| Amir Kahanovitz, Chief Economist of Phoenix-Excellence
After the Ukrainian cities of Kherson and Mariupol fell, the Russians closed in on Kyiv. The West now remembers to send Ukraine huge aid, but in terms of the capital market, the end is near, bring the following narrative: Commodity prices recorded a first week of declines, after three weeks of increase; The decline in the price of wheat, which collapsed, and the prices of gold and oil stood out.
The fear index is falling, and for a moment it also returned on Friday to area code 20, a level it last had only on February 25, at the beginning of the Russian invasion of Ukraine.
Once the capital market has begun to fold the war narrative (which is still ongoing), this week it will also be the donor of central banks to start summarizing it, with 20 of them announcing their policies this week, addressing the new economic environment.
The United Nations last week estimated that world food prices could jump another 20 percent, after the U.S. food price index, released on Thursday as part of the inflation figure, already described an annual jump of 7.9 percent (similar to a change in the general index).
Twelve of the 20 central banks are expected not to raise interest rates this week, including the Bank of Japan and the Bank of China, which are expected to reduce the reserve ratio for banks ahead of an expected further rate cut, but 8 central banks are expected to raise interest rates. 2018, despite a sharp move in the last two months of opening credit spreads.
Recall that a similar opening of spreads in 2018 caused Fed to stop the interest rate hikes then, but this time it is expected to move with them, into the financial crunch, to a total of 7 hikes this year. The market is already screaming that this is a big mistake.
Indicators are rising because interest rate hikes are threatening a recession: The slope of the yield curve in the US has dropped to a negative level even in the range of 7-10 years, joining the negative level in the 20-30 year period. Basis points only), and the inversion of 2-10 years is not far behind.Remember that the inversion of the yield curve is considered the most important indicator for the imminent end of an economic cycle in the range of one to two years.
The University of Michigan Consumer Survey on Future Expectations, released Friday, went on to describe a sharp sentiment crash from 59.4 points to 54.4, lower than expectations at 57.0, with only 18% of Americans saying their pay rise manages to make up for inflation.
Goldman Sachs Investment Bank (NYSE 🙂 on Thursday cut its forecast for the US economy this year from 3.3% to 1.75% and raised the probability of a recession, close to 35% in the coming year. The interest rate hikes, but if you get worse, the Fed will find that it has an interest rate close to zero, which leaves it with very little room for reaction, unless of course it opens up to the possibility of a negative interest rate.
In the meantime, Europe is happy with what their negative is and is not yet going to get out of it (but yes reduce bond purchases).
This week will be published in Israel, which is expected to accelerate to an annual change of 3.3%, and in our estimation, to 3.4%.
The author is the Chief Economist of Phoenix-Excellence. This review is provided as a service to readers only, and should not be construed as an offer, recommendation, substitute for the reader’s professional judgment or investment advice or investment marketing, purchase and / or sale and / or holding of the securities and / or financial assets mentioned or of securities and / Or any other financial assets