Inflation expectations highest since 2008

Didn't end well last time

Note: no newsletter on Tuesday.

Chart of the Day

After a pause over the summer, market-based inflation expectations for the US are once again on the rise. Investors are now pricing in inflation of 2.78% on average for the next five year, the highest since before the global financial crisis. Given that earlier period didn’t end so well, there are perhaps some more policymakers getting concerned about the situation. We’ll find out what the Fed thinks about all this at its next meeting in November.

Macro

The Fed will be disappointed by the non-farm payrolls data. the US added just 194,000 jobs in September. Canada, with a population one-tenth of the size, added 157,000 and has now regained the Covid-related losses.

One reason the Fed might not be that worried is it was public sector jobs weighing on the total, with the private sector looking better.

Japan's economy watchers survey is still below its pre-Covid norm, as the country continues to struggle and now faces downside risks from the slowdown in China.

Markets

US yields rose despite the weak jobs number.

With inflation expectations rising, real yields have dropped back.

Equity markets have yet to regain their losses from a couple of weeks ago, ending Friday in the red.

India and Russia have been gaining ground against other equity markets.

The dollar has taken a pause at its current relatively high level, edging down on Friday as yields rose by less in the US than elsewher.

For EM FX, Turkey and Brazil have been doing much worse than other countries.

Like what you see? Please forward this email to your friends and colleagues, or use the button below to share it on social media. They can also follow us https://twitter.com/macro_daily