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MORNING BID-A saucerful of data

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·2 min read
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A look at the day ahead from Saikat Chatterjee.

World stocks are set to register their biggest weekly drop in 2-1/2 months after this week's economic data stoked inflation fears in the United States and the prospect of earlier-than-expected monetary policy tightening.

A blowout reading on U.S. wholesale prices and jobless claims on Thursday followed Wednesday's data showing a stunning jump in consumer inflation. Inflationary pressure is undoubtedly building in the United States as vaccine rollouts bring economic normalisation but the jury is out on whether it will be a lasting change or merely transitory.

Fed speakers including the Richmond Fed's Thomas Barkin and the St Louis Fed's James Bullard offered up soothing words to the effect that no policy shifts were imminent. That has helped reverse some of this week's steep market losses, with U.S. and European shares set for stronger opens after a firm Wall Street close.

But signs of nervousness are palpable; market volatility gauges such as the VIX -- Wall Street's "fear gauge" are holding near March highs.

The dollar too, despite a small pullback overnight, is poised to close the week with healthy gains, especially against the yen. U.S. retail sales due later on Thursday may decide whether the dollar punches above the 110-yen level that will mark a two-month high.

Also global bond yields have eased - 10-year German borrowing costs have retreated from two-year highs for instance -- but inflationary concerns remain at the forefront with 10-year U.S. breakeven inflation rates comfortably perched near eight-year peaks.

It's also been a big week for cryptocurrencies. Bitcoin is holding just below $50,000. Smaller rival dogecoin meanwhile jumped as much as 20% after Tesla’s chief Elon Musk tweeted that he was involved in work to improve the token's transaction efficiency.

With the earnings seasons in cooling mode, the focus is shifting to the red-hot SPAC market with British technology investor Ian Osborne raising 400 million euros via a SPAC listing in Amsterdam

Finally pandemic news is less than reassuring, with Singapore announcing the strictest curbs on social gathering since easing a COVID-19 lockdown last year while the number of infections in India climbed above 24 million in India.

Key developments that should provide more direction to markets on Friday:

U.S. Retail sales, industrial production

ECB April meeting minutes

University of Michigan consumer sentiment Index for May