Investors are waking up to a big problem in big China. Stock futures and oil prices drop after angry protests against the zero-coronavirus swept the country.
“This is a surprisingly powerful new distraction for the markets when this week should have been all about incoming US data,” sums up the strategists at Saxo Bank. Watch companies with exposure to China, they say, “given forward earnings are likely to be downgraded following further lockdowns and protests in China”.
Before China grabbed the spotlight, weekend sales, jobs and inflation data due this week, as well as comments from Federal Reserve Chairman Jerome Powell, were the biggest focus.
Other questions are running now. Do China-related declines in oil prices lend to the theory of peak inflation? And what about China’s economic renaissance post-COVID?
on our site call todaywho says it It’s time for long-term bonds Due to inflated sticky food prices – thanks to China. It comes from Russell Clark, a former hedge fund manager who has spent the last 20 years focusing on that market and total selling and short selling.
He points out that investors have been harvesting the iShares 20-Year+ Treasury ETF
TLTAnd the
A liquid exchange-traded fund that buys long-term bonds, even as U.S. inflation soared to its highest levels in 1970.
I think the reason people get bullish is because the yield curve has inverted. And every time that happens, you have a recession and you want to get out of stocks and bonds,” Clark says. A yield curve inversion occurs when long-term interest rates fall below short-term rates. The inversion of 2- and 10-year Treasury yields has been at its most intense Since the eighties.
Evidence may lie in the weak performance of the bond market in Japan. “Not only was it prescient in driving US bond yields lower from 1999 onwards, but in 2020 the Japanese government bond market was also prescient in signaling future US Treasury sell-offs,” he says.
What Japan probably sees as American investors are not now is Chinese-driven food price inflation. He said this is something the Fed will find hard to ignore.
Since the 1980s, food commodity prices have followed higher crude commodity prices, and if the Fed wanted to lower that, it would raise interest rates. For example, lower natural gas prices
NG00
It would help ease fertilizer costs for farmers.
Clark points out that China is the world’s largest food importer, with prices much higher than the United States
“Pork, which is the most consumed meat in China, is now three times more expensive than the US market, and has recently doubled in price. Since Japan is also a large pork importer, this may have been the reason why JGB’s market sold out before the US.”
Beef is also a major import for China, and yes, prices are much higher than in the US
“In essence, I’m saying that China is exporting food inflation to the rest of the world, and I don’t see that ending at the moment. The JGBs and I seem to agree — and when I look at the US food CPI value on a logarithmic basis, I keep thinking about Interest rates go up, not go down,” Clark said.
He sees food inflation as secular, rather than cyclical, due to the demands of an increasingly civilized China. “Secular food inflation means political pressure to raise interest rates. US Treasury bonds seem to be short to me, just as everyone else is long.”
markets
Stock futures
ES00
Fall back, treasury revenue
BX: TMUBMUSD10Y
and oil
CL
They also fall out. Japanese Yen
US dollar / Japanese yen
See some safe haven offers. Hong Kong Hang Seng Index
Hong Kong: HSI
It closed down 1.5%.
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uproar
It appeared that a fire in an apartment building in a closed city killed ten people protests across China, calling on President Xi Jinping to step down and stop the zero-COVID policies. BBC reporter He was caught and beaten. Meanwhile, the closure means that Chinese farmers Destroy crops that they cannot sell.
And similar unrest in Zhengzhou, China’s Foxconn
TW: 2317
The factory is expected It caused a deficit of 6 million apple
AAPL
iPhone Pros this year.
Pinduoduo shares
PDD
Rising after the China-based mobile phone market Earnings and revenue reported.
MGM Resorts
MGMAnd the
Las Vegas Sands
LVS
Wayne Resorts
where
The highest in the premarket after Macau Temporarily renew their casino licenses.
Retailers in focus yet Online black friday sales It topped $9 billion, which is a record. This is as some are wondering if it is Cyber Monday still nothing.
St. Louis Federal Reserve President James Bullard will Sit down for an interview with MarketWatch Monday at 12 noon Eastern time. New York Federal Reserve Bank President John Williams addresses the Economic Club of New York at the same time. Powell will speak from the Fed on Wednesday, along with several other Fed officials this week.
A busy data week kicks off on Tuesday with home price indices and consumer confidence data. GDP, the personal consumption expenditures price index for October – a preferred measure of the Fed and employment data for November – also in play this week.
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random readings
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“Gaslighting” is Merriam Webster’s Word of the year. Later.
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