US Inflation, Pandemic and Evergrande

10 нояб. 2021 г.

The Federal Reserve Bank of New York recently published the results of a poll, in which it presented the main threats to financial markets in the horizon of the next year and a half. In the first place is the problem of inflation and tightening of monetary policy, in the second - the pandemic and new strains of the virus, in the third - the problems of the development sector in China.

It should be noted that so far each of the three key problems tends to worsen.

Take inflation, for example. Yesterday's data on the growth rate of producer prices in the United States showed that inflation is at its highest level over the past 11 years (8.6% y / y). Today the figures on consumer inflation will be published, but they are unlikely to show a breakdown of current trends. That is, the inflationary spiral is unwinding. But the Fed, we recall, continues to ignore this.

The second most important problem is that the pandemic also generally does not think to disappear. Infection rates in Germany rose sharply to their highest level since the start of the pandemic. The situation is similar in Greece, and Denmark plans to reintroduce some restrictions to stem a new spike in Covid-19 cases.

As for the third problem - the development sector in China, everything is also bad here. Even the Fed is worried about potential financial contamination from China's problems. Evergrande, meanwhile, is selling everything that can be sold in order to get money in hand, because today it is necessary to pay the next overdue payments with a total volume of under $ 150 million.And another Chinese developer Kaisa yesterday walked with an outstretched hand in front of bankers and members of the State Council of China.

In general, the optimism of the markets is, of course, understandable, but the reasons for sales are actually a wagon and a bogie.