Inflation data and government bond auctions are approaching, global assets are facing a direction of choice.

This week, the global financial markets will face a crucial "inflation test". Several data points related to US price pressures will be released intensively, and at the same time, the US Treasury will also hold two important bond auctions. These factors combined will pose a serious challenge to the recent global stock market rally. The "inflation week" officially began on Monday. The latest inflation expectations survey by the New York Fed shows that respondents expect an inflation rate of 3.2% in the next 12 months, lower than the 3.6% of the previous month, marking the first downward adjustment since October last year. This "soft data" releases some positive signals. However, the focus of the market will be on the "hard data" to be released on Wednesday, the US Commerce Department's May Consumer Price Index (CPI). According to FactSet's forecast, the overall CPI year-on-year rate is expected to rise from 2.3% in April to 2.5%; the core CPI, excluding food and energy, is expected to rise from 2.8% to 2.9%. In addition, the Producer Price Index (PPI) for May will be released on Thursday, with market expectations of an annual growth rate of 2.6%, slightly higher than April's 2.4%. The University of Michigan's Consumer Inflation Expectations survey will take the stage on Friday. Market volatility risks have intensified as the Federal Reserve has entered the "quiet period" before the interest rate decision meeting next week, during which officials are not allowed to make public comments. This means that despite the unexpectedly strong non-farm payroll data released last Friday, stimulating concerns about inflation resurgence, there will be no officials making verbal guidance this week. Jay Woods, Chief Global Strategist at Freedom Capital Markets, warned that if the CPI data exceeds expectations and shows a sustained inflation trend, it "will pour cold water on this stock market rebound." This may force the Federal Reserve to delay rate cuts, or even reconsider raising interest rates to achieve the 2% inflation target. In fact, the current stock market rebound is impressive. The MSCI Global Index hit a historic high on Monday, and the S&P 500 Index also broke through 6000 points in early trading, rebounding by over 20% from the low point of the "Liberation Day" on April 8th. In the bond market, investors should also closely monitor this week's US Treasury auctions. The Treasury will begin issuing a total of $97 billion in three-year and ten-year bonds starting Tuesday, followed by $22 billion in thirty-year bonds on Thursday. The yields on the ten-year and thirty-year bonds are currently close to key levels, with the former nearing 4.5% and the latter approaching 5%. Market subscription rates will reflect investors' judgments on inflation risks and expectations for the Trump administration's fiscal policy. The Senate Finance Committee is expected to release revisions to the Republican tax legislation this week. The bill is expected to increase the federal fiscal deficit by an additional $2.4 trillion over the next decade. The current 10-year U.S. Treasury yield is 4.478%, up 12 basis points from last week; the 30-year yield is 4.951%. Giuseppe Sette, co-founder of Reflexivity, pointed out that "the bond market has recently become the focus of the market, especially after the heavy fiscal bill last month attracted widespread attention." If this week's inflation data falls short of expectations, or if tensions between China and the US ease, it may lead to a rise in the bond market and a decline in yields, providing support for portfolios sensitive to macro narratives. Chris Larkin, trading director at E*Trade, a subsidiary of Morgan Stanley, said that while inflation data this week will affect market sentiment, the latest developments in US-China trade negotiations may play a more crucial role in the coming weeks. He said, "Against the backdrop of generally weak economic data last week, the stock market continues to rise, indicating that investors have a tolerant attitude towards moderate economic slowdown." However, "if there are no major surprises in the inflation data, market sentiment will quickly turn to the progress of US-China negotiations."