El Erian asks: When is stimulus too much stimulus? The Fed needs to think about how to start winding down its printing presses or the possible USD 4 tn in fiscal stimulus proposed by the Biden administration risks rising inflation and blunting the central bank’s policy toolkit, Allianz chief economist Mohamed El Erian writes for the Financial Times.

Endless liquidity helps stave off corporate bankruptcy but it brings risks of its own: Expectations for a surge in inflation risks steepening the yield curve and increasing market volatility. And with monetary policymakers hesitant to turn off the taps, the Fed could find itself in a lose-lose position: “let the risk of financial instability rise and threaten the real economy or intervene further in the functioning of markets … and risk more distortions that undermine efficient financial and economic resource allocations,” he writes.

The answer? El Erian doesn’t suggest reneging on fiscal stimulus efforts, but to find a way for the Fed to back off its injections of liquidity, currently running at USD 120 bn a month. How this will be possible he doesn’t say, though he does point out that the task would be easier if regulators got serious about managing the risk building in the non-bank financial sphere.

Chinese financing for overseas energy projects has shrunk to its lowest level since the global financial crisis due to negotiation barriers caused by covid-19 and difficulties with loan repayment, Bloomberg reports. Boston University figures show state-owned financing institutions in China have already scaled back loans to developing countries by some 43% last year as they grapple with recessions that have made repayment all but impossible. Chinese lenders have instead started providing concessional loans to increase their chances of reimbursement for financing energy projects. The lion’s share of financing last year went towards the construction of a natural gas pipeline in Nigeria.

Nightmare on Wall Street: The Biden administration is interested in looking into a financial transaction tax as it considers how to protect investors following the GameStop trading mania, a White House spokesperson told CNN Business. A tax could potentially be introduced on GameStop-esque trades in a bid to deter destabilizing market activity, the spokesperson suggested. The thought of a so-called “Tobin tax” is despised by Wall Street which has warned that such a levy would end up harming retail investors by increasing trading costs and curbing liquidity.

The EGX30 fell 1.2% yesterday on turnover of EGP 1.76 bn (17.7% above the 90-day average). Local investors were net sellers. The index is up 5.27% YTD.

In the green: MM Group (+5.4%) and Orascom Development (+4.7%).

In the red: Orascom Financial Holding (-4.2%), Orascom Investment Holding (-4.0%) and Fawry (-3.7%).

It’s a sea of red in Asian markets in early trading this morning and futures suggest US markets will follow suit to open in the red.