what the markets expect

Time.news – An incandescent week is expected for the markets. The alarm over a possible Russian military action in Ukraine adds to the uncertainty over the Fed’s upcoming tightenings. Last Friday, the tension between the US and Russia skyrocketed, sending Wall Street into a tailspin, with the Nasdaq almost losing 3% and oil that has rocketed to the top for seven years. And over the weekend the situation worsened: “There are no reasons for optimism” commented Pentagon spokesman John Kirby, after last Saturday’s phone call between US President Joe Biden and Russian Vladimir Putin failed.

“It is not a sign that things are moving in the right direction. It is not a sign that Putin intends to de-escalate. The negotiating margins have narrowed a lot,” added Kirby. White House National Security Advisor Jake Sullivan said the military maneuvers carried out by Moscow in recent days have placed Russian troops “in a position from which they could take military action very, very quickly.”

Meanwhile, a visit to Kiev by German Chancellor Olaf Scholz, who will be in Moscow tomorrow, is scheduled for today.

Today in Asia the stock exchanges are in the red, as are the European futures. Tokyo falls by 2.23%, Shanghai by 1% and Hong Kong by 1.5%. Futures on the EuroStoxx 50 and on Wall Street did not move. Oil prices climb close to $ 100, the highest in seven years, with WTI reaching $ 95 and Brent above $ 96 a barrel. On the more strictly economic front, after the surge in US inflation to 7.5% which has fueled the expectation of stronger and closer hikes in interest rates by the Fed this year, the calendar of this year week predicts US retail sales data on Wednesday February 16.

Analysts expect a slight increase in consumption, after the collapse of last December. On the same day, the Fed will release the minutes of the meeting on January 26th. It will be interesting to understand what the central bank governors said to each other, who in any case saw each other before the inflation data. Meanwhile, today the number one of the ECB, Christine Lagarde is speaking and this week the ‘hawk’ of the St. Louis Fed, James Bullard, will speak again, who has already said he is in favor of a 50 basis point increase in the cost of money in March and on a series of 100 basis points hikes by 1 July.

His words have already “set fire to” the markets last week. On Thursday 17 and Friday 18 February, the finance ministers and central bankers of the G-20 will meet for the first time this year in Jakarta. On the table the unattractive prospect for the markets of an increase in bond yields and a tightening of interest rate policy.

Red alert in Ukraine, Scholz in Kiev and then in Moscow

The winds of war are blowing ever stronger over Ukraine. German Chancellor Olaf Scholz is in Kiev today and Moscow tomorrow, to attempt a de-escalation of the crisis, while no breakthrough comes from the Biden-Putin telephone conversation that lasted over an hour last Saturday. Indeed, the US president threatens: “If you invade you will pay dearly”.

The two are left with nothing, while the secretary of state, Antony Blinken reveals that the “Russians could use an accident as a pretext”. And the Kremlin replies: “American hysteria has reached its peak”. Meanwhile, the US secret services let it be known that they have intercepted telephone calls from Russian military leaders indicating the dates of February 16-17 as those of the possible attack. Disinformation? It is not excluded, even if the news that arrives is not reassuring. Kiev “advises airlines not to fly over the Black Sea from today. And the number of Russian soldiers deployed at the border has risen to 130,000, beyond the critical threshold necessary to take the offensive.

In Germany, Steinmeier was re-elected president, who appealed to Putin: “Untie the noose around Ukraine’s neck” and “do not underestimate the strength of democracy”. The German government considers the situation “extremely dangerous”. Scholz’s task is very difficult, he will have to try to dissuade Putin from attempting an attack and, at the same time, warn him that Russia will have to pay a “very high price” if it invades Ukraine. His aides assure him that they have not lost hope that diplomacy can avoid a war, even if they downplay the expectations of a breakthrough. “I don’t think we will come out of this meeting with a concrete result,” said an official to the FT, adding that “this is not the time” to let our guard down. A meeting of NATO defense ministers will be held in Brussels on 16 and 17 February, before EU leaders gather for a summit at the end of the week.

Tomorrow, US retail and minute fed data will be released

Wednesday 16th will be the most interesting day of the week, with the release of US retail sales data in January and the release of the minutes on the Fed meeting on January 26th. The forecast is that of an economic growth in US retail of 1.8%, after -1.9% in December.

The day before, Tuesday 15 February, the data on producer prices will be released, which should decline slightly in January, going from 9.7% in December to 9% in January. In the night between 15 and 16 February, the data on inflation in China, which is practically non-existent, come out.

The forecast is that consumer prices in China will drop from 1.5% to 1% in January. From the minutes of the Fed meeting it will be interesting to understand what the central bank governors said on that occasion. The minutes come after the words of the ‘hawk’ Bullard, a voting member of the FOMC, which have definitely annoyed the markets, which do not live well with the idea of ​​rising rates.

Bullard said on Friday that January inflation data made him “strongly” more hawkish, prompting him to forecast a half percentage point hike in March rates and a full percentage point by July 1. Not only. Bullard did not rule out the announcement of a first Fed squeeze even before the official meeting on March 16. And this short-circuited the markets, which immediately tried to understand when such an event could have occurred. A meeting to be held today on the discount rate was immediately indicated as the one in which the Fed could surprise a first US rate hike. It is probably just rumors, but it is significant that these rumors find fertile ground at this stage. After Bullard, several Fed members stepped in to act as ‘firefighters’.

Atlanta Fed Chairman Raphael Bostic reiterated that his views “have not changed” and that he expects no more than three or four rate hikes this year, likely starting from a 25 basis point hike in March. The markets, on the other hand, are betting on at least six and a half rises, that is, everyone assumes a rise of a quarter of a point in March and 60% of analysts say they are up by half a percentage point. In practice, if such a line were crossed, the Fed would raise rates at each of its meetings from March until the end of the year.

However, in addition to Bostic, two other non-voting members of the FOMC, Mary Daly and Thomas Barkin, also spoke out against the hypothesis of a cut of half a percentage point in March. It should be noted that last Friday Christine Lagarde also warned against the possible boomerang effect of a rate hike that is too high, or too early. The rate hike “would solve none of the current problems,” Lagarde told a German newspaper, adding that the ECB must not be too hasty on rates because a hasty hike risks “jeopardizing growth”.

Lagarde, in other words, aims to buy time and keep the ECB at the window for as long as possible, waiting for a fall in inflation and a slowdown in growth, both possible, to nullify the idea of ​​raising European rates in the second half of the year. . In short, the Fed and the ECB do not travel on the same wavelength at this stage. Among other things, the Fed is also about to decide on a reduction of its balance sheet, which is currently around 9 trillion dollars, while the ECB has opened up to the possibility of raising rates but not to reducing its balance sheet.

Next week it will be interesting to hear what the various members of the Fed and the ECB will say. Today Lagarde speaks again at 5 pm. Bullard is also expected on the day. Then on Friday, February 17, the chief economist of the ECB, Philip Lane will speak and Bullard and Loretta Meister, president of the Cleveland Fed, will speak again.

The price of oil soars close to $ 100, at its top in 7 years

The crisis in Ukraine causes oil prices to fly back to their top in 7 years, close to 100 dollars a barrel, after they had dropped last week, pending the outcome of the US-Iran talks that could lead to an increase of the global supply of crude oil. “If a movement of troops occurs today, Brent will have no problem running above the $ 100 level” commented analyst Edward Moya in a statement. “My prediction – says Antonio Cesarano, global strategist of Intermonte Sim – is that oil prices will fluctuate between 85 and 100 dollars for a few months. Contrasting factors will weigh on the market, geopolitical tensions on the one hand and reopening on the other. , in particular that of China, which will increase from March, after the end of the Winter Olympics “.

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