Wall Street: inflation, Ukraine and ECB!

Posted 10 March, 2022

After the huge rebound the day before on Wall Street (+3.6% on the Nasdaq and +2% on the Dow), against a backdrop of hopes of appeasement on the Russian-Ukrainian file and relapse in crude oil prices, today's session should prove to be more difficult. The first indicative trend is down, with declines of 0.6% expected on the Dow Jones and the S&P 500. The barrel of WTI crude rose 4% to around $113. The ounce of gold stabilizes at $1,993.

US inflation figures will be monitored at 2:30 p.m. today. For the month of February, the consumer price index in the United States is expected to increase by 0.7% compared to the previous month and by 7.9% over one year. Excluding food and energy, the consensus is at +0.5% (+6.4% compared to last year).

The US weekly jobless claims for the week ending March 5 will be known at the same time (consensus 218,000).

The budget balance for the month of February will be communicated at 8 p.m. (consensus of 124 billion dollars in deficit).

The day will also be marked by discussions between Russia and Ukraine in Turkey. Yesterday, the operators had maintained some hopes, before the meeting between Russian Foreign Minister Sergei Lavrov and his Ukrainian counterpart Dmytro Kuleba, which will take place later Thursday. This is the first meeting between the two men since the invasion of Russia. Kuleba hinted that he didn't expect much from the confrontation. Ukraine also accuses Russia of genocide, after the bombing of a children's hospital in the city of Mariupol, in the southeast of the country. Ukrainian President Volodimir Zelensky expressed his emotion at this atrocity. He had previously adopted a softer tone against Moscow,

Ukraine wants to achieve a ceasefire, the liberation of its territory, and the resolution of humanitarian issues, said Dmytro Kuleba while acknowledging: "Honestly, I do not expect the talks bring a lot". Moscow demands from Kiev a position of neutrality by renouncing NATO. In an interview with the media Vice, Zelensky said he was convinced that Vladimir Putin would eventually agree to negotiate. "I think he will. I think he sees that we are strong (...). We need time," said the Ukrainian leader.

The ECB is meeting on Thursday and could temporize in the face of the uncertainties arising from this Ukrainian crisis. Christine Lagarde should nevertheless reiterate her desire for normalization this year while being cautious about the calendar. As the US Federal Reserve, the European Central Bank sees its task of monetary tightening considerably complicated by this crisis, as inflation accelerated to 5.8% in February in the eurozone. In the United States, accelerated inflation should confirm the Fed's intention to raise its key rates at the end of its meeting on March 15 and 16.

At its meeting on February 3, the ECB paved the way for key rate hikes, for the first time since the coronavirus crisis, which caused a surge in inflation. But the institution could now put a little water in its wine in the face of the strong return of uncertainties about growth while confirming its desire to normalize a monetary policy that remains ultra accommodating.

While no change in monetary policy is expected on Thursday, Christine Lagarde will therefore have to show skill in convincing the markets of her ability to control inflation which reached 5.8% over one year in February in the zone. euro, before the impact of the invasion of Ukraine, begins to be felt. Investors will also closely watch the Governing Council's new macroeconomic projections for inflation (expected to rise) and GDP growth (revised downwards expected).

According to a survey by 'Reuters' of a panel of economists, the ECB should now wait until the 4th quarter to raise rates, despite high inflation. Only six economists said they expect the deposit rate to rise (currently at -0.5%) in the third quarter, down from 16 in last month's survey. Nor does the Reuters survey reveal a clear consensus on when the ECB will choose to end its APP asset purchase program. This program already stopped for the first time, resumed at the end of 2019 in a gloomy economic climate. Prior to Russia's invasion of Ukraine, markets expected the ECB to announce a program halt in October 2022.

Crude prices remain very volatile, following Washington's announcement of a halt to Russian oil imports. While the United States has therefore decided on an embargo on Russian energy, the European Commission has been more cautious because of the block's dependence on Russia. However, the EC presented on Tuesday the outline of a plan dubbed 'REPowerEU' aimed at making Europe independent of Russian fossil fuels well before 2030. In particular, Brussels has set itself the ambitious objective of reducing gas imports by two-thirds. Russian in the EU before the end of this year. For its part, the International Energy Agency (IEA) will present an emergency oil plan next week. AIE members

Comments by the UAE Ambassador in Washington that his country will encourage OPEC to consider higher production to fill the supply gap as well as reports that Iraq is ready to increase production have led to a sharp fall in prices yesterday, but the latter is moving forward again on Thursday.

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10 March, 2022 10:18

← Oil: the Emirates will call on OPEC to increase its production

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Oil: the Emirates will call on OPEC to increase its production

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