Yeah, so this afternoon the Fed will almost surely hike and folks will be looking for answers to a whole lot of questions. The full preview is available here, but one thing you should note is that traders will be watching CPI and retail sales first and indeed, those prints may end up dictating the direction of the dollar and yields more so than the Fed depending on how anti-climactic Yellen turns out to be.

“Most investors expect policy makers to stick to their view of at least another hike before year end, yet greater focus will be placed on balance sheet communication. Should imminent normalization be highlighted, the dollar could face headwinds as the next rate hike will be pushed further down the curve, unless the Fed clearly underscores that this doesn’t alter its dot plot,” Bloomberg wrote this morning, adding that “the main risk event for the dollar could be seen before the monetary policy decision, as inflation and retail sales data are due.”

But before we focus on the Fed, let’s talk about something else.

Ok, like what?

Let’s say, China.

China??!!

Yes, China.

Where industrial output rose more than estimates and retail sales came in-line last month. Here’s the data deluge:

• China May Industrial Output Rises 6.5%; Est. 6.4%
• National Bureau of Statistics reports figures; survey ests. range 6.0%-7.0% (41 economists)
• Fixed-asset investment excluding rural households up 8.6% y/y in Jan.-May; est. 8.8% (range 8.6%-9.2%, 38 economists)
• May retail sales rose 10.7% y/y; est. 10.7% y/y (range 10.3%-11.7%, 41 economists)
• Jan.-May private fixed asset investment rises 6.8% y/y

That’s no too shabby considering the circumstances.

“Property curbs started to take a toll on investment growth. Other than that, the readings are quite good. Industrial output is growing relatively quickly, and consumption remains robust,” said Gao Yuwei, a researcher at Bank of China Ltd.’s Institute of International Finance in Beijing. “The second quarter in general shows signs of stabilization.”

And if you know anything about China (“China?!”), you know that stability is the name of the game.

“While policy has been tightened over the past couple of months, and nominal growth has begun to slow from its very rapid pace earlier in the year, there is no evidence of a severe slowdown in real activity growth so far,” Goldman adds. “This contrasts with the experience during the 2012-early 2016 period when growth would dip significantly almost immediately after the policy stance turned less supportive.”

We also got the all-important credit data:

• China’s May New Loans 1.11t Yuan; Est. 1t Yuan
• New yuan loans forecast range 690b yuan to 1.2t yuan from 33 economists
• May aggregate financing 1.06t yuan; est. 1.19t yuan (range 776b yuan to 1.99t yuan, 29 economists). April 1.39t yuan
• May M2 +9.6% y/y; est. +10.4% (range +10% to +11%, 36 economists). April +10.5%

We’ll have more on that later, but you’ll note that as the PBoC squeezes the shadow complex, generally what you want to see is new RMB loans holding up while TSF kind of drifts. That would indicate that the credit bubble is deflating while loans to the real economy are still stable.

Meanwhile, crude fell, extending losses incurred after Tuesday’s bearish API data. The catalyst for further weakness came from the IEA report we got overnight. Here are the highlights from that:

• New oil supplies from OPEC’s rivals will be more than enough to meet demand growth next year, International Energy Agency says in report.
• U.S., Brazil, Canada and other non-OPEC producers to increase production next year by most in 4 years
• OECD stockpiles might not fall to the desired level until close to the expiry of the OPEC- led agreement on cuts in March 2018
• Global oil demand growth to accelerate next year to 1.4m b/d and surpass 100m b/d for 1st time in 4Q
• Non-OPEC supplies to grow by 1.5m b/d in 2018, driven by strong U.S. crude output
• Demand for OPEC crude to drop ~200k b/d to 32.6m b/d in 2018
• OPEC pumped 32.1m b/d crude in May
• Oil inventories in developed nations are 292m bbl above their 5-year avg; inventories have increased by ~360k b/d this yr
• U.S. Oil Supplies to Surge in 2018, Exceeding Expectations: IEA
• U.S. total oil output for 2017 revised upward by 90k b/d, to 13.1m b/d
• Looking ahead to 2018, “the outlook for U.S. oil supplies has materially changed since the start of the year”
• Producers “increasing spending more sharply than originally thought” and pace and duration of additional rigs, new drilling “has exceeded all expectations”

As you can see, pretty “supply-ish.”

That of course comes on the heels of the latest OPEC report which showed (hilariously) that output rose to a six month high just as the cartel was extending the cuts.

“We had the API numbers yesterday going higher, then we have the IEA where the market seems to be focusing on the projected supply growth from North America next year,” Jens Pedersen, senior analyst at Danske Bank said, adding that the question now (as is the case every week), is whether the EIA data due this morning back up the API numbers.

Brent fell to $48.02 a barrel while WTI dropped to an intraday low of $45.72 by 9:06am in London after the IEA report hit when one-minute volume hit day-highs on both grades, 3.1k lots for WTI, 1.1k lots for Brent.

There were more fun comments out of Qatar overnight. Doha is now calling the Saudi-led sanctions a “siege.” Further, Qatar doesn’t need your goddamn humanitarian aid, because they’ve made other arrangements for trivial things like “food and medicine”. Here are those headlines:

• The move by Gulf nations to sever diplomatic and economic relations with Qatar and close land, sea and air access is an “illegal siege” and not a “boycott,” state-run Qatar News Agency reports, citing director of information office at the ministry of foreign affairs.
• “Siege aimed at putting the State of Qatar, its citizens and residents under pressure to achieve political purposes”
• Qatar “completely rejects linking its name with false allegations on financing of terrorism or even claiming its failure to fight terrorism”
• Says Qatar won’t take similar measures against other Gulf nations “despite the fact that these accusations have been internationally proven against many persons and entities carrying the nationalities of these countries according to the United lists of terrorist organizations and individuals”
• Says Qatar doesn’t need food or medicine relief, and has taken all steps to obtain food and other items

The Stoxx Europe 600 Index rose again with tech stocks leading the way for the second day following Monday’s rout. The FTSE rose as well, but lagged European shares on a stronger pound.

Here’s a snapshot of global equities:

• Nikkei down 0.08% to 19,883.52
• Topix down 0.1% to 1,591.77
• Hang Seng Index up 0.09% to 25,875.90
• Shanghai Composite down 0.7% to 3,130.67
• Sensex up 0.2% to 31,177.15
• Australia S&P/ASX 200 up 1.1% to 5,833.90
• Kospi down 0.09% to 2,372.64
• FTSE 7542.05 41.61 0.55%
• DAX 12892.83 127.85 1.00%
• CAC 5305.68 43.94 0.84%
• IBEX 35 10910.20 28.10 0.26%

And here’s the docket for the US:

• 8:30am: US CPI MoM, est. 0.0%, prior 0.2%
• 8:30am: US CPI Ex Food and Energy MoM, est. 0.2%, prior 0.1%
• 8:30am: US CPI YoY, est. 2.0%, prior 2.2%
• 8:30am: US CPI Ex Food and Energy YoY, est. 1.9%, prior 1.9%
• 8:30am: US CPI Core Index SA, est. 251.6, prior 251.2
• 8:30am: US CPI Index NSA, est. 244.9, prior 244.5
• 8:30am: Real Avg Weekly Earnings YoY, prior 0.34%
• 8:30am: Real Avg Hourly Earning YoY, prior 0.4%
• 8:30am: Retail Sales Advance MoM, est. 0.0%, prior 0.4%
• 8:30am: Retail Sales Ex Auto MoM, est. 0.1%, prior 0.3%
• 8:30am: Retail Sales Ex Auto and Gas, est. 0.3%, prior 0.3%
• 8:30am: Retail Sales Control Group, est. 0.3%, prior 0.2%
• 10am: Business Inventories, est. -0.2%, prior 0.2%
• 2pm: FOMC Rate Decision (Upper Bound), est. 1.25%, prior 1.0%
• 2pm: FOMC Rate Decision (Lower Bound), est. 1.0%, prior 0.75%