Five Things You Need to Know to Start Your Day - Bloomberg

Afghanistan fallout continues, OPEC+ meeting, and supply-chain issues remain severe. 

Defense

President Joe Biden again defended the handling of the U.S. withdrawal from Afghanistan, saying the deadline was “

designed to save American lives.”  UN Secretary-General Antonio Guterres said 18 million people -- half of Afghanistan’s population -- needed humanitarian assistance to survive. Differences are already emerging in Europe over how to handle the expected influx of refugees from the country. In Kabul, the Taliban and other Afghan leaders are said to have reached a consensus on the formation of a new government.

Oil rise

OPEC and its allies are expected to agree to increase production by 400,000 barrels per day at today’s online meeting. The move would be a continuation of the process of rolling back production cuts introduced in the depths of the Covid-19 crisis. The organization expects supplies to remain tight through the rest of the year, before flipping to a surplus in 2022. Oil is trading slightly higher this morning ahead of the decision. Elsewhere in commodities, corn prices sank as damage from Hurricane Ida on export infrastructure in Louisiana raised concerns about crops with nowhere to go. 

Logistics 

Data from Europe this morning confirmed that problems in global supply chains seem to be  only getting worse. Factories in the region saw unfilled orders rise to a record level as logistical problems are proving more stubborn than previously expected. A report from Switzerland showed manufacturers are increasingly adjusting their supply chains to place more orders with European firms. In the U.S., there are big problems in just getting containers, and then a shortage of drivers to move them around the country. All of which is feeding through to the cost of finished goods, and inflationary pressure that is still seen as transitory. 

Markets rise 

Global equities are rising again today even as valuations remain extremely high. Overnight the MSCI Asia Pacific Index added 0.3% while Japan’s Topix index closed  1% higher. In Europe the Stoxx 600 Index had gained 0.6% by 5:50 a.m. Eastern Time with travel stocks among the best performers as the region hit its 70% vaccination goal. S&P 500 futures pointed to a move higher at the open, the 10-year Treasury yield was at 1.31% and gold was broadly unchanged.

Coming up... 

ADP Employment Change data at 8:15 a.m. is expected to show strong job growth in August. U.S. manufacturing PMI is at 9:45 a.m. with construction spending and ISM manufacturing at 10:00 a.m. Crude oil inventory data is at 10:30 a.m. Campbell Soup Co., Brown-Forman Corp. and Nutanix Inc. are among the companies reporting results. 

What we've been reading

Here's what caught our eye over the last 24 hours.

And finally, here’s what Justina’s interested in this morning

We’ve written quite a bit about monetary tightening in this newsletter. In Europe, we got a sudden dose of the theme this week. First, euro-area inflation rose more than expected. Then we got some hawkish comments from European Central Bank policy makers Klass Knot and Robert Holzman, who argued for phasing out stimulus. Meanwhile, bond issuance is also supposed to pick up after a summer lull.

Ten-year Bund yields duly spiked six basis points yesterday and have kept climbing today. The yield curve immediately bear steepened. Knot and Holzman are known hawks, so in a way their stances are not surprising. But the fact that inflation delivered a surprise and financial conditions are easing is tipping the scales somewhat. 

At ING, strategists pointed out that even the more centrist Vice President Luis de Guindos said he expects consumer prices to keep picking up and the recovery will continue to be “fairly strong” -- which might mean the idea of cutting asset purchases in the pandemic program is gathering momentum.

We’ve seen a big drop in euro-zone bond yields throughout the summer, so the sharp reaction so far is not surprising. But as my colleague Marcus Ashworth wrote in Bloomberg Opinion today, we’ve learned from the Federal Reserve that with the right messaging, a gradual reduction in stimulus does not have to lead to a massive rates selloff once traders are convinced tapering is disconnected from any rate hikes.

That seems the right tact at a time when just like in the U.S., there’s still much uncertainty over how transitory the inflationary pressures are and what the impact of the delta variant will be.

Follow Bloomberg's Justina Lee on Twitter at @justinaknope

Like Bloomberg's Five Things? Subscribe for unlimited access to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close.

Adblock test (Why?)

Five Things You Need to Know to Start Your Day - Bloomberg
Read More