Period: 15 – 21 May 2021
Top news story: The main event of the week was the drop in real income of S&P 500 for the first time in 40 years:
The real return on revenue S&P 500 in per cent. Source: Bloomberg
At the same time, all of the inflation trends of the previous weeks were confirmed, moreover, there was a collapse of the main cryptocurrencies, which were treated as security assets. The only asset that has proven effective is gold:
Gold price chart (white) and its 200-day MA (yellow). Source: Bloomberg
Japan’s GDP returned to negative in the first quarter, falling 1.3% per quarter:
Japan GDP Growth Rate
PMI (Purchasing Managers' Index, less than 50 means decline) Japan’s service sector is the worst in nine months:
Japan Services PMI
CPI (Consumer Price Index) of the Euro Area (+1.6% per year) is the highest in 2 years:
Euro Area Inflation Rate
CPI of Canada (+3.4% per year) is at its highest in 10 years and approaching an 18-year peak:
PPI (Producer Price Index) in Japan (+ 3.6% per year) at its peak since 2014:
The British PPI (+ 3.9% per year) is the highest since 2018 and is close to the peak in 2011:
PPI in Germany (+ 5.2% per year) the highest since 2011:
PPI of South Korea (+ 5.6% per year) is also at its peak since 2011:
South Korea Producer Prices Change
Russia's PPI (+ 27.6% per year) is the highest since 2010:
Wholesale prices in India + 10.5% per year – the highest since 2010 and close to the peak since 1998:
The growth in house prices in China occurs at the maximum rate in 8 months (+ 4.8% per year):
China Newly Built House Prices YoY Change
Prices for new housing in Canada + 9.9% per year – the peak since 2007:
Canada New Housing Price Index
The number of new buildings in the United States slumped by 9.5% per month due to high prices and weak supply (that is, buyers do not purchase what is already in stock on the market):
United States Housing Starts
Market sentiment in Turkey is close to record low:
Turkey Consumer Confidence
Employment in Australia suddenly dropped:
Australia Employment Change
Given that Australia is a major supplier of raw materials to world markets, this is a rather bad symptom.
The Central Bank of China left monetary policy unchanged, as did the Central Bank of South Africa.
Summary: As expected, the pattern of last week has not changed – inflation is rising, the economy is falling. However, the United States data in the previous review show that the inflation rate will be quite long and strong. And in the rest of the world, the situation is similar for the reason that we all live in a dollar world, and because the United States is the world’s biggest consumer.
The collapse of cryptocurrency, following statements by Elon Musk and the Chinese authorities, testified that the asset may be of interest to speculators, but is extremely dangerous to ordinary investors who do not welcome such volatility and risk. And if Musk is likely to have engaged in pure speculation, then China’s leadership cannot be blamed. All the more interesting against this backdrop is gold, which has been growing steadily in recent weeks, which speaks to its high potential as a security asset.
There is no doubt that, in general, at long intervals, the gold will grow in earnest. But the fact that the gold has withstood the last week, despite the complexities of speculative attacks on it, suggests that it can be seriously seen as a defense against inflationary threats for several months.
In general, one can note that the general perception of threats in financial markets is increasing and, in theory, one should be prepared for all kinds of troubles even before the summer holidays.
We wish readers of our reviews a happy weekend and a fruitful work week!