Where Are We Headed?
This weekly is on the early side and I am wary of what Friday brings, especially as the debt ceiling saga gives rise to further bond market volatility.
Bond yields have fallen back to their lower end. Bonds have been gaining again and developed market central banks are continuing to say that price pressures are just transitory – despite recently admitting that current inflation will be transitory for longer. There have been a couple of major, but contradictory, factors that have been a big driver on markets.
Firstly, there has been much talk and some action out of China to quash rising commodity prices. This has helped to create a sell-off in commodity prices. Commodity prices are usually correlated to growth, however, and growth figures are being revised upwards, not downwards. Also, some see the “talking-down” by authorities as a sign they are nervous about inflation.
Secondly, there has been a subdued pick up in jobs. This raises the argument that the return-to-work theme will be slower than anticipated and that slack persists. Job ads in the US, for example, are staying up longer and longer as companies struggle to fill them, despite offering some substantial upfront incentives ranging from $3,000 to $30,000.
The US is not alone in its labour shortages – it is hitting the EU, UK and Australia too. Economies that are reliant on tourism and hospitality are struggling to find workers at a time when tourists are returning. Ordinarily, young workers would be ready to fill these jobs, but many blame the current system of welfare benefits acting as a disincentive to return to work
Electric vehicle sales continue to rise with 11% of the 11.6MN cars registered in the EU, Iceland, Norway and UK in 2020 either a EV or Hybrid. This is a tripling in new car sales share.
Officials from OPEC+ and Russia met on Thursday to decide whether to hike (in August) or hold (till September) oil output. Whilst Russia is leaning to hiking, Saudi Arabia remain cautious and the collective failed to reach an agreement as yet.
In the UK, Chancellor Rishi Sunak has spelt out the first signs of its vision for a post-BREXIT financial services that involves changing a slew of rules inherited from the EU.
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