Inflation risk dawns on equity investors

<p>Kia ora,</p><p>Welcome to Wednesday's Economy Watch where we follow the economic events and trends that affect New Zealand.</p><p>I'm David Chaston and this is the International edition from Interest.co.nz.</p><p>Today we lead with news equity market investors are waking up to the risk inflation will have to asset values.</p><p>But first in the US, there was more evidence overnight of a strong jobs market with <a href="https://www.bls.gov/news.release/jolts.nr0.htm" target="_blank"><strong>job openings</strong></a> reaching an all-time high in the latest March data. There is a growing a gap between open positions and workers willing and able to take those roles.</p><p>Perhaps a reflection of the much better jobs situation, Americans are <a href="https://www.wsj.com/articles/credit-card-debt-keeps-falling-banks-are-on-edge-11620725580?mod=hp_lead_pos3" target="_blank"><strong>paying off their credit cards</strong></a> at the fastest rates in years.</p><p>But their Federal government isn't following suit. There was another very large UST debt auction overnight, this time for their <a href="https://www.treasurydirect.gov/instit/annceresult/press/preanre/2021/R_20210511_2.pdf" target="_blank"><strong>3yr note</strong></a>. It was well supported raising US$89 bln from the $171 bln bid. The Fed was allocated US$31 bln of it. The median yield was 0.3% pa and that compares to the 0.35% at the <a href="https://www.treasurydirect.gov/instit/annceresult/press/preanre/2021/R_20210412_1.pdf" target="_blank"><strong>prior equivalent event</strong></a>.</p><p>US <a href="http://www.redbookresearch.com/8702.html" target="_blank"><strong>retail sales</strong></a> in early May are still showing positive gains on a year-on-year basis, good ones month-on-month.</p><p>In Germany, economic sentiment among businesses <a href="https://www.zew.de/presse/pressearchiv/ausblick-deutlich-verbessert-1" target="_blank"><strong>improved markedly</strong></a>, reaching its highest level since 2000. That is not to say current conditions are gr