Stocks flatline, crypto chugs higher ahead of today’s big CPI report

Good morning.

U.S. futures are trading sideways yet again. So much for that trillion-dollar infrastructure-spending bump. Investors are also unmoved by a $3.5 trillion Democrat-backed budget boost. Tough crowd.

Europe and Asia, however, continue to grind ahead with fresh gains as worries about the Delta variant begin to fade and the markets instead focus on overseas growth.

Speaking of momentum, the crypto rally shows no signs of slowing down. With Bitcoin pushing higher overnight, the big bulls are coming out again calling for—cough— BTC to hit $100,000.

Speaking of big price tags, we have the consumer price index report today, out before the bell. This will give investors a clearer picture of just how hot inflation is running. In today’s essay, I look at one of the big factors triggering those higher prices: a global supply chain in turmoil.

Let’s spin the globe, and see what’s moving markets.

Markets update

Asia

• The major Asian indexes are mostly higher with the Nikkei up nearly 0.6%.
• Über bull Cathie Wood sold off most of her firm’s China tech stocks last month at the height of Beijing’s latest regulatory crackdown, but she’s not closing the door on jumping back in.
• Early indications on global growth show the Delta variant isn’t slowing down the world’s major economies.

Europe

• The European bourses were in the green at the start with the Stoxx Europe 600 up 0.2% in early trading. After yesterday’s gains, the benchmark index is up 27.4% YTD, well outperforming the S&P 500.
• Healthcare, consumer goods and retail stocks lead the way higher today.
• Shares in Deliveroo fell 1% at the open after the food-delivery specialists delivered solid topline growth in the first half of the year. The stock soared earlier in the week on news German rival Delivery Hero had amassed a £284 million ($393 million) stake in the company.

U.S.

• U.S. futures are flat ahead of today’s big CPI report.
• Economists predict the report will show consumer price index climbed a further half-percentage point last month, pushing this closely watched inflation gauge to +5.3% year-on-year. The potential silver lining: inflation, it is believed, has peaked.
• The Dow and S&P 500 closed at a new all-time high on Tuesday after the Senate overwhelmingly approved a $1 trillion infrastructure bill (the amount of new spending will be closer to $550 billion) yesterday.

Elsewhere

• Gold is flat, trading around $1,730/ounce.
• The dollar is gaining ground again.
• Crude is up a touch with Brent trading around $71/barrel.
• Bitcoin adds to its impressive rally, trading above $46,000.

***

Supply pains

The other day I went to the local garden shop to pick up bamboo. Green-thumbs across the country use bamboo to construct simple, sturdy trellis systems for their lovely tomato patches. I had a different need. I wanted a few meters of bamboo rolls that I could fix atop the pergola to create a shady spot to write this newsletter in the morning, or to lunch al fresco.

The shop manager shook his head. Non c’è, he informed me. I was out of luck. There are all kinds of products that are on back-order, he explained, which nobody seems to be able to get their hands on. That even goes for bamboo, a plant that grows like a weed in some climates. I went to an artisanal lamp maker in Amandola, and heard the same thing there. In that case, it was a shortage of glass and steel that was messing with their production cycle.

This may be the summer of economic recovery, but it’s also the summer of supply chain woes. The backup can be seen on empty store shelves, or in car lots. And it’s a global phenomenon.

According to new Gallup data, a majority of American consumers have personally felt the global supply chain crunch. Three in five (60 percent) said that, in the past two months, they have been unable to secure a product on their shopping list. Nearly as many (57 percent) said they have endured a significant delay in getting the item they wanted.

These tiny little tales of consumer exasperation do add up. With supply chains in disarray, prices spike. We learned that lesson on Day 1 of “Introduction to microeconomics.”

The ripple effects can be felt across the economy. Businesses, for example, have to scramble, and get creative. They know the customer will shop around in times of scarcity, making consumer loyalty particularly fragile. This could be seen in a recent report by Umpqua Bank, which last week issued its annual business barometer.

They found supply chain issues to be one of the biggest headwinds facing small businesses, impacting their growth forecasts. One finding that stuck out: “88% of businesses polled cited at least some type of difficulty sourcing goods in the past 12 months with the most common reasons being increased prices and longer delays receiving goods,” the report found.

Higher prices. Lengthy delays. That sounds familiar.

***

Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com

As always, you can write to bullsheet@fortune.com or reply to this email with suggestions and feedback.

Today's read

Hackers just perpetrated what is likely the biggest heist ever in the world of DeFi—Fortune

Yelp lets customers find businesses requiring vaccinations, sparking negative reviews—Fortune

American travelers dodge the EU travel ban—for now—Fortune

Wall St banks forecast slimmer rise in Treasury yields this year—Financial Times

BioNTech Vaccine to Give German Economy Extraordinary Boost—Bloomberg

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