US markets surged overnight. Buoyed by generally good earnings, the Dow closed above 14,000 for the first time, up on the day by 0.4%. (To show the fickleness of equity markets, Google released its results after the market closed. Profits were up by 28% — this was apparently disappointing, and its shares dropped almost 8% in the “aftermarket”. Gadzooks!)

Aussie markets should be up today, but the big news comes from China. Today’s story is that the Chinese central bank is about to tighten monetary policy again. Interest rates are expected to rise (for the third time this year) and bank reserve ratios are to be raised (for the fifth time this year).

All this is because China’s goods and services inflation is rising rapidly. Also, until recently, China’s equity markets have been rising almost vertically — an extreme case of asset inflation.

As we have said, this is of global consequence and adds to the case for another rate rise here.

Read more at Henry Thornton.

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