This Is What Stagflation Looks Like
What’s in Today’s Report:
- This is What Stagflation Looks Like
- Yield Curve Chart: The Steepening Trend Is Stalling
U.S. futures are lower this morning amid new regulatory threats for Chinese tech companies, while Delta variant concerns linger and traders look ahead to fresh U.S. data.
Chinese regulators proposed a new set of rules for internet and technology companies overnight which once again triggered a wave of selling in Chinese markets, specifically in big cap tech names.
Economically, the Eurozone GDP flash met estimates while U.K. wage growth hit a new record in July the latest evidence that stagflation may be an emerging economic trend (more on that in today’s edition of the Report).
Looking into today’s session, there are two notable economic reports due out in the U.S. this morning: Retail Sales (E: -0.2%), and Industrial Production (E: 0.5%).
As has been the case recently, investors will be looking for data that is good enough to suggest we are not falling deeper towards a stagflationary environment but not so strong that it pulls forward expectations for tapering QE (the key to reading the data will be to monitor the reaction in the yield curve; we want to see steepening).
Finally, Fed Chair Powell will speak as part of a virtual town hall event at 1:30 p.m. ET this afternoon and the markets will be looking for any new clues as to the Committee’s taper plans/views of the economic recovery. For now, a continued, slightly dovish stance remains the best case scenario for stocks as another hawkish “tilt” would likely spark a run higher in yields, potentially weighing on broader equity markets.
