A look at the day ahead from Julien Ponthus

That the practicalities of minting a U.S. trillion-dollar coin are actually being debated says a lot about the zeitgeist of this final day of Q3 2021.

The idea of Treasury Secretary Janet Yellen raising $1,000,000,000,000 using a single coin in order to prevent a default sounds like a fairy tale, akin Tolkien’s Mordor-minted creation from Lord of the Rings. However, the potential for a U.S. default has begun to filter into asset prices.

The truth is that the response of central banks to the COVID-19 crash in the market has not been consistent so far. They continue buying securities at a rate of tens or billions per month despite rising energy prices, shortages, and an above-trend economic growth.

Talking of fairy tales: this week’s bond and equity selloff seem to point to the end for Goldilocks. This is when markets are able to thrive in an environment that allows them to grow and prosper with inflation and not too hot, not too cold economic growth.

Global yields are rapidly rising. The MSCI gauge of stocks around the world lost nearly 1% in the last quarter. Portfolio managers are shifting quickly from tech and growth stocks to financial and energy shares that are more likely to thrive when inflation is present.

China’s slowdown has been sinking into reality.

Recent data shows that China’s manufacturing activity declined unexpectedly in September as a result of lower electricity consumption and higher input prices.

Equity markets have been rising, with Asian shares outside Japan increasing by about 0.5%. While the dollar has risen to a new all-time high of $1.01 billion, oil prices are down a little.

The futures of Wall street and European bourses are moving higher.

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

— China manufacturing unexpectedly shrinks, services offer support

— China Evergrande shares swing as bondholders await word on payments

— Japan’s factory output extends declines on car production cuts

–UK economy bounced back by more than thought in Q2 before slowdown

— Cost inflation to dent Boohoo’s full year margins

— Diageo (LON:) sees boost to margins as bars, restaurants open

— UK Q2 GDP/current account

— US Q2 final GDP/weekly jobless/final core PCE