| Inflation pressures, China crackdown and Democrat tax plan. Inflation concerns seem set to dominate markets this week, with U.S. data tomorrow in focus as traders continue to adjust their expectations about the timing of stimulus withdrawal. On the raw-materials side, the price pressures are becoming increasingly hard to ignore with aluminum hitting the highest level in 13 years. Oil is back above $70 a barrel this morning. Producers are pushing the higher prices through to consumers as they battle with the increased costs of raw materials, shipping bottlenecks and rising labor expenses. China tech shares dropped once again after a report in the Financial Times said the government intends to break up Ant Group Co.'s Alipay business. The country's top regulator warned internet firms against blocking links to rival services and a member of the People's Bank of China's monetary policy committee said China should curb tech monopolies to ensure growth. Amid the tech crackdown, President Xi Jinping is urging members of the ruling Communist Party to act more boldly when necessary.  | House Democrats have drafted a package of tax proposals which falls short of President Joe Biden's ambitions. The lower increases in corporation tax, to 26.5%, and capital gains tax, to 25%, reflect the difficulty in keeping party moderates on board the ambitious spending plan. In the Senate, where one defection would derail the president's $3.5 trillion economic package, lobbying is focusing on Joe Manchin. The senator from West Virginia has already cast doubts on the timeline Democrats are pushing, saying he doesn't see the urgency. With markets in the West waiting for U.S. inflation data and those in the East keeping a close eye on the latest Chinese moves the week is off to a bit of a mixed start. Overnight the MSCI Asia Pacific Index slipped 0.5% while Japan's Topix index closed 0.3% higher. In Europe the Stoxx 600 Index had added 0.4% by 5:50 a.m. Eastern Time with energy companies and utilities among the biggest gainers. S&P 500 futures pointed to a move higher at the open, the 10-year Treasury yield was at 1.333% and gold rose. The U.S. August budget statement at 2:00 p.m. is the only economic release of note today. Oracle Corp. and MaxCyte Inc. report results. The SALT conference opens in the New York, while in Las Vegas, the rise in commodity prices is likely to be a hot topic at the MINExpo event. Here's what caught our eye over the weekend. Last week, Representative Brad Sherman told the WSJ "I want a labor market so tight that you don't even have to cover up your tattoos to get a job. I want employers camped out in front of my office begging for my help in how to hire people getting out of federal prison." This is a good line. But also it's a good idea.See right now, we know the Fed wants to achieve something resembling full or maximum employment. But nobody has any real objective way of knowing what it looks like when we get there. So despite last year's broad framework review, we still basically operate in a Phillips curve world, where the rate of inflation is the gauge we use to tell whether we're at max capacity or not. The thinking is, if inflation is too hot, the economy is at max capacity and so maybe rate hikes are called for. Unless of course the inflation is "transitory" or related to supply chain bottlenecks or reopening. In that case, it doesn't count, and it's not a signal of full employment. But as I wrote last month, you're always going to have this problem. Whether the unemployment rate is 5.2% (as it is now) or 3.5% (as it was before the pandemic), you can never really be certain that inflation is related to a tight labor market, or whether it's about something exogenous, like supply chain disruptions or oil. There's always going to be a story to tell either way. Ultimately, if you really want to know when we're at max employment, it may make sense to ditch the inflation speed limit altogether, and just try to observe the labor market directly. Seeing evidence that people aren't covering up their tattoos anymore or employers are camping out in order to hire people getting released from prison may be the better guide to know we're there. Follow Bloomberg's Joe Weisenthal on Twitter at @TheStalwart Like Bloomberg's Five Things? Subscribe for unlimited access to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. | 
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