How to Be a Warmonger by J. Powell

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SYDNEY – A preview of the day ahead in the European and global Wayne Cole markets.

So Tuesday’s bout of post-pandemic euphoria in Chinese markets has cooled today, perhaps an acknowledgment of how long it will likely take to significantly increase vaccination rates there.

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Even when restrictions ease, it will mean more infections and disease, which could hamper growth in the first half of next year. China’s disappointing November PMI surveys only underscore the damage already done.

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But markets also haven’t returned yesterday’s gains, so there’s clearly an expectation that Beijing is about to open, which must be positive for the global economy and supply chains as we go forward. time.

Which leaves investors waiting for Powell, again. Analysts say he will have to play Grinch to prevent US markets from easing financial conditions further. Since the Fed hiked 75 basis points on Nov. 2, 10-year yields have fallen 38 basis points and undone much of that good work.

So the message will probably be, « Hold your horses on the rate cuts folks. » The labor market is tight and inflation of 7.7% is not 2%. The terminal rate will have to be higher than expected to be sufficiently binding and to remain there longer.

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Whether he can be hawkish enough is another question as signs of a turning point in inflation mount. Here in Australia today, a new monthly inflation measure rose just 0.2% in October when some analysts expected a 1.0% jump. The annual pace slowed to 6.9% from 7.3% and suggests a peak is near.

This echoes inflation data from Germany and Spain which both surprised on the downside and saw markets pull 10 basis points off ECB rate prices at the December policy meeting. This suggests that today’s EU-wide inflation figure will be lower than the 10.4% forecast, even if the basic measures prove more rigid.

Key developments that could influence markets on Wednesday:

Federal Reserve Chairman Jerome Powell speaks on the economic outlook and the labor market ahead of a hybrid event from the Brookings Institution at 6.30pm GMT, including a question and answer session.

A horde of US data, including JOLTS job openings, ADP employment, Chicago PMI and the second estimate of third quarter GDP and PCE prices. (Editing by Stephen Coates)