Brent oil rises back over $100 as the Middle East conflict intensifies. Treasury yields rise, despite the expansion of a bond buyback. Markets now turn their attention to an expected European Central Bank (ECB) rate hike tonight.
In our deep-dive interview, ANZ Senior China Strategist Zhaopeng Xing looks at whether China’s latest changes to house sales rules can revive a flagging property market.
5 things to know in 5 minutes:
Brent is above US$100/barrel as the Middle East conflict intensifies. That has led to heightened inflation fears, lifting US Treasury yields. Longer bond yields rose even as the US Treasury tripled its buyback of less liquid long Treasuries. Fed hike expectations rose. Markets turn their attention to the European Central Bank’s rate call tonight. ANZ Economist Henry Russell expects a 25 basis point hike to 2.5%.
Henry says Europe’s inflation dynamics show no pass through of the oil price shock into underlying prices.
China’s CPI inflation rose to 0.8% year-on-year in August from 0.5% in July. Producer prices were up 3.8%, compared to 3.5% previously. ANZ Senior China Strategist Zhaopeng Xing says the domestic oil price was a key driver.
Zhaopeng says China’s inflation cycle will continue to be driven by the supply side, or cost-push inflation, rather than the demand side.
Taiwan’s CPI inflation was lower than expected in August. It eased to 2.4% from 2.5% in July. It had been expected to rise. ANZ Chief Economist for Greater China Raymond Yeung says the central bank has room to hold rates this month.
Cheers,
Bernard.
PS: Catch you tomorrow with that ECB rate decision and a look ahead to critical US inflation data on Friday night.
