China's decision to suspend various rare earth exports in April continues to wreak havoc in key supply chains around the world, especially in the automotive industry. Some European auto parts factories have suspended production.

In terms of economic data, the US "stagnation" alarm is unlikely to be loud on Wednesday.

The numbers show that our private sector job growth in May was the slowest in more than two years, which could be an ominous signal of Friday’s non-farm wage report. At the same time, the service industry signed a contract for the first time in nearly a year, and the investment price paid by enterprises has reached the highest in two and a half years.

If the gold price takes the prompt from the "fume" of these numbers, the bond market takes the prompt from the "bucks" side of the equation. Treasury bond prices are strong, with 10-year yields lowering their biggest drop since mid-April.

Trump used weak economic data to enter social media and repeated his call for Fed Chairman Jerome to "too late" Powell to lower interest rates and complained that "Europe" has lowered interest rates nine times.

If he refers to the European Central Bank, it is not very accurate. The ECB has lowered seven times since June last year, but is expected to account for eight times on Thursday.

Bank of Canada took a leaf from the Fed’s book on Wednesday, decided not to lower interest rates and chose to wait to see what the impact of U.S. trade policy is. It says if the economy is slow enough, it may require a cut.

In addition to the ECB, the biggest marketing campaign on Thursday could be China's "unofficial" service division PMI report in May. Signs of newer weakness may be a hint of a “risky” tone to the world market on Thursday, although Wednesday’s evidence suggests that is not guaranteed.

Dissolution is greater than inflation

Investors, consumers and policy makers may reasonably worry about the ghost of tariff inflation later this year and beyond, but for the moment, strong global firing forces are under pressure.

The OECD said on Tuesday it expects the G20 economy's collective annual headline inflation to 3.6% from moderately 6.2% last year, further cooling to 3.2% in 2026.

The OECD believes the United States is a "significant exception" with inflation rising to less than 4% later this year and staying above targets in 2026.

Although U.S. annual PCE consumer inflation cooled to 2.1% in April, and was the slowest in four years, in fact, consumer inflation expectations were the highest in decades in the Fed’s 2% target. As a result, the Fed suspended its easing cycle, with U.S. bond production higher than most of its G10 peers.

Goldman Sachs economists shared the OECD view that U.S. inflation will reach nearly 4% this year, with tariffs accounting for about half of that. Many others agree that the United States seems to be the exception, not the rule.

China and the eurozone, the world's next two largest economies, have tried to avoid disintegration. Deepening the trade and financial ties between the two may only exacerbate these forces, thus causing prices to rise.

The ghost of deflation

The eurozone's annual inflation rate fell to 1.9% in May, below the European Central Bank's 2% target, essentially a drop in another quarter of the pace later this week. There seems to be more relaxed and relaxed.

As Nomura points out, inflation swaps are priced at least as low as possible for the next two years. This combined with weak growth due to U.S. tariffs and China’s elimination pressure could force the ECB to lower its 50 basis points to 1.5% in September.

Of course, China's war on deflation is well known to investors, but given its protractedness, it seems to have been out of their collective radar.

China's last annual inflation rate exceeded 1% two years ago and has remained on average since then. China's 10-year bond yields remain below a record low of 1.60% in January, reflecting investor suspicion that price pressure will accelerate soon.

They have reason to doubt. Beijing's fiscal and monetary stimulus efforts since September, deflation and record bond yields continue to hamper the economy. The punitive tariffs impose exports on one of the largest export markets in the United States, creating huge uncertainties on the country's economic outlook.

reer-view mirror

This is where exchange rates become important. On the surface, Beijing appears to resist growing pressure on the dollar so far, with onshore and offshore yuan trading at close to its strongest levels last week since November.

But when the broad effective exchange rate (REER) of the element is considered, its measurement of its value to a basket of currencies is adjusted by inflation, the weakest since 2012. Robin Brooks of the Brookings Institution believes it could be less than 10%.

Because Chinese goods are so cheap in the global market, China is essentially exporting deflation. The relative weakness of the yuan may put pressure on other Asian countries to weaken their currencies to remain competitive, even if the Trump administration may encourage these administrations to do the exact opposite.

Countries in Asia and around the world, especially in the euro zone, may also be concerned that China may dump goods that previously depend on the United States in its markets.

If anyone wants to confirm that “equal inflation in tariffs” is too simple, they have recovered from Switzerland this week, and potential negative interest rates may not be far behind.

Indeed, Trump’s threatened tariffs could bring everything to the surface. But the example of Switzerland is a warning to markets and policy makers that global dissolution forces may be spreading.

Can the market be transferred tomorrow?

*Australia Trade (April) *South Korea GDP (Quarter 1, revised version) *China Caixin Services PMI (May) *European Central Bank Interest Rate Decisions *Canadian Trade (April) *Canadian PMI (May) *U.S. Weekly Jobless Claims *U.S. Trade *U.S. Trade (April)

The opinions expressed are the opinions of the author. They did not reflect the views of Reuters News, which is committed to integrity, independence and freedom from prejudice under the principle of trust.

(Edited by Jamie McGeever; Nia Williams)