With fears that the spreading COVID-19 would slow the economic recovery, it appeared the "reflation trade" narrative was unwinding after an April peak. But then the July's nonfarm payrolls report came in hotter than expected, adding 943K jobs vs. 900K consensus. That implies that the economy may be strong, for the Federal Reserve, enough to start tapering its assets purchases sooner rather than later.  Yields have moved higher, and commodity and financial stocks are outperforming again. 

The biggest wildcard for U.S. inflation over the next year doesn’t come from used cars or airline fares. Instead, it is housing.  Contributions from rising rents and home prices could partially offset anticipated declines. Economists at Fannie Mae said they expected the rate of shelter inflation to pick up from around 2% in May to 4.5% over the coming years—and higher still, if house-price growth doesn’t cool off soon.

Oil was hit with renewed selling pressure on Monday, falling below $70 a barrel and adding to last week’s steep losses on growing concerns about the Delta coronavirus variant sapping demand in Asia. China, the world’s biggest oil importer, is fighting its worst Covid outbreak since the start of the pandemic and has tightened travel restrictions and started mass testing in an effort to try to contain the virus.