May 14, 2022
  • May 14, 2022

Hour of Reckoning on Russia Fallout Threats Markets: Eco Week

By on March 5, 2022 0

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(Bloomberg) – In the space of an hour on Thursday, another high-profile US inflation printout and the European Central Bank’s first major decision since Russia’s invasion of Ukraine will put on the spotlight. tests investors trying to assess the fallout of the war on the global economy.

U.S. consumer prices likely jumped 7.9% in February from a year ago, just as energy costs soared before the conflict, according to a Bloomberg survey’s median forecast from economists. It would be the largest annual increase since the start of 1982.

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Just before the release of these figures, the European Central Bank will unveil its first monetary policy response to the Russian invasion. Officials previously keen to exit the emergency stimulus at a time of record inflation may avoid rushing to do so amid uncertainty about the impact on growth, even if prices rise even further.

The US Federal Reserve, which won’t issue a decision until next week, could also be cautious. President Jerome Powell has now backed a quarter-point interest rate hike this month, saying in congressional testimony that Russia’s attack posed risks to both inflation and growth prospects.

The International Monetary Fund has warned that the ongoing war and associated sanctions will have a severe impact on the global economy.

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The massive rise in commodity prices this week highlights the effect of the war on global inflation. The cost of crude, metals and grains soared as commodities posted their biggest weekly rise since 1974 and the days of the oil crisis.

These developments will continue to extend to consumers as they fuel up their vehicles, shop for groceries and pay their heating bills. Thursday’s US CPI report may reflect some of the war-induced commodity boom.

For more, read the full week of Bloomberg Economics for the US

Other U.S. data in the week ahead includes January jobs numbers and March consumer sentiment. There are no Fed speeches scheduled as the central bank enters its blackout period ahead of the meeting.

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What Bloomberg Economics says:

“The war in Ukraine is moving fast – too fast for the European Central Bank to have a clear idea of ​​how monetary policy should be changed in response at its next meeting on March 10. Bloomberg Economics expects the Board of Governors is sticking to the path it previously set – at least for now.

–David Powell and Maeva Cousin. For a full analysis, click here

Elsewhere, Russian inflation could rise further, South Korea will hold a presidential election and the UK economy likely saw a small expansion in January.

Click here to see what happened last week and below is our summary of what is happening in the global economy.

Asia

South Koreans will choose a new president, with former conservative prosecutor Yoon Suk-yeol currently leading the polls in the race for the Blue House.

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The winner will lead Asia’s fourth-largest economy and one of the world’s leading chip suppliers. Soaring property prices, high personal debt and gaping income gaps are among the issues that could push Koreans out of the ruling party and its candidate, Lee Jae-myung.

In Japan, the latest wage data should underscore the scale of the challenge facing Prime Minister Fumio Kishida as he tries to raise wages.

Japan also releases revised growth figures for the last quarter which should show a stronger rebound, although the omicron, supply problems and Russia’s invasion of Ukraine could tip the economy over. opposite direction this quarter.

In Australia, RBA chief Philip Lowe is speaking twice and will likely reinforce his message of patience on interest rates amid weak wage growth and geopolitical instability.

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China’s National People’s Congress began on Saturday, with around 3,000 delegates gathering in Beijing for annual legislative meetings. It is the biggest political event ahead of a twice-a-decade party leadership reshuffle scheduled for the second half of the year. China will also release trade data on Monday and inflation figures on Wednesday.

For more, read the full Asia Week Ahead from Bloomberg Economics

Europe, Middle East, Africa

A first glimpse of the inflationary shock threatening the Russian economy amid unprecedented global sanctions will appear in February data due Wednesday. Economists forecast an acceleration to 9.15%. Although this is the highest since the start of 2016, it is only a taste of what is likely to happen.

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Elsewhere in the region, data on Wednesday could show Hungarian inflation at 8.5% in February, while a Czech reading the next day could top 10% for the first time in nearly a quarter century.

Meanwhile, the Czech Republic’s austerity coalition is poised to approve a revised state budget for 2022 as its plans to cut pandemic-era deficits face economic fallout from Ukraine. .

Besides the ECB, other central banks in the region reacting to the changed war landscape include those of Poland, which is expected to raise its rate by half a point to 3.25%, and Serbia, whose officials may stand by in the face of growing pressure to meet.

The euro region data includes figures indicating the strength of Germany’s manufacturing base at the start of the year, encompassing both factory orders and industrial production. Economists predict a monthly increase for each report.

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In the UK, monthly gross domestic product data may show only a slight increase in January after a decline in December, a legacy of the impact of the omicron variant of the coronavirus which led to restrictions at the end of the month. ‘last year.

South African data on Tuesday will likely show the economy growing 4.8% in 2021 and 1.6% in the last quarter. The expansion was likely crimped by travel bans just before the summer vacation season during the country’s short, strong omicron wave, as well as soaring gasoline prices.

On Wednesday, data from Ghana will likely show February inflation breaching the top of the central bank‘s target range of 6% to 10% for a sixth consecutive month, bolstering the case for higher inflation. rate. On the same day, the Mauritian central bank is expected to keep its key rate unchanged to support the recovery.

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For more, read Bloomberg Economics’ full week for EMEA

Latin America

Chile kicks off a busy week for the region on Monday with monthly trade data, including copper exports, followed by the highly anticipated February consumer price reading on Tuesday. Above-target inflation that shows little sign of abating has traders expecting another 150 basis point rate hike from the central bank this month.

In Mexico, manufacturing and industrial production reports for January are expected to show some slowdown, while same-store sales are unlikely to register a third consecutive double-digit increase. On Wednesday, expect inflation to pick up in February after a slight cooling in December and January.

Like Mexico, Brazil faces the uncomfortable reality this week that consumer prices did not peak in November as hoped, but actually accelerated for a second month in February. Forecasts are clustered around 10.5%, compared to 10.06% in December. Look for negative pulls from January’s Industrial Production and Retail Sales reports.

Argentina reports construction and industrial production activity, but both will be overshadowed by the battle to secure the country’s personnel-level agreement with the International Monetary Fund through congress.

On Thursday, expect Peru’s central bank to raise its key rate for an eighth consecutive meeting, the longest streak under its chief, Julio Velarde, who took office in 2006.

For more, read the full Latin America Week Ahead from Bloomberg Economics

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