Asia | Bitcoin & Crypto | FX | Monetary Policy & Inflation | US
Charts of the Week: ‘Complicated and Grave’
- By Matthew Tibble
- 2 min read
This article is only available to Macro Hive subscribers. Sign-up to receive world-class macro analysis with a daily curated newsletter, podcast, original content from award-winning researchers, cross market strategy, equity insights, trade ideas, crypto flow frameworks, academic paper summaries, explanation and analysis of market-moving events, community investor chat room, and more.
Summary
- Things are ‘complicated and grave’ in China.
- Vegetable oil gets pricey.
- Stablecoins get unstable.
- The BoE expects (very) high inflation.
China’s Flight Departures Slump
The zero-Covid strategy continues to suppress Chinese flight departures as Premier Li Keqiang warned of a ‘complicated and grave’ employment situation. Meanwhile, some Beijing stores have started to close, and American businesses in China are pulling investment and revising lower their revenue projections. It comes as China recorded 21 high-risk areas (all in Beijing), up from 12 last week. Departures from Beijing fell 24.3% WoW (Chart 1). Our Flight Tracker report captures more.
On Rising Prices: Vegetable Oil
Alarmingly, and possibly a sign of things to come, vegetable oils jumped 25-35% to near all-time highs (Chart 2). Vegetable oils are a key component of food consumption for more than half the world’s population. Ukraine and Russia account for 80% of global exports of sunflower oil. By one estimate, global sunflower oil supply is expected to fall 25% this year and could drop further depending on the course of the war.
Indonesia has responded by imposing a ban on exports of palm oil to control domestic prices. Indonesia accounts for about 60% of global exports of palm oil. John Tierney explores more.
Stablecoin Terra De-Pegs
Crypto is having a hard time of late (bitcoin has plunged 20% since the Fed meeting a week ago). Stablecoins are looking particularly vulnerable. The currency pegs of countries have been prone to break when the Fed raises rates. Already, we are seeing the USD-HKD peg face pressure. In crypto land, the Terra stablecoin appears to be the first major victim. It should trade at 1:1 with the US dollar. But it has recently de-pegged and continues to trade below par (Chart 3). The Luna foundation has stepped in to try to stabilise the coin. Our latest BTC update explores more.
BoE Inflation Expectations Rise, by a Lot
The Bank of England hiked 25bp at the latest MPC meeting, but with more votes for 50bp than expected. In the forecasts, as expected, the near-term inflation outlook was significantly increased in the wake of recent CPI outturns, the likelihood of a further Ofgem price cap rise in October, and the continued tightness in the labour market.
However, the rise was much greater than expected. Economists are currently looking for Q4 inflation around 7-8%, but the BoE has set a path that would leave it above 10% (Chart 4). Our BoE Review explores more.