Macroeconomic & Geopolitical

Stagflation Fears Send Markets an Early Fright

October 2021 – 3 min read
The upward surprise in U.S. CPI and rising oil prices led markets to pull forward rate hike expectations, leading to flattening in the U.S. yield curve. Moreover, higher breakevens and lower real yields suggest markets are increasingly concerned about stagflation in the U.S.


Arrows indicate consensus forecast compared to the previous period. Local dates of release.


  • We will watch Markit flash PMIs for October to see if declining COVID cases are supporting the service sector and to gauge any disruptions from supply constraints.
  • Earnings season continues next week. Consensus expectations for Q3 S&P 500 earnings seem low compared with elevated company guidance.


  • October flash PMIs should be lower than September numbers in Germany, France, and the U.K., following ongoing supply chain disruptions and COVID regulations.
  • The U.K. Consumer Price Index is estimated to be high for September. We will watch the effect of the global supply squeeze, increasing gas and coal prices, and the BoE’s response.

Asia Pacific

  • China 3Q21 GDP will likely moderate further, with risks tilted to the downside, given a quarterly rise in cases, bad weather, tightening regulations, and energy shortages.
  • China activity data should show the impact of energy constraints on production and a relaxation of mobility measures since August.

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Bonnie David


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