflation is released tomorrow, followed by 10-year and 30-year auctions. However, if the JOLTs Job Openings for April come in much lower than the forecast 7.5 million jobs, I expect the inflationistas to breathe easier once again.

That is not to say that I am now dismissing the inflation threat. What is most interesting about the price action overnight is how quickly the inflation theme has remerged. Precisely one day, in fact, after a very deflating US jobs number on Friday. A very dovish set of comments from Chicago Fed Evans were also ignored.

Inflation nerves just won’t go away. I continue to maintain that the power of the commodity price rally and the expected GDP growth in the US is inconsistent with US 10-year yields remaining at 1.50%, despite the liquidity ocean looking for a home, and whether or not the inflation is transitory or not.

The falls overnight on equity markets, notably technology, are likely to be just as much due to extended shorter-term valuations and nervous investors than to inflation prospects. Goldman Sachs may also be partially responsible, publishing a report on technology stocks highlighting that regulatory risks are the biggest threat to the big-tech story.

Readers will know I have alluded to the same theme before; although I do not consider myself a Master of the Universe and don’t consider lunch is for wimps, it’s nearly as important as breakfast. But Goldman’s moves markets, though, as evidenced by their bullish commodity report yesterday and early Asia rallies in the space.

Asian equities, particularly North Asia, opened much lower today after the fall by the NASDAQ overnight. I will stick my head out and say the NASDAQ fall bears monitoring. The index closed below its upward 14-month support line overnight, the first time since the lows in March 2020. It also closed below its 100-day moving average (DMA), another warning sign.

The NASDAQ needs to recapture 13,350.00 tout suite or a substantial correction lower on the cards, targeting the 200-DMA around 12,500.00. The S&P 500 and Dow Jones look much healthier by comparison, with their March 2020 support lines still far from present levels. Cyclical rotation, anyone?

On the inflation theme, China’s Official Inflation and PPI data came in almost bang-on expectations today. Inflation YoY for April rose 0.90%, while PPI YoY for April rose 6.80%. The latter reflects the rise in oil prices, commodities and other inputs.

But whether this translates to higher factory gate prices from China is another thing altogether. That’s not been the case in the past, but maybe this time it will be different?

Philippines GDP disappointed yet again as COVID-19’s eternal lockdown and swine flu in the pork industry torpedoed growth once again. GDP YoY fell 4.20%, lower than the -3.0% forecast but better than the previous -6.8% fall.

Indonesian Retail Sales fell by -14.60% YoY in March, distorted by base effects but highlighting that domestic demand remains crimped even as exports recover. Again, that is a slight improvement over the previous -18.1% print. The best that can be said is that the Philippines and Indonesian data is improving a very low base.

That reflects most of ASEAN, with vaccination programs proceeding at a snail’s pace and leaving them vulnerable to COVID-19 waves, and tourism sectors in a deep freeze. Nevertheless, with high beta to the cyclical recovery, assuming all go well, and starting from a low base, ASEAN markets remain my favorite recovery trade.

On the theme of COVID-19, Malaysia also releases GDP today and is expected to show the same trend as the Philippines. Negative but recovering a low base. However, that is likely to be drowned out by the announcement yesterday of a dramatic tightening of Movement Control Orders across the entire country for the next month.

Like Thailand, COVID-19 cases have been spiking in Malaysia, prompting government action. Indonesia also has a bullet to dodge, having cancelled Eid-based movement for two weeks by air, sea and land. A large portion of the ASEAN recovery rests on how the next two weeks play out across the region with COVID-19.

Otherwise, the data calendar is strictly tier-2 across Asia and Europe today, with the German ZEW Economic Sentiment Index only passing interest. Investors will be more interested in whether the equity sell-off deepens and broadens, or if this is another wax-on, wax-off day with the gnomes of Wall Street deciding that inflation isn’t such a worry tomorrow after all.

Watch the US JOLTS Job Openings and the ISM New York Index for April, though. With the street on inflation-alert again, high prints could deepen the technology sell-off.

Original Post

Today’s Theme: Inflation

Related Articles

Marc Chandler
FOMC: Words Not Actions By Marc Chandler - Jun 14, 2021 1

The Federal Reserve's Open Market Committee meeting is the most important event in the week ahead. It is not that it will take fresh policy action. Rather, its observations about...

Today’s Theme: Inflation

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email