A look at the day ahead from Sujata Rao.
Inflation-watchers were greeted on Friday by news that Japan’s wholesale inflation had hit a record 9.0% in November, rising for the ninth straight month. The news sets the stage for the U.S. CPI release that economists expect at 6.8%, a level that would be the highest since 1982. Some even expect a headline number with a “7-handle”.
So jittery are Americans about inflation that President Joe Biden — facing mid-term elections next year — released a statement saying the data would not “reflect today’s reality” and price rises would soon subside.
In any case, the Federal Reserve looks almost sure to speed up stimulus unwinding when it meets next week — all the data indicates a robust economy and tightening labour markets, with Thursday’s weekly jobless claims sharply below predictions.
Even the Bank of Japan will discuss at next week’s meeting paring pandemic-time emergency funding, Reuters reported on Friday.
Unsurprisingly, economists polled by Reuters predict higher bond volatility ahead, though they also see 10-year U.S. yields ending 2022 around 2% – barely 50 basis points higher than now
U.S. Treasury yields are on track for their biggest weekly rise since March, following three weeks of decline. Equity markets are reasonably buoyant – while world stocks are set for the biggest weekly gain since March; European stocks are down though Wall Street futures are pointing north.
Meanwhile, bets on a UK rate hike next week should dwindle further after data showed a tepid 0.1% GDP expansion in October (0.4% was forecast), alongside sharp falls in manufacturing and construction
(Graphic: US CPI, https://fingfx.thomsonreuters.com/gfx/mkt/movanlqqepa/Pasted%20image%201636552297844.png)
Key developments that should provide more direction to markets on Friday:
-Fitch downgraded property developers China Evergrande and Kaisa, citing offshore bond default
-European Commission announced draft rules to give drivers for firms such as Uber and Deliveroo employee benefits
-ECB speakers: President Lagarde, board members Panetta, Weidman and Villeroy BIS head Carstens
-Final services PMIs everywhere
-Final German CPI
-U.S. CPI/University of Michigan sentiment and inflation expectations index
-Fitch to review Spain/UK ratings
(Reporting by Sujata Rao; editing by Karin Strohecker)
